<PAGE>
AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
SECURITIES ACT FILE NO. 333-1670
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 1
[_]
POST-EFFECTIVE AMENDMENT NO.
----------------
MEDALLION FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
205 EAST 42ND STREET, SUITE 2020, NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 682-3300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------
ALVIN MURSTEIN
CHIEF EXECUTIVE OFFICER
MEDALLION FINANCIAL CORP.
205 EAST 42ND STREET, SUITE 2020
NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
STEVEN N. FARBER, ESQ. MARIO M. CUOMO, ESQ.
STANLEY KELLER, ESQ. CHRISTOPHER E. MANNO, ESQ.
WILLKIE FARR & GALLAGHER
PALMER & DODGE LLP
ONE BEACON STREET 153 EAST 53RD STREET
BOSTON, MASSACHUSETTS 02108 NEW YORK, NEW YORK 10022
(617) 573-0100 (212) 821-8000
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box [_]
It is proposed that this filing will become effective (check appropriate
box):
[_] when declared effective pursuant to Section 8(c) of the Securities Act of
1933.
[_] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933 and the
Securities Act registration statement number of the earlier effective
registration statement for the same offering is 333- .
[_] This Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933 and the Securities Act registration
statement number of the earlier effective registration statement for the
same offering is 333- .
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box: [_]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES BEING BEING OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- - - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 5,750,000 $12.00 $69,000,000 $23,793.10(3)
</TABLE>
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
(1) Includes 750,000 shares which may be sold by the Company pursuant to an
option granted to the Underwriters solely to cover over-allotments, if
any.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933.
(3) This amount was paid in connection with the initial filing of the
Registration Statement on February 26, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
<PAGE>
MEDALLION FINANCIAL CORP.
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM NO. ITEMS IN PARTS A AND B OF FORM N-2 LOCATION IN PROSPECTUS
-------- ---------------------------------- ----------------------
<C> <S> <C>
1. Outside Front Cover........... Front Cover Page
2. Inside Front and Outside Back Front Cover Page and Outside Back
Cover Page.................... Cover Page
3. Fee Table and Synopsis........ Prospectus Summary; Fees and Expenses
4. Financial Highlights.......... Prospectus Summary; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations
5. Plan of Distribution.......... Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders.......... Not Applicable
7. Use of Proceeds............... Prospectus Summary; Use of Proceeds;
Business
8. General Description of the Cover Page; Prospectus Summary; Risk
Registrant.................... Factors; The Company; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Investment Objectives,
Policies and Restrictions;
Determination of Net Asset Value;
Financial Statements
9. Management.................... Management; Custodian, Transfer Agent,
Dividend Disbursing Agent and
Registrar; Investment Objectives,
Policies and Restrictions
10. Capital Stock, Long Term Debt,
and Other Securities......... Business; Dividend Reinvestment Plan;
Federal Income Tax Considerations;
Description of Capital Stock
11. Defaults and Arrears on Senior Not Applicable
Securities....................
12. Legal Proceedings............. Not Applicable
13. Table of Contents of the
Statement of Additional
Information.................. Not Applicable
14. Cover Page.................... Not Applicable
15. Table of Contents............. Not Applicable
16. General Information and Business
History.......................
17. Investment Objective and Business; Investment Objectives,
Policies...................... Policies and Restrictions
18. Management.................... Management; Principal Stockholders
19. Control Persons and Principal
Holders of Securities........ Principal Stockholders
20. Investment Advisory and Other Management; Custodian, Transfer Agent,
Services...................... Dividend Disbursing Agent and
Registrar; Experts; Investment
Objectives, Policies and Restrictions
21. Brokerage Allocation and Other Not Applicable
Practices.....................
22. Tax Status.................... Federal Income Tax Considerations
23. Financial Statements.......... Index to Financial Statements;
Financial Statements
</TABLE>
- - - ----------
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED APRIL 30, 1996
5,000,000 SHARES
[LOGO] MEDALLION
FINANCIAL CORP.
COMMON STOCK
All of the shares of Common Stock, $.01 par value (the "Common Stock"),
offered hereby (the "Offering") are being sold by Medallion Financial Corp.
(the "Company").
The Company is a specialty finance company with a leading position in the
origination and servicing of loans financing the purchase of taxicab medallions
and related assets. The Company also originates and services commercial
installment loans financing small businesses in other targeted industries. In
addition, the Company operates a taxicab rooftop advertising business. See
"Business." The Company was organized to expand the specialty finance and
taxicab rooftop advertising businesses conducted by several companies which
will be acquired simultaneously with the closing of the Offering. See "The
Company."
Prior to the Offering there has been no public market for the Common Stock.
The Common Stock has been approved, subject to official notice of issuance, for
quotation on the Nasdaq National Market under the symbol "TAXI." It is
currently anticipated that the initial public offering price will be between
$10.00 and $12.00 per share. For a discussion of the factors considered in
determining the initial public offering price, see "Underwriting." The Company
is a closed-end, non-diversified management investment company that has elected
to be treated as a business development company under the Investment Company
Act of 1940, as amended.
This Prospectus sets forth the information about the Company that a
prospective investor should know before purchasing Common Stock. Prospective
investors are advised to read this Prospectus and retain it for future
reference.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS FOR INFORMATION THAT
PROSPECTIVE INVESTORS SHOULD CONSIDER IN CONNECTION WITH THEIR INVESTMENT
DECISION.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- - - --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO PUBLIC SALES LOAD(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
- - - -------------------------------------------------------------------------------------
Total(3).................................. $ $ $
</TABLE>
- - - --------------------------------------------------------------------------------
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(1) Excludes financial advisory fees payable by the Company. The Company has
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Certain
Transactions" and "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted a 30-day option to the Underwriters to purchase up
to an aggregate of 750,000 additional shares of Common Stock at the Price
to Public less Sales Load, solely to cover over-allotments, if any. If all
of such shares are purchased, the total Price to Public, Sales Load and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters, and subject to various prior
conditions, including the right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made against payment
therefor at the offices of Furman Selz LLC in New York, New York on or about
, 1996.
FURMAN SELZ
J.C. BRADFORD & CO.
EVEREN SECURITIES, INC.
----------
The date of this Prospectus is , 1996
<PAGE>
[MAP AND PHOTOGRAPHS APPEAR HERE]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
<PAGE>
PROSPECTUS SUMMARY
Medallion Financial Corp. ("Medallion Financial") was recently organized to
acquire and expand the specialty finance businesses conducted by Tri-Magna
Corporation ("Tri-Magna"), Edwards Capital Company ("Edwards") and
Transportation Capital Corp. ("TCC" and, collectively with Tri-Magna and
Edwards, the "Founding Companies") as well as the taxicab rooftop advertising
business conducted by Tri-Magna. Tri-Magna has conducted its specialty finance
and taxicab rooftop advertising businesses through its wholly owned
subsidiaries, Medallion Funding Corp. ("MFC") and Medallion Media, Inc.
("Media"), respectively, and references herein to Tri-Magna include such
subsidiaries unless the context indicates otherwise. Simultaneously with, and
as a condition to, the closing of the Offering, Medallion Financial will
acquire each of the Founding Companies (the "Acquisitions"). See "Business --
Formation Transactions." In connection with the Acquisitions, Medallion
Financial has filed an application for an exemptive order under the Investment
Company Act of 1940, as amended (the "1940 Act"), with the Securities and
Exchange Commission (the "Commission"). See "Additional Information." The
Acquisitions and the Offering are contingent upon the receipt of such exemptive
order. Unless the context indicates otherwise, all references herein to the
"Company" include Medallion Financial Corp. and the Founding Companies
collectively as if their operations had been conducted on a combined basis
prior to the Offering, and references herein to "Medallion Financial" shall
mean Medallion Financial Corp. alone.
----------------
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION AND
DATA IN THIS PROSPECTUS (I) HAVE BEEN ADJUSTED TO GIVE EFFECT TO THE
ACQUISITIONS, (II) ASSUME A 12,500 FOR ONE STOCK SPLIT AND AN AMENDMENT AND
RESTATEMENT OF THE CERTIFICATE OF INCORPORATION OF MEDALLION FINANCIAL (THE
"CERTIFICATE") WHICH ARE EXPECTED TO BE EFFECTED PRIOR TO THE DATE OF THIS
PROSPECTUS AND (III) ASSUME THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED.
THE COMPANY
The Company is a specialty finance company with a leading position in the
origination and servicing of loans financing the purchase of taxicab medallions
and related assets ("Medallion Loans"). The Company also originates and
services commercial installment loans financing small businesses in other
targeted industries ("Commercial Installment Loans"). In addition, the Company
operates a taxicab rooftop advertising business. See "Business."
Management of the Company has successfully operated Tri-Magna, an investment
company registered under the 1940 Act, since it began its medallion lending
operations in 1979. Tri-Magna is the largest of the three Founding Companies
being acquired by Medallion Financial in connection with the Offering. Alvin
Murstein, a founder and the Chairman and Chief Executive Officer of the Company
and of Tri-Magna, has over 40 years of experience in the ownership, management
and financing of taxicab fleets, taxicab medallions and corporate car services.
While loans in Tri-Magna's portfolio have been from time to time in arrears or
default, Tri-Magna has never experienced a loss of principal on any of the $296
million in aggregate principal amount of Medallion Loans it has originated. See
"Management" and "Business --Medallion Lending."
Medallion Loans comprised approximately 79% of the Company's $149 million
loan portfolio at December 31, 1995 on a pro forma basis. Since 1979 the
Company has originated, on a combined basis, approximately $511 million in
Medallion Loans in New York City, Boston, Chicago, Cambridge, Newark,
Philadelphia and Hartford. Substantially all of the Company's Medallion Loans
are originated at fixed rates of interest in excess of the prime rate of
interest charged by major commercial banks (the "Prime Rate"). Approximately
94% in principal amount of the Medallion Loans are collateralized by first
security interests in New York City taxicab
3
<PAGE>
medallions and related assets. The Company estimates that the average loan-to-
value ratio of all of the Company's Medallion Loans was 54% at December 31,
1995, which the Company believes is representative of its historical average
loan to value ratio. In addition, the Company has recourse against the direct
and indirect owners of the medallion through personal guarantees. Although
personal guarantees increase the commitment of borrowers to repay their loans,
there can be no assurance that the assets available under personal guarantees
would, if required, be sufficient to satisfy the obligations secured by such
guarantees. The New York City Taxi and Limousine Commission (the "TLC")
estimates that the total value of all 11,787 New York City medallions and
related assets exceeds $2.3 billion and the Company estimates that the total
value of all taxicab medallions and related assets in the United States exceeds
$5 billion. The Company believes that it will continue to develop growth
opportunities by further penetrating the highly fragmented medallion financing
markets and by acquiring additional medallion financing businesses and
portfolios. See "Business -- Medallion Lending."
Commercial Installment Loans comprised approximately 21% of the Company's
loan portfolio at December 31, 1995 on a pro forma basis. From the inception of
this business in 1987 through December 31, 1995, Tri-Magna has originated
approximately 1,056 Commercial Installment Loans in an aggregate principal
amount of approximately $69 million. Tri-Magna's Commercial Installment Loan
activity has increased in recent years, with the number and principal amount of
Commercial Installment Loans originated by Tri-Magna in 1994 being 87% and 40%
greater, respectively, than in 1993. The Company's Commercial Installment Loans
generally are secured by equipment and made at fixed rates of interest
averaging approximately 500 to 700 basis points over the prevailing Prime Rate.
Approximately 78% of the Company's Commercial Installment Loan portfolio at
December 31, 1995 was comprised of loans secured by either retail dry cleaning
equipment or coin operated laundromat equipment. In addition, as with Medallion
Loans, the Company requires the principals of borrowers to personally guarantee
loans. The Company has focused its lending efforts on the retail dry cleaning
and coin operated laundromat industries because they have offered the Company
high rates of interest and a strong collateral position. The Company's
aggregate realized loss of principal on loans secured by retail dry cleaning
and coin operated laundromat equipment originated to date is $52,000 or 0.11%
of the approximately $49 million in principal amount of such loans. The Company
plans to expand its Commercial Installment Loan activities to include a more
diverse borrower base, a larger geographic area and other targeted industries.
See "Business --Commercial Installment Loans."
The Company also provides taxicab rooftop advertising and had 1,670 installed
taxicab rooftop advertising displays ("Displays") at December 31, 1995. The
Company's taxicab rooftop advertising business began operations in November
1994. The Company believes that there is a significant opportunity for a
provider of taxicab rooftop advertising that operates in several major
metropolitan markets because many large advertisers prefer to advertise
nationally. The Company is well positioned to take advantage of this
opportunity because it believes it is one of the largest providers of such
advertising in the nation. The Company currently provides such advertising in
New York City, Philadelphia, Miami and Boston. The Company also intends to
expand to other major metropolitan areas and has recently entered the Atlanta
and Los Angeles markets. The Company believes that there are growth
opportunities within its existing markets because only approximately 25% of New
York City taxicabs have rooftop advertising and a much smaller percentage of
the taxicabs in other major metropolitan areas nationwide have rooftop
advertising. In addition, the Company believes that its growth will be
facilitated by its reputation and relationships within the taxicab industry and
because the Company's arrangement with the taxicab owners provides them with
incremental income. See "Business -- Taxicab Rooftop Advertising."
The Company funds its operations through credit facilities with bank
syndicates and, to a lesser degree, through the issuance of fixed-rate, long-
term subordinated debentures that are issued to, or guaranteed by, the U.S.
Small Business Administration (the "SBA"). SBA financing offers attractive
interest rates, for example currently as low as 4.00% for Specialized Small
Business Investment Companies ("SSBICs"), but the availability of such
financing is limited. Accordingly, as the Company grows, it intends to continue
to reduce its reliance on SBA funding, while still maintaining the flexibility
to borrow under SBA programs to finance a
4
<PAGE>
portion of its loan portfolio when it is advantageous to do so. At December 31,
1995, $90 million of the Company's debt consisted of bank debt which was at a
weighted average effective rate of interest of 7.45%, or 105 basis points below
the Prime Rate and 183 basis points above 90 day LIBOR as of such date. The
balance of the Company's debt, $32 million, consisted of subordinated SBA
debentures, with fixed rates of interest with a weighted average rate of 7.44%.
After the Offering, the Company intends to negotiate an increase in the size of
its bank credit facilities from its current $96 million aggregate level. The
Company believes that this increase will not affect the interest rate currently
charged under its credit facilities. See "Business -- Sources of Funds."
The Company is a closed-end, non-diversified management investment company
under the 1940 Act. The investment objectives of the Company are to provide a
high level of distributable income, consistent with preservation of capital, as
well as long-term growth of net asset value. The Company is managed by its
executive officers under the supervision of its Board of Directors and has
retained FMC Advisers, Inc. ("FMC") as an investment adviser. The principals of
FMC have served as directors and executive officers of Tri-Magna and MFC since
inception of these businesses. They will resign from their offices with Tri-
Magna and MFC effective upon the closing of the Acquisitions. See "Investment
Objectives, Policies and Restrictions -- The Investment Adviser" and "Certain
Transactions." The Company has elected to be treated as a business development
company under the 1940 Act. See "Regulation." In addition, it plans to elect to
be treated for tax purposes as a regulated investment company (a "RIC") under
the Internal Revenue Code of 1986, as amended (the "Code"). As a RIC, the
Company will not be subject to U.S. federal income tax on any investment
company taxable income (which includes, among other things, dividends and
interest reduced by deductible expenses) that it distributes to its
stockholders if at least 90% of its investment company taxable income for that
taxable year is distributed. The Company intends to pay quarterly cash
dividends to comply with this requirement. Stockholders can elect to reinvest
distributions. See "Dividend Reinvestment Plan." The Company's specialty
finance subsidiaries, MFC, TCC and Edwards (collectively the "RIC
Subsidiaries"), also plan to elect to be treated as RICs and will distribute at
least 90% of their respective investment company taxable income to the Company.
See "Federal Income Tax Considerations."
The consideration to be paid by the Company for the Founding Companies was
determined through arm's-length negotiations between Medallion Financial and
representatives of each Founding Company. The factors considered by the parties
in determining the consideration to be paid included, among others, the history
of and prospects for the business in which the particular Founding Company
operates, the Founding Company's past and present operations, loan portfolio
quality, past and present revenue and earnings and the trends in such revenue
and earnings, expert opinion, revenue and earnings prospects and stock prices
of comparable finance companies and out-of-home advertising companies. Each
Founding Company was represented by independent counsel in the negotiation of
the terms and conditions of the Acquisitions.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the 5,000,000 shares
Company(1)....................
Common Stock to be outstanding
after the Offering(1)......... 7,500,000 shares
Nasdaq National Market TAXI
Symbol........................
Use of proceeds................ To pay the purchase price for the Founding
Companies and to repay indebtedness.
Distributions.................. The Company intends to pay quarterly dividends
and to distribute to its stockholders at least
90% of its investment company taxable income
annually.
</TABLE>
- - - ----------
(1) Does not include 750,000 shares of Common Stock issuable pursuant to the
over-allotment option granted to the Underwriters.
5
<PAGE>
RISK FACTORS
Investment in shares of the Common Stock involves certain risks relating to
the structure, operations and regulation of the Company that should be
considered by prospective purchasers of the Common Stock. The following summary
of Risk Factors is qualified in its entirety by the more detailed information
appearing under the heading "Risk Factors" in this Prospectus. Principal risk
factors include:
Industry and Geographic Concentration. A substantial portion of the Company's
revenue is derived from operations in New York City and these operations are
substantially focused in the area of financing New York City taxicab medallions
and related assets. There can be no assurance that an economic downturn in New
York City in general, or in the New York City taxicab industry in particular,
would not have an adverse impact on the Company. See "Risk Factors -- Industry
and Geographic Concentration" and "-- Taxicab Industry Regulation."
Interest Rate Spread. The Company's net interest income is largely dependent
upon achieving a positive interest rate spread and other factors. See "Risk
Factors -- Interest Rate Spread; Prepayment Risk."
Leverage. The Company's use of leverage poses certain risks for holders of
the Common Stock, including the possibility of higher volatility of both the
net asset value of the Company and the market price of the Common Stock and,
therefore, an increase in the speculative character of the Common Stock. See
"Risk Factors-- Leverage."
Absence of Combined Operating History. The Founding Companies have been
operating as separate independent entities with separate management teams.
Medallion Financial was recently organized and there can be no assurance that
it will be able to successfully integrate these businesses and effectively
implement the Company's strategy to expand operations. See "Risk Factors --
Absence of Combined Operating History."
No Prior Market for Common Stock. There has been no prior public market for
the Common Stock and no assurance can be given that an active trading market
will develop after the Offering. See "Risk Factors -- No Prior Public Market
for the Common Stock; Determination of the Public Offering Price."
Immediate and Substantial Dilution. Immediately upon the closing of the
Offering, the purchasers of the Common Stock will experience dilution in the
net tangible book value of their shares of $4.88 per share. See "Dilution". In
addition, such purchasers will incur further dilution to the extent the Company
issues options under its compensation plans and such options are exercised at a
time when the exercise price is less than the market price for the Common
Stock. See "Management--1996 Stock Option Plan," and "--Non-Employee Directors
Stock Option Plan."
Reliance on Management. The success of the Company will be largely dependent
upon the efforts of senior management. The death, incapacity or loss of the
services of any of such individuals could have an adverse effect on the
Company. See "Risk Factors--Reliance on Management."
Control by Existing Stockholders and Shares Eligible for Future Sale. After
the Offering, two officers who are also directors of the Company, together with
entities affiliated with them, will beneficially own approximately 35%, or 2.6
million of the 7.5 million shares of Common Stock outstanding. All but
approximately 100,000 of these shares are restricted securities under Rule 144
of the Securities Act of 1933, as amended (the "Securities Act") and will
become eligible for sale, subject to the Rule 144 resale restrictions on
October 23, 1997. All of such shares are also subject to lock-up agreements
with the Underwriters and may not be sold for a period of two years from the
date of this Prospectus without the prior written consent of Furman Selz LLC.
