LOAN AND SECURITY AGREEMENT

Exhibit 10.19

 

LOAN AND SECURITY AGREEMENT

 

by and between

 

WELLS FARGO FINANCIAL PREFERRED CAPITAL, INC.

 

AND

 

C & F FINANCE COMPANY

TABLE OF CONTENTS

 

 

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LOAN AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT is made as of the 1st day of August, 2005 by and among C & F FINANCE COMPANY, a Virginia corporation with its chief executive office at 316 East Grace Street, Richmond, Virginia 23219 (“Borrower Agent”) and such other Persons joined hereto from time to time as borrowers (collectively, the “Borrowers” and each individually is referred to as a “Borrower”), and WELLS FARGO FINANCIAL PREFERRED CAPITAL, INC. (“WFFPC”), an Iowa corporation with its principal office located at 206 Eighth Street, Des Moines, Iowa 50309.

 

BACKGROUND

 

Borrowers have requested and WFFPC has agreed to make available to Borrowers a secured revolving credit facility in the initial amount of the Maximum Principal Amount, all on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties covenant and agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1 Certain Definitions . The terms defined in this Section 1.1, whenever used and capitalized in this Amended and Restated Loan and Security Agreement shall, unless the context otherwise requires, have the respective meanings herein specified.

 

“ Advance ” means each advance of the Loan made to Borrowers pursuant to Section 2.1 hereof.

 

“ Affiliate ” means (i) any Person who or entity which directly or indirectly owns, controls or holds 5.0% or more of the outstanding beneficial interest in a Borrower; (ii) any entity of which 5.0% or more of the outstanding beneficial interest is directly or indirectly owned, controlled, or held by a Borrower; (iii) any entity which directly or indirectly is under common control with a Borrower; (iv) any officer, director, partner or employee of a Borrower or any Affiliate; or (v) any immediate family member of any Person who is an Affiliate. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

 

“ Agreement ” means this Loan and Security Agreement and all exhibits and schedules hereto, as the same may be amended, modified or supplemented from time to time.

 

“ Availability Statement ” means the certificate in substantially the form of Exhibit B attached hereto and made part hereof to be submitted by Borrowers to WFFPC in accordance with the provisions of Section 2.1 and Section 3.3 hereof.

 

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“ Bankruptcy Code ” means the United States Bankruptcy Code as now constituted or hereafter amended and any similar statute or law affecting the rights of debtors.

 

“ Base Rate ” means for any date of determination the LIBOR Rate for such date.

 

“ Books and Records ” means all of Borrowers’ original ledger cards, payment schedules, credit applications, contracts, lien and security instruments, guarantees relating in any way to the Collateral and other books and records or transcribed information of any type, whether expressed in electronic form in tapes, discs, tabulating runs, programs and similar materials now or hereafter in existence relating to the Collateral.

 

“ Borrowers’ Loan Account ” has the meaning assigned to that term in Section 2.1 of this Agreement.

 

“ Borrowing Base ” means, as of the date of determination and subject to change from time to time as described below, an amount equal to 85% of the aggregate balance of outstanding Eligible Receivables net of unearned interest, fees, commissions, discounts and reserves. Notwithstanding the foregoing, WFFPC may adjust the above rates in the Borrowing Base from time to time and at any time in WFFPC’s reasonable credit judgment, upon three (3) days notice to Borrowers, including, without limitation, to reflect, in WFFPC’s judgment, the experience with Borrowers (including without limitation any increased credit, operational, legal, regulatory, political or reputational risk of Borrowers).

 

“ Business Day ” means any day except a Saturday, Sunday or other day on which national banks are authorized by law to close including, without limitation, United States federal government holidays.

 

“ Capital Base ” means the sum of Borrowers’ Tangible Net Worth plus Subordinated Debt.

 

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and regulations with respect thereto in effect from time to time.

