**Exhibit 10.1**

** **

LOAN AGREEMENT

 

THIS LOAN AGREEMENT is made as of July 15,2009, between **TITAN MACHINERY INC.,**a Delaware corporation with its principal offices located in Fargo, NorthDakota, and **BREMER BANK, N.A.**, anational banking association with offices located in Lisbon, North Dakota.

 

NOW, THEREFORE, in consideration of themutual promises and covenants set forth below, the Bank and the Borrower agreeas follows:

 

ARTICLE I - DEFINITIONS

 

Section 1.1  Definitions.  For all purposes of this Agreement, except asotherwise expressly provided or unless the context otherwise requires:

 

(a)                                  The termsdefined in this Article have the meanings assigned to them in thisArticle, and include the plural as well as the singular.

 

(b)                                 All accountingterms not otherwise defined herein have the meanings assigned to them inaccordance with GAAP.

 

“Advance” means an advance by the Bank to theBorrower pursuant to Section 2.1, 2.2. or 2.3.

 

“Agreement” means this Loan Agreementtogether with all amendments, modifications and restatements thereof.

 

“Bank” means Bremer Bank, N.A., it successorsor assigns.

 

“Borrower” means Titan Machinery Inc.

 

“Borrowing Base Certificate” means a writing,in the form of Exhibit “A” attached hereto, completed and signed bythe Borrower as contemplated by this Agreement.

 

“Collateral Documents” means the securityagreement, financing statement, pledges, intercreditor agreements, landlorddisclaimer and consent agreements and all other collateral documents referredto in Section 3.1 and Section 8.20.

 

“Cost of Goods Sold” shall have the meaningassigned to it in accordance with GAAP.

 

“Current Assets” shall mean the aggregateamount of the Borrower’s assets properly shown as current assets on its balancesheet, determined in accordance with GAAP, minus the following: receivables andother amounts due from any shareholder, director, officer or employee of the

 

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Borrower, and receivables and other amounts due from any other relatedor affiliated Person of the Borrower.

 

“Current Liabilities” shall mean theaggregate amount of the Borrower’s liabilities properly shown as currentliabilities on its balance sheet, determined in accordance with GAAP.

 

“Debt” shall mean the aggregate amount of theBorrower’s items properly shown as liabilities on its balance sheet, determinedin accordance with GAAP, less any liabilities that constitute SubordinatedDebt.

 

“Eligible Equipment” means the dollar valueof all equipment (including vehicles) of the Borrower accounted for at thelower of net book value as determined in accordance with GAAP or the appraisedvalue of such equipment as determined by Steffes Auction Company or such otherauction company selected by the Bank pursuant to an appraisal on terms and conditionssatisfactory to the Bank.  Withoutlimiting the discretion of the Bank to consider any item of equipment not to beEligible Equipment, and by way of example only of types of equipment that theBank will consider not to be Eligible Equipment, notwithstanding any earlierclassification of eligibility, the following shall not be considered EligibleEquipment (i) any equipment which is not located on the Premises of theBorrower; (ii) any equipment which is obsolete or not useable in thenormal course of the Borrower’s operations; (iii) any equipment in whichthe Bank does not have a perfected security interest constituting a first lien;and (iv) any equipment inventory in Borrower’s rental fleet held for rentby the Borrower.

 

“Eligible Equipment Inventory” means thedollar value of New Equipment Inventory and Used Equipment Inventory of theBorrower in which the Bank holds a first perfected security interest accountedfor at the lower of cost or fair market value computed on a first-in-first-outbasis in accordance with GAAP, which New Equipment Inventory and Used EquipmentInventory has been paid for by the Borrower in full and provided, further, thatEligible Equipment Inventory, shall not, in any event, include:

 

(a)                                  inventory whichis (i) in-transit; or (ii) not located on the Borrower’s Premises orin another location approved by the Bank in writing; or (iii) not subjectto an effective financing statement filed by the Bank to perfect a firstsecurity interest in such inventory; or (iv) on consignment to or from anyother Person or subject to any bailment; or (v) subject to any lien infavor of any Person other than the Bank;

 

(b)                                 raw materialsand work in process;

 

(c)                                  supplies,packaging and parts inventory;

 

(d)                                 inventory thatis damaged, obsolete or not currently saleable in the normal course of theBorrower’s operations;

 

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(e)                                  inventory thatthe Borrower has returned, has attempted to return, is in the process ofreturning or intends to return to the vendor thereof; and

 

(f)                                    inventoryotherwise deemed ineligible by the Bank in its sole discretion.

 

“Eligible Parts Inventory” means the dollarvalue of the parts inventory of the Borrower in which the Bank holds aperfected first security interest accounted for at the lower of cost or fairmarket value computed on a first-in-first—out basis in accordance withGAAP.  Without limiting the discretion ofthe Bank to consider any parts not to be Eligible Parts Inventory, and by wayof example only, Eligible Parts Inventory shall not, in any event, include:

 

(a)                                  parts inventorywhich is (i) in-transit; or (ii) not located on the Borrower’sPremises or in another location approved by the Bank in writing; or (iii) notsubject to an effective financing statement filed by the Bank to perfect asecurity interest in such inventory; or (iv) on consignment to or from anyother Person or subject to any bailment.

 

(b)                                 parts inventorythat is damaged, obsolete or not currently saleable in the normal course of theBorrower’s operations;

 

(c)                                  parts inventorythat the Borrower has returned, has attempted to return, is in the process ofreturning or intends to return to the vendor thereof; and

 

(d)                                 parts inventoryotherwise deemed ineligible by the Bank in its sole discretion.

 

“Eligible Receivables”  means only such accounts receivable of theBorrower as the Bank, in its sole discretion, shall deem eligible.  Without limiting the discretion of the Bankto consider any account receivable not to be an Eligible Receivable, and by wayof example only of types of accounts receivable that the Bank will consider notto be Eligible Receivables, notwithstanding any earlier classification ofeligibility, the following accounts receivable shall not be considered EligibleReceivables: (i) any account receivable which is not paid in full within90 days after it is created; (ii) any account receivable as to which anywarranty is breached; (iii) any account receivable as to which the accountdebtor or other obligor disputes liability or makes any claim; (iv) anyaccount receivable owed by any officer, director or shareholder of the Borroweror any of their relatives or any Person wholly or partly owned or controlleddirectly or indirectly by any of them or any of their relatives; (v) anyaccount receivable owed by any Person as to whom a petition in bankruptcy orother application for relief is filed under any bankruptcy, reorganization,receivership, moratorium, insolvency or similar law; (vi) any accountreceivable owed by any Person who makes an assignment for the benefit ofcreditors, becomes insolvent, fails, suspends business, or goes out ofbusiness; (vii) any account receivable owed by the United Statesgovernment or any agency of the United States government or any account ownedby a Native American Sovereign Nation; (viii) any account receivable owedby any Person if 10% or more in amount of accounts receivable owed by suchPerson to the Borrower are considered ineligible; (ix) consignmentreceivables; (x) bonded receivables; (xi) any account receivableconstituting a retainage; (xii) any account receivable for

 

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goods which have not been shipped or work which has not been fullyperformed; (xiii) any account receivable owed by any Person outside the UnitedStates of America; (xiv) any account receivable owed by any Person with whosecreditworthiness the Bank becomes dissatisfied; (xv) any intercompany accountreceivable; and (xvi) any account receivable in which the Bank does not have aperfected security interest constituting a first lien.

 

In the event the Borrower owes any amount toany Person that owes an account receivable to the Borrower, such amount owed bythe Borrower shall be deducted from that portion of the account receivable whichwould otherwise qualify as an Eligible Receivable and only the differencethereof shall be considered an Eligible Receivable.  No account receivable which does not qualifyas an Eligible Receivable shall be considered an Eligible Receivable unless theBank, upon the written request of the Borrower, states in writing that suchaccount receivable is to be considered an Eligible Receivable.

 

“Environmental Laws” means all federal,state, local and foreign laws, statutes, codes, ordinances, regulations, requirements,rules and common law relating in any way to any hazardous or toxicmaterials or the protection of the environment.

 

“Event of Default” has the meaning specifiedin Section 7.1.

 

“GAAP” means the generally acceptedaccounting principles in the United States in effect from time to timeincluding, but not limited to, Financial Accounting Standards Board (FASB)Standards and Interpretations, Accounting Principals Board (APB) Opinions andInterpretations, and certain other accounting principles which have substantialauthoritative support.

 

“Letter of Credit” means any one or moreirrevocable letters of credit which may be issued by the Bank for the accountof the Borrower.  (Nothing in thisAgreement shall be construed as a commitment by the Bank to issue any lettersof credit for the account of the Borrower.)

 

“Letter of Credit Amount” means the sum of (i) theaggregate amount available for drawing under any issued and outstanding Letterof Credit, and (ii) amounts drawn under any Letter of Credit for which theBank has not been reimbursed.

