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Warehouse Borrower granted Finance Co. a security interest in forklifts, inventory, accounts, and equipment. The loan agreement stated that default would occur if Borrower failed to maintain insurance on the equipment, moved collateral outside the state without consent, failed to deliver quarterly financial statements within 30 days after quarter-end, or sold equipment outside the ordinary course without remitting the sale proceeds to Finance Co. Borrower has made every payment on time.
During a field audit, Finance Co. discovered that Borrower's equipment insurance lapsed for 18 days before being reinstated, two forklifts were moved to a neighboring state for a short project, the latest financial statements were 45 days late, and Borrower sold an obsolete conveyor to a scrap buyer without remitting the proceeds. Borrower argues that none of these events should matter because no payment was missed and Finance Co. suffered no proven loss.
Discuss which events may constitute defaults and what facts would matter in deciding whether Finance Co. may treat the loan as in default.