 

“ Collateral ” means

 

(i)

All of each Borrower’s Receivables, now owned or existing or hereafter arising or acquired;

 

(ii)

All collateral, security and guaranties now or hereafter in existence for any Receivables;

 

(iii)

All insurance related to any Receivables, to any collateral or security for any Receivables or to any obligor in respect of any Receivables and all proceeds of such insurance (including, without limitation, all non-filing insurance, credit insurance and credit life insurance related to any Receivables, to any collateral or security for any Receivables, or to any obligor in respect of any Receivables and all proceeds of such insurance);

 

(iv)

All of each Borrower’s Books and Records related to any Receivables including all computers and computer related equipment, tapes and software;

 

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(v)

All notes, drafts, deposit accounts, acceptances, documents of title, deeds, policies and policies or certificates of insurance (including without limitation credit insurance, credit life insurance, non-filing insurance and title insurance) and securities (domestic and foreign) and letter of credit rights now or hereafter owned by each Borrower or in which a Borrower has or at any time acquires an interest in connection with any Receivables;

 

(vi)

All of each Borrower’s Accounts, Documents, Instruments, General Intangibles and Chattel Paper as defined in Section 1.2 (b) of this Agreement, now owned or existing or hereafter arising or acquired, and all payment obligations owed to a Borrower, now owned or existing or hereafter arising or acquired; together with all collateral, security and guaranties now or hereafter in existence for any of the foregoing; and

 

(vii)

All cash and non-cash proceeds of all the foregoing.

 

“ Collections ” means payment of principal, interest and fees on Receivables, the cash and non-cash proceeds realized from the enforcement of such Receivables and any security therefor, or the Collateral, proceeds of credit, group life or non-filing insurance, or proceeds of insurance on any real or personal property which is part of the collateral for the Receivables.

 

“ Commitment ” means the maximum principal amount which WFFPC has agreed may be loaned to Borrowers, jointly and severally, pursuant to Article 2 hereof, being, on the date hereof, the Maximum Principal Amount.

 

“ Consumer Finance Laws ” means all applicable laws and regulations, federal, state and local, relating to the extension of consumer credit, and the creation of a security interest in personal property or a mortgage in real property in connection therewith, as the case may be, and laws with respect to protection of consumers’ interests in connection with such transactions, including without limitation, any usury laws, the Federal Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, RESPA, the Magnuson-Moss Warranty Act, the Federal Trade Commission’s Rules and Regulations and Regulations B and Z of the Federal Reserve Board, as any of the foregoing may be amended from time to time.

 

“ Consumer Purpose Loans ” means loans to one or more individuals the proceeds of which are used to purchase goods, services or merchandise for personal, household or family use.

 

“ Credit Documents ” means this Agreement, the Note, the Subordination Agreement(s), the Custodian Agreement(s) and any and all additional documents, instruments, agreements and other writings executed and delivered pursuant to or in connection with this Agreement.

 

“ Custodian Agreement ” means that certain Custodian Agreement dated of even date herewith by and among WFFPC, Borrowers, and an individual custodian, substantially in the form of Exhibit C attached hereto and made part hereof, as the same may be amended, modified, restated or extended from time to time.

 

“ Debt ” means, as of the date of determination, all outstanding indebtedness (other than deferred loan origination fees of Borrowers) including without limitation (a) all loans made by WFFPC to Borrowers; (b) accounts payable as of the date of determination; (c) income tax liabilities;

 

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(d) mortgages; (e) deposits and debenture instruments; and (f) Subordinated Debt.

 

“ Default ” means an event, condition or circumstance which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

 

“ EBITDA Ratio ” means Borrowers’ earnings before payments of interest, taxes, depreciation and amortization expense for the twelve month period ending on the date of determination, net of any deficits from the amount required as an allowance for loan losses under Section 6.4(c) hereof and the amount of any accounts to be charged off, that have not been charged off, to the extent there is not an excess reserve, in Section 6.4(e) hereof, as a percent of interest expense during such twelve month period in accordance with GAAP principles pursuant to Section 6.4 of this Agreement.