Such consent will not, however, affect the resale restrictions under Rule 144.
See "Risk Factors--Control by Existing Stockholders" and "--Shares Eligible for
Future Sale."
6
<PAGE>
SUMMARY FINANCIAL DATA
PRO FORMA
(SEE PRO FORMA FINANCIAL STATEMENTS FOR ADJUSTMENTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
--------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS
DATA
Investment income....... $3,846 $3,901 $3,915 $4,028 $15,690
Interest expense........ 2,043 1,997 1,945 2,018 8,003
------ ------ ------ ------ -------
Net interest income..... 1,803 1,904 1,970 2,010 7,687
Equity in earnings of
unconsolidated subsidi-
ary(1)................. 31 56 19 20 126
Other income............ 228 198 199 264 889
Accretion of negative
goodwill............... 193 193 193 193 772
Operating expenses...... (988) (952) (978) (938) (3,856)
Amortization of good-
will................... (105) (105) (105) (105) (420)
------ ------ ------ ------ -------
Net investment income... 1,162 1,294 1,298 1,444 5,198
Realized gain (loss) on
investments, net....... (4) (8) (11) 34 11
Change in unrealized de-
preciation of invest-
ments(2)............... 6 43 129 17 195
------ ------ ------ ------ -------
Net increase in net
assets resulting from
operations(3).......... $1,164 $1,329 $1,416 $1,495 $ 5,404
====== ====== ====== ====== =======
Pro forma net increase
in net assets resulting
from operations per
share(3)............... $ 0.15 $ 0.18 $ 0.19 $ 0.20 $ 0.72
====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Return on assets(4)................................................ 3.39%
Return on equity(5)................................................ 10.96
Average yield, e.o.p.(6)........................................... 10.69
Average cost of funds, e.o.p.(7)................................... 7.44
Spread, e.o.p.(8).................................................. 3.25
Other income ratio(9).............................................. 0.60
Operating expense ratio(10)........................................ 2.42
Medallion Loans as a percentage of investments..................... 79
Commercial Installment Loans as a percentage of investments........ 21
Investments to assets.............................................. 93
Equity to assets................................................... 31
Debt to equity..................................................... 211
SBA debt to total debt............................................. 30
BALANCE SHEET DATA (IN THOUSANDS)
Investments
Medallion Loans................................................... $117,489
Commercial Installment Loans...................................... 31,490
Unrealized depreciation of investments(11)......................... --
--------
Investments, net of unrealized depreciation of investments......... 148,979
Total assets....................................................... 159,440
Notes payable and demand notes..................................... 72,713
Subordinated SBA debentures........................................ 31,426
Total liabilities.................................................. 110,138
Total stockholders' equity......................................... 49,302
</TABLE>
- - - ---------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by the Company from its investment in Media.
(2) Change in unrealized depreciation of investments represents the (increase)
decrease for the period in the unrealized depreciation applied against the
Company's investments to state them at fair value.
(3) Net increase in net assets resulting from operations is the sum of net
investment income, net realized gains or losses on investments and the
change in unrealized gains or losses on investments. Per share data is
based upon 7,500,000 pro forma weighted average shares outstanding and
does not reflect the 750,000 shares of Common Stock issuable under the
Underwriters' over-allotment option.
(4) Return on assets represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total assets at the date indicated.
(5) Return on equity represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total stockholders' equity at the date indicated.
(6) Average yield, e.o.p. represents the end of period weighted average
interest rate on investments at the date indicated.
(7) Average cost of funds, e.o.p. represents the end of period weighted
average interest rate on debt at the date indicated.
(8) Spread, e.o.p. represents average yield, e.o.p. less average cost of
funds, e.o.p.
(9) Other income ratio represents other income for the fiscal year ending on
the date indicated divided by investments at the date indicated.
(10) Operating expense ratio represents operating expenses for the fiscal year
ending on the date indicated divided by total assets at the date
indicated.
(11) Upon completion of the Acquisitions, the Company's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by the
Company in accordance with the 1940 Act and the purchase method of
accounting.
7
<PAGE>
TRI-MAGNA
(MFC, BUT NOT MEDIA, IS CONSOLIDATED WITH TRI-MAGNA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991(1) 1992(1) 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income........ $ 8,806 $ 7,953 $ 8,333 $ 8,820 $ 9,803
Net interest income...... 4,667 4,444 4,672 4,064 3,769
Net investment income.... 2,534 2,045 1,839 1,624 1,518
Net increase in net
assets resulting from
operations.............. 2,129 1,947 1,671 1,660 1,439
SELECTED FINANCIAL RATIOS AND
OTHER DATA(1)
Return on average
assets(2)............... 3.17% 2.81% 2.12% 1.88% 1.50%
Return on average
equity(3)............... 19.90 17.67 15.29 15.29 12.97
Spread(4)................ 4.77 4.67 4.90 3.20 2.35
Weighted average assets.. $67,238 $69,401 $78,921 $88,414 $96,189
Weighted average
investments(5).......... 65,943 65,673 75,790 86,496 92,433
Weighted average equity.. 10,696 11,019 10,931 10,855 11,094
Weighted average debt.... 48,230 47,160 60,160 67,955 73,063
<CAPTION>
DECEMBER 31,(1)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of
investments............. 73% 81% 81% 72% 68%
Commercial Installment
Loans as a percentage of
investments............. 27 19 19 28 32
Debt to equity(6)........ 218 259 315 356 464
</TABLE>
MEDIA(7)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Advertising revenue................................... $227,756 $1,542,013
Cost of services...................................... 83,341 483,721
-------- ----------
Gross margin.......................................... 144,415 1,058,292
Other operating expenses.............................. 126,036 829,293
-------- ----------
Income before taxes................................... 18,379 228,999
Income taxes.......................................... -- 103,043
-------- ----------
Net income............................................ $ 18,379 $ 125,956
======== ==========
</TABLE>
EDWARDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income............. $ 5,535 $ 5,444 $ 4,955 $ 4,334 $ 4,317
Net interest income........... 2,277 2,571 2,214 1,569 1,569
Net investment income......... 1,604 1,398 1,617 1,060 1,087
Net increase in net assets
resulting from operations
before extraordinary items... 965 1,385 1,617 1,060 1,087
Net increase in net assets
resulting from operations.... 965 1,385 1,617 534 1,087
SELECTED FINANCIAL RATIOS AND OTHER
DATA(1)
Return on average assets(2)... 2.27% 3.19% 3.60% 2.35% 2.42%
Return on average partners'
capital(8)................... 12.22 16.47 17.51 11.69 12.29
Spread(4)..................... 4.34 4.96 3.54 2.09 1.96
Weighted average assets....... $42,501 $43,465 $44,953 $45,025 $44,829
Weighted average invest-
ments(5)..................... 40,260 41,567 43,047 43,074 43,508
Weighted average partners'
capital...................... 7,900 8,409 9,235 9,064 8,846
Weighted average debt......... 34,630 35,275 34,385 34,690 34,535
<CAPTION>
DECEMBER 31,(1)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of investments.... 98% 98% 98% 98% 99%
Commercial Installment Loans
as a percentage of
investments.................. 2 2 2 2 1
Debt to partners' capital(6).. 427 382 365 408 382
</TABLE>
8
<PAGE>
TCC
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1991(1) 1992(1) 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income....... $ 4,197 $ 3,944 $ 3,110 $ 2,217 $ 1,836
Net interest income..... 1,694 2,406 2,046 1,508 1,386
Net investment income,
adjusted for taxes(9).. 488 1,294 1,760 144 245
Net increase (decrease)
in net assets resulting
from operations........ (2,519) 648 1,923 790 530
SELECTED FINANCIAL
RATIOS AND OTHER
DATA(1)
Return on average
assets(2).............. (7.76)% 2.46% 8.36% 3.90% 2.91%
Return on average common
equity(3).............. (61.83) 14.73 33.84 11.22 6.74
Spread(4)............... 3.23 7.34 7.67 6.26 7.44
Weighted average
assets................. $32,479 $26,338 $23,011 $20,260 $18,183
Weighted average
investments(5)......... 31,854 24,235 18,994 14,442 10,389
Weighted average common
equity................. 4,074 4,398 5,683 7,042 7,859
Weighted average debt... 25,198 17,967 13,133 9,330 7,330
<CAPTION>
DECEMBER 31,(1)
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of
investments............ 84% 82% 85% 80% 81%
Commercial Installment
Loans as a percentage
of investments......... 16 18 15 20 19
Debt to equity(6)....... 274 192 107 73 64
</TABLE>
- - - ----------
(1) Unaudited.
(2) Return on average assets is calculated as the net increase in net assets
resulting from operations divided by the weighted average assets for the
period.
(3) Return on average equity is calculated as the net increase in net assets
resulting from operations divided by the weighted average equity for the
period.
(4) Spread is calculated as the difference between average yield and average
cost of funds.
(5) Investments consists of the Company's loan portfolio and excludes cash and
cash equivalents.
(6) Debt to equity is defined as total debt divided by total shareholders
equity and minority interest. In the case of Edwards, debt to partners'
capital is defined as total debt divided by total partners' capital.
(7) Although Tri-Magna owns 100% of Media, under the 1940 Act Media is not
permitted to be consolidated with Tri-Magna because Tri-Magna is an
investment company and Media is not.
(8) Return on average partners' capital is calculated as the net increase in
net assets resulting from operations before extraordinary items divided by
weighted average partners' capital for the period.
(9) Net investment income has been adjusted by combining TCC's income tax
provision (benefit) on investment income, realized losses on investments
and change in unrealized depreciation of investments, in order to present
TCC's financial statements on a comparable basis to the other Founding
Companies.
9
<PAGE>
FEES AND EXPENSES
The purpose of the following table is to assist prospective investors in
understanding the various costs and expenses that an investor in the Company
will bear directly or indirectly.
FEE TABLE (1)
<TABLE>
<S> <C>
STOCKHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)............... 7.00%(2)
Dividend Reinvestment Plan Fees.............................. None (3)
ANNUAL EXPENSES (as a percentage of net assets attributable to
Common Stock)(4)
Management Fees.............................................. 0.46 (5)
Operating Expenses........................................... 7.37 (6)
Interest Payments on Borrowed Funds.......................... 16.23 (7)
Other Expenses............................................... 0.85
-----
Total Annual Expenses.......................................... 24.91%
=====
</TABLE>
- - - ----------
(1) Based on estimated amounts for the current fiscal year.
(2) The sales load, which is a one-time fee paid by the Company to the
Underwriters in connection with the Offering, is the only sales load paid
in connection with the Offering. See "Underwriting."
(3) The expenses of the Dividend Reinvestment Plan are included in stock record
expenses, a component of "Other Expenses." The participants in the Dividend
Reinvestment Plan will bear a pro rata share of brokerage commissions
incurred with respect to open market purchases. See "Distributions" and
"Dividend Reinvestment Plan." The Company has no cash purchase plan.
(4) Assumes a net asset value of $49.3 million, which will be the Company's
estimated stockholders' equity upon completion of the Offering. Operating
expenses, interest payments on borrowed funds and other expenses are
calculated on a pro forma basis based on the year ended December 31, 1995.
(5) Management expenses consist of fees paid to the Company's investment
adviser, FMC. See "Investment Objectives, Policies and Restrictions -- The
Investment Adviser" and "Certain Transactions."
(6) Operating expenses consist primarily of compensation and employee benefits,
data processing, advertising, travel and other marketing expenses,
occupancy costs and other similar expenses. See "Management."
(7) Interest payments on borrowed funds consist primarily of interest payable
under credit agreements with banks and on subordinated SBA debentures. See
"Business -- Sources of Funds."
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Company. These amounts assume no increase or
decrease in leverage and are based upon payment by an investor of a 7% sales
load (the underwriting discount paid by the Company in connection with the
Offering) and payment by the Company of operating expenses at the levels set
forth in the table above.
An investor would pay the following expenses on a $1,000 investment, assuming
(i) a 5% annual return and (ii) reinvestment of all dividends and distributions
at net asset value:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
$279 $579 $772 $1,004
</TABLE>
This example as well as the information set forth in the table above should
not be considered a representation of the future expenses of the Company.
Actual expenses may be greater or less than those shown. Moreover, while the
example assumes (as required by the Commission) a 5% annual return, the
Company's performance will vary and may result in a return greater or less than
5%. In addition, while the example assumes reinvestment of all dividends and
distributions at net asset value, participants in the Dividend Reinvestment
Plan will receive shares purchased by the Dividend Reinvestment Plan Agent at
the market price in effect at the time, which may be at, above or below net
asset value. See "Distributions" and "Dividend Reinvestment Plan."
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating an investment in the shares of Common Stock offered hereby.
INTEREST RATE SPREAD; PREPAYMENT RISK
While the Medallion Loans and Commercial Installment Loans originated by the
Company in most cases bear interest at fixed rates, the Company finances a
substantial portion of such loans by incurring indebtedness with floating
interest rates. As a result, the Company's interest costs have increased in
the past and could increase in the future during periods of rising interest
rates, which may decrease net interest margins and thereby adversely affect
the Company's profitability. Accordingly, the Company, like most financial
services companies, faces the risk of interest rate fluctuations. Although the
Company intends to manage its interest rate risk through asset and liability
management, including the use of interest rate caps and swaps, general rises
in interest rates will tend to reduce the Company's net interest margin in the
short term. In addition, the Company relies on its counterparties to perform
their obligations under such interest rate caps and swaps. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Furthermore, loans made by the Company typically may be prepaid by the
borrower upon payment of certain prepayment charges. A borrower is likely to
exercise prepayment rights at a time when the interest rate payable on the
borrower's loan is high relative to prevailing interest rates. In such a lower
interest rate environment, the Company will have difficulty re-lending such
prepaid funds at comparable rates and, therefore, to the extent that the
Company's cost of funds is not correspondingly reduced, such a decrease in
market interest rates could adversely affect the Company. See "Business --
Medallion Lending" and "-- Commercial Installment Loans."
LEVERAGE
The Company is leveraged as a result of its bank borrowings and subordinated
SBA debentures. Leverage poses certain risks for holders of Common Stock,
including possible higher volatility of both the net asset value of the
Company and the market price of the Common Stock. Since interest is paid to
the Company's creditors before any income is distributed to the Company's
stockholders, fluctuations in the interest payable to such creditors will
affect the yield to holders of the Common Stock. In addition, income earned by
the Company from operations and lending the proceeds of borrowings must exceed
the interest payable with respect to such borrowings in order for there to be
income available for distribution to stockholders. Furthermore, the high rate
of distribution of investment company taxable income required to maintain the
Company's tax status as a RIC limits the funds that can be retained in the
business to cover periods of loss, provide for future growth and pay for
extraordinary items. In addition, in the event of a liquidation of the
Company, the Company's creditors would have claims on the Company's assets
superior to the claims of the holders of the Common Stock. Furthermore,
certain amounts could become payable to the SBA in connection with the
Company's repurchase, at a discount, of preferred stock from the SBA
previously issued by MFC and TCC, which resulted in a realized gain in
retained earnings in the amount of the repurchase discount. Such discounts
will be accreted to paid-in capital on a straight-line basis over 60 months;
however, if MFC or TCC is liquidated or loses its SBA license during the
accretion period, the SBA would have a claim for the remaining unaccreted
amount attributable to the subsidiary liquidating or losing its license. See
"Business -- Sources of Funds -- Preferred Stock Repurchase Agreements."
At December 31, 1995, the Company had $90.4 million outstanding under credit
facilities with bank syndicates aggregating $95.5 million and consisting of
(i) revolving lines of credit totalling $90.0 million, (ii) a $3.2 million
term loan and a $2.0 million term loan and (iii) a $275,000 demand loan of
Media, whose financial statements are not permitted to be consolidated with
the Company's financial statements. Amounts outstanding under the revolving
lines of credit, $3.2 million term loan and demand loan are together secured
by all of the Company's assets and bear interest at the relevant agent bank's
prime rate or, at the Company's option, a rate based on LIBOR. At December 31,
1995, the rates of interest on amounts outstanding under the revolving lines
11
<PAGE>
of credit and the demand loan ranged from 7.00% to 8.50%. The $3.2 million
term loan bears interest at the annual rate of 8.50% and the $2.0 million term
loan bears interest at the annual rate of 7.50%. The revolving lines of credit
mature between May 17, 1996 and September 30, 1996, the $2.0 million term loan
matures on July 31, 1997 and the $3.2 million term loan must be repaid from
the proceeds of the Offering. See "Use of Proceeds" and "Business -- Sources
of Funds."
At December 31, 1995, the Company had borrowed $31.7 million under
subordinated SBA debentures that have fixed rates of interest and a ten-year
term. These debentures have maturities ranging from May 7, 1996 to September
1, 2004 and rates of interest varying from 5.00% to 9.80% per annum.
At December 31, 1995, the weighted average annual rate of interest on all of
the Company's borrowings was 7.44%. Based upon that rate, the Company must
achieve annual returns on investments of at least 4.86% to cover annual
interest payments on the bank and subordinated SBA debentures described above.
The following table illustrates the effect of leverage to a stockholder
assuming the Company's cost of funds at December 31, 1995 as described above
and various annual rates of return, net of expenses. The calculations set
forth in the table are hypothetical and actual returns may be greater or less
than those appearing below:
<TABLE>
<S> <C> <C> <C> <C> <C>
Assumed return on investments (net of
expenses)(1)................................. -10% -5% 0% 5% 10%
Corresponding net income to common
stockholders(1).............................. -48.0% -31.9% -15.7% 0.5% 16.6%
</TABLE>
- - - ----------
(1) Assumes (i) $159.4 million in average assets, (ii) an average cost of
funds of 7.44%, (iii) $104.1 million in average debt outstanding and (iv)
$49.3 million of average stockholders equity.
AVAILABILITY OF FUNDS
The Company has a continuing need for capital to finance its lending
activities. The Company funds its operations through credit facilities with
bank syndicates and, to a lesser degree, through subordinated SBA debentures.
Reductions in the availability of funds from banks and under SBA programs on
terms favorable to the Company could have a material adverse effect on the
Company. Because the Company intends to distribute to its shareholders at
least 90% of its investment company taxable income, such earnings will not be
available to fund loan originations.
At December 31, 1995, approximately 26% of the Company's $121.8 million of
outstanding indebtedness consisted of subordinated SBA debentures and the
Company intends to continue to seek to finance a portion of its business
through SBA funding programs. Although the Company is not aware of any pending
legislation to eliminate the SBA or to restrict or terminate the specific SBA
programs in which the Company participates, some members of Congress have
called for reform or elimination of various federally funded programs,
including those of the SBA. Discontinuation, elimination or a significant
reduction of or restriction on financing available to the Company from the SBA
would reduce the Company's funding alternatives.
Even if the SBA continues to receive funding and its programs are maintained
in their current form, the financing that the SBA makes available to Small
Business Investment Companies ("SBICs") and SSBICs will remain limited and
many SBICs and SSBICs will continue to compete with the Company for the
limited funds that are available. Although the Company has obtained
substantial financing under SBA programs in the past, there can be no
assurance that the Company will be able to obtain its desired level of SBA
financing in the future. See "Business -- Sources of Funds."
In addition to limits on the aggregate amount of SBA financing available,
such financing is restricted in its application. The SBA has informed the
Company that due to the SBA's concerns regarding the concentration of SSBIC
and SBIC loans in the taxicab industry and the availability of private capital
to finance taxicab related businesses, no additional SBA financing will be
made available to certain SBICs and SSBICs for such loans. As a result, the
Company does not expect to obtain additional SBA financing to originate
additional Medallion Loans. See "Business -- Sources of Funds."