 

“L/C Application” means an application andagreement for letters of credit in the Bank’s then current standard form.

 

“Net Worth” shall mean the aggregate amountof the Borrower’s items properly shown as assets on its balance sheet minus theaggregate amount of the Borrower’s items properly shown as liabilities on itsbalance sheet, determined in accordance with GAAP, plus Subordinated Debt. 

 

“New Equipment Inventory” means new wholegoods inventory held for sale by the Borrower in the ordinary course of theBorrower’s business which new equipment inventory (i) is ready for sale tocustomers of the Borrower; (ii) meets all standards imposed by anygovernmental agency; (iii) is located on the Premises of the Borrower; (iv) isnot obsolete; (v) is not on

 

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consignment to or from any other Person or been sold or otherwisedelivered, transferred or conveyed to any other Person or is subject to anybailment or lease; (vi) is subject to a perfected security interestconstituting a first lien in favor of the Bank; (vii) does not have morethan fifty (50) hours of use; and (viii) is not Used Equipment Inventory.

 

“Notes” means individually and collectivelythe promissory notes described in Section 2.1 and 2.3 together with anysubsequent renewals, modifications, extensions and substitutions thereof.

 

“Obligations” means each and every debt,liability and obligation of every type and description which the Borrower maynow or at any time hereafter owe to the Bank including, without limitation, theindebtedness arising under this Agreement, the Notes and the L/C Applications.

 

“Person” means any individual, corporation,partnership, joint venture, association, joint-stock company, limited liabilitycompany, trust, cooperative or other business entity, unincorporatedorganization, or government or any agency or political subdivision thereof.

 

“Premises” means the equipment dealershipsoperated by the Borrower in Lisbon, Lidgerwood, Kulm, Wishek, Jamestown,LaMoure, Wahpeton, Casselton, Bismarck, West Fargo,  Mandan, Grand Forks, Kintyre, Minot,Mayville, Arthur and Fargo, North Dakota; Watertown, Aberdeen, Sioux Falls,Rapid City, Huron, Pierre, Highmore, Miller and Redfield, South Dakota;Pipestone, Graceville, Marshall, Fergus Falls, Elbow Lake, Roseau, Crookston,Ada, Thief River Falls, Winger and Moorhead, Minnesota; Waverly, Kingsley, LeMars, Cherokee, Anthon, Dike, Des Moines, Blairstown, Cedar Rapids, GrundyCenter, Davenport, Avoca, Greenfield, Clear Lake and Sioux City, Iowa; Omahaand Lincoln, Nebraska; Billings, Belgrade, Great Falls, Missoula and Kalispell,Montana; and Cheyenne, Casper and Gillette Wyoming.

 

“Revolving Note” means the promissory notereferred to in Section 2.1 together with any subsequent renewals,extensions, modifications and substitutions thereof.

 

“Subordinated Debt” shall mean Debt that isexpressly subordinated to the Bank in a writing acceptable to the Bank.

 

“Tangible Net Worth” shall mean Net Worthminus the aggregate amount of the Borrower’s items properly shown as thefollowing types of assets on its balance sheet determined in accordance withGAAP: (i) goodwill, patents, non-competes, copyrights, mailing lists,trade names, trademarks, servicing rights, organizational and franchise costs,bond underwriting costs, and other like assets properly classified asintangible; (ii) leasehold improvements; (iii) receivables, loans andother amount due from any shareholder, director, officer or employee of theBorrower, and receivables, loans and other amounts due from any other relatedor affiliated Person of the Borrower; and (iv) investments or otherinterests in non-public companies, cooperatives, entities or  partnerships.

 

“Term Note” means the promissory notereferred to in Section 2.3 together with any subsequent renewals,extensions, modifications and substitutions thereof.

 

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“Total Loan Value” means (i) seventy-fivepercent (75%) of the Borrower’s Eligible Receivables; plus (ii) fiftypercent (50%) of the Borrower’s Eligible Equipment less an amount equal to theunpaid balance of any obligations owing any Person supplying or financing thepurchase of or having a lien or security interest in any equipment, other thanthe Bank; plus (iii) fifty percent (50%) of the Borrower’s EligibleEquipment Inventory less an amount equal to the unpaid balance of anyobligations owing the person supplying or financing the purchase of anyequipment inventory or having a lien or security interest in any equipmentinventory, other than the Bank; plus (iv) fifty percent (50%) of theBorrower’s Eligible Parts Inventory less an amount equal to the unpaid balanceof any obligations owing any Person supplying or financing the purchase of anyparts inventory or having a lien or security interest in any parts inventory,other than the Bank; less (v) the Letter of Credit Amount less (vi) theunpaid balance of the Term Note all as determined by the Borrower in accordancewith GAAP, consistently applied and as reflected by and determined inaccordance with the Borrowing Base Certificate.

 

“Used Equipment Inventory” means all usedwhole goods inventory held for sale by the Borrower in the ordinary course ofthe Borrower’s business which used equipment inventory (i) is ready forsale to customers of the Borrower; (ii) meets all standards imposed by anygovernmental agency; (iii) is located on the Premises of the Borrower; (iv) isnot obsolete; (v) is not on consignment to or from any other Person orbeen sold or otherwise delivered, transferred or conveyed to any other Personor is subject to any bailment or lease; (vi) is subject to a perfectedsecurity interest constituting a first lien in favor of the Bank; and (vii) isnot New Equipment Inventory.

 

ARTICLE II - AMOUNT ANDTERMS OF LOANS

 

Section 2.1  Revolving Loan .  Subject to the terms and conditions of thisAgreement, the Bank may, in its discretion, make Advances to the Borrower underthis Section from time to time from the date hereof in the aggregateamount not to exceed at any one time outstanding the sum of Twenty-five MillionDollars ($25,000,000).  Within the limitsset forth in this Section, the Borrower may borrow, prepay and re-borrow underthis Section.  The obligation to repaythe Advances made pursuant to this Section shall be evidenced by apromissory note payable to the Bank and containing the terms relating to therepayment, interest rate and other matters as set forth in Schedule 2.1attached to and made a part of this Agreement (“Revolving Note”).

 

Section 2.1.1 Purposeof Advances.  The purpose for thefirst Advance under Section 2.1 is to replace, but not satisfy, anexisting obligation of the Borrower to the Bank dated August 28, 2008, inthe original principal amount of $25,000,000. Subsequent Advances under Section 2.1 shall be used solely for theshort term working capital requirements of the Borrower.

 

Section 2.1.2  Making Advances. Advances pursuant to Section 2.1shall be made in accordance with the terms and conditions of a cash managementagreement(s) among the Bank and the Borrower.

 

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In addition to Advances madeby the Bank to the Borrower pursuant to any cash management agreement(s), theBorrower may also request Advances directly from the Bank under the RevolvingNote in accordance with this Section. Each such Advance under the Revolving Note shall be made on written,oral, electronic or telephonic request from any Person purporting to beauthorized to request Advances on behalf of the Borrower, which notice orrequest shall specify the date of the requested Advance and the amountthereof.  Upon the Borrower’s fulfillmentof the applicable conditions set forth in Article III, the Bank maydisburse the amount of the requested Advance by crediting the same to theBorrower’s demand deposit account maintained with the Bank or in such othermanner as the Bank and the Borrower may from time to time agree. Any Advancepursuant to Section 2.1 not made in accordance with a cash managementagreement shall be made at least one bank business day prior to the date of thedesired Advance and such Advance request shall be made by Mark Kalvoda or JonSwanson or David J. Meyer or Ted Christianson or Peter Christianson on behalfof the Borrower.  Notwithstanding theimmediately foregoing sentence, in the absence of bad faith on the part of theBank, regardless of how the Advance is made or requested, the Borrower shall beobligated to repay all Advances notwithstanding the fact that the Personrequesting the same was not in fact authorized to do so.

 

Any request for an Advance,whether written, oral, electronic, telephonic or by way of a cash managementagreement shall be deemed to be a representation by the Borrower that thestatements set forth in Section 3.2 are correct.

 

Section 2.1.3  Discretionary Advances.  The Borrower understands and agrees thatnotwithstanding that conditions to Advances and various covenants and Events ofDefault are set forth herein as would be common to a loan agreement in whichthe lender made a commitment to lend, the Bank may, in its sole discretion andfor any reason whatsoever, refuse to make Advances pursuant to Section 2.1even though the Borrower may be in perfect compliance with this Agreement.

 

Section 2.1.4  Loan Advance Formula.  The Borrower’s ability to request Advancespursuant to Section 2.1 shall be limited in the aggregate principal amountat any one time outstanding, to the lesser of: (a) $25,000,000; or (b) theTotal Loan Value.  Notwithstandinganything to the contrary in this Agreement or under the terms of the Notes, ifat any time the aggregate principal amount outstanding under the Revolving Noteexceeds the lesser of (a) $25,000,000 or (b) the Total LoanValue, the Borrower shall immediately repay to the Bank the amount of theexcess which payment shall be applied to the Revolving Note.