 

“ Eligible Receivables ” means, as of the date of determination, Receivables (net of unearned interest, fees, unearned discounts, reserves and commissions thereon) which are Chattel Paper, which conform to the warranties set forth in Section 4.1 hereof, in which WFFPC has a validly perfected first priority Lien, and which are not any of the following: (i) Receivables for which a payment is 61 or more days past due on a contractual basis; (ii) Receivables subject to litigation, foreclosure, repossession or bankruptcy proceedings or the account debtor with respect to which is a debtor under the Bankruptcy Code unless they are contractually current; (iii) Receivables from officers, employees or shareholders of any Borrower or any Affiliate; (iv) Receivables which have been deferred or extended more than twice during any rolling 12 month period; (v) Interest Only Accounts; (vi) Real Estate Related Accounts; (vii) Receivables arising from deficiency balance accounts; (viii) Receivables for which Custodian or WFFPC has not received the corresponding original certificate of title within 120 days from the origination of such Receivable; (ix) Receivables purchased from a dealer to the extent such Receivables exceed an amount equal to 15% of gross Receivables; and (x) Receivables which, in WFFPC’s reasonable credit judgment, do not constitute acceptable collateral.

 

“ Environmental Control Statutes ” means any federal, state, county, regional or local laws governing the control, storage, removal, spill, release or discharge of Hazardous Substances, including without limitation CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous Materials Transportation Act, the Emergency Planning and Community Right to Know Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of 1990, any similar or implementing state law, and in each case including all amendments thereto and all rules and regulations promulgated thereunder and permits issued in connection therewith.

 

“ EPA ” means the United States Environmental Protection Agency, or any successor thereto.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, all amendments thereto, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to refer to any successor sections.

 

“ Event of Default ” has the meaning assigned to that term in Article 8 of this Agreement.

 

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“ GAAP ” means generally accepted accounting principles in the United States applied on a consistent basis, in accordance with the Statement of Auditing Standards No. 69, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor’s Report” (SAS 69) or superseding pronouncements, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or in such other statements by such other entity as WFFPC may reasonably approve, which are applicable in the circumstances as of the date in question. The requirement that such principles be applied on a consistent basis shall mean that the accounting principles observed in a current period are comparable in all material respects to those applied in a preceding period, or, in the event of a material change in any accounting principle from that observed in any previous period (i) financial reports covering preceding periods during the term of this Agreement are restated to reflect such change and provide a consistent basis for comparison among periods and (ii) the financial covenants set forth in Section 6.4 shall be adjusted as determined by WFFPC to reflect similar performance standards as those measured by the existing covenants using the previously observed accounting principles.

 

“ General Intangibles ” has the meaning assigned to that term in Section 1.2(b).

 

“ Hazardous Substance ” means any toxic, reactive, corrosive, carcinogenic, flammable or hazardous pollutant or other substance, including without limitation petroleum and items defined in Environmental Control Statutes as “hazardous substances,” “hazardous wastes,” “pollutants” or “contaminants.”

 

“ Intangible Assets ” means all assets of any Person which would be classified in accordance with GAAP as intangible assets, including without limitation (a) all franchises, licenses, permits, patents, applications, copyrights, trademarks, trade names, goodwill, experimental or organization expenses and other like intangibles, and (b) unamortized debt discount and expense and unamortized stock discount and expense.

 

“ Interest-Only Accounts ” means those Receivables on which collections are applied entirely to interest and expense charges, with no portion thereof being required to reduce the principal balance on the loan prior to the stated maturity of such accounts.

 

“ LIBOR Rate ” means the 30-Day London Interbank Offered Rate for any day as found in the Wall Street Journal, Interactive Edition, or any successor edition or publication.

 

“ Lien ” means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including without limitation any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.

 

“ Loan ” means the aggregate principal amount advanced by WFFPC to Borrowers pursuant to Section 2.1 of this Agreement, together with interest accrued thereon and fees and costs incurred in connection therewith.