The SBA also restricts the amount of secured bank debt that SBICs and SSBICs
with outstanding SBA financing may incur. As a result, the SBA could preclude
TCC and Edwards from increasing or refinancing their
12
<PAGE>
credit facilities. Combined with limitations on SBA funding, these
restrictions on secured bank debt could restrict further growth of TCC's and
Edwards' loan portfolios.
INDUSTRY AND GEOGRAPHIC CONCENTRATION
Medallion Loans collateralized by New York City taxicab medallions and
related assets comprised a substantial portion of the Company's Medallion Loan
portfolio at December 31, 1995. According to TLC data, over the past 20 years
New York City medallions have appreciated in value an average of 10.5% each
year; however, for sustained periods during that time, medallions declined in
value. Most of the Company's Commercial Installment Loans have been made to
retail dry cleaning and coin operated laundromat businesses in New York City
and a major portion of the Company's taxicab advertising revenue is derived
from New York City taxicabs. There can be no assurance that the Company will
be able to geographically diversify its operations or that an economic
downturn in New York City in general, or in the New York City taxicab, retail
dry cleaning or coin operated laundromat industries in particular, would not
have an adverse impact on the Company. In addition to expanding
geographically, the Company intends to expand its financing operations to
include other industries and financial products and there can be no assurance
that management's experience with its current lending activities will lead to
success with such other industries and products. See "Business."
ABSENCE OF COMBINED OPERATING HISTORY
Medallion Financial was founded recently and has conducted no operations to
date. Medallion Financial has entered into agreements to acquire the Founding
Companies simultaneously with the closing of the Offering. Each of the
Founding Companies has been operating independently of each other with
separate management teams and there can be no assurance that Medallion
Financial will be able to successfully integrate these businesses and
effectively implement the Company's strategy to expand operations. In
addition, there can be no assurance that the expected benefits of
consolidation, such as reduced risk through diversification of the portfolio
and elimination of duplicate facilities and expenses, will materialize. See
"The Company," "Business" and "Management."
COMPETITION
Banks, credit unions and other finance companies, some of which are SSBICs
and SBICs, compete with the Company in the origination of Medallion Loans and
Commercial Installment Loans. Finance subsidiaries of equipment manufacturers
also compete with the Company. Many of these competitors have greater
resources than the Company and certain competitors are subject to less
restrictive regulations than the Company. As a result, there can be no
assurance that the Company will be able to identify and complete financing
transactions that will permit it to compete successfully. The Company's
taxicab rooftop advertising business competes with other taxicab rooftop
advertisers as well as all segments of the out-of-home advertising industry
and other types of advertising media, including cable and network television,
radio, newspapers, magazines and direct mail marketing. Many of these
competitors have greater financial resources than the Company and offer
several forms of advertising as well as production facilities. There can be no
assurance that the Company will compete with these businesses successfully.
See "Business."
CREDIT QUALITY
The Company's loans are not guaranteed by the SBA. The Company's borrower
base consists primarily of small business owners that have limited resources.
There is generally no publicly available information about such small business
owners, and the Company must rely on the diligence of its employees and agents
to obtain information in connection with the Company's credit decisions. In
addition, these small businesses do not have audited financial statements.
Typically, the success of small businesses and their ability to repay the
Company's loans are dependant upon the management talents and efforts of one
person or a small group of persons, and the
death, disability or resignation of one or more of these persons could have an
adverse impact on their business. Moreover, small businesses may be more
vulnerable to economic downturns and often need substantial additional capital
to expand or compete. Such companies may also experience substantial
variations in operating results. Lending to small businesses therefore
involves a high degree of business and financial risk, which can result in
13
<PAGE>
substantial losses and accordingly should be considered speculative. In
addition, expansion of the portfolio and increases in the proportion of the
portfolio consisting of Commercial Installment Loans could have an adverse
impact on the credit quality of the portfolio. See "Business -- Medallion
Lending" and "-- Commercial Installment Loans."
PORTFOLIO VALUATION
Under the 1940 Act, the Company's loan portfolio must be recorded at fair
market value. Unlike certain lending institutions, the Company is not
permitted to establish reserves for loan losses, but adjusts quarterly the
valuation of its portfolio to reflect the Company's estimate of the current
realizable value of the loan portfolio. Since no ready market exists for this
portfolio, fair market value is subject to the good faith determination of the
Company's management and the approval of the Company's Board of Directors. In
determining such value, the directors take into consideration various factors
such as the financial condition of the borrower, the adequacy of the
collateral, and the relationships between current and projected market rates
of interest and portfolio rates of interest and maturities. For example, in a
period of sustained increases in market rates of interest, the Board of
Directors could decrease its valuation of the portfolio because the portfolio
consists primarily of fixed-rate loans. These fair valuation procedures are
designed to approximate the value that would have been established by market
forces and are therefore subject to uncertainties and variations from reported
results. Based on the foregoing criteria, the Company determines net
unrealized depreciation of investments or the amount by which the Company's
estimate of the current realizable value of its portfolio is below its cost
basis. At December 31, 1995, the Company's net unrealized depreciation of
investments was $1.6 million. Based upon current market conditions and current
loan to value ratios, the Company's Board of Directors believes that its net
unrealized depreciation of investments is adequate to reflect the fair market
value of the portfolio. Because of the subjectivity of these estimates, there
can be no assurance that in the event of a foreclosure or in the sale of
portfolio loans, the Company would be able to recover the amounts reflected on
its balance sheet. Further, costs associated with foreclosure proceedings,
such as a 5% New York City transfer tax assessed in connection with every
medallion transfer, may reduce the Company's expected net proceeds. See
"Business -- Medallion Lending -- Loan Portfolio"; "-- Commercial Installment
Loans -- Loan Portfolio"; "-- Delinquency and Collections"; and "-- Loan Loss
Experience."
TAXICAB INDUSTRY REGULATION
Every city in which the Company originates Medallion Loans, and most other
major cities in the United States, limit the supply of taxicab medallions. In
many markets, regulation results in supply restrictions which, in turn,
support the value of medallions; consequently, actions which loosen such
restrictions and result in the issuance of additional medallions into a market
could decrease the value of medallions in that market and, therefore, the
collateral securing the Company's then outstanding Medallion Loans, if any, in
that market. The Company is unable to forecast with any degree of certainty
whether any potential increases in the supply of medallions will occur.
However, in January 1996, the New York City Council passed a law authorizing
the city to sell up to 400 additional taxicab medallions, which would only
represent a 3.4% increase in the 11,787 taxicab medallions presently
outstanding. The first 133 of such medallions are expected to be sold in May
1996 with the balance to be sold over the next three years. See "Business --
Medallion Lending --Industry Overview."
In New York City, and in other markets where the Company originates
Medallion Loans, taxicab fares are generally set by government agencies,
whereas expenses associated with operating taxicabs are largely unregulated.
As a consequence, in the short term, the ability of taxicab operators to
recoup increases in expenses is limited. Escalating expenses, therefore, can
render taxicab operation less profitable and make it more difficult for
borrowers to service loans from the Company and could potentially adversely
affect the value of the Company's collateral. In January 1996, the TLC
approved an increase of approximately 20% in taxicab fares and imposed a
mandatory retirement age for taxicabs. These measures took effect on March 1,
1996. The Company is unable to predict whether ridership or taxicab operator
profitability will be affected by these measures.
14
<PAGE>
GOVERNMENT REGULATION OF TOBACCO ADVERTISING
Currently, substantially all of the Company's taxicab rooftop advertising
revenue is derived from cigarette advertising. President Clinton recently
authorized the Food and Drug Administration (the "FDA") to assert regulatory
jurisdiction over cigarettes and smokeless tobacco products ("tobacco
products") for the purpose of curbing use of these products by individuals
under the age of 18. The FDA has proposed new rules which, among other things,
regulate advertising of tobacco products. The Company believes that certain of
the proposed rules which include provisions prohibiting the placement of
tobacco products advertising within 1,000 feet of playgrounds and primary and
secondary schools only apply to stationary advertising such as billboards and,
thus, would not restrict taxicab rooftop advertising. However, other
restrictions in the proposed rules limiting tobacco products advertising to a
format consisting of black text on a white background may apply to taxicab
rooftop advertising. The Company cannot predict whether or in what form the
proposed rules will be adopted, or whether the proposed rules will be modified
or nullified by legislative or judicial action. In any event, if rules
restricting the advertising of tobacco products are adopted and are ultimately
interpreted to restrict taxicab rooftop advertising, such rules could have an
adverse effect upon the taxicab rooftop advertising business of the Company.
The Liggett Group, Inc. ("Liggett") recently settled two tobacco liability
actions. Under the terms of the settlements, Liggett agreed to comply with
certain of the proposed FDA advertising regulations. Liggett controls only
approximately 2% of the U.S. market for tobacco products and the remainder of
the tobacco industry has yet to demonstrate a willingness to voluntarily
comply with the proposed FDA regulations. However, if the larger tobacco
companies were to elect to voluntarily comply with the proposed FDA
regulations and such regulations were interpreted to include taxicab rooftop
advertising, a substantial component of Media's current revenues could be
adversely impacted.
From time to time there have been legislative initiatives requiring
advertisers which carry tobacco products to also display anti-smoking
messages. In 1994, the U.S. Court of Appeals for the Second Circuit upheld a
district court ruling which prevented the application of a New York City
ordinance requiring, in certain circumstances, that Displays carry anti-
smoking messages. There can be no assurance that there will not be further
such initiatives or that they will be nullified by judicial action.
PASS-THROUGH TAX TREATMENT
Risks Associated with Distribution Requirements and Leverage
The Company, together with the RIC Subsidiaries, intends to qualify and
elect to be treated as a RIC under Subchapter M of the Code. In any year in
which these companies so qualify under Subchapter M, they generally will not
be subject to federal income tax on investment company taxable income (which
includes, among other things, dividends and interest reduced by deductible
expenses) distributed to their stockholders. To so qualify, these companies
must meet certain income, distribution and diversification requirements. See
"Federal Income Tax Considerations." However, because these companies use
leverage, they are subject to certain asset coverage ratio requirements set
forth in the 1940 Act. These asset coverage requirements could, under certain
circumstances, prohibit these companies from making distributions that are
necessary to maintain Subchapter M status. In addition, the asset coverage and
distribution requirements impose significant cash flow management restrictions
on the Company and limit the Company's ability to retain earnings to cover
periods of negative income, provide for future growth and pay for
extraordinary items, such as the repayment of principal of debt incurred by
the Company. See "Federal Income Tax Considerations." Qualification as a RIC
under Subchapter M is made on an annual basis and, although it is the
Company's policy to qualify as a RIC, no assurance can be given that Medallion
Financial or the RIC Subsidiaries will continue to qualify for such treatment.
If these companies were to elect not to be treated as RICs under Subchapter M,
or were to fail to qualify because the 1940 Act asset coverage requirements or
the payment of extraordinary items precluded distributions necessary to
maintain Subchapter M status or for any other reason, their respective incomes
would become fully taxable and a substantial reduction in the amount of income
available for distribution to Medallion Financial and its stockholders would
result. See "Federal Income Tax Considerations" and "Regulation."
15
<PAGE>
The Small Business Investment Act of 1958 (the "SBIA") and regulations
thereunder ("SBA Regulations") restrict distributions by an SSBIC or an SBIC.
Consequently, an SSBIC or SBIC which is also a RIC could be prohibited by SBA
Regulations from making the distributions necessary to qualify as a RIC. Under
such circumstances, in order to comply with the SBA Regulations and the RIC
distribution requirements, the applicable SSBIC or SBIC must request and
receive a waiver of the SBA's restrictions. While the current policy of the
Office of SBIC Operations is to grant such waivers if the SSBIC or SBIC makes
certain offsetting adjustments to its paid-in capital and surplus accounts,
there can be no assurance that this will continue to be the policy or that the
relevant SSBIC or SBIC will have adequate capital to make the required
adjustments. In the absence of a waiver, compliance with the SBA Regulations
may result in loss of RIC status and a consequent imposition of an entity-
level tax.
Risks Associated with Diversification Requirements
The Company intends to pursue an expansion strategy in its taxicab rooftop
advertising business and believes that there are growth opportunities in this
market. However, the asset diversification requirements under the Code could
restrict such expansion. These requirements provide, in part, that not more
than 25% of the value of a RIC's total assets may be invested in the
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer or two or more issuers controlled by such RIC which are
engaged in similar or related trades or businesses. Unlike Medallion
Financial's investments in the RIC Subsidiaries, which will not be subject to
this diversification test so long as these subsidiaries are RICs, Medallion
Financial's investment in Media will be subject to this test. The test is
initially calculated at the time the assets are acquired. At the time of the
Acquisitions, Media will represent less than 25% of Medallion Financial's
assets and the diversification test will be satisfied. Subsequent growth of
Media, if internally generated, will not retrigger the test even if Media
represents in excess of 25% of Medallion Financial's assets. However, under
the Code, the test must be reapplied in the event that Medallion Financial
makes a subsequent investment in Media, lends to it or acquires another
taxicab rooftop advertising business. If such aggregate asset value represents
more than 25% of Medallion Financial's total assets at that time, Medallion
Financial would fail the diversification test. If that were to occur Medallion
Financial would lose RIC status with the consequences described above.
Accordingly, the Company's maintenance of RIC status could limit the Company's
ability to expand its taxicab rooftop advertising business. It will be the
Company's policy to expand its advertising business through internally
generated growth and to only consider acquisitions if, giving effect to the
acquisition, the Code's diversification requirements would be met.
NO PRIOR PUBLIC MARKET FOR THE COMMON STOCK; DETERMINATION OF THE PUBLIC
OFFERING PRICE
There has been no prior public market for the Common Stock. Consequently,
the initial public offering price was determined through negotiations among
the Company and the representatives of the Underwriters. See "Underwriting"
for factors considered in determining the initial public offering price. The
negotiated initial public offering price may not be indicative of net asset
value or the market price for the Common Stock following the Offering. The
Common Stock has been approved, subject to official notice of issuance, for
quotation on the Nasdaq National Market under the symbol "TAXI." However,
there can be no assurance that an active trading market will develop
subsequent to the Offering or, if developed, that it will be sustained. See
"Underwriting."
DEPENDENCE ON CASH FLOW FROM SUBSIDIARIES
Medallion Financial is a holding company and will derive most of its
operating income and cash flow from its subsidiaries. As a result, Medallion
Financial will rely entirely upon distributions from its subsidiaries to
generate the funds necessary to make dividend payments and other distributions
to its stockholders. Funds are expected to be provided to Medallion Financial
by its subsidiaries through dividends and payments on intercompany
indebtedness, but there can be no assurance that such subsidiaries will be in
a position to make such dividend or debt payments. See "The Company" and
"Business."
IMMEDIATE AND SUBSTANTIAL DILUTION
Immediately upon the closing of the Offering, the purchasers of the Common
Stock will experience dilution in the net tangible book value of their shares
of $4.88 per share. See "Dilution." In addition, such purchasers will incur
further dilution to the extent the Company issues options under the Medallion
Financial Corp. 1996
16
<PAGE>
Stock Option Plan (the "1996 Plan") and the Medallion Financial Corp. 1996
Non-Employee Directors Stock Option Plan (the "Director Plan") and such
options are exercised at a time when the exercise price is less than the
market price for the Common Stock. See "Management--1996 Stock Option Plan"
and "--Non-Employee Directors Stock Option Plan."
RELIANCE ON MANAGEMENT
The success of the Company will be largely dependent upon the efforts of
senior management. The death, incapacity or loss of the services of any of
such individuals could have an adverse effect on the Company and there can be
no assurance that other qualified officers could be hired. See "Management."
CERTAIN ANTI-TAKEOVER PROVISIONS
Prior to the completion of the Offering, the Company will adopt the
Certificate and Restated By-Laws (the "By-Laws"). Certain provisions of the
Certificate and the By-Laws may have the effect of discouraging a third party
from making an acquisition proposal for the Company and thereby inhibit a
change in control of the Company in circumstances that could give the holders
of the Common Stock the opportunity to realize a premium over the then
prevailing market price of the Common Stock. Such provisions may also
adversely affect the market price for the Common Stock. In addition, the
classification of the Company's Board of Directors into three classes may have
the effect of delaying a change in control of the Company. See "Description of
Capital Stock -- Delaware Law and Certain Provisions of the Certificate of
Incorporation and the By-Laws."
CONTROL BY EXISTING STOCKHOLDERS
After the Offering, two officers who are also directors of the Company,
together with entities affiliated with them, will beneficially own
approximately 35% of the Common Stock outstanding (approximately 31% of the
Common Stock outstanding assuming exercise of the Underwriters' over-allotment
option in full). Because of their Common Stock ownership, these stockholders,
if they were to act together, could control the election of all members of the
Company's Board of Directors and determine most corporate actions after the
Offering. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
market prices prevailing from time to time. In addition, several of the
Company's principal stockholders and entities affiliated with them hold a
significant portion of the Company's outstanding Common Stock and a decision
by one or more of these stockholders to sell their shares could adversely
affect the market price of the Common Stock. Upon completion of the Offering,
the Company will have outstanding 7,500,000 shares of Common Stock (8,250,000
if the Underwriters' over-allotment option is exercised in full). Of these
shares, the 5,000,000 shares offered hereby (5,750,000 if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction or registration under the Securities Act except to the extent
purchased by affiliates of the Company.
The remaining 2,500,000 shares (the "Restricted Shares") were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act and are restricted securities under Rule
144 of the Securities Act and may not be sold without registration except in
compliance with Rule 144 or an exemption from registration under the
Securities Act. These shares were sold at the Company's inception on October
23, 1995 at their fair value at the time of $2,000 or, after giving effect to
a 12,500 for one stock split expected to be effected prior to completion of
the Offering, less than one cent per share. All of the Restricted Shares are
subject to lock-up agreements as described below (the "Lock-up Agreements").
In addition, all of the Restricted Shares will not be eligible for sale
pursuant to Rule 144 until the expiration of the two-year holding period from
the date such Restricted Shares were acquired. Accordingly, 2,500,000
Restricted Shares will become eligible for sale subject to Rule 144 resale
restrictions, including volume limitations, on October 23, 1997. The
Commission has proposed amendments to Rule 144 that would, if adopted,
retroactively reduce the two-year holding period to one year.
17
<PAGE>
Pursuant to Lock-up Agreements entered into by the Company's directors and
officers and certain other stockholders, all of the Restricted Shares are
subject to certain resale restrictions in addition to those imposed under Rule
144. Each party to a Lock-up Agreement has agreed that he or she will not,
directly or indirectly, offer for sale, sell, contract to sell, grant an
option to purchase or otherwise dispose of any shares of the Common Stock,
except for shares escrowed by the Alvin Murstein Second Family Trust and the
Andrew Murstein Family Trust (collectively the "Murstein Trusts") for the
benefit of FMC and gifts to family members or charitable institutions, for a
period of two years from the date of this Prospectus, without the prior
written consent of Furman Selz LLC. Such consent will not, however, affect the
resale restrictions under Rule 144. See "Underwriting."
In addition, it is anticipated that upon the closing of the Offering, three
executive officers of the Company will be granted stock options currently
estimated to be exercisable for 180,000 shares of Common Stock. The exercise
price for such shares will be equal to the public offering price set forth on
the cover page of this Prospectus. These options will become exercisable in
five equal annual installments commencing one year after the date of this
Prospectus, except in the case of Mr. Kowalsky whose options shall become
exercisable in three equal annual installments. Including shares reserved for
issuance in connection with such options, the Company will reserve a total of
750,000 additional shares of Common Stock for issuance with respect to the
grant of options under the 1996 Plan.