 

Section 2.1.5 CleanUp.  Notwithstanding anything to thecontrary contained in this Agreement or the Revolving Note, the Borrower agreesthat for a period of fifteen (15) consecutive days during the term of theRevolving Note, there shall be no outstanding balance owing the Bank under theRevolving Note.

 

Section 2.1.6 Non-UsageFee.  The Borrower shall pay the Banka non-usage fee (“Non-Usage Fee”) at an annual rate equal to .50% applied tothe average monthly unused

 

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amount of the Revolving Note, as determinedby the Bank in its reasonable discretion, payable monthly on the 1st day of each month, in arrears.  Any Non-Usage Fee remaining unpaid at thetime the Revolving Note is due and payable in full shall be due and payable onthat date.

 

Section 2.2 Letters of Credit.  The Bank may in its sole discretion, issuefor the Borrower’s account, from the date hereof to and including July 13,2010, or until an Event of Default occurs, whichever occurs first, one or moreirrevocable standby letters of credit (each a “Letter of Credit”) to be used tosecure payment to supplier(s) of the Borrower in connection with theBorrower’s purchase of inventory from such suppliers.  The Bank shall have no obligation to issueany Letter of Credit to the extent its face amount would exceed, when combinedwith the face amount of other issued Letters of Credit, the sum of $1,000,000or, when combined with Advances made under Section 2.1 would exceed theTotal Loan Value.  Each Letter of Credit,if any, shall be issued pursuant to a separate L/C Application entered into bythe Borrower and the Bank for the benefit of the issuer, completed in a mannersatisfactory to the Bank.  The terms andconditions set forth in each such L/C Application shall supplement the termsand conditions hereof, but if the terms of any such L/C Application and theterms of this Agreement are inconsistent, the terms of this Agreement shallcontrol.  No Letter of Credit shall beissued with an expiry date later than July 14, 2010.

 

Section 2.2.1 Payment of Amountsdrawn under Letters of Credit; Obligation of Reimbursement.  The Borrower shall reimburse the Bank for alldraws under any Letter of Credit in accordance with the applicable L/CApplication as follows:

 

(a)                                  The Borrowerhereby agrees to pay the Bank on the day a draft is honored under any Letter ofCredit a sum equal to all amounts drawn under such Letter of Credit plus anyand all reasonable charges and expenses that the Bank may pay or incur relativeto such draw and the applicable L/C Application, plus interest on all suchamounts, charges and expenses as set forth below (the Borrower’s obligation topay all such amounts is herein referred to as the “Obligation of Reimbursement”).

 

(b)                                 Whenever adraft is submitted under a Letter of Credit, the Bank may make an Advance underSection 2.1 in the amount of the Obligation of Reimbursement and shallapply the proceeds of such Advance thereto. Such Advance shall be repayable in accordance with and be treated in allother respects as an Advance under Section 2.1.

 

(c)                                  If a draft issubmitted under a Letter of Credit when the Borrower is unable, because anEvent of Default then exists or for any other reason, to obtain an Advance topay the Obligation of Reimbursement, the Borrower shall pay to the Bank ondemand and in immediately available funds, the amount of the Obligation ofReimbursement together with interest, accrued from the date of the draft untilpayment in full.  Notwithstanding theBorrower’s inability to obtain an Advance for any reason, the Bank isirrevocably authorized, in

 

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its sole discretion, to makean Advance in an amount sufficient to discharge the Obligation of Reimbursementand all accrued but unpaid interest thereon.

 

(d)                                 The Borrower’sobligation to repay any Advance made under this Section 2.2, shall beevidenced by the Revolving Note.

 

Section 2.2.2  Discretionary Advances.  The Bank may at any time and for any reasonrefuse to make an Advance or to issue a Letter of Credit for the Borrower’saccount whether the Borrower is or is not in compliance with thisAgreement.  The Bank need not show thatan adverse change has occurred in the Borrower’s condition, financial orotherwise, in order to refuse to issue any Letter of Credit.

 

Section 2.3 Term Loan.  Subject to and upon the terms, covenants andconditions set forth in this Agreement, the Bank agrees to make a singleAdvance to the Borrower under this Section in the amount of FifteenMillion Dollars ($15,000,000.00).  Theobligation to repay the Advance made pursuant to this Section shall beevidenced by a promissory note payable to the Bank, containing the termsrelating to the repayment, interest rate and other matters as set forth in Schedule2.3 attached to and made a part of this Agreement (“Term Note”).  The Advance made pursuant to this Section shallnot be on a revolving credit basis and, accordingly, the Borrower shall not beentitled to reborrow upon any repayment. The purpose for the Advance under this Section 2.3 is for the longterm working capital requirements of the Borrower.

 

Section 2.4  Payment.  All payments of principal and interest underthis Agreement or the Notes shall be made to the Bank in immediately availablefunds.  The Borrower agrees that theamount shown on the books and records of the Bank as being the aggregate amountof Advances outstanding under the Notes shall be prima facie evidence of theprincipal amount of the Notes then outstanding. The Borrower hereby authorizes the Bank, if and to the extent payment isnot promptly made pursuant hereto, to charge against the Borrower’s account withthe Bank an amount equal to the accrued interest and principle from time totime due and payable to the Bank under the Notes.

 

Section 2.5  Payment on Non-Business Days.  Whenever any payment to be made hereunder orunder the Notes shall be stated to be due on a Saturday, Sunday or a holidayfor banks under the laws of the State of North Dakota, or the United States,such payment may be made on the next succeeding bank business day, and suchextension of time shall in such case be included in the computation of paymentof interest on the Notes.

 

Section 2.6  Late Fees.  The Borrower agrees to pay to the Bank a latepayment service charge in an amount equal to five percent (5%) of anyinstallment of principal or interest (excluding any final installment) notreceived by the Bank with respect to the Notes within ten (10) days of thedate due but in no event shall such late payment service charge exceed themaximum amount allowed by law. Acceptance by the Bank of any late fee shall not constitute a waiver of anyEvent of Default.

 

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Section 2.7 Prepayment Premium.  The Borrower shall be entitled to prepay theTerm Note in whole or in part from time to time, which prepayment shall beapplied to the last maturing installment or installments of the Term Note butshall not change the amount of the required monthly payment or in any mannermodify the payment schedule of the Term Note. Any such prepayment shall be subject to a prepayment premium (which theBorrower shall pay on demand to the Bank) equal to five percent (5%) of theprincipal portion of the prepayment in the event the prepayment is made duringthe first year of the Term Note; four percent (4%) of the principal portion ofthe prepayment in the event the prepayment is made during the second year ofthe Term Note; three percent (3%) of the principal portion of the prepayment inthe event the prepayment is made during the third year of the Term Note; twopercent (2%) of the principal portion of the prepayment in the event theprepayment is made during the fourth year of the Term Note; and one percent(1%) of the principal portion of the prepayment in the event the prepayment ismade during the fifth year of the Term Note.

 

ARTICLE III - CONDITIONS OFLENDING

 

Section 3.1  Conditions Precedent to Initial Advance.  The willingness of the Bank to considermaking the Advances under Article II (including the initial Advance) issubject to the condition precedent that the Bank shall have received on orbefore the day of such Advance all of the following, each dated (unlessotherwise indicated) such day, in form and substance satisfactory to the Bank:

 

(a)                                  The RevolvingNote and Term Note duly executed.

 

(b)                                 A certifiedcopy of the resolutions of the Borrower authorizing the execution, delivery andperformance of this Agreement, the Notes, Collateral Documents and othermatters contemplated hereby.

 

(c)                                  Copies of thearticles of incorporation and bylaws of the Borrower certified by its secretaryas being true and correct.

 

(d)                                 Evidence thatthe Borrower is in good standing with the office of the Delaware Secretary ofState, North Dakota Secretary of State, Minnesota Secretary of State, SouthDakota Secretary of State, Nebraska Secretary of State, Iowa Secretary ofState, Montana Secretary of State and Wyoming Secretary of State.

 

(e)                                  Intercreditoragreements executed by Case LLC, Case Credit Corporation, New Holland CreditCompany, LLC, New Holland North America, Inc., GE Commercial DistributionFinance Corporation and such other third party creditors of the Borrower as theBank deems necessary, in form and content satisfactory to the Bank.

 

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(f)                                    A security agreement dulyexecuted and related financing statement, together with any such otherdocumentation required by the Bank, whereby to secure the Obligations of theBorrower to the Bank, the Borrower grants the Bank a perfected security interestin all of the Borrower’s inventory, equipment, fixtures, contract rights,chattel paper, accounts and other rights to payment, deposit accounts andgeneral intangibles whether now owned or hereafter acquired and whereverlocated and the products and proceeds thereof all as more specifically setforth in the security agreement.