 

“ Loan Availability ” means the amount available for Advances under this Agreement on any date as determined in accordance with the Availability Statement submitted to WFFPC on such date in accordance with Section 3.3.

 

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“ Local Authorities ” means individually and collectively the state and local governmental authorities which govern the business and operations owned or conducted by Borrowers or any of them.

 

“ Maximum Principal Amount ” means $85,000,000 from the date hereof through and including the first anniversary of this Agreement; $95,000,000 after the first anniversary of this Agreement through and including the second anniversary of this Agreement; and $100,000,000 thereafter.

 

“ Note ” means the promissory note to this Agreement of Borrowers in favor of WFFPC in substantially the form of Exhibit E attached hereto and made part hereof, evidencing the joint and several obligation of Borrowers to repay the Loan, and any and all amendments, renewals, replacements or substitutions therefor.

 

“ Obligations ” means each and every draft, liability and obligation of every type and description which Borrowers may now or at any time hereafter owe to WFFPC (whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it arises in a transaction involving WFFPC alone or in a transaction involving other creditors of Borrowers, or any of them, and whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several), and including specifically, but not limited to, all indebtedness of Borrowers arising under this Agreement, the Note, a Letter of Credit or any other loan or credit agreement between or among a Borrower or Borrowers and WFFPC, whether now in effect or hereafter entered into and including, without limitation, all Loans.

 

“ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“ Person ” means all natural persons, corporations, limited partnerships, general partnerships, joint stock companies, limited liability companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and federal and state governments and agencies or regulatory authorities and political subdivisions thereof, or any other entity.

 

“ Plan ” means any employee benefit plan subject to the provisions of Title IV of ERISA which is maintained in whole or in part for employees of Borrowers or any Affiliate of Borrowers.

 

“ Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

“ Real Estate Related Accounts ” means Receivables arising from loans (a) the proceeds of which are used to purchase or improve real property; or (b) collateralized or secured by an interest in real property; and shall include without limitation home equity accounts.

 

“ Receivables ” means all lien, title retention and security agreements, chattel mortgages, chattel paper, bailment leases, installment sale agreements, instruments, consumer finance paper and/or promissory notes securing and evidencing loans made, and/or time sale transactions acquired, by a Borrower.

 

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“ Reportable Event ” has the meaning assigned to that term in Section 4.13 of this Agreement.

 

“ Request for Advance ” means the certificate in the form of Exhibit A attached hereto and made part hereof to be delivered by Borrowers to WFFPC as a condition of each Advance pursuant to Section 2.7 hereof.

 

“ Restricted Payments ” means payments by Borrowers, or any of them, which constitute (a) redemptions, repurchases, dividends or distributions of any kind with respect to a Borrower’s capital stock or any warrants, rights or options to purchase or otherwise acquire any shares of a Borrower’s capital stock or (b) payments of principal or interest on Subordinated Debt.

 

“ Schedule of Receivables and Assignment ” means a schedule in the form of Exhibit F attached hereto and made part hereof to be submitted by Borrowers to WFFPC pursuant to Section 2.1 and Section 3.3 hereof, describing the Receivables assigned and pledged to WFFPC, for the benefit of WFFPC, on the date hereof and thereafter for the period to which such schedule relates and confirming the assignment and pledge of such Receivables.

 

“ Senior Debt ” means all indebtedness (including accounts payable) of Borrowers, or any of them, not expressed to be subordinated or junior to any other indebtedness of Borrowers, or any of them.

 

“ Subordinated Debt ” means any indebtedness of Borrowers for borrowed money and which shall contain provisions subordinating the payment of such indebtedness and the liens and security interests securing such indebtedness to Senior Debt, in form, substance and extent acceptable to WFFPC, in its sole discretion.

 

“ Subordination Agreement ” means, individually, and “ Subordination Agreements ” means, collectively, the Subordination Agreements substantially in the form of Exhibit G attached hereto and made part hereof, as the same may be amended, modified, restated or extended from time to time.