In addition, a total of 100,000 additional shares of Common Stock will be
reserved for issuance with respect to the grant of options under the Director
Plan. It is anticipated that upon Commission approval of the Director Plan,
the Company's four disinterested directors will each receive an option to
purchase the number of shares of Common Stock determined by dividing $100,000
by the fair market value of the Common Stock on the date the plan is approved
by the Commission.
Following the completion of the Offering, the Company currently expects to
file a registration statement under the Securities Act to register shares for
issuance under the 1996 Plan and the Director Plan. Shares issued upon
exercise of outstanding stock options after the effective date of such
registration statement generally will be tradeable without restriction under
the Securities Act. See "Shares Eligible for Future Sale."
18
<PAGE>
THE COMPANY
The Company is a specialty finance company with a leading position in the
origination and servicing of Medallion Loans. The Company also originates and
services Commercial Installment Loans. In addition, the Company operates a
taxicab rooftop advertising business. The investment objectives of the Company
are to provide a high level of current income, consistent with preservation of
capital, as well as long-term growth of net asset value. The Company intends
to pay quarterly cash dividends.
The Company is a closed-end, non-diversified management investment company
and has elected to be treated as a business development company under the 1940
Act. See "Regulation." In addition, it plans to elect to be treated for tax
purposes as a RIC under the Code. As a RIC, the Company will not be subject to
U.S. federal income tax on any investment company taxable income (which
includes, among other things, dividends and interest reduced by deductible
expenses) that it distributes to its stockholders for its taxable year if at
least 90% of its investment company taxable income for that taxable year is
distributed. See "Federal Income Tax Considerations."
The Company was incorporated in Delaware in 1995 to acquire and expand the
specialty finance and taxicab rooftop advertising businesses of the Founding
Companies. The closing of the Offering is contingent upon the completion of
the acquisition of each of the Founding Companies. For a description of the
transactions pursuant to which these businesses will be acquired, see
"Business -- Formation Transactions" and "Certain Transactions." The Pro Forma
Summary and Selected Financial Data of the Company included in this Prospectus
for the year ended December 31, 1995 and each quarter in the year ended
December 31, 1995 are derived from the financial position and results of
operations of each of the Founding Companies, collectively, and are presented
as if the Acquisitions and the Offering had been effected as of January 1,
1995 or December 31, 1995, as applicable. In addition, Pro Forma Combined
Financial Statements for the Company for the year ended December 31, 1995, Pro
Forma Combined Statements of Operations for each quarter in the year ended
December 31, 1995 and Financial Statements and Notes thereto for each of the
Founding Companies for the years ended December 31, 1993, 1994 and 1995 as
well as Historical Selected Financial Data for each of the Founding Companies
for the years ended December 31, 1991, 1992, 1993, 1994 and 1995 are included
in this Prospectus.
The aggregate consideration being paid by the Company to acquire the
Founding Companies consists of (i) $38.9 million in cash, (ii) the assumption
of approximately $90.1 million in bank debt and (iii) the assumption of
approximately $31.7 million in subordinated SBA debentures. The aggregate
consideration to be paid for each Founding Company, including assumption of
debt, based on December 31, 1995 amounts, is estimated to be as follows: (a)
Tri-Magna -- $93.7 million; (b) Edwards -- $50.0 million; and (c) TCC -- $17.0
million. The consideration being paid for each Founding Company was determined
by arm's-length negotiations between the Company and such Founding Company.
See "Business -- Formation Transactions," "Use of Proceeds" and "Certain
Transactions."
19
<PAGE>
The following chart illustrates the organization of the Company following
the Acquisitions:
[CHART APPEARS HERE]
Tri-Magna Corporation (MFC and Media). Tri-Magna is a closed-end, management
investment company registered under the 1940 Act and is the sole stockholder
of MFC and Media. Management of the Company has operated Tri-Magna and its
subsidiaries since they were organized. Operating primarily in New York City,
MFC is a well-established medallion lender and has diversified its operations
by developing a division that originates Commercial Installment Loans
financing small businesses outside of the taxicab industry. MFC, the largest
SSBIC in the nation, was incorporated in 1979 and is a closed-end, management
investment company registered under the 1940 Act. Media, which was
incorporated in 1994, provides taxicab rooftop advertising and has initiated a
plan to become a national provider of such advertising. Media currently
provides such advertising in New York City, Philadelphia, Miami and Boston and
has recently entered the Atlanta and Los Angeles markets. Upon consummation of
the Acquisitions, Tri-Magna will be merged into Medallion Financial and MFC
and Media will become wholly owned subsidiaries of Medallion Financial. At
that time, Tri-Magna will constitute approximately 62% of the Company's
assets.
Edwards Capital Company. Operating almost exclusively in New York City,
Edwards is a well-established medallion lender. Unlike MFC and TCC, which are
SSBICs, Edwards is an SBIC and, therefore, is permitted to lend to any small
business concern rather than being restricted to financing small business
concerns that are owned and managed by persons deemed to be socially or
economically disadvantaged. Accordingly, Edwards has a potentially larger
borrower base than the SSBICs and performs its credit analyses based solely on
economic criteria. The Company anticipates that after the Offering, Edwards
will increase its volume of originations of Commercial Installment Loans.
Edwards was organized in 1979 and has been operated as a privately held
limited partnership since 1981. Medallion Financial intends to acquire
substantially all of its assets through a newly formed subsidiary which has
registered as a closed-end, management investment company under the 1940 Act.
Upon consummation of the Acquisitions, Edwards will be registered as a closed-
end, management investment company under the 1940 Act and will constitute
approximately 28% of the Company's assets.
20
<PAGE>
Transportation Capital Corp. TCC is a well-established and geographically
diverse medallion lender with operations in Boston, Cambridge, Chicago and New
York City. The Company anticipates that after the Offering, TCC will increase
its volume of originations of Commercial Installment Loans. TCC is a wholly
owned indirect subsidiary of Leucadia National Corporation ("Leucadia"). TCC
was incorporated in 1979 and is licensed as an SSBIC. Upon consummation of the
Acquisitions, TCC will be a closed-end, management investment company
registered under the 1940 Act, will be a wholly owned subsidiary of Medallion
Financial and will constitute approximately 10% of the Company's assets.
The Company's executive offices are located at 205 East 42nd Street, Suite
2020, New York, New York 10017, and its telephone number is (212) 682-3300.
21
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
N-2 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, filed as part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is hereby made to the Registration
Statement, including the exhibits and schedules thereto. Statements contained
in this Prospectus as to the contents of any contract or any other document
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. MFC, TCC and Edwards have each filed or intend to file with the
Commission a Notification of Registration on Form N-8A and intend to file a
Registration Statement on Form N-5 under the 1940 Act prior to June 1996. For
further information with respect to MFC, TCC and Edwards, reference is hereby
made to their respective Registration Statements on Form N-5, including the
exhibits and schedules thereto. The Registration Statement and the
Registration Statements on Form N-5 when filed, including exhibits and
schedules thereto, may be inspected without charge at the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies can also be obtained from the Commission at
prescribed rates.
In connection with the Acquisitions, the Company has filed with the
Commission an application for an exemptive order under the 1940 Act (the
"Application"). The Application seeks an exemption from certain provisions of
the 1940 Act and rules thereunder that would otherwise prohibit the
Acquisitions and operation of the Company on a combined basis. The
Acquisitions and the Offering are contingent upon receipt of such exemptive
order. The Application may be inspected without charge at the Commission's
Public Reference Section and copies can be obtained from the Commission at
prescribed rates. See "Business -- Formation Transactions."
In connection with Tri-Magna's merger with Medallion Financial, Tri-Magna
will file an application on Form N-8F with the Commission to deregister as an
investment company under the 1940 Act. The application on Form N-8F may be
inspected without charge at the Commission's Public Reference Section and
copies can be obtained from the Commission at prescribed rates. See
"Business--Formation Transactions."
22
<PAGE>
DISTRIBUTIONS
The Company's policy is to make quarterly distributions of its investment
company taxable income and to distribute at least 90% of such income annually.
Initial distributions to stockholders are expected to be declared
approximately 90 days, and paid approximately 120 days, after the completion
of the Offering. Investment company taxable income of the Company includes,
among other things, dividends and interest reduced by deductible expenses. See
"Federal Income Tax Considerations." The Company does not expect to have
capital gains, however, to the extent that it does, it will distribute them
annually. The Company's ability to make dividend payments is restricted by
certain asset coverage requirements under the 1940 Act and is dependent upon
maintenance of its status as a RIC under the Code. See "Regulation" and
"Federal Income Tax Considerations." The Company's ability to make dividend
payments is further restricted by certain financial covenants contained in the
Company's credit agreements, by SBA Regulations and under the terms of the
subordinated SBA debentures. The Company has adopted a dividend reinvestment
plan pursuant to which stockholders can have distributions reinvested in
additional shares of Common Stock. See "Dividend Reinvestment Plan."
Substantially all of the Company's investment company taxable income is
expected to be comprised of cash dividends paid to it by the RIC Subsidiaries.
The RIC Subsidiaries intend to elect to be treated for tax purposes as RICs
under the Code and, therefore, must comply with the same income distribution
requirements that apply to the Company. As RICs, they are not subject to U.S.
federal income tax on any investment company taxable income that they
distribute to their stockholder, the Company, if at least 90% of their
respective investment company taxable income is distributed to the Company.
See "Federal Income Tax Considerations." The policy of each of the RIC
Subsidiaries is to make quarterly distributions to the Company of at least 90%
of their respective investment company taxable income. Substantially all of
the RIC Subsidiaries' net income is investment company taxable income and is
derived from interest paid on Medallion Loans and Commercial Installment
Loans.
Media is not required to pay dividends to the Company. Media, unlike the RIC
Subsidiaries, does not qualify as a RIC under the Code and, therefore, is not
subject to RIC distribution requirements. Media is subject to U.S. federal
income tax as a corporation under the Code and will pay taxes on corporate
income under the standard corporate tax rules. Media may retain all of its
earnings for funding the operation and expansion of its business. Any
dividends that are paid by Media to the Company, however, are expected to be
distributed to stockholders.
23
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering, after deducting the sales
load and other offering expenses payable by the Company (estimated to be
approximately $5.7 million), are estimated to be approximately $49.3 million,
assuming an offering price of $11.00 per share (approximately $57.0 million if
the Underwriters' over-allotment option is exercised in full). Of this amount,
$38.9 million will be used to pay the cash purchase price for the acquisition
of the Founding Companies. See "Business -- Formation Transactions" and
"Certain Transactions."
The following table sets forth the aggregate consideration estimated to be
payable for each Founding Company based on December 31, 1995 amounts:
<TABLE>
<CAPTION>
BANK DEBT SBA DEBT
CASH ASSUMED ASSUMED TOTAL
------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tri-Magna................................ $13,378 $80,295 $ -- $ 93,673
Edwards.................................. 15,197 9,850 24,950 49,997
TCC...................................... 10,349 -- 6,730 17,079
------- ------- ------- --------
Total.................................. $38,924 $90,145 $31,680 $160,749
======= ======= ======= ========
</TABLE>
All cash payments reflected in the preceding table are payable solely out of
the net proceeds of the Offering. Of the $121.8 million in indebtedness
assumed in connection with the Acquisitions, $10.4 million and $7.0 million
will initially be repaid from the proceeds from the Offering and the cash
acquired in the Acquisitions, respectively, within 30 days of the completion
of the Offering. The repayment of indebtedness with cash acquired in the
Acquisitions will require SBA approval and no assurance can be given that such
approval will be obtained. Of the $10.4 million, $3.2 million will be used to
repay indebtedness incurred in connection with the Company's repurchase of
subordinated SBA debentures and preferred stock. The indebtedness to be repaid
from the proceeds of the Offering bears interest at rates ranging from 7.25%
to 8.50%, with a weighted average rate of interest of 7.60%. Such indebtedness
would otherwise mature at various dates through September 30, 1996. The
Company is also assuming a $275,000 demand loan which is an obligation of
Media, an unconsolidated subsidiary of Tri-Magna. See "Business -- Sources of
Funds -- Preferred Stock Repurchase Agreements" and "Investment Objectives,
Policies and Restrictions--The Investment Adviser."
24
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
at December 31, 1995 assuming (i) 2,500,000 shares of Common Stock of the
Company issued prior to the Offering (the "Pre-Offering Issuance") had been
outstanding on that date, (ii) the sale of 5,000,000 shares of Common Stock
offered hereby with estimated net proceeds of $49.3 million and (iii) the
application of the estimated net proceeds in connection with the Acquisitions,
application of the cash acquired in connection therewith and for other uses as
described herein. See "Use of Proceeds" and "Business -- Sources of Funds."
This table should be read in conjunction with the Selected Financial Data
included in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
PRO FORMA
AS ADJUSTED
MEDALLION FOR APPLICATION
FINANCIAL AS ADJUSTED OF OFFERING
HISTORICAL FOR OFFERING PROCEEDS
---------- ------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Subordinated SBA debentures of
subsidiaries........................ $-- $-- $ 31,426
Notes payable to bank................ -- -- 72,713
---- ------- --------
Total long-term debt............... -- -- 104,139
Stockholders' equity:(1)
Preferred Stock, $.01 par value;
1,000,000 shares authorized; no
shares issued and outstanding....... -- -- --
Common Stock, $.01 par value;
15,000,000 shares authorized;
2,500,000 shares issued and
outstanding historical, 7,500,000
shares as adjusted for Offering,
7,500,000 shares pro forma as
adjusted for application of Offering
proceeds............................ -- 75 75
Additional paid-in capital........... 2 49,225 49,227
---- ------- --------
Total stockholders' equity......... 2 49,300 49,302
---- ------- --------
Total capitalization................... $ 2 $49,300 $153,441
==== ======= ========
</TABLE>
- - - ----------
(1) Reflects a 12,500 for one stock split and an amendment and restatement of
the Certificate which are expected to be effected prior to the date of
this Prospectus.
25
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at December 31, 1995
was negative $3.4 million, or negative $1.36 per share after giving effect to
(i) the Acquisitions and (ii) the Pre-Offering Issuance. "Pro forma net
tangible book value per share" is the pro forma tangible net worth (total pro
forma tangible assets less total pro forma liabilities) of the Company divided
by the number of shares of Common Stock outstanding after giving effect to (i)
the Acquisitions and (ii) the Pre-Offering Issuance. Assuming an initial
offering price per share of $11.00 after giving effect to the sale of the
Common Stock offered hereby (after deducting the sales load and estimated
offering expenses), the pro forma net tangible book value of the Company at
December 31, 1995 would have been $45.9 million, or $6.12 per share,
representing an immediate increase in net tangible book value of $7.48 per
share to existing stockholders and an immediate dilution of $4.88 per share to
the investors purchasing the shares of Common Stock in the Offering ("New
Investors").
The following table illustrates this dilution to New Investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $11.00
Pro forma net tangible book value per share before the
Offering..................................................... ($1.36)
Increase per share attributable to the sale of shares to New
Investors.................................................... 7.48
------
Pro forma net tangible book value per share after the
Offering..................................................... 6.12
------
Dilution to New Investors.............................................. $ 4.88
======
</TABLE>
The following table sets forth at the date of this Prospectus the number of
shares of Common Stock acquired from the Company, the total consideration paid
to the Company and the average price per share paid by existing stockholders
(after giving effect to the Acquisitions and the SBA Repurchase) and by the
New Investors.
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 2,500,000 33.3% $ 2,000 -- % $ --
New Investors............... 5,000,000 66.7 55,000,000 100.0 11.00
--------- ----- ----------- -----
Total....................... 7,500,000 100.0% $55,002,000 100.0%
========= ===== =========== =====
</TABLE>
26
<PAGE>
SELECTED FINANCIAL DATA
Medallion Financial Corp. was recently organized to acquire and expand the
specialty finance businesses conducted by Tri-Magna, Edwards and TCC as well
as the taxicab rooftop advertising business conducted by Tri-Magna. Medallion
Financial has only recently been organized and, accordingly, has no results of
operations. Simultaneously with, and as a condition to the closing of the
Offering, Medallion Financial will acquire each of the Founding Companies.
Prior to the Acquisitions, each of the Founding Companies had been operating
independently of each other. Accordingly, the following Selected Financial
Data is comprised of two major sections.
The first section, Pro Forma Selected Financial Data, presents selected
unaudited financial data of the Company as if the Founding Companies had been
acquired and the Offering effected, and gives effect to the application of the
proceeds of the Offering and the cash acquired in the Acquisitions as
described in "Use of Proceeds." In addition, the pro forma information is
based on available information and certain assumptions and adjustments set
forth in Notes 1 and 2 to the "Pro Forma Combined Financial Statements." The
pro forma selected balance sheet data were prepared as if the Offering and the
Acquisitions had occurred on December 31, 1995. The pro forma selected
statement of operations data were prepared as if the Offering and the
Acquisitions had occurred on January 1, 1995. The pro forma data are not
necessarily indicative of the future financial position or results of
operations of the Company.
The second section of the following discussion presents the Historical
Selected Financial Data of each of the Founding Companies. The Historical
Selected Financial Data for the fiscal years ended December 31, 1995, 1994 and
1993 have been derived from audited financial statements appearing elsewhere
in this Prospectus. The Historical Selected Financial Data for Edwards and TCC
have been reclassified to permit a presentation that is consistent with the
investment company status they will acquire upon completion of the
Acquisitions and the Offering. The Historical Selected Financial Data for the
fiscal years ended December 31, 1991 and 1992 for Edwards have been derived
from its audited financial statements not included in this Prospectus. The
Historical Selected Financial Data for the fiscal years ended December 31,
1991 and 1992 for Tri-Magna and TCC have been derived from their respective
unaudited financial statements not included in this Prospectus. These
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of the financial position and results of operations of the
Founding Companies for the period presented.
The Selected Financial Data provided herein should be read in conjunction
with the financial statements of Tri-Magna, Edwards and TCC, including the
Notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this Prospectus.
27
<PAGE>
PRO FORMA SELECTED FINANCIAL DATA
(SEE PRO FORMA FINANCIAL STATEMENTS FOR ADJUSTMENTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
--------------------------------------------- ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Investment income....... $3,846 $3,901 $3,915 $4,028 $15,690
Interest expense........ 2,043 1,997 1,945 2,018 8,003
------ ------ ------ ------ -------
Net interest income..... 1,803 1,904 1,970 2,010 7,687
Equity in earnings of
unconsolidated subsidi-
ary(1)................. 31 56 19 20 126
Other income............ 228 198 199 264 889
Accretion of negative
goodwill............... 193 193 193 193 772
Operating expenses...... (988) (952) (978) (938) (3,856)
Amortization of good-
will................... (105) (105) (105) (105) (420)
------ ------ ------ ------ -------
Net investment income... 1,162 1,294 1,298 1,444 5,198
Realized gain (loss) on
investments, net....... (4) (8) (11) 34 11
Change in unrealized de-
preciation of invest-
ments(2)............... 6 43 129 17 195
------ ------ ------ ------ -------
Net increase in net
assets resulting from
operations(3).......... $1,164 $1,329 $1,416 $1,495 $ 5,404
====== ====== ====== ====== =======
Pro forma net increase
in net assets resulting
from operations per
share(3)............... $ 0.15 $ 0.18 $ 0.19 $ 0.20 $ 0.72
====== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
<S> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA
Return on assets(4)............................................. 3.39%
Return on equity(5)............................................. 10.96
Average yield, e.o.p.(6)........................................ 10.69
Average cost of funds, e.o.p.(7)................................ 7.44
Spread, e.o.p.(8)............................................... 3.25
Other income ratio(9)........................................... 0.60
Operating expense ratio(10)..................................... 2.42
Medallion Loans as a percentage of investments.................. 78.9
Commercial Installment Loans as a percentage of investments..... 21.1
Investments to assets........................................... 93.4
Equity to assets................................................ 30.9
Debt to equity.................................................. 211
SBA debt to total debt.......................................... 30.1
<CAPTION>
DECEMBER 31,
1995
--------------
BALANCE SHEET DATA (IN THOUSANDS)
<S> <C>
Investments
Medallion Loans................................................ $117,489
Commercial Installment Loans................................... 31,490
Unrealized depreciation of investments(11)...................... --
--------
Investments, net of unrealized depreciation of investments...... 148,979
Total assets.................................................... 159,440
Notes payable and demand notes.................................. 72,713
Subordinated SBA debentures..................................... 31,426
Total liabilities............................................... 110,138
Total stockholders' equity...................................... 49,302
</TABLE>
- - - ---------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by the Company from its investment in Media.