 

(g)                                 Evidence thatthe security interest granted by the security agreement referred to in (f) aboveis subject only to the prior liens, if any, contemplated by the intercreditor agreementsreferred to in (e) above and the purchase money liens contemplated by Section 6.2(f).

 

(h)                                 A certificateof insurance evidencing a policy or policies of insurance covering the Borrower’soperations and property as required by Section 5.7 of this Agreement, suchpolicy to insure against all risks and names the Bank as mortgagee/lender losspayee on all property policies which insures the property of the Borrowersubject to the Collateral Documents.

 

(i)                                     A signed copyof an opinion of counsel for the Borrower addressed to the Bank and itsparticipants in form and substance acceptable to the Bank.

 

(j)                                     A completedBorrowing Base Certificate.

 

(k)                                  Copies of allleases of real property under which the Borrower is a tenant, together with aLandlord’s Disclaimer and Consent in favor of the Bank, in form and contentacceptable to the Bank, from the landlord of each such lease properly executedon behalf of such landlord.

 

(l)                                     Any and allother agreements, documents, instruments and powers as the Bank may require ordeem necessary, in its sole discretion, to carry into effect the purposes ofthe documents described in this Section 3.1 and this Agreement.

 

Section 3.2  Conditions Precedent to Advance.  The willingness of the Bank to considermaking each Advance (including the initial Advance) under Article II issubject to the further conditions precedent that on the date of such Advance.

 

(a)                                  Therepresentations and warranties contained in Article IV are correct on andas of the date of such Advance as though made on and as of such date, except tothe extent that such representations and warranties relate solely to an earlierdate.

 

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(b)                                 No event hasoccurred and is continuing, or would result from such Advance, whichconstitutes an Event of Default or would constitute an Event of Default but forthe requirement that notice be given or time elapse or both.

 

ARTICLE IV - REPRESENTATIONSAND WARRANTIES

 

In order to induce the Bank to considermaking the Advances described in this Agreement, the Borrower herebyrepresents, warrants and certifies to the Bank as follows:

 

Section 4.1  Existence and Power.  The Borrower is a Delaware corporation dulyorganized, validly existing and in good standing under the laws of the State ofDelaware, and is duly licensed or qualified to transact business in alljurisdictions, where the character of the property owned or leased or thenature of the business transacted by it makes such licensing or qualificationnecessary.  The Borrower’s chiefexecutive office is located in Fargo, North Dakota.  The Borrower has all requisite power andauthority to conduct its business, to own its properties and to execute anddeliver, and to perform all of its obligations under this Agreement, the Notes,L/C Applications and the Collateral Documents.

 

Section 4.2  Authorization of Borrowing; No Conflict asto Law or Agreements.  The execution,delivery and performance by the Borrower of this Agreement, the Notes, L/CApplications and the Collateral Documents, has been duly authorized by allnecessary corporate action and does and will not (i) require any consentor approval of the shareholders of the Borrower, or any authorization, consentor approval by any governmental department, commission, board, bureau, agencyor instrumentality, domestic or foreign, (ii) violate any provision of anylaw, rule or regulation or of any order, writ, injunction or decreepresently in effect having applicability to the Borrower or of the articles ofincorporation or bylaws of the Borrower, (iii) result in a breach of orconstitute a default under any indenture or loan or credit agreement, lease orinstrument to which the Borrower is a party or by which its properties may bebound or affected, or (iv) result in or require the creation or impositionof any mortgage, deed of trust, pledge, lien, security interest, or othercharge or encumbrance of any nature (other than under the Collateral Documents)upon or with respect to any of the properties now owned or hereafter acquiredby the Borrower.

 

Section 4.3  Financial Condition.  The Borrower has furnished the Bank with anaudited  financial statement as of January 31,2009.  The financial statement fairlyrepresents the financial condition of the Borrower on the date thereof, and wasprepared in accordance with GAAP.  Therehas been no material adverse change in the business, properties or condition(financial or otherwise) of the Borrower since the date of the financialstatement.

 

Section 4.4  Litigation.  There are no actions, suits or proceedingspending or, to the knowledge of the Borrower, threatened or affecting theBorrower or the properties of the Borrower before any court or governmentaldepartment, commission, board, bureau, agency or instrumentality, domestic orforeign, which, if determined adversely, would have a material adverse affecton the financial condition, properties or operations of the Borrower.

 

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Section 4.5  Taxes. The Borrower has filed all federal, state and local tax returns whichare required to be filed and has paid or caused to be paid to the respectivetaxing authorities all taxes as shown on said returns or on any assessmentreceived by them to the extent such taxes have become due.

 

Section 4.6  Titles and Liens.  The Borrower has good title to each of theproperties and assets reflected in the latest financial statement referred toin Section 4.3 free and clear of all mortgages, security interests, liensand encumbrances except for mortgages, security interests and liens disclosedon such financial statement.

 

Section 4.7  Legal Agreements.  This Agreement constitutes, and the Notes,L/C Applications and the Collateral Documents, when executed and deliveredhereunder, will constitute the legal, valid and binding obligations of theBorrower (or the maker thereof), enforceable against it in accordance withtheir respective terms, except as enforcement may be limited by the applicationof bankruptcy and other laws effecting creditors’ rights generally.

 

Section 4.8  Default.  The Borrower is not in default of a materialprovision under any material agreement, instrument, decree or order to which itis a party or by which its properties are bound or affected.

 

Section 4.9  Pension Plans.  The Borrower has not established ormaintained, or made any contributions to, any employee benefit plan which issubject to Part 3 of Subtitle B of Title 1 of ERISA or, if such a plan hasbeen so established, maintained or contributed to, such plan did not have any “accumulatedfunding deficiency” (as that term is defined in Section 302 of ERISA) asof the date hereof, and, without limiting the generality of the foregoing, theBorrower has not incurred any material liability to the Pension BenefitGuaranty Corporation with respect to any such plan.

 

Section 4.10  Environmental Matters.

 

(a)                                  The Borrower isnot in violation of any Environmental Laws; and

 

(b)                                 No disposal orrelease of any hazardous or toxic material has occurred on, from or under anyproperty owned, operated or controlled by the Borrower, except as may haveoccurred in accordance with all applicable Environmental Laws; and

 

(c)                                  There has beenno treatment, manufacturing, refining, handling or storage of any hazardous ortoxic material at any property owned, operated or controlled by the Borrower,except as may have occurred in accordance with all applicable EnvironmentalLaws; and

 

(d)                                 No litigation,investigation or administrative action has been commenced or is pending orthreatened, nor has any settlement been reached with any public or privateparty or parties, or any order issued, relating in any way to any

 

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alleged or actual presence,disposal or release of any hazardous or toxic material or any violation of anyEnvironmental Laws with respect to any property owned, operated or controlledby the Borrower; and

 

(e)                                  The Borrowerand all tenants of the Borrower have filed all notices and permit applicationsrequired to be filed under the Environmental Laws with respect to theirbusinesses, property and operations; and

 

(f)                                    Except as setforth in Schedule 4.10 (f), the Borrower has no known contingentliability with respect to its business, property or operations as now orpreviously owned, operated, controlled or conducted by the Borrower inconnection with any hazardous or toxic material or any Environmental Laws.

 

Section 4.11  Use of Loans.  The Borrower is not engaged, or as one or itsimportant activities, in the business of extending credit for the purpose ofpurchasing or carry margin stock (within the meaning of Regulation U of theBoard of Governors of the Federal Reserve System), and no part of the proceedsof any Advance hereunder will be used to purchase or carry any such marginstock or to extend credit to others for the purpose of purchasing any suchmargin stock.

 

Section 4.12  Licenses, Franchises, Etc.  The Borrower possesses adequate licenses,permits, franchises, patents, copyrights, trade marks and trade names, orrights thereto, to conduct its business substantially as now conducted and aspresently proposed to be conducted.

 

Section 4.13  Consents.  No consent, approval, order or authorizationof, or registration, declaration or filing with, or notice to, any governmentalauthority or any third party is required in connection with the execution anddelivery of this Agreement, the Notes, L/C Applications, Collateral Documents,or any other agreements or instruments mentioned in this Agreement to which theBorrower is a party, or in connection with the carrying out or performance ofany of the transactions required or contemplated hereby or thereby or, ifrequired, such consent, approval, order or authorization has been obtained orsuch registration, declaration or filing has been accomplished or such noticehas been given prior to the date hereof.

 

Each of the representations and warranties made in this Article IVshall be deemed to be repeated and reaffirmed on and as of the date any Advanceis made by the Bank to the Borrower pursuant to Article II hereof and asof the date any Letter of Credit is issued pursuant to Article II hereof.

 

ARTICLE V - AFFIRMATIVECOVENANTS

 

So long as Obligations to the Bank shallremain unpaid, the Borrower will comply with the following requirements unlessthe Bank shall otherwise consent in writing, all in form and substanceacceptable to the Bank:

 

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Section 5.1  Financial Statements, Litigation, Etc.