 

“ Subsidiary ” of any entity means any corporation of which such entity directly or indirectly owns or controls at least a majority of the outstanding stock having general voting power. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

 

“ Tangible Net Worth ” means, at any date, the amount of the capital stock liability of Borrowers on a consolidated basis (but excluding the effect of intercompany transactions) plus (or minus in the case of a deficit) its capital surplus and earned surplus minus, to the extent not otherwise excluded (i) the cost of treasury shares; (ii) the amount equal to the value shown on its books of Intangible Assets, including the excess paid for assets acquired over their respective book values on the books of the corporation from which acquired; (iii) investments in and loans to any Subsidiary or Affiliate or to any shareholder, director or employee of Borrowers, any Subsidiary or any Affiliate, and (iv) any deficits from the amount required as an Allowance for Loan Losses under Section 6.4(c) hereof and, to the extent there is not an excess reserve, the amount of any accounts to be charged off, that have not been charged off, in Section 6.4(e) hereof

 

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“ Termination Date ” means the earlier of (a)                      , 2009, as such date may be extended from time to time in accordance with the provisions of Section 2.4 of this Agreement; or (b) the date on which the Commitment is terminated and the Loan becomes due and payable pursuant to Section 9.1.

 

“ Total Liabilities ” means all liabilities of Borrowers, as determined in accordance with GAAP.

 

“ WFFPC ” means Wells Fargo Financial Preferred Capital, Inc., an Iowa corporation, and its respective successors and assigns.

 

Section 1.2 Rules of Construction .

 

(a) Accounting Term . Except as otherwise provided herein, financial and accounting terms used in the foregoing definitions or elsewhere in this Agreement shall be defined in accordance with GAAP.

 

(b) Uniform Commercial Code . Except as otherwise provided herein, terms used in the foregoing definitions or elsewhere in this Agreement that are defined in the Uniform Commercial Code, including without limitation, “ Accounts ”, “ Documents ”, “ Instruments ”, “ General Intangibles ”, and “ Chattel Paper ” shall have the respective meanings given to such terms in the Uniform Commercial Code as in effect in the State of Iowa from time to time.

 

ARTICLE 2

 

THE REVOLVING CREDIT FACILITY

 

Section 2.1 The Loan . Until the Termination Date and subject to the terms and conditions of this Agreement, WFFPC shall, upon the prior application of Borrowers, from time to time, make Advances to Borrowers on or after the date of this Agreement, which Borrowers may repay and reborrow from time to time, in the maximum principal amount at any one time outstanding not to exceed the lesser of the amount of the Commitment or the Borrowing Base in effect as of the date of determination, as follows:

 

(a) WFFPC shall establish on its books an account in the name of Borrowers (the “Borrowers’ Loan Account”). A debit balance in Borrowers’ Loan Account shall reflect the amount of Borrowers’ indebtedness to WFFPC from time to time by reason of Advances and other appropriate charges (including, without limitation, interest charges) hereunder. At least once each month, WFFPC shall provide to Borrowers a statement of Borrowers’ Loan Account which statement shall be considered correct and accepted by Borrowers and conclusively binding upon Borrowers unless Borrowers notify WFFPC to the contrary within 30 days of WFFPC’s providing such statement to Borrowers.

 

(b) Borrowers shall prepare a completed Availability Statement as of each month end and forward such statement to WFFPC by the 20th day of the following month.

 

(c) Each Advance made hereunder shall, in accordance with GAAP, be entered as a debit to Borrowers’ Loan Account, and shall be in a principal amount which, when aggregated with all other Advances then outstanding, shall not exceed the lesser of the then effective Borrowing Base or Commitment.

 

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(d) The Loan shall be due and payable to WFFPC on the Termination Date. Upon the occurrence of an Event of Default, WFFPC shall have rights and remedies available to it under Article 9 of this Agreement.

 

(e) Lender has the right at any time, and from time to time, in its reasonable credit judgment (but without any obligation) to set aside reasonable reserves against the Borrowing Base in such amounts as it may deem appropriate.