(2) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against the Company's investments to state them at fair value.
(3) Net increase in net assets resulting from operations is the sum of net
investment income, net realized gains or losses on investments and the
change in unrealized gains or losses on investments. Per share data is
based upon 7,500,000 pro forma weighted average shares outstanding and
does not reflect 750,000 shares issuable under the Underwriters' over-
allotment option.
(4) Return on assets represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total assets at the date indicated.
(5) Return on equity represents net increase in net assets resulting from
operations for the fiscal year ending on the date indicated divided by
total stockholders' equity at the date indicated.
(6) Average yield, e.o.p. represents the end of period weighted average
interest rate on investments at the date indicated.
(7) Average cost of funds, e.o.p. represents the end of period weighted
average interest rate on debt at the date indicated.
(8) Spread, e.o.p. represents average yield, e.o.p. less average cost of
funds, e.o.p..
(9) Other income ratio represents other income for the fiscal year ending on
the date indicated divided by investments at the date indicated.
(10) Operating expense ratio represents operating expenses for the fiscal year
ending on the date indicated divided by total assets at the date
indicated.
(11) Upon completion of the Acquisitions, the Company's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by the
Company in accordance with the 1940 Act and the purchase method of
accounting.
28
<PAGE>
HISTORICAL SELECTED FINANCIAL DATA
TRI-MAGNA
(MFC, BUT NOT MEDIA, IS CONSOLIDATED WITH TRI-MAGNA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income............ $ 8,806 $ 7,953 $ 8,333 $ 8,820 $ 9,803
Interest expense............. 4,139 3,509 3,661 4,756 6,034
------- ------- ------- ------- -------
Net interest income.......... 4,667 4,444 4,672 4,064 3,769
Equity in earnings of
unconsolidated
subsidiary(1)............... -- -- -- 18 126
Other income................. 393 632 541 519 446
Total non-interest expense... 2,249 2,754 3,097 2,700 2,615
Dividends paid on minority
interest.................... 277 277 277 277 208
------- ------- ------- ------- -------
Net investment income........ 2,534 2,045 1,839 1,624 1,518
Realized gain (loss) on in-
vestments, net.............. (205) (223) (115) (22) 61
Change in unrealized
depreciation of
investments(2).............. (200) 125 (53) 58 (140)
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations... $ 2,129 $ 1,947 $ 1,671 $ 1,660 $ 1,439
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND
OTHER DATA(3)
Return on average assets(4).. 3.17% 2.81% 2.12% 1.88% 1.50%
Return on average equity(5).. 19.90 17.67 15.29 15.29 12.97
Interest rate spread
Average yield(6)............ 13.35 12.11 10.99 10.20 10.61
Average cost of funds(7).... 8.58 7.44 6.09 7.00 8.26
Spread(8)................... 4.77 4.67 4.90 3.20 2.35
Other income to average as-
sets........................ 0.58 0.91 0.69 0.59 0.47
Non-interest expense to aver-
age assets.................. 3.34 3.97 3.92 3.05 2.73
Weighted average assets...... $67,238 $69,401 $78,921 $88,414 $96,189
Weighted average invest-
ments(9).................... 65,943 65,673 75,790 86,496 92,433
Weighted average equity...... 10,696 11,019 10,931 10,855 11,094
Weighted average debt........ 48,230 47,160 60,160 67,955 73,063
<CAPTION>
DECEMBER 31,(3)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of investments... 73.0% 81.0% 81.0% 72.4% 68.4%
Commercial Installment Loans
as a percentage of
investments................. 27.0 19.0 19.0 27.6 31.6
Investments to assets........ 94.6 93.8 96.4 96.7 96.3
Equity to assets............. 16.9 15.0 12.9 11.8 17.4
Debt to equity(10)........... 218 259 315 356 464
SBA debt to total debt....... 28.3 23.8 19.8 17.5 --
<CAPTION>
DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans............. $45,642 $56,460 $66,437 $65,424 $66,338
Commercial Installment
Loans...................... 16,922 13,325 15,577 24,918 30,619
Unrealized depreciation of
investments(11)............. (900) (775) (828) (770) (910)
------- ------- ------- ------- -------
Investments, net of
unrealized depreciation of
investments................. 61,664 69,010 81,186 89,572 96,047
Total assets................. 65,199 73,603 84,239 92,590 99,788
Notes payable................ 31,700 40,000 50,700 59,025 80,295
Subordinated SBA debentures.. 12,500 12,500 12,500 12,500 --
Total liabilities............ 44,954 53,341 64,171 72,480 82,474
Minority interest............ 9,234 9,234 9,234 9,234 --
Total shareholders' equity... 11,011 11,027 10,834 10,876 17,314
</TABLE>
29
<PAGE>
MEDIA(1)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Advertising revenue................................... $227,756 $1,542,013
Cost of services...................................... 83,341 483,721
-------- ----------
Gross margin.......................................... 144,415 1,058,292
Other operating expenses.............................. 126,036 829,293
-------- ----------
Income before taxes................................... 18,379 228,999
Income taxes.......................................... -- 103,043
-------- ----------
Net income............................................ $ 18,379 $ 125,956
======== ==========
</TABLE>
- - - ----------
(1) Equity in earnings of unconsolidated subsidiary represents the net income
for the period earned by Tri-Magna from its investment in Media. Although
Tri-Magna owns 100% of Media, under the 1940 Act Media is not permitted
to be consolidated with Tri-Magna because Tri-Magna is an investment
company and Media is not.
(2) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against Tri-Magna's investments to state them at fair value.
(3) Unaudited.
(4) Return on average assets is calculated as the net increase in net assets
resulting from operations divided by the weighted average assets for the
period.
(5) Return on average equity is calculated as the net increase in net assets
resulting from operations divided by the weighted average equity for the
period.
(6) Average yield is calculated as gross investment income for the period
divided by the weighted average investments for the period.
(7) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(8) Spread is calculated as the difference between average yield and average
cost of funds.
(9) Investments consists of the Tri-Magna's loan portfolio and excludes cash
and cash equivalents and Tri-Magna's investment in Media.
(10) Debt to equity is defined as total debt divided by total shareholders
equity and minority interest.
(11) Upon completion of the Acquisitions, Tri-Magna's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by Tri-
Magna in accordance with the 1940 Act and the purchase method of
accounting.
30
<PAGE>
EDWARDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income............. $ 5,535 $ 5,444 $ 4,955 $ 4,334 $ 4,317
Interest expense.............. 3,258 2,873 2,741 2,765 2,748
------- ------- ------- ------- -------
Net interest income........... 2,277 2,571 2,214 1,569 1,569
Other income.................. 322 412 476 620 443
Total non-interest expense.... 965 1,512 1,022 1,108 885
Income tax expense............ 30 73 51 21 40
------- ------- ------- ------- -------
Net investment income......... 1,604 1,398 1,617 1,060 1,087
Realized gain (loss) on
investments, net............. (639) (13) -- -- --
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations
before extraordinary items... 965 1,385 1,617 1,060 1,087
Extraordinary items(1)........ -- -- -- (526) --
------- ------- ------- ------- -------
Net increase in net assets
resulting from operations.... $ 965 $ 1,385 $ 1,617 $ 534 $ 1,087
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND OTHER
DATA(2)
Return on average assets(3)... 2.27% 3.19% 3.60% 2.35% 2.42%
Return on average partners'
capital(4)................... 12.22 16.47 17.51 11.69 12.29
Interest rate spread
Average yield(5)............. 13.75 13.10 11.51 10.06 9.92
Average cost of funds(6)..... 9.41 8.14 7.97 7.97 7.96
Spread(7).................... 4.34 4.96 3.54 2.09 1.96
Other income to average as-
sets......................... 0.76 0.95 1.06 1.38 0.99
Non-interest expense to
average assets............... 2.27 3.48 2.27 2.46 1.98
Weighted average assets....... $42,501 $43,465 $44,953 $45,025 $44,829
Weighted average invest-
ments(8)..................... 40,260 41,567 43,047 43,074 43,508
Weighted average partners'
capital...................... 7,900 8,409 9,235 9,064 8,846
Weighted average debt......... 34,630 35,275 34,385 34,690 34,535
<CAPTION>
DECEMBER 31,(2)
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a
percentage of investments.... 98.0% 98.3% 98.3% 98.3% 98.6%
Commercial Installment Loans
as a percentage of
investments.................. 2.0 1.7 1.7 1.7 1.4
Investments to assets......... 95.0 96.7 97.0 97.5 97.1
Partners' capital to assets... 18.6 20.1 21.0 19.2 20.2
Debt to partners' capital(9).. 427 382 365 408 382
SBA debt to total debt........ 63.6 73.2 71.6 71.4 71.7
</TABLE>
31
<PAGE>
EDWARDS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans.............. $39,564 $42,301 $43,383 $42,740 $43,177
Commercial Installment
Loans....................... 867 719 758 747 622
Unrealized depreciation of
investments(10).............. (50) (50) (43) (20) (20)
------- ------- ------- ------- -------
Investments, net of unrealized
depreciation of investments.. 40,381 42,970 44,098 43,467 43,779
Total assets.................. 42,501 44,430 45,476 44,574 45,084
Notes payable and demand
notes........................ 12,250 9,125 9,900 10,000 9,850
Subordinated SBA debentures... 21,450 24,950 24,950 24,950 24,950
Total liabilities............. 34,601 35,511 35,926 35,998 35,967
Total partners' capital....... 7,900 8,919 9,551 8,576 9,117
</TABLE>
- - - ----------
(1) Edwards incurred a prepayment premium of $526,000 in connection with its
refinancing of $4.6 million and $5.1 million of subordinated SBA
debentures on June 29, 1994 and September 28, 1994, respectively.
(2) Unaudited.
(3) Return on average assets is calculated as the net increase in net assets
resulting from operations before extraordinary items divided by the
weighted average assets for the period.
(4) Return on average partners' capital is calculated as the net increase in
net assets resulting from operations before extraordinary items divided
by the weighted average partners' capital for the period.
(5) Average yield is calculated as gross investment income for the period
divided by the weighted average investments for the period.
(6) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(7) Spread is calculated as the difference between average yield and average
cost of funds.
(8) Investments consists of Edwards' loan portfolio and excludes cash and
cash equivalents.
(9) Debt to partners' capital is defined as total debt divided by total
partners' capital.
(10) Upon completion of the Acquisitions, Edwards' loan portfolio will be
recorded on the balance sheet at fair market value as estimated by
Edwards in accordance with the 1940 Act and the purchase method of
accounting.
32
<PAGE>
TCC
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Investment income................ $ 4,197 $ 3,944 $ 3,110 $ 2,217 $ 1,836
Interest expense................. 2,503 1,538 1,064 709 450
------- ------- ------- ------- -------
Net interest income.............. 1,694 2,406 2,046 1,508 1,386
Total non-interest expense....... 1,206 1,038 1,269 711 760
Income tax expense (benefit)(1).. -- 74 (983) 653 381
------- ------- ------- ------- -------
Net investment income, adjusted
for taxes(2).................... 488 1,294 1,760 144 245
Realized gain (loss) on
investments..................... (1,302) (646) (69) (144) (50)
Change in unrealized depreciation
of investments(3)............... (1,705) -- 232 790 335
------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from
operations...................... $(2,519) $ 648 $ 1,923 $ 790 $ 530
======= ======= ======= ======= =======
SELECTED FINANCIAL RATIOS AND
OTHER DATA(4)
Return on average assets(5)...... (7.76)% 2.46% 8.36% 3.90% 2.91%
Return on average common
equity(6)....................... (61.83) 14.73 33.84 11.22 6.74
Interest rate spread
Average yield(7)................ 13.16 15.90 15.77 13.86 13.58
Average cost of funds(8)........ 9.93 8.56 8.10 7.60 6.14
Spread(9)....................... 3.23 7.34 7.67 6.26 7.44
Non-interest expense to average
assets.......................... 3.71 3.94 5.51 3.51 4.18
Weighted average assets.......... $32,479 $26,338 $23,011 $20,260 $18,183
Weighted average
investments(10)................. 31,854 24,235 18,994 14,442 10,389
Weighted average common equity... 4,074 4,398 5,683 7,042 7,859
Weighted average debt............ 25,198 17,967 13,133 9,330 7,330
<CAPTION>
DECEMBER 31,(4)
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Medallion Loans as a percentage
of investments.................. 83.8% 81.6% 85.4% 80.1% 81.5%
Commercial Installment Loans as a
percentage of investments....... 16.2 18.4 14.6 19.9 18.5
Loans to assets.................. 91.7 74.4 75.6 52.8 52.6
Equity to assets................. 26.4 33.2 46.5 57.1 60.2
Debt to equity(11)............... 274 192 107 73 64
SBA debt to total debt........... 30.7 73.4 100.0 100.0 100
<CAPTION>
DECEMBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Investments
Medallion Loans................. $23,368 $16,471 $15,433 $ 8,796 $ 7,988
Commercial Installment Loans.... 4,513 3,721 2,641 2,185 1,808
Unrealized depreciation of
investments(12)................. (2,000) (2,000) (1,768) (978) (642)
------- ------- ------- ------- -------
Investments, net of unrealized
depreciation of investments..... 25,881 18,192 16,306 10,003 9,154
Cash and cash equivalents........ 1,847 5,790 3,911 8,199 7,781
Total assets..................... 28,223 24,453 21,569 18,951 17,416
Notes payable and demand notes... 14,132 4,132 -- -- --
SBA debentures................... 6,265 11,405 10,730 7,930 6,730
Total liabilities................ 20,766 16,348 11,541 8,129 6,937
Total shareholders' equity....... 7,457 8,105 10,028 10,822 10,479
</TABLE>
- - - ----------
(1) Income tax expense (benefit) includes income tax provision (benefit) on
investment income, realized losses on investments and change in
unrealized depreciation of investments. See note (2).
(2) Net investment income has been adjusted by combining TCC's income tax
provision (benefit) in order to present TCC's financial statements on a
comparable basis to the other Founding Companies.
(3) Change in unrealized depreciation of investments represents the
(increase) decrease for the period in the unrealized depreciation applied
against TCC's investments to state them at fair value.
(4) Unaudited.
(5) Return on average assets is calculated as the net increase (decrease) in
net assets resulting from operations divided by the weighted average
assets for the period.
(6) Return on average common equity is calculated as the net increase in net
assets resulting from operations divided by the weighted average equity
for the period.
(7) Average yield is calculated as gross investment income excluding interest
income on cash and cash equivalents for the period divided by the
weighted average investments for the period.
(8) Average cost of funds is calculated as interest expense for the period
divided by the weighted average debt for the period.
(9) Spread is calculated as the difference between average yield and average
cost of funds.
(10) Investments consists of TCC's loan portfolio and excludes cash and cash
equivalents.
(11) Debt to equity is defined as total debt divided by total shareholders
equity and minority interests.
(12) Upon completion of the Acquisitions, TCC's loan portfolio will be
recorded on the balance sheet at fair market value as estimated by TCC in
accordance with the 1940 Act and the purchase method of accounting.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
This discussion is intended to assist investors in their analysis of the
financial condition and results of operations of the Company. The information
contained in this section should be read in conjunction with the Pro Forma
Summary Financial Data and the Pro Forma and Historical Selected Financial
Data and the Financial Statements and Notes thereto appearing in this
Prospectus.
The Company's principal activity is the origination and servicing of
Medallion Loans and Commercial Installment Loans. The earnings of the Company
depend primarily on its level of net interest income, which is the difference
between interest earned on interest-earning assets consisting primarily of
Medallion Loans and Commercial Installment Loans, and the interest paid on
interest-bearing liabilities consisting primarily of credit facilities with
bank syndicates and subordinated debentures issued to or guaranteed by the
SBA. Net interest income is a function of the net interest rate spread, which
is the difference between the average yield earned on interest-earning assets
and the average interest rate paid on interest-bearing liabilities, as well as
the average balance of interest-earning assets as compared to interest-bearing
liabilities. Net interest income is affected by economic, regulatory and
competitive factors that influence interest rates, loan demand and the
availability of funding to finance the Company's lending activities. The
Company, like other financial institutions, is subject to interest rate risk
to the degree that its interest-earning assets reprice on a different basis
than its interest-bearing liabilities.
The Company's investment income is driven by the yield on Medallion Loans
and Commercial Installment Loans. The extent to which the yield of the
Company's Medallion Loan originations exceeds the Prime Rate has been in a
long-term decline. However, since December 1994 the average yield of both the
Medallion Loan and Commercial Installment Loan portfolios has slightly
increased. On a pro forma basis, weighted average portfolio yield at December
31, 1995 was 10.69% for the entire portfolio and 9.90% for the Medallion Loan
portfolio. The increase in average yield is partially the result of
stabilization in market interest rates for Medallion Loans, which began in
July 1994. Since December 1994, the average portfolio yield has increased as
older, lower interest rate loans in the portfolio have matured or been prepaid
and newer, higher interest rate loans have constituted a greater proportion of
the portfolio. From inception of its business through December 31, 1995, the
period between the origination and final payment of all Medallion Loans
originated by Tri-Magna has been estimated by the Company to be 29 months. The
Company believes that this time period varies to some extent as a function of
changes in interest rates because borrowers are more likely to exercise
prepayment rights in a decreasing interest rate environment when the interest
rate payable on the borrower's loan is high relative to prevailing interest
rates and are less likely to prepay in a rising interest rate environment.
The Company has also increased the average yield of the portfolio by
shifting the portfolio mix toward a higher percentage of Commercial
Installment Loans, which historically have had a yield of approximately 350
basis points higher than the Company's Medallion Loans and 500 to 700 basis
points higher than the prevailing Prime Rate. On a pro forma basis, Commercial
Installment Loans had a weighted average yield of 13.53% and represented 21%
of the total portfolio or $31.5 million at December 31, 1995. The Company
intends to continue to increase the percentage of Commercial Installment Loans
in the total portfolio.
The Company's interest expense is driven by the interest rate payable on the
Company's LIBOR-based short-term credit facilities with bank syndicates and,
to a lesser degree, fixed-rate, long-term subordinated debentures issued to or
guaranteed by the SBA. Recently, the Company has reduced its reliance on SBA
financing and increased the relative proportion of bank debt to total
liabilities. SBA financing can offer very attractive rates, but such financing
is restricted in its application and its availability is uncertain. In
addition, SBA
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financing subjects its recipients to limits on the amount of secured bank debt
they may incur. Accordingly, the Company plans to continue to limit its use of
SBA funding and will seek such funding only when advantageous, such as when
SBA financing rates are particularly attractive, and to fund loans that
qualify under the SBIA and SBA Regulations, through subsidiaries already
subject to SBA restrictions. The Company believes that its transition to
financing its operations primarily with short-term LIBOR-based bank debt has
generally decreased its interest expense thus far, but has also increased the
Company's exposure to the risk of increases in market interest rates. The
Company also expects that net interest income should increase because bank
debt is more available than SBA financing and will thus permit an increase in
the size of the loan portfolio. On a pro forma basis, at December 31, 1995,
short-term LIBOR-based debt constituted 67.9% of total debt.