 

(a)                                  The Borrowerwill deliver to the Bank, as soon as available and in any event within 120 daysafter the end of each fiscal year of the Borrower, a copy of the audit reportof the Borrower with the unqualified opinion of independent certified publicaccountants selected by the Borrower and acceptable to the Bank, all inreasonable detail and all prepared in accordance with GAAP.

 

(b)                                 The Borrowerwill deliver to the Bank within 30 days after the end of each calendar month, abalance sheet of the Borrower as of the end of such month, a related statement ofearnings and retained earnings for such period and for the year to date, and anaccounts receivable aging report and accounts payable report, in reasonabledetail and stating in comparative form the figures for the corresponding dateand period of the previous year, all prepared in accordance with GAAP.

 

(c)                                  As soon asavailable and in any event within 120 days after the end of each fiscal year ofthe Borrower, the Borrower shall deliver to the Bank copies of the federal andstate tax returns (including all forms and supporting schedules) filed by theBorrower for such year.

 

(d)                                 Immediatelyafter the commencement thereof, the Borrower shall provide the Bank with noticein writing of all litigation affecting the Borrower of the type described in Section 4.4or which seek a monetary recovery against the Borrower in excess of $50,000.

 

(e)                                  Immediatelyupon the occurrence thereof, the Borrower shall give the Bank notice of theoccurrence of any Event of Default under this Agreement or any event of whichthe Borrower has knowledge and which, with the passage of time, or giving ofnotice or both, would constitute an Event of Default under this Agreement.

 

(f)                                    Immediatelyupon the occurrence thereof, the Borrower shall give the Bank notice of anymaterial adverse change in the operations, business, properties, assets orconditions, financial or otherwise, of the Borrower, which could adversely andmaterially affect the Borrower’s ability to perform its obligations under thisAgreement, the Notes, L/C Applications or the Collateral Documents.

 

(g)                                 The Borrowerwill deliver to the Bank within 30 days after the end of each calendar month,and as often as the Bank may request, a completed Borrowing Base Certificate.

 

(h)                                 The Borrowerwill deliver to the Bank at such times as the Bank may request, the mostcurrent Dealer Statement from Case and New Holland detailing which items of theBorrower’s inventory are subject to floor plan financing 

 

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from Case and New Holland aswell as comparable documentation from GE Commercial Distribution FinanceCorporation.

 

(i)                                     The Borrowerwill deliver to the Bank at such times as the Bank may request, a monthlyinventory report and new inventory orders report of the Borrower.

 

(j)                                     Concurrentlywith the delivery of the audit report referred to in (a) above, theBorrower will deliver to the Bank a certificate by the CEO of the Borrower (i) certifyingas to whether there exists an Event of Default on the date of such certificateor if an Event of Default then exists specifying the details thereof and theaction which the Borrower has taken or proposes to take with respect thereto, (ii) settingforth in reasonable detail calculations demonstrating compliance with thefinancial covenants set forth in this Agreement, and (iii) stating whetherany change in GAAP or the application thereof has occurred since the date ofthe Borrower’s most recent previously delivered audited financial statementsand, if any changes occurred, specifying the effect of such change on thefinancial statements accompanying such certificate.

 

(k)                                  Concurrentlywith the delivery of the audit report referred to in (a) above, theBorrower will deliver to the Bank a certificate of the accounting firm reportedon such financial statements stating whether it obtained any knowledge duringthe course of its examination of such financial statements of the occurrence ofan Event of Default, (which certificate may be limited to the extent requiredby accounting rules and guidelines).

 

(l)                                     The Borrowershall deliver such other information respecting the financial condition andresults of operations of the Borrower as the Bank may from time to timerequest.

 

Section 5.2  Books and Records; Inspection andExamination.  The Borrower will keepaccurate books of record and account in which true and complete entries will bemade in accordance with GAAP consistently applied and, upon request of theBank, will give any representative of the Bank access to, and permit suchrepresentative to examine, copy or make extracts from, any and all books,records and documents in its possession, to inspect any of its properties andto discuss its affairs, finances and accounts with any of its principalofficers, all at such times during normal business hours and as often as theBank may reasonably request.  Inaddition, the Borrower agrees to permit the Bank or its agents orrepresentatives, at the Borrower’s expense, to conduct periodic collateralaudits of the Borrower’s business and inventories, such audits to be conductednot less often than once each calendar quarter should the Bank so desire.

 

Section 5.3  Compliance with Laws.  The Borrower will comply with therequirements of applicable laws and regulations, the noncompliance with whichwould materially and adversely affect its business or its financial condition.

 

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Section 5.4  Payment of Taxes and Other Claims.  The Borrower will pay or discharge all taxes,assessments and governmental charges levied or imposed upon it or upon itsincome or profits, or upon any properties belonging to it, prior to the date onwhich penalties attach thereto and all lawful claims for labor, materials andsupplies which, if unpaid, might by law become a lien or charge upon anyproperties of the Borrower provided, that the Borrower shall not be required topay any such tax, assessment, charge or claim whose amount, applicability orvalidity is being contested in good faith by appropriate proceedings.

 

Section 5.5  Maintenance of Properties.  The Borrower will keep and maintain all ofits properties necessary or useful in its business in good condition, repairand working order; provided, however, that nothing in this Section shallprevent the Borrower from discontinuing the operation and maintenance of any ofits properties if such discontinuance is, in its judgment, desirable in theconduct of its business and not disadvantageous in any material respect to theBank as holder of the Notes.

 

Section 5.6  Preservation of Existence.  The Borrower will preserve and maintain itscorporate existence and all of its rights, privileges and franchises; provided,however, that the Borrower shall not be required to preserve any of its rights,privileges and franchises if the Borrower shall determine that the preservationthereof is no longer desirable in the conduct of the business of the Borrowerand that the loss thereof is not disadvantageous in any material respect to theBank as the holder of the Notes.

 

Section 5.7  Insurance.  The Borrower shall (i) keep all of itsproperties adequately insured at all times with responsible insurance carriersagainst loss or damage by fire and other hazards, (ii) maintain adequateinsurance at all times with responsible insurance carriers against liability onaccount of damage to persons or property, and (iii) maintain adequateinsurance covering such other risks as the Bank may reasonably request.  For purposes of this Section, insurance shallbe deemed adequate if the same is not less extensive in coverage and amount asis customarily maintained by other entities engaged in the same or similarbusiness.  All insurance policies shallname the Bank as loss payee or beneficiary and shall otherwise be acceptable tothe Bank.  The Borrower shall provide theBank with a detailed list of the insurance in effect, setting forth the namesof the insurance companies, the amounts and rights of insurance, the dates ofexpiration, and the properties and risks covered thereby.  Acceptance of the insurance policies referredto above shall not bar the Bank from requiring additional insurance which itdeems reasonably necessary.  The policiesof insurance referred to herein shall contain an agreement of the insurer togive not less than thirty (30) days advance written notice to the Bank in theevent of cancellation of such policy or change affecting the coveragethereunder.  All such insurance companiesshall be licensed to transact business in the State where the insured propertyis located.  In the event the Borrowerfails to pay any premium on any such insurance, the Bank may do so, and theBorrower shall reimburse the Bank for any such payment on demand.

 

Section 5.8  Environment.  The Borrower shall remain in compliance withthe provisions of all Environmental Laws and shall notify the Bank immediatelyof any notice of any hazardous discharge or other environmental complaintreceived from any governmental agency or any other

 

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Person and shall immediately contain or remove the same in compliancewith all applicable laws and promptly pay any fine or penalty assessed inconnection therewith.  The Borrowerhereby agrees to defend, indemnify, and hold the Bank harmless from and againstany and all claims, damages, judgments, penalties, costs, and expenses(including attorney fees and court costs now or hereafter arising from theenforcement of this Section) arising directly or indirectly from the activitiesof the Borrower, its predecessors in interest, or third parties arisingdirectly or indirectly from any violation of any Environmental Laws.  This indemnity shall survive termination ofthis Agreement.

 

ARTICLE VI -NEGATIVE COVENANTS

 

So long as the Obligations of the Borrower tothe Bank remain unpaid, the Borrower agrees that, without the prior writtenconsent of the Bank:

 

Section 6.1  Indebtedness.  The Borrower will not incur, create, assumeor permit to exist any indebtedness or liability on account of deposits oradvances or any indebtedness for borrowed money, or any other indebtedness orliability evidenced by notes, bonds, debentures, installment sale contracts orsimilar obligations except the following:

 

(a)           Pledges or deposits held by the Borrower under federal andstate laws relating to the payroll of the Borrower.

 

(b)           The obligations to the Bank under the Notes.

 

(c)           The indebtedness and obligations described in thefinancial statement referred to in Section 4.3 of this Agreement.

 

(d)           Purchase money obligations incurred by the Borrower fornew inventory purchased by the Borrower in the ordinary course of the operationof the business of the Borrower.