 

Section 2.2 The Note . The indebtedness of Borrowers to WFFPC hereunder shall be evidenced by a Note executed by Borrowers in favor of WFFPC, which shall be substantially in the form of Exhibit E attached hereto and made part hereof, dated the same date as this Agreement. The principal amount of the Note will be the Maximum Principal Amount; provided, however, that notwithstanding the face amount of the Note, Borrowers’ liability under the Note shall be limited at all times to the actual indebtedness (principal, interest and fees) then outstanding and owing by Borrowers to WFFPC hereunder.

 

Section 2.3 Method of Payment . Borrowers shall make all payments of principal and interest on the Note in lawful money of the United States of America and in funds immediately available by wire transfer, to WFFPC at its address referred to in Section 10.3 of this Agreement or at such other address as WFFPC otherwise directs. Whenever any payment is due on a day, which is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and interest shall be paid for such extended time.

 

Section 2.4 Extension and Adjustment of Termination Date . Upon the mutual agreement of all parties to this agreement, the Termination Date may be extended. Any extension to the Termination Date shall be in writing and executed by the authorized representatives of each party.

 

Section 2.5 Use of Proceeds . The initial Advance shall be used to refinance and pay all of Borrowers’ indebtedness under a line of credit with Bank of America, N.A. Advances shall be used to finance Borrowers’ portfolios of Consumer Purpose Loans which constitute Eligible Receivables, for other lawful corporate purposes except as limited under this Agreement.

 

Section 2.6 Interest .

 

(a) In the absence of an Event of Default or Default hereunder, and prior to maturity, the outstanding balance of the Loan will bear interest at an annual rate at all times equal to the Base Rate plus 180 basis points if the average outstanding principal balance of the Obligations during any calendar month is less than $75,000,000 and the Base Rate plus 175 basis points if the average outstanding principal balance of the Obligations during any calendar month equals or exceeds $75,000,000. Interest shall be payable monthly in arrears on the first day of each month commencing on the first such date after the first Advance under the Loan and continuing until the Commitment is terminated and Obligations are indefeasibly paid in full. Interest as provided hereunder will be calculated on the basis of a 360 day year and the actual number of days elapsed. The rate of interest provided for hereunder is subject to increase or decrease when and as the Base Rate increases or decreases in an amount corresponding to the change in the Base Rate. Any such change in interest rate hereunder shall take effect the first day of the month following a change in the Base Rate.

 

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(b) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default or Default hereunder, including after maturity and before and after judgment, Borrowers hereby agree to pay to WFFPC interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest with respect thereto, at the rate of 2.50% per annum above the rate otherwise applicable to the Loan.

 

Section 2.7 Advances .

 

(a) Borrower Agent shall notify WFFPC in writing not later than 1:00 p.m., Philadelphia, time, on the date of each requested Advance under the Commitment, specifying the date, amount and purpose of the Advance. Such notice shall be in the form of the Request for Advance attached hereto and made part hereof as Exhibit A , shall be certified by the President or Treasurer (or such other authorized Person as Borrower Agent directs from time to time) of Borrower Agent and shall contain the following information and representations, which shall be deemed affirmed and true and correct as of the date of the requested Advance:

 

(i) the aggregate amount of the requested Advance, which shall be in multiples of $5,000 but not less than the lesser of $5,000 or the unborrowed balance of the Commitment;

 

(ii) confirmation of Borrowers’ compliance with Sections 2.1(c), 6.4 and 7.1 through 7.12 both immediately prior to and after making such Advance; and

 

(iii) statements that the representations and warranties set forth in Article 4 are true and correct as of the date of the Advance; no Event of Default or Default has occurred and is then continuing; and that there has been no material adverse change in Borrowers’ financial condition, operations or business since the date of the monthly and audited annual financial statements most recently delivered by Borrowers to WFFPC pursuant to Sections 5.1(l) or 6.2 of this Agreement.