The Company's cost of funds is primarily driven by (i) the average maturity
of debt issued by the Company, (ii) the premium to LIBOR paid by the Company
on its LIBOR-based debt, and (iii) the ratio of LIBOR-based debt to SBA
financing. The Company incurs LIBOR-based debt for terms generally ranging
from 30 to 180 days. The Company's subordinated debentures issued to or
guaranteed by the SBA typically have terms of ten years. The Company's cost of
funds reflects fluctuations in LIBOR to a greater degree than in the past
because LIBOR-based debt has come to represent a greater proportion of the
Company's debt. The Company measures its cost of funds as its aggregate
interest expense for all of its interest-bearing liabilities divided by the
face amount of such liabilities. The Company analyzes its cost of funds in
relation to the average of the monthly 90- and 180-day LIBOR (the "LIBOR
Benchmark"). At December 31, 1995, the Company's average cost of funds, e.o.p.
was 7.44%, or 187 basis points over the LIBOR Benchmark of 5.57%.
In connection with its Medallion Loan finance business, the Company also
conducts a taxicab rooftop advertising business which began operations in
November 1994. Media's revenue is affected by the number of Displays that it
owns and the occupancy rate of those Displays. At December 31, 1995, Media had
1,670 installed Displays. The Company expects that Media will continue to
expand its operations. Although Media is a wholly-owned subsidiary of the
Company, its results of operations are not consolidated with the Company
because Commission regulations prohibit the consolidation of non-investment
companies, such as Media, with investment companies, such as Medallion
Financial.
Factors which affect the Company's net assets include net realized gain/loss
on investments and change in net unrealized depreciation of investments. Net
realized gain/loss on investments is the difference between the proceeds
derived upon foreclosure of a loan and the cost basis of such loan. Change in
net unrealized depreciation of investments is the amount, if any, by which the
Company's estimate of the fair market value of its loan portfolio is below the
cost basis of the loan portfolio. Under the 1940 Act, the SBIA and SBA
Regulations, the Company's loan portfolio must be recorded at fair market
value or "marked to market." Unlike certain lending institutions, the Company
is not permitted to establish reserves for loan losses, but adjusts quarterly
the valuation of its loan portfolio to reflect the Company's estimate of the
current realizable value of the loan portfolio. Since no ready market exists
for the Company's loans, fair market value is subject to the good faith
determination of the Company. In determining such value, the Company takes
into consideration factors such as the financial condition of its borrowers,
the adequacy of its collateral and the relationships between current and
projected market rates of interest and portfolio rates of interest and
maturities. Any change in the fair value of portfolio loans as determined by
the Company is reflected in net unrealized depreciation of investments and
affects net increase in net assets resulting from operations but has no impact
on net investment income or distributable income. Upon completion of the
Acquisitions, the Company's loan portfolio will be recorded on the balance
sheet at fair market value as estimated by the Company in accordance with the
1940 Act and the purchase method of accounting.
The Company has only recently been organized and, accordingly, has no
results of operations. Simultaneously with, and as a condition to the closing
of the Offering, the Company will acquire each of the Founding Companies.
Prior to the Acquisitions, each of the Founding Companies had been operating
independently of each other, with management of the Company successfully
operating Tri-Magna since it began
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its medallion lending operations in 1979. Tri-Magna is the largest of the
three Founding Companies and is an investment company registered under the
1940 Act.
The following discussion, under the caption "Pro Forma Results of
Operations," presents the results of operations of the Company had the
Founding Companies been acquired and the Offering effected on January 1, 1995.
In addition, the pro forma information is based on available information and
certain assumptions and adjustments set forth in Notes 1 and 2 to the "Pro
Forma Combined Financial Statements." The Pro Forma Data are not necessarily
comparable to or indicative of future performance. The historical financial
condition and results of operations of each of Tri-Magna, Edwards and TCC are
then discussed. Discussions of asset/liability management and liquidity and
capital resources of the Company on a combined basis then follow.
PRO FORMA RESULTS OF OPERATIONS
Performance Summary. Investment income increased in each of the last three
quarters of 1995 due to improved average yield, e.o.p. and the increased size
of the loan portfolio. Although interest expense rose in the fourth quarter
due to increased debt outstanding and increased commitment fees, interest
expense declined in the second and third quarters. As a result of these
favorable factors in investment income and interest expense, net interest
income, net investment income and net increase in net assets resulting from
operations all increased in each of the last three quarters of 1995. Although
the long term trend of year to year declines in net increase in net assets
resulting from operations continued through 1995, the Company believes that
the quarter to quarter increases in 1995 pro forma quarterly results indicate
the beginning of a change in this trend and that this change will be enhanced
through the consolidation of the Founding Companies.
Investment Income. Investment income increased in each of the last three
quarters of 1995 due to improved average yield, e.o.p. and the increased size
of the loan portfolio. On a pro forma basis, average yield, e.o.p. as of
December 31, 1995 was 10.69%. The increase in average yield, e.o.p. was caused
by both (i) a shift in the portfolio mix toward a higher percentage of
Commercial Installment Loans which represented approximately 21% of the loan
portfolio on a pro forma basis at December 31, 1995 and historically have been
originated at a yield of approximately 350 basis points higher than Medallion
Loans and 500 to 700 basis points higher than the prevailing Prime Rate and
(ii) a slight increase in the average yield on Medallion Loans.
Interest Expense. The Company's average cost of funds, e.o.p. was 7.44% at
December 31, 1995. This reflected a LIBOR Benchmark decline of 93 basis points
during 1995. Interest expense declined in the second and the third quarters of
1995 as a result of (i) the decline in the LIBOR Benchmark, and (ii) a 38
basis point decrease in the spread over LIBOR charged by the Company's banks.
In the fourth quarter, however, interest expense rose due to increased
outstanding debt and the commitment fees paid to banks to establish a larger
credit facility.
Net Interest Income. Net interest income increased 5.6% from the first
quarter to the second quarter of 1995, 3.5% from the second quarter to the
third quarter of 1995, and 2.0% from the third quarter to the fourth quarter
of 1995. The Company's spread, e.o.p. was 3.25% at December 31, 1995.
Equity in Earnings of Unconsolidated Subsidiary. For the year ended December
31, 1995, Media generated advertising revenue of $1.5 million and incurred
Display rental costs of $484,000, resulting in a gross margin of $1.0 million
or 68.6% of advertising revenue. For the year ended December 31, 1995, Media
generated $126,000 in net income which is recorded as equity in earnings of
unconsolidated subsidiary on the Company's pro forma combined statement of
operations and represented 2.4% of the Company's net investment income on a
pro forma basis.
Other Income. The Company derived $889,000 in other income, or 0.60% of
investments for the year ended December 31, 1995, consisting of prepayment
fees, servicing income, and, to a lesser extent, late charges. Prepayment fees
are heavily influenced by the level and volatility of interest rates and
competition.
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Accretion of Negative Goodwill. Accretion of negative goodwill relates to
$2.9 million of negative goodwill generated in the acquisition of Tri-Magna.
Operating Expenses. The Company had operating expenses of $3.9 million for
the year ended December 31, 1995. Approximately $1.7 million or 43.6% of
operating expenses was related to salaries and benefits. Additionally,
$716,000 and $1.4 million were due to professional fees and other operating
expenses, respectively. The operating expense ratio was 2.40% at December 31,
1995. The Company believes that it will further reduce operating expenses by
consolidating the operations of the Founding Companies. Furthermore, the
Company expects that operating expenses as a percentage of average assets will
decline as the loan portfolio increases due to economies of scale.
Amortization of Goodwill. The amortization of goodwill of $420,000 for the
year ended December 31, 1995 relates to $6.3 million of goodwill generated in
the acquisitions of Edwards and TCC. Goodwill is the amount by which the cost
of acquired businesses exceeds the fair value of the net assets acquired.
Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. The Company experienced a net realized gain on
investments of $11,000 and a decrease in unrealized depreciation of $195,000
or 0.13% of the loan portfolio.
Net Investment Income. Net investment income increased 11.4% from the first
quarter to the second quarter, 0.3% from the second quarter to the third
quarter, and 11.2% from the third quarter to the fourth quarter due to
improved portfolio yields and the increased size of the loan portfolio.
Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased 14.2% from the first quarter to the
second quarter, 6.5% from the second quarter to the third quarter, and 5.6%
from the third quarter to the fourth quarter. Return on assets and return on
equity were 3.39% and 10.96%, respectively, at December 31, 1995.
TRI-MAGNA HISTORICAL RESULTS OF OPERATIONS
Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995
Net Interest Income. Net interest income decreased $295,000 or 7.3% from
$4.1 million for the year ended December 31, 1994 to $3.8 million for the year
ended December 31, 1995. The interest rate spread of 3.20% for the year ended
December 31, 1994 decreased 85 basis points to 2.35% for the year ended
December 31, 1995. This decrease reflected a 126 basis point increase in the
average cost of funds offset by a 41 basis point increase in the average yield
of the portfolio during the period. Tri-Magna's investment income increased
$983,000 or 11.1% from $8.8 million for the year ended December 31, 1994 to
$9.8 million for the year ended December 31, 1995. The increase in investment
income was the result of portfolio growth of $5.9 million or 6.8% from an
average of $86.5 million for the year ended December 31, 1994 to an average of
$92.4 million for the year ended December 31, 1995. The increase in investment
income was also the result of an increase in the average yield of the
portfolio which increased 41 basis points from 10.20% for the year ended
December 31, 1994 to 10.61% for the year ended December 31, 1995. Commercial
Installment Loans represented approximately 27.6% of the gross loan portfolio
at December 31, 1994 and 31.6% at December 31, 1995.
The increase in average yield was caused by both (i) a shift in the
portfolio mix toward a higher percentage of Commercial Installment Loans which
historically have had a yield of approximately 350 basis points higher than
Medallion Loans and (ii) an increase in the average interest rate on Medallion
Loans.
Tri-Magna's interest expense increased $1.2 million, or 26.9%, from $4.8
million for the year ended December 31, 1994 to $6.0 million for the year
ended December 31, 1995. The increase was in part the result of increased
average net borrowings of $5.1 million or 7.5% from $68.0 million for the year
ended December 31,
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1994 to $73.1 million for the year ended December 31, 1995. The increased
borrowings were incurred to fund portfolio growth. Interest expense also
increased as the result of a 124 basis point increase in the average cost of
funds during the period from an average of 7.00% for the year ended December
31, 1994 to 8.26% for the year ended December 31, 1995. Tri-Magna's 126 basis
point increase in average cost of funds was driven by a 118 basis point
increase in the LIBOR Benchmark and an 8 basis point increase in the
difference between cost of funds and the LIBOR Benchmark. At December 31, 1994
and 1995, short-term LIBOR-based debt constituted 78.7% and 91.0%,
respectively, of total liabilities. Tri-Magna negotiated an increase in the
amount available under its credit facilities from $65.0 million to $85.0
million to repay $12.5 million in subordinated SBA debentures, repurchase
preferred stock from the SBA and fund portfolio growth.
Equity in Earnings of Unconsolidated Subsidiary. For the year ended December
31, 1995, Media generated advertising revenue of $1.5 million and incurred
Display rental costs of $484,000, resulting in a gross margin of $1.0 million
or 68.6% of advertising revenue. For the year ended December 31, 1995, Media
generated $126,000 in net income which is recorded as equity in earnings of
unconsolidated subsidiary on Tri-Magna's statement of operations and
represented 8.3% of Tri-Magna's net investment income. Media began active
operations in November 1994; accordingly, there were no corresponding
operating data for the year ended December 31, 1994. At December 31, 1995,
Media had 1,670 Displays.
Other Income. Tri-Magna's other income decreased $73,000 or 14.1% from
$519,000 for the year ended December 31, 1994 to $446,000 for the year ended
December 31, 1995. This decrease was primarily caused by the receipt of fewer
prepayment fees due to an increase in market rates for Medallion Loans
resulting in decreased refinancing activity.
Non-interest Expense. Tri-Magna's non-interest expense decreased $85,000 or
3.1% from $2.7 million for the year ended December 31, 1994 to $2.6 million
for the year ended December 31, 1995. The decrease was primarily due to
reduction in profit sharing payments.
Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. For the year ended December 31, 1995, Tri-Magna
had a realized gain on investments of $61,000 as compared to a $22,000 loss on
investments for the year ended December 31, 1994. Tri-Magna's change in net
unrealized depreciation of investments increased $198,000 or 341.4% from
$58,000 at December 31, 1994 to negative $140,000 at September 30, 1995 due to
the potential loan loss exposure associated with the increased proportion of
Commercial Installment Loans in the loan portfolio and overall portfolio
growth.
Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994
Net Interest Income. Net interest income decreased $608,000 or 12.9% from
$4.7 million for the year ended December 31, 1993 to $4.1 million for the year
ended December 31, 1994. The interest rate spread of 4.90% for the year ended
December 31, 1993 decreased 170 basis points to 3.20% for the year ended
December 31, 1994. This decrease reflected a 79 basis point decrease in the
average yield of the loan portfolio and a 91 basis point increase in the
average cost of funds over the year. Tri-Magna's investment income increased
$487,000 or 5.9% from $8.3 million for the year ended December 31, 1993 to
$8.8 million for the year ended December 31, 1994. The increase in investment
income was the result of portfolio growth of $10.7 million or 14.1% from an
average of $75.8 million for the year ended December 31, 1993 to an average of
$86.5 million for the year ended December 31, 1994. Loan portfolio growth was
offset by a decrease in the average yield of the portfolio of 79 basis points
from 10.99% for the year ended December 31, 1993 to 10.20% for the year ended
December 31, 1994. The decrease in average yield of the portfolio represented
the continuation of a long-term trend which has been primarily caused by
competition in the Medallion Loan origination market.
Tri-Magna's interest expense increased $1.1 million or 29.7% from $3.7
million for the year ended December 31, 1993 to $4.8 million for the year
ended December 31, 1994. The increase was the result of increased average net
borrowings of $7.8 million or 13.0% from $60.2 million for the year ended
December 31, 1993 to $68.0 million for the year ended December 31, 1994. The
increased borrowings were incurred to fund
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loan portfolio growth. Interest expense also increased as the result of a 91
basis point increase in the average cost of funds during the period from an
average of 6.09% for the year ended December 31, 1993 to 7.00% for the year
ended December 31, 1994. Tri-Magna's 91 basis point increase in average cost
of funds was driven by a 331 basis point increase in the LIBOR Benchmark
offset by a 240 basis point decrease in the difference between cost of funds
and the LIBOR Benchmark. The decrease in the difference between cost of funds
and the LIBOR Benchmark was primarily the result of a decrease in the average
maturity of Tri-Magna's LIBOR debt and an increase in the ratio of LIBOR-based
debt to SBA financing. LIBOR-based borrowings represented approximately 78.7%
of Tri-Magna's total liabilities at December 31, 1994 and 75.9% at December
31, 1993.
Equity in Earnings of Unconsolidated Subsidiary. For the period ended
December 31, 1994, Media generated advertising revenue of $228,000 and
incurred Display rental costs of $83,000, resulting in a gross margin of
$144,000 or 63.2% of advertising revenue. For the period ended December 31,
1994, Media generated $18,000 in net income which is recorded as equity in
earnings of unconsolidated subsidiary on Tri-Magna's statement of operations
and represented 1.1% of Tri-Magna's net investment income. Media began active
operations in November 1994; accordingly, there were no corresponding
operating data for the year ended December 31, 1993.
Other Income. Tri-Magna's other income decreased $22,000 or 4.1% from
$541,000 for the year ended December 31, 1993 to $519,000 for the year ended
December 31, 1994.
Non-interest Expense. Tri-Magna's non-interest expense decreased $397,000 or
12.8% from $3.1 million for the year ended December 31, 1993 to $2.7 million
for the year ended December 31, 1994. The decrease was due to a decrease in
salaries and benefits related to a reduction of senior executive bonuses and
profit sharing plan contributions.
Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. For the year ended December 31, 1994, Tri-Magna
had a net realized loss on investments of $22,000 compared to a net realized
loss on investments of $115,000 for the year ended December 31, 1993. The 1993
net loss on investments reflected the write-off of the last radio car loans in
Tri-Magna's portfolio. Tri-Magna no longer originates radio car loans. Tri-
Magna's change in net unrealized depreciation of investments decreased
$111,000 or 209.4% from negative $53,000 at December 31, 1993 to $58,000 at
December 31, 1994, due to the reduced potential loan loss exposure associated
with the write-off of the last radio car loans.
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EDWARDS HISTORICAL RESULTS OF OPERATIONS
Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995
Net Interest Income. Net interest income remained essentially unchanged at
$1.6 million for the years ended December 31, 1995 and December 31, 1994. The
interest rate spread of 2.09% for the year ended December 31, 1994 decreased
13 basis points to 1.96% for the year ended December 31, 1995. The decrease
reflected a 14 basis point decrease in the average yield of the loan portfolio
and a 1 basis point decrease in the average cost of funds during the period.
Edwards' investment income decreased $17,000 or 0.4% to $4.3 million for the
year ended December 31, 1995. The decrease in investment income was the result
of the decrease in the average yield of the portfolio which decreased 14 basis
points from 10.06% for the year ended December 31, 1994 to 9.92% for the year
ended December 31, 1995. The decrease in investment income was offset by
portfolio growth of $434,000 or 1.0% from an average of $43.1 million for the
year ended December 31, 1994 to an average of $43.5 million for the year ended
December 31, 1995.
Edwards' interest expense decreased $17,000 or 0.6% to $2.7 million for the
year ended December 31, 1995. The decrease in interest expense reflected a 1
basis point decrease in the average cost of funds during the period from an
average of 7.97% for the year ended December 31, 1994 to 7.96% for the year
ended December 31, 1995. The decrease was a result of the refinancings in June
1994 of $4.6 million and September 1994 of $5.1 million of subordinated SBA
debentures at a lower interest rate and a decrease in average net borrowing of
$155,000 or 0.5% from $34.7 million for the year ended December 31, 1994 to
$34.5 million for the year ended December 31, 1995. The foregoing were offset
by an increase in interest rates on bank debt. Edwards' 1 basis point decrease
in average cost of funds was driven by a 118 basis point increase in the LIBOR
Benchmark and a 119 basis point decrease in the difference between cost of
funds and the LIBOR Benchmark. The decrease in the difference between cost of
funds and the LIBOR Benchmark was primarily the result of a reduction in the
weighted average interest rate paid on subordinated SBA debentures caused by
the refinancing of $9.7 million of such debentures. Subordinated SBA
debentures represented 69.4% of total liabilities at December 31, 1994 and
remained almost unchanged at December 31, 1995. The balance of total
liabilities is represented primarily by LIBOR-based credit facilities with
banks.
Other Income. Edwards' other income decreased $177,000 or 28.5% from
$620,000 for the year ended December 31, 1994 to $443,000 for the year ended
December 31, 1995. This decrease was primarily the result of decreased income
from servicing Medallion Loan participations. Gross loans serviced by Edwards
for third parties declined by $4.5 million from $44.3 million at December 31,
1994 to $39.8 million at December 31, 1995. Edwards typically receives
servicing fees which average 51 basis points of the principal amount of each
loan participation that it services. Other income also decreased because of a
reduction in the receipt of prepayment fees and late charges.
Non-interest Expense. Edwards' non-interest expense decreased $223,000 or
20.1% from $1.1 million for the year ended December 31, 1994 to $885,000 for
the year ended December 31, 1995. The reduction was primarily related to
decreased professional fees which were higher in 1994 primarily because of
costs associated with refinancing subordinated debentures.
Net Realized Gain/Loss on Investments. During the year ended December 31,
1994 and 1995 Edwards did not incur any realized gains or losses on
investments because Edwards' portfolio consists almost entirely of Medallion
Loans.
