General Terms
The legal document that outlines the lender's and borrower's responsibilities for that known colloquially as a "Revolver" or "Line."
What is the "Revolving and Term Credit Agreement"
No part of "...any loan advance under the Revolving Credit Agreement" shall be used for these purposes though generally they can be thought of as the same thing.
What is "personal, family, or household purposes"
A borrower must maintain this type of covenant ensuring certain financial ratios are met.
What is a Financial Covenant?
All notices required or provided in this Agreement shall be this to be effective.
What is "in writing and mailed"?
When a company does all of these three things it creates this, according to Exhibit D:
1. "Performs a service" / "sells a good"
2. "Delivers or ships the good"
3. "creates an invoice, shipping document, or receipt"
What is a "Qualified Account"
A legal document such as the Revolving Credit Agreement is full of these definitions that are shortened and generally in Bold Text.
What is a "Defined Term"
"all financial statements of Customer...were prepared according to" this standard accounting convention.
What is Generally Accepted Accounting Principles (GAAP)?
This class or type of covenant restricts borrowers from doing certain things such as incurring additional debt without lender approval, to name one of many
What is a Negative Covenant?
A borrower filing for bankruptcy would trigger this type of default. [Be specific]
What is an Insolvency Default?
Obsolete Inventory is excluded from the Borrowing Base. However, Exhibit B does not explicitly refer to "Obsolete Inventory". Rather Exhibit B refers to "Qualified Inventory" as inventory in this condition?
What is "in good condition"?
This Exhibit, referred to at the top in all capital letters, deals entirely with the Borrowing Base.
What is "Exhibit B"
"Borrowing Base" = Exhibit B
In Section (l) the Customer assures us that there is no litigation or administrative proceedings pending or to the knowledge of Customer, threatened against Customer which might (taken in totality) result in this.
What is a "Material Adverse Change"
The MAC clause
This negative covenant states that employee wages are to be paid at this time.
What is "when due?"
The Lender "...may refuse any request for an advance upon notice from any of the undersigned" but only if more than this number sign the Agreement? (convoluted, but think logically)
What is more than one customer?
Frequently a Qualified Account is overstated on the Accounts Receivable Aging because the Accounts Payable Aging is not scanned for these.
What is a "set-off, credit allowance, or adjustment?"
It is always a good question to ask about these as well! Altogether these are known as A/R "dilution."
For $200 extra points name at least one other dilutive item that may occur in a default situation.
This Exhibit, referred to at the top in all capital letters, deals entirely with Security Documents.
What is Exhibit C?
Security Documents = Collateral = Exhibit C
Unless our Customer is a Trust, every entity type (Corporation, LLC, etc) represents and warrants that its status has these two qualities.
What is "validly existing" and "in good standing"
A default and acceleration can occur when any of these six events occurs. Examples of events include these three.
What is:
- Customer fails to pay any amount due under this Agreement or Note or any other indebtedness of Customer to Lender
- Any Rep or Warranty was found to be false
- A Material Adverse Change (MAC) occurs
- Customer fails to observe/perform any Covenant
- Any Guaranty is revoked, Guarantor dies, etc
- An event of default under any Security Agreement or Note
"The aggregate amount of all Revolving Loans at any time outstanding...shall never exceed this"
What is the Borrowing Base?
To keep borrowers from inflating Inventory values, Exhibit B requires inventory not to exceed the lower of these two values
What is "lower of cost or wholesale market?"
A blanket attestation by the Customer that certain items are true and correct.
What is a "Representation and Warranty"
The customer represents and warrants that there is "no substance...that has been, or is present,...in or about any real estate...owned or occupied by customer." Collectively these substances are known as.
What is a "Hazardous Substance"
No "Amendment or Modification of this Agreement shall be effective" unless it has been set forth in this specific way (two things).
What is "in writing" and "signed by Lender and Customer"?
This is the only dividend a company can make and still be in compliance with the "Distributions" Covenant
What is a Stock Dividend? (for 200 extra points, Why is this allowed?)
Exhibit B refers to "Qualified Chattel Paper". Chattel Paper is generally created through this type of service,
What is equipment financing, vehicle sales, or leasing.