 

(b) Subject to the satisfaction of the conditions set forth in Section 2.7(a) and 5.2, and the other terms of this Agreement, WFFPC shall make the requested Advance available to Borrowers by wiring such amount to an account designated by Borrower Agent and in Borrowers’ name, or as otherwise instructed by Borrower Agent, not later than 5:00 p.m., Des Moines, Iowa, time on the day of the requested Advance.

 

(c) Each request for an Advance pursuant to this Section 2.7 shall be irrevocable and binding on Borrowers.

 

Section 2.8 Prepayment .

 

(a) Optional Prepayments . Borrowers may prepay the Loan from time to time, in full or in part not to exceed $5,000,000 without notice, and, in part, in excess of $5,000,000 upon 7 Business Day’s prior notice to WFFPC without premium or penalty, provided that (i) in the event Borrowers repay the Loan in full prior to the first anniversary of this Agreement, Borrowers shall pay a sum equal to 1.0% of the Commitment as a prepayment fee; (ii) in the event Borrowers repay the Loan in full after the first anniversary of the date of this Agreement and prior to the second anniversary of the date of this Agreement, Borrowers shall pay a sum equal to 0.5% of the Commitment as a prepayment fee; (iii) if the Loan is prepaid in full at any time after the second anniversary of the date of this Agreement and prior to the third anniversary of the date of this Agreement, Borrowers shall pay a

 

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sum equal to 0.25% of the Commitment as a prepayment fee; (iv) prepayments shall be in a minimum amount of $10,000 and $10,000 increments in excess thereof; and (v) partial prepayments prior to the Termination Date shall not reduce WFFPC’s Commitment under this Agreement and may be reborrowed, subject to the terms and conditions hereof for borrowing, and partial prepayments will be applied first to accrued interest and fees and then to outstanding Advances. Each Borrower acknowledges that the above described fee is an estimate of WFFPC’s damages in the event of early termination and is not a penalty. In the event of termination of the credit facility established pursuant to this Agreement, all of the Obligations shall be immediately due and payable upon the termination date stated in any notice of termination. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Credit Documents shall survive any such termination, and WFFPC shall retain its liens in the Collateral and all of its rights and remedies under the Credit Documents notwithstanding such termination until Borrowers have paid the Obligations to WFFPC, in full, in immediately available funds, together with the applicable termination fee, if any.

 

(b) Mandatory Prepayments . In the event that amounts outstanding hereunder at any time exceed the Borrowing Base (whether established by an Availability Statement or otherwise) Borrowers shall pay to WFFPC immediately and without demand or notice of any kind required, the amount by which Borrowers’ indebtedness hereunder exceeds the Borrowing Base then applicable, together with all accrued interest on the amount so paid and any fees and costs incurred in connection therewith.

 

Section 2.9 Fees . Borrowers shall pay to WFFPC, at WFFPC’s offices, the following:

 

(a) Administrative Fee . A non-refundable administrative fee of $2,000 shall be due and payable monthly in arrears on the first day of each month commencing on the first such date after the funding of this Agreement and continuing until the Commitment is terminated and the Obligations are indefeasibly paid in full, in which event a monthly installment of the administrative fee shall be paid on the date of such termination.

 

ARTICLE 3

 

SECURITY

 

Section 3.1 Security Interest . To secure the payment and performance of the Obligations, each Borrower hereby grants to WFFPC a continuing general Lien on and a continuing security interest in all of the Collateral, wherever located, whether now owned or hereafter acquired, existing or created, together with all replacements and substitutions therefor, and the cash and non-cash proceeds thereof. The Liens and security interests of WFFPC in the Collateral shall be first and prior perfected Liens and security interests and may be retained by WFFPC until all of the Obligations have been indefeasibly satisfied in full and the Commitment has expired or otherwise has been terminated.

 

Section 3.2 Financing Statements . WFFPC is hereby authorized by each Borrower to file any financing statements covering the Collateral or an amendment that adds collateral covered by the financing statement or an amendment that adds a debtor to a financing statement, in each case whether or not a Borrower’s signature appears thereon. Borrowers agree to comply with the requirements of all state and federal laws and requests of WFFPC in order for WFFPC to have and maintain a valid and perfected first security interest in the Collateral.