 

Section 6.2  Liens. The Borrower will not create, incur, assume or suffer to exist anymortgage, deed of trust, pledge, lien, security interest, or other charge orencumbrance of any nature on any of its assets, now owned or hereafter acquiredor assign or otherwise convey any right to receive income excluding, however,from the operation of the foregoing:

 

(a)           Liens for taxes or assessments or other governmentalcharges to the extent not required to be paid by Section 5.4.

 

(b)           Materialmen’s, merchants’, carriers’, workmen’s, repairmen’sor other like liens arising in the ordinary course of business to the extentnot required to be paid by Section 5.4.

 

(c)           Pledges or deposits to secure obligations under workmen’scompensation laws, unemployment insurance and social security laws, or tosecure the performance of bids, tenders, contracts (other than for therepayment of borrowed money) or leases or to secure

 

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statutory obligations or surety or appealbonds, or to secure indemnity, performance or other similar bonds in theordinary course of business.

 

(d)           Zoning restrictions, easements, licenses, restrictions onthe use of real property or minor irregularities in title thereto, which do notmaterially impair the use of such property in the operation of the Borrower’sbusiness or the value of such property for the purpose of such business.

 

(e)           Security interest and liens granted to the Bank under theCollateral Documents.

 

(f)            Purchase money security interests for new inventorypurchased by the Borrower from its suppliers in the ordinary course of theoperation of the business of the Borrower.

 

(g)           The security interests, mortgages and liens that arereflected on the financial statement of the Borrower referred to in Section 4.3of this Agreement.

 

Section 6.3  Conduct of Business.  The Borrower will not enter into or engage inany business which is not presently conducted by the Borrower.

 

Section 6.4  Sale of Assets.  The Borrower will not sell, lease, assign,transfer or otherwise dispose of any of its assets (whether in one transactionor in a series of transactions) to any Person other than in the ordinary courseof business.

 

Section 6.5  Sale and Leaseback.  The Borrower will not enter into anyarrangement, directly or indirectly, with any other Person whereby it shallsell or transfer any real or personal property, whether now owned or hereafteracquired, and then or thereafter rent or lease as lessee such property or anypart thereof or any other property which it intends to use for substantiallythe same purpose or purposes as the property being sold or transferred.

 

Section 6.6  Consolidation/Merger.  The Borrower will not consolidate with ormerge into any Person or permit any other Person to merge into it, or acquire(in a transaction analogous in purpose or effect to a consolidation or merger),any assets of any Person.

 

Section 6.7  Guaranties. The Borrower will notassume, guarantee, endorse or otherwise become liable for the obligation of anyPerson except by endorsement of negotiable instruments for deposit orcollection in the ordinary course of business, nor sell any notes or accountsreceivable with recourse.

 

Section 6.8 Current Ratio.  As measured at the end of each fiscal quarterof the Borrower, the Borrower shall not allow its ratio of Current Assets toCurrent Liabilities to be less than 1.20 to 1.00.

 

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Section 6.9  Debt to Tangible Net Worth.  As measured at the end of each fiscal year ofthe Borrower, the Debt of the Borrower shall not exceed the Tangible Net Worthof the Borrower by a ratio greater than 3.50 to 1.00.

 

Section 6.10 Debt Service CoverageRatio.  As measured at the end ofeach fiscal quarter of the Borrower, the Borrower shall not allow its debtservice coverage ratio to be less than 1.20 to 1.00 on a rolling twelve monthbasis.  Debt service coverage ratio shallbe defined as the ratio computed when the sum of (i) net operatingincome;  plus (ii) depreciation andamortization expense; plus (iii) interest expense is divided by the sum of(i) current maturities of long term debt; plus (ii) interest expensefor interest actually paid.

 

Section 6.11  Distributions.  Upon the occurrence of an Event of Default,the Borrower shall not make any distributions to the shareholders of theBorrower whether in cash, assets or in obligations of the Borrower; or pay orremit any salary, loan, rent, bonus, consultant fee or other form ofcompensation to the shareholders of the Borrower or allocate or otherwise setapart any sum for the payment of any dividend or distribution on, or for thepurchase or redemption of any shareholder interests; or make any otherdistribution to the shareholders of the Borrower.

 

Section 6.12  Subsidiaries.  Except for Transportation Solutions LLC whichis a wholly owned subsidiary of the Borrower, the Borrower has no subsidiaries[Persons in which the Borrower owns or controls, directly or indirectly, 50% ormore of the voting ownership interest of such Person (“Subsidiaries”)] oraffiliates and shall not create or permit to exist any Subsidiaries of theBorrower.

 

Section 6.13  Fiscal Year.  The Borrower shall not change its fiscalyear.

 

Section 6.14 Organizational Documents..  The Borrower shall not amend, modify,replace or restate its articles of incorporation or bylaws.

 

Section 6.15 Acquisitions.  The Borrower shall not acquire, in whole orin part, any stock or other ownership interest in any Person nor shall itacquire in any transaction or series of transactions all or a substantial partof any of the assets of any Person.

 

Section 6.16 New Equipment InventoryTurnover.  As measured at the end ofeach fiscal quarter of the Borrower, the Borrower shall not allow its ratio of (i) thecost of goods sold of New Equipment Inventory to (ii) the dollar value ofthe Borrower’s new equipment inventory, accounted for at the lower of cost orfair market value computed on a first-in first-out basis to be less than 1.75to 1.00 on a rolling twelve month basis.

 

Section 6.17 Used Equipment InventoryTurnover.  As measured at the end ofeach fiscal quarter of the Borrower, the Borrower shall not allow its ratio of (i) thecost of goods sold of Used Equipment Inventory to (ii) the dollar value ofthe Borrower’s Used Equipment Inventory, accounted for at the lower of cost orfair market value computed on a first-in first-out basis to be less than 1.75to 1.00 on a rolling twelve month basis.

 

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Section 6.18 Parts Inventory Turnover.  As measured at the end of each fiscal quarterof the Borrower, the Borrower shall not allow its ratio of (i) the cost ofgoods sold of parts inventory to (ii) the dollar value of the Borrower’sparts inventory, accounted for at the lower of cost or fair market valuecomputed on a first-in first-out basis to be less than 1.50 to 1.00 on arolling twelve month basis.

 

ARTICLE VII - EVENTS OFDEFAULT, RIGHTS AND REMEDIES

 

Section 7.1   Event of Default.  “Event of Default,” wherever used herein,means any one of the following events:

 

(a)                                  Failure to makeany payment, when due, of the principal or interest of any of the Notes.

 

(b)                                 Anyrepresentation or warranty made by the Borrower in this Agreement or by theBorrower in any certificate, instrument or statement contemplated by or made ordelivered pursuant to or in connection with this Agreement, shall prove to havebeen incorrect in any material respect when made.

 

(c)                                  Default in theperformance, or breach, of any covenant or agreement of the Borrower in thisAgreement or by the Borrower or any maker of any covenant or agreement in theCollateral Documents, Notes, L/C Applications or any other agreement with theBank (other than a covenant or agreement a default in whose performance orwhose breach is elsewhere in this Section specifically dealt with).

 

(d)                                 The Borrowershall voluntarily file, or have filed against them involuntarily, a petitionfor liquidation, reorganization, adjustment of debt or similar relief under thefederal Bankruptcy Code or any present or future state or other federalbankruptcy or insolvency law, or a receiver, trustee, or similar officer shallbe appointed for it or for all or a substantial part of their property.

 

(e)                                  The renderingagainst the Borrower of a final judgment, decree or order for the payment ofmoney and the continuance of such judgment, decree or order unsatisfied and ineffect for any period of 30 consecutive days without a stay of execution.

 

(f)                                    A default underany bond, debenture, note or other evidence of indebtedness of the Borrower(including to the Bank) or under any indenture or other instrument under whichany such evidence of indebtedness has been issued or by which it is governedand the expiration of the applicable period of grace, if any, specified in suchevidence of indebtedness, indenture or other instrument.

 

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(g)                                 The CollateralDocuments shall, at any time after their execution and delivery and for anyreason, cease (i) to create a valid and perfected first prioritylien/security interest (unless otherwise provided for in this Agreement) in andto the property purported to be subject to such Collateral Documents; or (ii) tobe in full force and effect or shall be declared null and void, or the validityor enforceability thereof shall be contested by the maker of such CollateralDocuments, or the maker shall deny it has any further liability or obligationunder the Collateral Documents.

 

(h)                                 If the Borrowershall dissolve or cease to be a validly existing corporation under the laws ofthe State of Delaware or cease to be authorized to do business in the State(s) ofNorth Dakota, South Dakota, Nebraska, Iowa, Montana, Wyoming and Minnesota orany other jurisdiction in which it is required to be authorized to do business.

 

(i)                                     In the eventthe Borrower is in default of its Master Dealer Agreements with Case or New Holland.

 

(j)                                     In the eventthe Master Dealer Agreements of the Borrower with Case or New Holland arecancelled or terminated for any reason.