Extraordinary Item. Edwards incurred a prepayment premium of $526,000 in
connection with its refinancing of $4.6 million and $5.1 million of
subordinated SBA debentures on June 29, 1994 and September 28, 1994,
respectively.
Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994
Net Interest Income. Net interest income decreased $645,000, or 29.3% from
$2.2 million for the year ended December 31, 1993 to $1.6 million for the year
ended December 31, 1994. The interest rate spread of
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3.54% for the year ended December 31, 1993 decreased 145 basis points to 2.09%
for the year ended December 31, 1994, due entirely to a decrease in average
yield of the portfolio. The decrease reflected a 145 basis point decrease in
the average yield of the portfolio and no change in the average cost of funds
during the period. Edwards' investment income decreased $620,000 or 12.4% from
$4.9 million for the year ended December 31, 1993 to $4.3 million for the year
ended December 31, 1994. The decrease in investment income was the result of a
decrease in the average yield of the portfolio which decreased 145 basis
points from 11.51% for the year ended December 31, 1993 to 10.06% for the year
ended December 31, 1994. The decrease in average yield of the portfolio
represented the continuation of a long-term trend which was primarily caused
by general decreases in interest rates and competition in the Medallion Loan
origination market.
Edwards' interest expense increased $24,000 or 0.9% to $2.8 million for the
year ended December 31, 1994. The increase was the result of an increase in
interest rates on bank debt offset by the refinancing of $5.1 million of
subordinated debentures in September 1994 and $4.6 million of subordinated SBA
debentures in June 1994 at lower interest rates. In addition, Edwards incurred
increased average net borrowings of $305,000 or 0.9% from $34.4 million for
the year ended December 31, 1993 to $34.7 million for the year ended December
31, 1994. The average cost of funds during 1993 and 1994 remained unchanged at
7.97%. Stability in Edwards' average cost of funds was the result of a 331
basis point increase in the LIBOR Benchmark and a 331 basis point decrease in
the difference between cost of funds and the LIBOR Benchmark. The decrease in
the difference between cost of funds and the LIBOR Benchmark was primarily the
result of a reduction in the weighted average interest rate paid on
subordinated SBA debentures caused by the partial year effect of the
refinancing of $9.7 million of such debentures. Subordinated SBA debentures
represented 69.4% of total liabilities at December 31, 1993 and remained
almost unchanged at December 31, 1994. The balance of total liabilities is
primarily represented by LIBOR-based credit facilities with banks.
Other Income. Edwards' other income increased $144,000 or 30.3% from
$476,000 for the year ended December 31, 1993 to $620,000 for the year ended
December 31, 1994. This increase was the result of increased income from
servicing Medallion Loan participations. Gross loans serviced by Edwards for
third parties increased $9.3 million from $35.0 million at December 31, 1993
to $44.3 million at December 31, 1994. Edwards typically receives servicing
fees which average 51 basis points of the principal amount of each loan
participation that it services. Other income also increased because of an
increase in the receipt of prepayment fees and late charges.
Non-interest Expense. Edwards non-interest expense increased $86,000 or 8.6%
from $1.0 million for the year ended December 31, 1993 to $1.1 million for the
year ended December 31, 1994. The increase is primarily related to increased
professional fees which were higher in 1994 because of costs associated with
the refinancing of subordinated debentures.
Net Realized Gain/Loss on Investments. During the year ended December 31,
1994, Edwards did not incur any realized gains or losses on investments
because Edwards' portfolio consists almost entirely of Medallion Loans.
Extraordinary Item. Edwards incurred a prepayment premium of $526,000 in
connection with its refinancing of $4.6 million and $5.1 million of
subordinated SBA debentures on June 29, 1994 and September 28, 1994,
respectively.
TCC HISTORICAL RESULTS OF OPERATIONS
Comparison of the Historical Years Ended December 31, 1994 and December 31,
1995
Net Interest Income. Net interest income decreased $122,000 or 8.1% from
$1.5 million for the year ended December 31, 1994 to $1.4 million for the year
ended December 31, 1995. The decrease was primarily due to loan portfolio
contraction in the amount of $1.2 million undertaken in connection with a
change in investment
41
<PAGE>
policy instituted by Leucadia in 1993. Under this change in policy TCC
substantially reduced Medallion Loan originations in New York City where
competition had decreased yields, and emphasized originations in Boston,
Cambridge, Chicago and Newark where yields were higher. The interest rate
spread of 6.26% for the year ended December 31, 1994 increased 118 basis
points to 7.44% for the year ended December 31, 1995. This spread increase
reflected primarily a reduction in higher interest rate subordinated SBA
debentures, resulting in a 146 basis point decrease in the average cost of
funds for the period offset by a 28 basis point decrease in the average yield
of the portfolio. TCC finances its portfolio with fixed-rate subordinated SBA
debentures rather than LIBOR-based bank debt. TCC's investment income
decreased $381,000 or 17.2% from $2.2 million for the year ended December 31,
1994 to $1.8 million for the year ended December 31, 1995. The decrease in
investment income was the result of a $591,000 or 29.5% decrease in interest
earned on the loan portfolio which contracted $4.0 million or 27.8% from an
average of $14.4 million for the year ended December 31, 1994 to an average of
$10.4 million for the year ended December 31, 1995. In addition, the average
yield of the portfolio decreased 28 basis points from 13.86% for the year
ended December 31, 1994 to 13.58% for the year ended December 31, 1995. The
decrease in interest earned on the loan portfolio was offset by a $210,000 or
97.7% increase in interest income earned on treasury bills from $215,000 at
December 31, 1994 to $425,000 at December 31, 1995 attributable to an increase
in the weighted average interest rate on treasury bills which increased 156
basis points from 3.96% at December 31, 1994 to 5.52% at December 31, 1995.
TCC's interest expense decreased $259,000 or 36.5% from $709,000 for the
year ended December 31, 1994 to $450,000 for the year ended December 31, 1995.
The decrease was in part the result of a decrease in average net borrowing of
$2.0 million or 21.4% from $9.3 million for the year ended December 31, 1994
to $7.3 million for the year ended December 31, 1995. This decrease was caused
by the repayment of subordinated SBA debentures in the amount of $1.2 million.
TCC repaid subordinated SBA debentures with higher average interest rates than
the debentures remaining outstanding; accordingly, interest expense also
decreased as the result of a 146 basis point decrease in the average cost of
subordinated SBA debentures outstanding from an average of 7.60% at December
31, 1994 to 6.14% at December 31, 1995.
Non-interest Expense. TCC's non-interest expense increased $49,000 or 6.9%
from $711,000 for the year ended December 31, 1994 to $760,000 for the year
ended December 31, 1995. The increase was primarily due to a $124,000 increase
in pension expense. In 1994, pension expense was reduced due to the merger of
the defined benefit pension plans of TCC and Leucadia. The increase in pension
expense was offset by a $75,000 reduction in operating expenses relating to a
reduction in rent and salaries associated with the contraction of the loan
portfolio.
Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. TCC realized a loss on investments of $50,000 for
the year ended December 31, 1995, and a $144,000 loss on investments for the
year ended December 31, 1994. TCC's change in unrealized depreciation of
investments decreased $455,000 or 57.6% from $790,000 at December 31, 1994 to
$335,000 at December 31, 1995 due to the reduction of potential loan loss
exposure corresponding to the contraction of the loan portfolio.
Comparison of the Historical Years Ended December 31, 1993 and December 31,
1994
Net Interest Income. Net interest income decreased $538,000 or 26.9% from
$2.0 million for the year ended December 31, 1993 to $1.5 million for the year
ended December 31, 1994. These effects were in large part a result of
Leucadia's change in investment policy. The interest rate spread of 7.67% for
the year ended December 31, 1993 decreased 141 basis points to 6.26% for the
year ended December 31, 1994. This decrease reflected a 191 basis point
decrease in the average yield of the portfolio offset by a 50 basis point
decrease in the average cost of funds for the year. TCC finances its portfolio
with fixed-rate subordinated SBA debentures rather than LIBOR-based bank debt.
TCC's investment income contracted $893,000 or 28.8% from $3.1 million for the
year ended December 31, 1993 to $2.2 million for the year ended December 31,
1994. The decrease in investment income was the result of a $994,000 or 33.2%
decrease in interest earned on the loan portfolio which contracted $4.6
million or 24.2% from an average of $19.0 million for the year ended December
31, 1993 to an average of $14.4 million for the year ended December 31, 1994.
In addition, the average yield of the portfolio
42
<PAGE>
decreased 191 basis points from 15.77% for the year ended December 31, 1993 to
13.86% for the year ended December 31, 1994 reflecting the repayment of higher
rate loans and the resulting increased proportion of lower rate loans in the
portfolio. The decrease in interest earned on the loan portfolio was offset by
a $101,000 or 88.6% increase in interest income on treasury bills from
$114,000 at December 31, 1993 to $215,000 at December 31, 1994 attributable to
an increase in the weighted average interest rate earned on treasury bills
which increased 113 basis points from 2.83% at December 31, 1993 to 3.96% at
December 31, 1994.
TCC's interest expense decreased $355,000 or 32.3% from $1.1 million for the
year ended December 31, 1993 to $709,000 for the year ended December 31, 1994.
The decrease was in part the result of a decrease in average net borrowing of
$3.8 million or 29.0% from $13.1 million for the year ended December 31, 1993
to $9.3 million for the year ended December 31, 1994. This decrease was caused
by the repayment of subordinated SBA debentures in the amount of $2.8 million.
TCC repaid subordinated SBA debentures with higher average interest rates than
the debentures remaining outstanding; accordingly, interest expense also
decreased as the result of a 50 basis point decrease in the average cost of
subordinated SBA debentures outstanding from an average of 8.10% at December
31, 1993 to 7.60% at December 31, 1994.
Non-interest Expense. TCC's non-interest expense decreased $558,000 or 42.9%
from $1.3 million for the year ended December 31, 1993 to $711,000 for the
year ended December 31, 1994. The decrease was primarily due to a $363,000
reduction in legal and accounting fees which were higher in 1993 principally
due to costs related to non-recurring litigation and filings with the
Commission, a $113,000 reduction in pension expense related to the merger of
TCC's defined benefit plan into Leucadia's defined benefit plan and a $57,000
reduction in rent expense.
Income Tax Expense. A $1.6 million increase in provision for income taxes
for the year ended December 31, 1994 was primarily due to the effect of the
change in tax status of TCC beginning in July 1, 1993 from a non-taxable RIC
to a taxable corporation.
Net Realized Gain/Loss on Investments and Change in Net Unrealized
Depreciation of Investments. TCC realized a loss on investments of $69,000 for
the year ended December 31, 1993, and a $144,000 loss on investments for the
year ended December 31, 1994. TCC's change in unrealized depreciation of
investments increased $558,000 or 240.5% from $232,000 at December 31, 1993 to
$790,000 at December 31, 1994 due to the reduction of potential loan loss
exposure corresponding to the contraction of the loan portfolio.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity. Financial institutions such as the Company are
subject to interest rate risk to the extent their interest-earning assets
(consisting of Medallion Loans and Commercial Installment Loans) reprice on a
different basis over time in comparison to their interest-bearing liabilities
(consisting primarily of credit facilities with bank syndicates and
subordinated SBA debentures).
A relative measure of interest rate risk can be derived from the Company's
interest rate sensitivity gap. The interest rate sensitivity gap represents
the difference between interest-earning assets and interest-bearing
liabilities which mature and/or reprice within specified intervals of time.
The gap is considered to be positive when repriceable assets exceed
repriceable liabilities and negative when the inverse situation exists. A
relative measure of interest rate sensitivity is provided by the cumulative
difference between interest sensitive assets and interest sensitive
liabilities for a given time interval expressed as a percentage of total
assets.
The following schedule of principal payments sets forth at December 31, 1995
the amount of interest-earning assets and interest-bearing liabilities
maturing or repricing within the time periods indicated. The principal amount
of Medallion Loans and Commercial Installment Loans are assigned to the time
frames in which such principal amounts are contractually obligated to be paid.
The Company has not reflected an assumed annual prepayment rate for Medallion
Loans or Commercial Installment Loans in this table.
43
<PAGE>
The Company's interest rate sensitive assets were $159.5 million and
interest rate sensitive liabilities were $121.8 million at December 31, 1995.
The one year cumulative interest rate gap was negative $63.8 million, or 40.0%
of interest rate sensitive assets.
SCHEDULE OF PRINCIPAL PAYMENTS AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
MORE THAN 1 MORE THAN 2 MORE THAN 3 MORE THAN 5
LESS THAN AND LESS THAN AND LESS THAN AND LESS THAN AND LESS THAN
1 YEAR 2 YEARS 3 YEARS 5 YEARS 10 YEARS TOTAL
--------- ------------- ------------- ------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Medallion Loans and
Commercial Installment
Loans................. $ 17,709 $ 23,324 $ 26,740 $53,875 $28,904 $150,552
Cash and cash equiva-
lents 8,960 -- -- -- -- 8,960
-------- -------- -------- ------- ------- --------
Total.................. 26,669 23,324 26,740 53,875 28,904 159,512
-------- -------- -------- ------- ------- ========
Liabilities
Revolving line of cred-
it.................... 84,913 -- -- -- -- 84,913
Term loan.............. 3,232 2,000 -- -- -- 5,232
Subordinated SBA deben-
tures................. 2,290 1,500 3,000 -- 24,890 31,680
-------- -------- -------- ------- ------- --------
Total.................. 90,435 3,500 3,000 -- 24,890 $121,825
-------- -------- -------- ------- ------- ========
Interest rate gap....... $(63,766) $ 19,824 $ 23,740 $53,875 $ 4,014
======== ======== ======== ======= =======
Cumulative interest rate
gap.................... $(63,766) $(43,942) $(20,202) $33,673 $37,687
</TABLE>
Having interest-bearing liabilities that mature or reprice more frequently
on average than assets may be beneficial in times of declining interest rates,
although such an asset/liability structure may result in declining net
earnings during periods of rising interest rates. Conversely, having interest-
earning assets that mature or reprice more frequently on average than
liabilities may be beneficial in times of rising interest rates, although this
asset/liability structure may result in declining net earnings during periods
of falling interest rates. The mismatch between maturities and interest rate
sensitivities of the Company's interest-earning assets and interest-bearing
liabilities results in interest rate risk. Abrupt increases in market rates of
interest may have an adverse impact on the Company's earnings.
The effect of changes in market rates of interest is mitigated by regular
turnover of the portfolio. From inception of its business through December 31,
1995, the period between the origination and final payment of all Medallion
Loans originated by Tri-Magna is estimated by the Company to have been 29
months on a weighted average basis. Accordingly, the Company anticipates that
approximately 40% of the portfolio will mature or be prepaid each year. The
Company believes that the average life of its loan portfolio varies to some
extent as a function of changes in interest rates because borrowers are more
likely to exercise prepayment rights in a decreasing interest rate environment
when the interest rate payable on the borrower's loan is high relative to
prevailing interest rates and are less likely to prepay in a rising interest
rate environment.
The Company seeks to manage the exposure of the balance of the portfolio to
increases in market interest rates by entering into interest rate cap
agreements to hedge a portion of its variable-rate debt against increases in
interest rates and by incurring fixed-rate debt. The Company has entered into
interest rate cap agreements to limit the Company's interest rate exposure to
7.5% on $20.0 million of its LIBOR-based debt through April 7, 1997 and to
7.0% on an additional $20.0 million of its LIBOR-based debt through November
16, 1997. The preceding schedule of principal payments table does not account
for the effect of the Company's interest rate cap agreements. The Company will
seek to manage interest rate risk by evaluating and purchasing, if
appropriate, additional derivatives, originating adjustable-rate loans and
revising, if appropriate, its overall level of asset and liability matching.
Nevertheless, the Company accepts varying degrees of interest rate risk
depending on market conditions and believes that the resulting asset/liability
interest rate mismatch results in opportunities for higher net interest
income.
44
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity are credit facilities with bank
syndicates, fixed rate, long-term subordinated SBA debentures that are issued
to or guaranteed by the SBA and loan amortization and prepayments. As a RIC,
the Company distributes at least 90% of its investment company taxable income;
consequently, the Company primarily relies upon external sources of funds to
finance growth. At December 31, 1995, 74% of the Company's $121.8 million of
debt consisted of bank debt, substantially all of which was at variable
effective rates of interest averaging below the Prime Rate and 26% consisted
of subordinated SBA debentures with fixed rates of interest with a weighted
average rate of 7.44%. The Company is eligible to seek SBA funding but plans
to continue to limit its use of SBA funding and will seek such funding only
when advantageous, such as when SBA financing rates are particularly
attractive, or to fund loans that qualify under SBA regulations through
Edwards and TCC which are already subject to SBA restrictions. In the event
that the Company seeks SBA funding, no assurance can be given that such
funding will be obtained. See "Risk Factors -- Availability of Funds." In
addition to SBA funding, an additional $5.1 million of debt was available at
December 31, 1995 at variable effective rates of interest averaging below the
Prime Rate under the Company's $95.2 million bank credit facilities. After the
Offering the Company intends to negotiate an increase in the amount available
under such facilities.
The following table illustrates each of the Founding Companies' sources of
available funds and amounts outstanding under credit facilities at December
31, 1995. The Company has only set forth funding sources which are expected to
be available to the indicated companies after the Offering and the
Acquisitions. This table does not include Media's $275,000 demand loan. In
addition to the following amounts, $10.4 million is expected to be available
to the Company from the proceeds of the Offering. See "Use of Proceeds."
<TABLE>
<CAPTION>
TRI-MAGNA MFC EDWARDS TCC TOTAL
--------- ------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equiva-
lents.................. $ 31 $ 1,146 $ -- $7,781 $ 8,958
Revolving lines of cred-
it..................... 2,000 78,000 10,000 90,000
Amounts available..... 87 4,850 150 5,087
Amounts outstanding... 1,913 73,150 9,850 84,913
Average interest
rate................ 7.59% 7.40% 7.34%
Maturity............. 8/96 9/96 5/96-9/96
Term loans.............. 3,232 2,000 5,232
Interest rate......... 8.50% 7.50%
Maturity.............. 5/96 7/97
SBA debentures.......... 24,950 6,730 31,680
Average interest
rate................. 8.00% 5.38%
Maturity.............. 9/96-9/04 5/96-6/02
Total cash and remaining
amounts available under
credit facilities...... 118 5,996 150 7,781 14,045
Total debt outstanding.. $5,145 $75,150 $34,800 $6,730 $121,825
</TABLE>
Loan amortization and prepayments also provide a source of funding for the
Company. Prepayments on loans are influenced significantly by general interest
rates, economic conditions and competition. Medallion Loan prepayments
accelerated throughout virtually all of 1993 and the first three months of
1994 because of the generally lower level of interest rates which prompted
significant Medallion Loan refinancing activity. However, these prepayments
have slowed since early 1994 because of increases in the level of interest
rates which have caused a decrease in Medallion Loan refinancing activity.
MFC and TCC have repurchased all of their previously issued preferred stock
from the SBA for an aggregate price of $4.4 million, representing a discount
of 65.0% from the original aggregate issuance price of $12.6 million. MFC's
repurchase of preferred stock as well as its repayment of all of its
outstanding subordinated
45
<PAGE>
debentures has resulted in the termination of SBA limits on the amount of
secured bank debt MFC can incur and a realized gain in retained earnings in
the amount of the repurchase discount which will be accreted to paid-in
capital on a straight-line basis over 60 months. After the termination of such
limit, MFC negotiated a $15.0 million increase in its revolving line of
credit.