 

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Section 3.3 Documents to be Delivered to WFFPC . Concurrently with the execution and delivery of this Agreement and, thereafter, by the 20th day of each month for the prior month and at any other time as WFFPC may require, Borrowers shall deliver to WFFPC (for each Borrower and on consolidated basis) an Availability Statement (together with all supporting schedules), a Schedule of Receivables and Assignment, an aging of Receivables, books and records consisting of data tape information and such other documentation as WFFPC may require; however, the security interest of WFFPC in the Collateral shall attach immediately upon the creation or acquisition thereof by Borrowers, regardless of whether the same be then or thereafter delivered to WFFPC. All Receivables of Borrowers shall be stamped and assigned to WFFPC as follows to evidence the assignment to WFFPC:

 

The within instrument or agreement is pledged as collateral to Wells Fargo Financial Preferred Capital, Inc., its successors and assigns.

 

Borrowers shall: (a) deliver to the custodian under the Custodian Agreement, as the bailee and designee of WFFPC, or, upon the request of WFFPC, to WFFPC, the Collateral and all Documents, General Intangibles and Instruments relating to Collateral and, upon request of WFFPC, deliver to WFFPC or its designee any other property in which Borrowers have granted WFFPC a security interest hereunder, including, but not limited to, all of Borrowers’ Books and Records including all computers, computer related equipment, tapes and software; and (b) execute and deliver to WFFPC, for the benefit of WFFPC, such assignments, mortgages, financing statements, amendments thereto and continuation statements thereof, in form satisfactory to WFFPC, and such additional agreements, documents or instruments as WFFPC may, from time to time, require to evidence, perfect and continue to perfect WFFPC’s liens and security interests granted hereunder. For purposes of this Article 3, the parties hereto agree that, until WFFPC shall otherwise direct or designate, the custodian(s) under the Custodian Agreement or Agreements as from time to time in effect, shall be deemed to be the designee of WFFPC and WFFPC shall have the right, at any time and from time to time, to direct or redirect the delivery of all or any of the foregoing items to any other designee. WFFPC may in its sole discretion record or file any such document, instrument or agreement, including, without limitation, this Agreement, as it may from time to time deem desirable.

 

Section 3.4 Collections . Notwithstanding the assignment (but not in any way to be deemed or construed to impair or affect the security interest granted hereunder) of the Receivables by Borrowers to WFFPC, until the occurrence of a Default or an Event of Default, Borrowers may service, manage, enforce and receive Collections on Receivables for the account of WFFPC. Borrowers shall have no power to make any unusual allowance or credit to any obligor without WFFPC’s prior written consent.

 

Upon notice by WFFPC at any time following the occurrence of an Event of Default or Default, WFFPC may require Borrowers to endorse and deposit all Collections within one Business Day of receipt thereof and in the original form received (except for the endorsement of Borrowers, if necessary, to enable the collection of instruments for the payment of money, which endorsements Borrowers hereby agree to make) in such account maintained with such depository as WFFPC may from time to time specify, such account to limit withdrawals by Borrowers therefrom only to the order of WFFPC, but to permit withdrawals by WFFPC therefrom without the co-signature of a Borrower. WFFPC may also require Borrowers to enter into an appropriate lock box agreement with WFFPC or another financial institution acceptable to WFFPC, in form and content acceptable

 

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to WFFPC, with respect to opening and maintaining a lock box arrangement for the Collections. Such lock box agreements shall be irrevocable so long as Borrowers are indebted to WFFPC under this Agreement and this Agreement remains in effect.

 

Section 3.5 Additional Rights of WFFPC; Power of Attorney .

 

(a) In addition to all the rights granted to WFFPC hereunder, WFFPC shall have the right, at any time following the occurrence and during the continuance of a Default or an Event of Default, to notify the obligors and acc