 

(k)                                  In the eventthe Borrower is no longer authorized, for any reason, to be a Case or NewHolland dealer for any of its dealerships located at the Premises  (or any dealership locations subsequentlyacquired) provided that the combined gross revenue from the dealerships thatare no longer authorized to be Case or New Holland dealers equals or exceeds,in the aggregate, twenty-five percent (25%) or more of the gross revenue of theBorrower as set forth in the audited financial statement referred to in Section 4.3.

 

Section 7.2  Rights and Remedies.  Immediately upon the occurrence of an Eventof Default or at any time thereafter until such Event of Default is cured tothe written satisfaction of the Bank, the Bank may exercise any one or more ofthe following rights and remedies:

 

(a)                                  The Bank may,without notice to the Borrower, declare all Obligations then outstanding, allinterest accrued and unpaid thereon, and all other amounts payable under thisAgreement to be forthwith due and payable, whereupon such Obligations, all suchaccrued but unpaid interest and all such amounts shall become and be forthwithdue and payable, without presentment, demand, protest or further notice of anykind, all of which are hereby expressly waived by the Borrower.

 

(b)                                 The Bank may,without notice to the Borrower, and without further action, set-off and applyany and all money owing by the Bank to the Borrower to

 

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the payment of theObligations, then outstanding, including interest accrued thereon, and of allother sums then owing by the Borrower.

 

(c)                                  The Bank mayexercise and enforce the rights and remedies available to it under the Notes,Collateral Documents, or any other agreement or by law.

 

ARTICLE VIII - MISCELLANEOUS

 

Section 8.1  No Obligation To Renew.  The Borrower understands and expressly agreesthat the Bank is under no obligation to renew or extend this Agreement, theNotes or Letters of Credit or provide any other or additional financing.  The Bank’s decision with respect to anyrenewals, extensions or additional financing will be a separate, independentdecision and may involve factors other than, or in addition to, the Borrower’screditworthiness or prior relationship with the Bank.

 

Section 8.2  No Waiver; Cumulative Remedies.  No failure or delay on the part of the Bankin exercising any right, power or remedy hereunder shall operate as a waiverthereof; nor shall any single or partial exercise of any such right, power orremedy preclude any other or further exercise thereof or the exercise of anyother right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of anyremedies provided by law.

 

Section 8.3  Amendments.  No amendment, modification, termination orwaiver of any provision of this Agreement, the Collateral Documents, the Notes,or any other document contemplated by this Agreement, or consent by the Bank toany departure therefrom shall be effective unless the same shall be in writingand signed by the Bank and then such waiver or consent shall be effective onlyin the specific instance and for the specific purpose which given.  No notice to or demand on the Borrower in anycase shall entitle the Borrower to any other or further notice or demand insimilar or other circumstances.

 

Section 8.4  Addresses for Notices.  Except as otherwise expressly providedherein, all notices, requests, demands and other communications provided forhereunder shall be in writing and mailed or delivered to the applicable partyat its address indicated below:

 

If to the Borrower:

 

Titan Machinery Inc.

ATTN: David J. Meyer

PO Box 10818

Fargo, ND 58106-0818

 

If to the Bank:

 

Bremer Bank, N.A.

ATTN: Wes Well

PO Box 273

Lisbon, ND 58054-0273

 

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or, as to each party, at such other address as shall be designated bysuch party in a written notice to the other party complying as to delivery withthe terms of this section.  All suchnotices, requests, demands and other communications shall, when mailed, beeffective when deposited in the mails, addressed as aforesaid, except thatnotices or requests to the Bank pursuant to any of the provisions of Article IIshall not be effective until received by the Bank.

 

Section 8.5  Execution in Counterparts.  This Agreement may be executed in any numberof counterparts, each of which when so executed and delivered shall be deemedto be an original and all of which counterparts, when taken together, shallconstitute but one and the same instrument.

 

Section 8.6  Binding Effect, Assignment.  This Agreement shall be binding upon andinure to the benefit of the Borrower, and the Bank, and its respectivesuccessors and assigns, except that the Borrower shall not have the right toassign its rights hereunder or any interest herein without the prior writtenconsent of the Bank.

 

Section 8.7  Governing Law.  The loan to the Borrower as evidenced by thisAgreement was negotiated and made within the State of North Dakota and,accordingly, shall be governed by, and construed in accordance with, the lawsof the State of North Dakota.

 

Section 8.8  Severability of Provisions.  Any provision of this Agreement which isprohibited or unenforceable shall be ineffective to the extent of suchprohibition or unenforceability without invalidating the remaining provisionshereof.

 

Section 8.9  Further Assurances.  The Borrower agrees to do such further actsand things and execute and deliver such agreements, powers and instruments asthe Bank may reasonably require or deem necessary to carry into effect thepurposes of this Agreement.

 

Section 8.10  Conflicting Provisions.  This Agreement shall control with respect toany of its provisions that conflict or are inconsistent with the Notes,Collateral Documents, and any other such documents executed in connection withthis Agreement, but to the extent not conflicting or inconsistent, the Notes,Collateral Documents, and any other such documents executed in connection withthis Agreement, shall be in full force and effect.

 

Section 8.11  Relationship.  The Bank is acting in its sole capacity as alending institution with respect to the Borrower and there is no partnership oragency relationship created.  The Bankassumes no fiduciary duty and no conditions or suggestions of action orinaction shall be deemed to constitute participation by the Bank in the businessof the Borrower.

 

Section 8.12  Ramification of Provisions.  The Borrower has reviewed this Agreement, theNotes, Collateral Documents, and any other such documents executed inconnection with this Agreement, and has had the opportunity to consult with itsattorneys regarding the ramifications and

 

24

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effect of this Agreement, the Notes, Collateral Documents, and othersuch documents executed in connection with this Agreement.

 

Section 8.13  Entire Agreement.  This Agreement constitutes the entireagreement between the parties and shall not in any way be modified, varied oramended unless in writing signed by the parties.

 

Section 8.14  Headings.  Such headings used in this Agreement are forthe convenience of reference only and shall not affect the construction of thisAgreement.

 

Section 8.15  Jurisdiction/Venue.  The Borrower consents to jurisdiction as toall issues concerning or relating to this Agreement, the Notes and theCollateral Documents with the federal or state district courts designated forRansom County, North Dakota.

 

Section 8.16  Expenses.  The Borrower shall, on demand by the Bank,reimburse the Bank for any and all costs and expenses, including withoutlimitation reasonable attorneys’ fees, paid or incurred by either the Bank inconnection with (i) the preparation of this Agreement, the Notes, theCollateral Documents, and any other document or agreement related hereto orthereto, and the transactions contemplated hereby, which amount shall be paidprior to the making of any Advance hereunder; (ii) the negotiation of anyamendments, modifications or extensions to or any of the foregoing documents,instruments or agreements and the preparation of any and all documentsnecessary or desirable to effect such amendments, modifications or extensions;and (iii) the enforcement by the Bank during the term hereof or thereafterof any of the rights or remedies of the Bank under any of the foregoingdocuments, instruments or agreements or under applicable law, whether or notsuit is filed with respect thereto.

 

Section 8.17  Adequate Financing.  The Borrower warrants and represents that theextensions of credit provided for under the terms and conditions of thisAgreement constitute adequate and sufficient financing by the Bank.

 

Section 8.18  Participation/Assignments.  The Bank shall have the right, but not theobligation, to assign all or a portion of the indebtedness evidenced by theNotes or grant participation in all or a portion of the indebtedness evidencedby the Notes to other Persons and shall have the right to disclose any and allinformation, financial or otherwise, regarding the Borrower to such potentialparticipants and assignees.

 

Section 8.19  Interest Limitation.  All agreements between the Bank and theBorrower are expressly limited so that in no contingency or event whatsoever,whether by reason of acceleration of maturity or prepayment of the obligationsof the Borrower owing the Bank, shall the amount of interest paid or agreed tobe paid to Bank for the use, forbearance, loaning or retention of theobligations of the Borrower owing the Bank exceed the maximum permissibleinterest rate under applicable law.  If,from any circumstances whatsoever, fulfillment of any provisions of any of theNotes or Collateral Documents shall involve transcending the limit of validityprescribed by law, then the obligation to be fulfilled shall automatically bereduced to the limit of such validity. If,

 

25

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from any circumstances, the Bank should ever receive as interest anamount which would exceed the highest lawful interest rate, such amount whichwould be in excess of such highest lawful interest rate shall be applied toreduction of the principal balance evidenced by the Notes and not to thepayment of interest.  This provisionshall control every other provision of the Notes and Collateral Documentsbetween the Bank and the Borrower and shall be binding upon and available toany subsequent holder of the Notes.

 

Section 8.20  Prior Documentation.  The Borrower shall be bound by and shallcontinue to comply with all documents previously executed and delivered to theBank including, but not limited to, security agreements, financing statementsand subordination agreements except to the extent that this Agreement isinconsistent or conflicting with any such previous agreements ordocuments.  This Agreement shall replacethat certain loan agreement among the Bank and the Borrower dated August 28,2008.

 

Section 8.21  Waiver of Jury.  In the interest of expediting any disputesthat might arise between the parties to this Agreement, the parties herebywaive their respective rights to a trial by jury of any dispute or claimconcerning this Agreement, the Notes, the Collateral Documents and any otherdocuments or agreements contemplated by or executed in connection with thisAgreement.

 

IN WITNESS WHEREOF, the parties hereto havecaused this Agreement to be executed as of the date first above written.

 

 
|   | BREMER BANK, N.A.    |
|--------|----------------------|
|   |                 |   |
|   |                 |   |
|   | By                   | /s/ Wes Well |
|   |                 | Wes Well |
|   |                 | President |
|   |                 |   |
|   |                 |   |
|   | TITAN MACHINERY INC. |
|   |                 |   |
|   |                 |   |
|   | By                   | /s/ David J. Meyer |
|   |                 | David J. Meyer |
|   |                 | Its CEO and Chairman |

 

26

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DISCRETIONARYREVOLVING

PROMISSORYNOTE

(Note)

 
| $25,000,000 |   | Lisbon,  North Dakota |
|-------------|--------|-----------------------|
|        |   | July 15, 2009    |

 

For value received, the undersigned, **TITAN MACHINERY INC.**, a Delawarecorporation (“Borrower”), promises to pay to the order of **BREMER BANK, NATIONAL ASSOCIATION**, anational banking association, (“Bank”) at its office in Lisbon, North Dakota orsuch other place as the holder hereof may from time to time in writingdesignate, in lawful money of the United States of America, the principal sumof Twenty-five Million Dollars ($25,000,000), or, if less, the aggregate unpaidprincipal amount of all Advances made by the Bank to the undersigned pursuantto Section 2.1 of that certain Loan Agreement between the Borrower and theBank dated July 15, 2009, (together with all amendments, modifications andrestatements thereof the “Agreement”), and remaining unpaid at maturity,together with interest on all principal amounts hereunder remaining unpaid fromtime to time from the date of the initial Advance hereunder at an annual rate(computed on a 365/360 basis; that is by applying the ratio of the annualinterest rate over a year of 360 days, multiplied by the outstanding principalbalance, multiplied by the actual number of days the principal balance isoutstanding) equal to the Index Rate less .25 percentage points.  Notwithstanding the foregoing, at no timeshall the interest rate be less than four and one-half percent (4.5%).  As used herein, the Index Rate means the rateof interest announced as the Bremer Financial Reference Rate which rate issubject to change from time to time.  TheIndex Rate is not necessarily the lowest rate charged by the Bank on its loansand is set by the Bank in its sole discretion. The Borrower understands that the Bank may make loans based on otherrates as well.  If the Index Rate becomesunavailable during the term of this Revolving Note, the Bank may designate asubstitute Index Rate.  The Bank willadvise the Borrower of the current Index Rate upon the Borrower’s writtenrequest.  The Index Rate change will notoccur more than once daily.  The IndexRate as of the date of this Revolving Note is equal to three and one-quarterpercent (3.25%) resulting in an initial rate of interest under this RevolvingNote of three percent (3%) subject to the floor of four and one-half percent(4.50%) as set forth above.  Under nocircumstances will the interest rate on this Revolving Note be more than themaximum rate allowed by applicable law.

 

The entire principal balance, and any unpaidaccrued interest, of this Revolving Note shall be due on July 14, 2010,unless payment in full is demanded earlier under the Agreement.  Accrued interest on this Revolving Note shallbe paid monthly commencing August 1, 2009, and continuing on the same dayof each month thereafter until this Revolving Note is paid in full.

 

This Revolving Note is the Revolving Notereferred to in the Agreement and the holders hereof are entitled to all of thebenefits provided for in the Agreement, to which Agreement reference is herebymade for a statement of the terms and conditions under which this indebtednesswas incurred and is to be repaid and under which provisions of the due date ofthis Revolving Note may

 

Schedule 2.1

 

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be accelerated.  Payment of thisRevolving Note is secured by the Collateral Documents referred to in theAgreement.  The provisions of theAgreement are incorporated by reference herein with the same force and effectas though fully set forth herein.  Theterms used in this Revolving Note shall have the same definitions as providedfor in the Agreement.

 

This Revolving Note shall be subject to alate payment service charge as set forth in the Agreement.

 

This Revolving Note shall be subject to theNon-Usage Fee as set forth in the Agreement.

 

All payments on this Revolving Note shall befirst applied to the payment of any costs of collection and attorneys’ feesthat may be due hereon (as allowed by law), then to the payment of accruedinterest and finally to the payment of principal.

 

This Revolving Note is issued and shall begoverned by the laws of the State of North Dakota.  All makers, endorsers, sureties, guarantors,and other accommodation parties hereby waive presentment for payment, protestand notice of non-payment; and a consent without affecting their liabilityhereunder, to any and all extensions, renewals, substitutions, and alterationsof any of the terms of this Note and to release of, or failure by the Bank toexercise any rights against, any party liable for or any property securingpayment thereof.

 

The Borrower hereby waives the right to anyjury trial in any action, proceeding or counterclaim brought by either the Bankor the Borrower against the other.

 

 
|   | TITAN MACHINERY INC. |
|--------|----------------------|
|   |                 |
|   |                 |   |
|   | By                   | /s/ David J. Meyer |
|   |                 | David J. Meyer |
|   |                 | Its CEO and Chairman |

 

----

 

PROMISSORYNOTE

(Term Note)

 
| $15,000,000 |   | Lisbon, North Dakota |
|-------------|--------|----------------------|
|        |   | July 15, 2009   |

 

For value received, the undersigned, **TITAN MACHINERY INC.**, a Delawarecorporation (“Borrower”), promises to pay to the order of **BREMER BANK, NATIONAL ASSOCIATION**, anational banking association, (“Bank”) at its office in Lisbon, North Dakota orsuch other place as the holder hereof may from time to time in writingdesignate, in lawful money of the United States of America, the principal sumof Fifteen Million Dollars ($15,000,000) together with interest on the unpaidprincipal balance from the date of this Term Note at an annual rate (computedon a 365/360 basis; that is by applying the ratio of the annual interest rateover a year of 360 days, multiplied by the outstanding principal balance,multiplied by the actual number of days the principal balance is outstanding)equal to 5.90 %.  Under no circumstanceswill the interest rate on this Term Note be more than the maximum rate allowedby applicable law.

 

The Advance made pursuant to this Term Noteshall not be on a revolving credit basis and, accordingly, the Borrower shallnot be entitled to reborrow upon any prepayment.

 

Principal and interest due under this TermNote shall be payable in consecutive monthly installments of $289,300,commencing on August 1, 2009 and continuing on the 1st day of each monththereafter until July 1, 2014 when the balance of all unpaid principal andaccrued interest of this Term Note shall be due and payable in full unlesspayment in full is demanded earlier under the Agreement.

 

This Term Note is the Term Note referred toin that certain Loan Agreement between the Bank and the Borrower dated July 15,2009 (together with all amendments, modifications and restatements thereof the(“Agreement”) and the holders hereof are entitled to all of the benefitsprovided for in the Agreement, to which Agreement reference is hereby made fora statement of the terms and conditions under which this indebtedness wasincurred and is to be repaid and under which provisions of the due date of thisTerm Note may be accelerated.  Payment ofthis Term Note is secured by the Collateral Documents referred to in theAgreement.  The provisions of theAgreement are incorporated by reference herein with the same force and effectas though fully set forth herein.  Theterms used in this Term Note shall have the same definitions as provided for inthe Agreement.

 

This Term Note shall be subject to a latepayment service charge as set forth in the Agreement.  This Term Note is also subject to theprepayment premium contemplated by the Agreement.

 

Schedule2.3

 

All payments on this Term Note shall be firstapplied to the payment of any costs of collection and attorneys’ fees that maybe due hereon (as allowed by law), then to the payment of accrued interest andfinally to the payment of principal.

 

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This Term Note is issued and shall begoverned by the laws of the State of North Dakota.  All makers, endorsers, sureties, guarantors,and other accommodation parties hereby waive presentment for payment, protestand notice of non-payment; and a consent without affecting their liabilityhereunder, to any and all extensions, renewals, substitutions, and alterationsof any of the terms of this Term Note and to release of, or failure by the Bankto exercise any rights against, any party liable for or any property securingpayment thereof.

 

The Borrower hereby waives the right to anyjury trial in any action, proceeding or counterclaim brought by either the Bankor the Borrower against the other.

 

 
|   | TITAN MACHINERY INC. |
|--------|----------------------|
|   |                 |
|   |                 |   |
|   | By                   | /s/ David J. Meyer |
|   |                 | David J. Meyer |
|   |                 | Its President |

 

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