The Company has limited its use of SBA funding and will seek such funding
only when advantageous. Over the past two years the Company has expanded its
loan portfolio, reduced its level of SBA financing and increased its level of
bank funding. At December 31, 1995, SBA financing represented 26.0% of total
debt as compared to 39.7% at December 31, 1994. The Company's bank financing
increased to $90.1 million at December 31, 1995 from $69.0 million at December
31, 1994. While bank funding often carries higher interest rates than SBA
funding, the Company believes that such higher rates will be offset by the
increased volume of funding and loan originations which should result in
increased net interest margin.
Media was initially capitalized with equity investments and now funds its
operations primarily through internal cash flow. Media is not a RIC and,
therefore, is able to retain earnings to finance growth.
The Company believes that the net proceeds of this Offering remaining after
application of such proceeds to the purchase of the Founding Companies,
application of the cash acquired in connection with the Acquisitions,
anticipated borrowings from the SBA and under its bank credit facilities and
cash flow from operations (after distributions to stockholders) will be
adequate to fund the continuing growth of the Company's loan portfolio and
advertising business through at least the end of 1996. In addition, in order
to provide the funds necessary for the Company's expansion strategy, the
Company expects to incur, from time to time, additional short- and long-term
bank and (to the extent permitted) SBA leverage, and to issue, in public or
private transactions, its equity and debt securities. The availability and
terms of any such securities will depend upon market, regulatory and other
conditions. There can be no assurance that such additional financing will be
available on terms acceptable to the Company.
46
<PAGE>
BUSINESS
GENERAL
The Company operates a specialty finance business and its principal focus is
the origination and servicing of Medallion Loans. As an adjunct to its finance
business, the Company also operates a taxicab rooftop advertising business.
The Company has been engaged in taxicab medallion lending since 1979 and has
developed a leading position in the industry. The Company also originates and
services Commercial Installment Loans secured by retail dry cleaning and coin
operated laundromat equipment. It entered into this business in 1987 in order
to diversify its lending activity. The Company originates and services
Commercial Installment Loans to other targeted industries and intends to use
the expertise it has developed in its areas of concentration to further expand
the range of financial products it offers as well as the industries and
geographic areas it services.
The Company believes its taxicab rooftop advertising business is one of the
largest providers in the nation of this segment of the out-of-home advertising
industry. At December 31, 1995, the Company had 1,670 installed taxicab
rooftop advertising displays. The Company sells advertising space to
advertising agencies and companies promoting products. Currently, the Company
provides such advertising in New York City, Philadelphia, Miami and Boston.
The Company also intends to expand to other major metropolitan areas and has
recently entered the Atlanta and Los Angeles markets.
BUSINESS STRATEGY
Prior to the Offering, each of the Founding Companies that was engaged in
specialty financing operated under regulatory and capital constraints imposed
under the SBIA and SBA Regulations. Certain SBA Regulations precluded these
companies from offering flexible terms often requested by customers and, in
the case of MFC and TCC, restricted their lending activities as SSBICs to
borrowers that are socially or economically disadvantaged ("Disadvantaged
Borrowers") and small business concerns that are at least 50% owned and
managed by Disadvantaged Borrowers. In addition, the size of Tri-Magna's loan
portfolio was significantly limited because the SBA restricted the amount of
bank debt that Tri-Magna could incur. See "Regulation."
As a result of the Offering and the Acquisitions, Medallion Financial will
have greater flexibility and resources to operate its specialty finance
business and its lending activities will be subject to fewer restrictions than
was the case for each of the Founding Companies operating separately.
Medallion Financial will, however, continue to focus loan originations on
specific industries and perform credit reviews and analyses as it has
historically. Specifically, the Offering and the Acquisitions will permit
Medallion Financial to:
(i) significantly increase its debt to equity ratio to a level that is
more consistent with industry standards for finance companies;
(ii) originate loans to borrowers that are not Disadvantaged Borrowers
and, as a result, broaden its base of borrowers;
(iii) originate loans to borrowers whose intended use of proceeds is not
restricted to investment in their businesses (e.g., refinancing a
Medallion Loan where the proceeds are used to purchase a home or
finance an unrelated business);
(iv) originate loans with terms of less than four years; and
(v) explore the potential to securitize its loan portfolio and sell the
loans into the secondary market.
The Founding Companies have regularly received requests for products both
with some of these characteristics and from non-Disadvantaged Borrowers, but
in many cases have had to reject such requests due to restrictions imposed
under SBA Regulations.
47
<PAGE>
In addition to engaging in operations which are not subject to SBA
restrictions, the Company intends to initiate other strategies to expand its
lending activities as follows:
(i) develop larger Medallion Loan and Commercial Installment Loan
origination operations in cities in which it now has a presence, such
as Boston, Chicago, Cambridge, Newark, Philadelphia and Hartford as
well as continue to expand its operations in New York City, the
largest taxi medallion lending market in the U.S.;
(ii)originate larger loans, decrease the amount of loan participations
that the Company sells to third parties, and consider the repurchase
of participations that the Company previously sold to third parties;
(iii) take advantage of opportunities to acquire other medallion lenders
and portfolios of Medallion Loans as they may arise; and
(iv) continue to expand its portfolio of loans secured by retail dry
cleaning and coin operated laundromat equipment and consider lending
to other targeted industries.
The Company also intends to expand its taxicab rooftop advertising business,
which has grown rapidly over the past year. The Company believes that a
significant market opportunity exists because (i) providing taxicab rooftop
advertising is a largely unpenetrated segment of the out-of-home advertising
market and (ii) many customers that advertise nationally prefer a single
provider that can deliver the effectiveness of taxicab rooftop advertising
simultaneously in several major metropolitan markets. In addition, the Company
believes that only approximately 25% of New York City taxicabs have rooftop
advertising and a much smaller percentage of the taxicabs operating in other
major metropolitan areas nationwide have rooftop advertising.
The Company's strategy to expand its taxicab rooftop advertising business is
to penetrate each of its targeted geographic markets further by securing
additional exclusive, long-term contracts with individual and taxicab fleet
owners, expanding Display servicing and maintenance operations, adding to its
national advertising accounts, exploring opportunities to provide taxicab
interior audio and visual advertising and acquiring other taxicab rooftop
advertising businesses. In addition, the Company will seek to maximize
utilization rates by increasing the proportion of long-term advertising
contracts in its inventory. The Company currently provides advertising in New
York City, Philadelphia, Miami and Boston. The Company also intends to expand
to other major metropolitan areas and has recently entered the Atlanta and Los
Angeles markets.
GROSS LOAN PORTFOLIO SUMMARY DATA
The following table classifies, on a combined basis, the Company's loans
outstanding as of December 31, 1995:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE MATURITY BALANCE
TYPE OF LOAN OF LOANS INTEREST RATE DATE OUTSTANDING
------------ -------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
New York City Medallion Loans... 1,063 9.65% 1/96-12/15 $110,222,301
Other Medallion Loans........... 230 13.54 1/96-2/02 7,280,835
----- ------------
All Medallion Loans........... 1,293 9.90 1/96-12/15 117,503,136
Dry cleaners and laundromats.... 509 13.79 1/96-9/05 25,631,766
Other........................... 97 12.63 1/96-10/02 7,417,033
----- ------------
Total....................... 1,899 10.69% 1/96-12/15 $150,551,935
===== ============
</TABLE>
MEDALLION LENDING
Industry Overview
The New York City Market. A New York City taxicab medallion represents the
only license to operate a taxicab and accept street hails in New York City. As
reported by the TLC, individual (owner-driver) medallions
48
<PAGE>
currently sell for approximately $177,000 and corporate medallions currently
sell for approximately $208,000. According to TLC data, over the past 20
years, medallions have appreciated in value an average of 10.5% each year. The
TLC estimates that in 1993 New York City taxicabs transported approximately
226 million people and collected in excess of $1 billion in gross revenue.
Taxicabs play a prominent role in intra-Manhattan travel. According to the
TLC, taxicabs transported 154% more passengers than Manhattan buses in 1993.
In addition, taxicabs provided 34% of all intra-Manhattan passenger trips
taken in 1993 by subway, bus, livery car or taxicab. Between 1977 and 1993,
taxicab ridership for intra-Manhattan travel increased by 42%, while citywide
bus ridership declined by 40%. The Company believes that much of the
popularity of taxicabs can be attributed to the difficulty and expense
Manhattan residents encounter in maintaining a private automobile in
Manhattan.
The number of taxicab medallions is limited by law and no new medallions
have been issued since 1937. It is anticipated, however, that 400 additional
medallions will be issued over the next four years with the first 133
medallions offered for sale in May 1996. See "Risk Factors -- Taxicab Industry
Regulation." As a result of the limited supply of medallions, an active market
for medallions has developed. TLC estimates indicate that the total value of
the 11,787 medallions exceeds $2.3 billion. The law limiting the number of
medallions also stipulates that the ownership for the 11,787 medallions shall
remain divided into 4,969 owner-driver or individual medallions and 6,818
fleet or corporate medallions. Corporate medallions are more valuable because
they can be aggregated by businesses and leased to drivers.
Based upon TLC statistics, the Company estimates that from 1989 through 1993
the number of taxicab medallions sold each year ranged from approximately 500
to 850, divided roughly equally between corporate and individual medallions.
The purchase of a taxicab medallion is frequently financed with a loan and, in
addition, there is an active refinancing market for such loans. Assuming that
approximately 75% of the purchase price of corporate medallions and
approximately 75% of the purchase price of individual medallions are typically
financed, the dollar volume of New York City financing of medallion sales
would range from $72 million to $124 million a year. The Company believes that
the dollar volume of the refinancing market exceeds the dollar volume of
financing of medallion sales.
A prospective medallion owner must qualify under the medallion ownership
standards set and enforced by the TLC. These standards prohibit individuals
with criminal records from owning medallions, require that the funds used to
purchase medallions be derived from legitimate sources and mandate that
taxicab vehicles and meters meet TLC specifications. In addition, before the
TLC will approve a medallion transfer, the TLC requires a waiver from the
seller's insurer stating that there are no outstanding claims for personal
injuries in excess of insurance coverage. After the sale is approved, the
owner's taxicab is subject to quarterly TLC inspections.
The Boston and Cambridge Markets. The Company estimates that Boston
medallions currently sell for approximately $98,000. The number of Boston
medallions had been limited by law since 1930 to 1,525 medallions. In 1993,
however, the Massachusetts legislature authorized the Boston Hackney Carriage
Bureau, which regulates the issuance of new medallions, to issue 300
additional medallions, but the Bureau has only issued 40 additional medallions
which are restricted to "wheelchair accessible" taxicabs. The Company
estimates that the total value of all Boston medallions and related assets is
approximately $157 million. In addition, the Company estimates Cambridge
medallions currently sell for approximately $80,000. The number of Cambridge
medallions has been limited to 248 since 1945 by a Cambridge city ordinance;
accordingly, the Company estimates that the total value of all Cambridge
medallions and related assets is approximately $25 million.
The Chicago Market. Based on the Company's experience, Chicago medallions
currently sell for approximately $37,000. Pursuant to a 1988 municipal
ordinance, the number of outstanding medallions, which currently is capped at
5,500, has increased steadily from 4,600 in 1988 and will be increased to
5,700 in 1997. The ordinance has also required two major taxicab companies to
forfeit 1,300 medallions from 1988 through 1997. The newly issued and
forfeited medallions have been reissued for nominal consideration to new
owners by the city through a lottery. The Company estimates that the total
value of all Chicago medallions and related assets is approximately $250
million.
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<PAGE>
Market Position
The Company has originated and serviced Medallion Loans since 1979 and has
established a leading position in this industry. The Company's management has
a long history of owning, managing and financing taxicab fleets, taxicab
medallions and corporate car services. Medallion Loans collateralized by New
York City taxicab medallions and related assets comprised 94% of the value of
the Company's Medallion Loan portfolio at December 31, 1995. The balance
consisted of Medallion Loans collateralized by Boston, Chicago, Cambridge,
Newark, Philadelphia and Hartford taxicab medallions. The Company believes
that there are significant growth opportunities in these and other
metropolitan markets nationwide.
Most New York City medallion transfers are handled through approximately 35
medallion brokers who are licensed by the TLC. In addition to brokering
medallions, these brokers also arrange TLC documentation, insurance, vehicles
and meters as well as financing. The Company has excellent relations with many
of the most active of these brokers and regularly receives referrals from
them. However, the Company receives most of its referrals from a small number
of brokers. The Company does not pay referral fees.
Loan Portfolio
Medallion Loans comprised approximately 79% of the Company's loan portfolio
at December 31, 1995 on a pro forma basis. On that date, the Company had 1,293
Medallion Loans outstanding ranging from $645 to $720,000 in principal amount
outstanding with an average principal amount outstanding of $91,000.
Substantially all of the Company's Medallion Loans are made at fixed rates of
interest in excess of the Prime Rate. These loans generally require equal
monthly payments covering accrued interest and amortization of principal over
a ten-year schedule subject to a balloon payment of all outstanding principal
after four years. Borrowers may prepay Medallion Loans upon payment of a fee
of 90 days' interest. The Company generally retains the Medallion Loans it
originates. From inception of its business through December 31, 1995, the
period between the origination and final payment of all Medallion Loans
originated by Tri-Magna has been estimated by the Company to be 29 months on a
weighted average basis. The Company believes that this weighted average time
period varies to some extent as a function of changes in interest rates
because borrowers are more likely to exercise prepayment rights in a
decreasing interest rate environment when the interest rate payable on the
borrower's loan is high relative to prevailing interest rates and are less
likely to repay in a rising interest rate environment. At December 31, 1995,
substantially all of the Company's Medallion Loans were secured by first
security interests in taxicab medallions and related assets. The Company
originates Medallion Loans at an approximate average loan-to-value ratio of
70%. The Company estimates that the average loan to value ratio of all of the
Company's Medallion Loans at December 31, 1995 was 54%, which the Company
believes is representative of its historical average loan to value ratio. The
Company has recourse against the direct and indirect owners of the medallion
through personal guarantees. Although personal guarantees increase the
commitment of borrowers to repay their loans, there can be no assurance that
the assets available under personal guarantees would, if required, be
sufficient to satisfy the obligations secured by such guarantees.
The Company believes that its Medallion Loan portfolio is of high credit
quality because medallions have generally increased in value and are easy to
repossess and resell in an active market. While loans in Tri-Magna's portfolio
have been from time to time in arrears or default, Tri-Magna has never
experienced a loss of principal on any of the $296 million in aggregate
principal amount of Medallion Loans it has originated since 1979. The Company
has lost little principal or interest on Medallion Loans in their entirety. In
the event of defaults by borrowers, the medallions collateralizing such loans
have been seized and, when such loans have not been brought current, readily
sold in the active market for medallions at prices at or in excess of the
amounts due.
COMMERCIAL INSTALLMENT LOANS
Overview
Tri-Magna began Commercial Installment Loan operations in 1987 to diversify
its loan portfolio which, prior to that time, consisted almost entirely of
Medallion Loans. Tri-Magna has chosen to concentrate these
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<PAGE>
operations on originating loans secured by retail dry cleaning and coin
operated laundromat equipment because of certain characteristics similar to
medallion lending that make these industries attractive candidates for
profitable lending. These factors include the following (i) relatively high
fixed rates of interest ranging from approximately 500 to 700 basis points
over the prevailing Prime Rate at the time of origination, (ii) low historical
repossession rates, (iii) vendor recourse, (iv) significant equity investments
by borrowers, (v) an active market for repossessed equipment, (vi) a small
average loan size of $53,000 and (vii) collateral service life that is
frequently twice as long as the term of the loans. The Company estimates that
there are approximately 4,000 retail dry cleaners and approximately 3,000
laundromats in the New York City metropolitan area. Specialization in these
industries has permitted relatively low administrative costs because
documentation and terms of credit are standardized. Moreover, the consistency
among the loans has facilitated simplified credit review and portfolio
analysis. In addition, the Company believes that other niche industries with
similar characteristics will provide additional loan portfolio growth
opportunities.
Loan Portfolio
Commercial Installment Loans comprised 21% of the Company's loan portfolio
at December 31, 1995 on a pro forma basis. These loans finance either the
purchase of the equipment and related assets necessary to open a new business
or the purchase or improvement of an existing business. The Company has
originated Commercial Installment Loans in principal amounts ranging from
$5,000 to $500,000. These loans are generally retained by the Company and
typically have maturities ranging from one to seven years. At December 31,
1995, there were 606 Commercial Installment Loans outstanding with a balance
of $31.5 million on a pro forma basis. Loans to dry cleaners and laundromats
represented 78% of the aggregate principal amount of Commercial Installment
Loans outstanding at December 31, 1995. The remaining Commercial Installment
Loans are spread among other industries including food service, private pay
phone and radio broadcast.
The principal amount of the Company's originations of Commercial Installment
Loans has increased during the three years ended December 31, 1995. The
Company originated 350 Commercial Installment Loans in 1995 in the aggregate
principal amount of $24.7 million. The Company originated 339 Commercial
Installment Loans in 1994 in the aggregate principal amount of $24.1 million,
compared to 181 Commercial Installment Loans in the aggregate principal amount
of $17.2 million originated in 1993.
From 1987 through December 31, 1995, Tri-Magna originated 1,056 Commercial
Installment Loans in the aggregate principal amount of $69.0 million, of which
$18.3 million were to retail dry cleaners and $31.1 million were to coin
operated laundromats. The balance of Tri-Magna's Commercial Installment Loans
were secured by real estate, food service equipment, radio broadcast licenses
and other equipment.
Commercial Installment Loans made by the Company typically require equal
monthly payments covering accrued interest and amortization of principal over
a four- to five-year term and generally can be prepaid with a fee of 90 days'
interest. At December 31, 1995, the Company's Commercial Installment Loans had
a weighted average interest rate of 13.53%. The term of, and interest rate
charged on, the Company's loans outstanding at the time of the Offering are
subject to SBA Regulations. See "Regulation." Under SBA Regulations, the
maximum rate of interest permitted on loans originated by the Company during
December 1995 was 15%; however, effective January 31, 1996, the maximum rate
was raised to 19%. Unlike Medallion Loans, for which competition precludes the
Company from charging the maximum rate of interest permitted under SBA
Regulations, the Company is able to charge the maximum rate on certain
Commercial Installment Loans and anticipates that after the Offering,
Medallion Financial will be able to charge in excess of the maximum rate. The
weighted average rate of interest on Commercial Installment Loans exceeded the
weighted average rate of interest on Medallion Loans by 363 basis points at
December 31, 1995. The Company believes that the increased yield on Commercial
Installment Loans compensate for their higher risk relative to Medallion Loans
and further illustrate the benefits of diversification.
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<PAGE>
The Company generally originates Commercial Installment Loans at an
approximate average loan to value ratio of 80% and estimates that the average
loan to value ratio of all of the Company's Commercial Installment Loans at
December 31, 1995 was approximately 60%. Substantially all of the Company's
Commercial Installment Loans are collateralized by first security interests in
the assets being financed by the borrower. At December 31, 1995, 78% of the
aggregate principal outstanding in the Company's Commercial Installment Loan
portfolio was secured by first security interests in retail dry cleaning and
coin operated laundromat equipment and the balance, 22%, was secured by real
estate, food service equipment, radio broadcast licenses and other equipment.
In addition, the Company requires the principals of borrowers to personally
guarantee loans. Additional security is provided by equipment vendors, and at
December 31, 1995, approximately 40% of the aggregate principal amount of
Commercial Installment Loans outstanding was secured by full recourse
guarantees from equipment vendors and approximately 5% was secured by partial
recourse guarantees from equipment vendors. The Company's aggregate realized
loss of principal on loans secured by retail dry cleaning and coin operated
laundromat equipment originated to date is $52,000 or 0.11% of the
approximately $49.4 million in principal amount of such loans originated to
date.
MARKETING, ORIGINATION AND LOAN APPROVAL PROCESS
The Company employs five loan officers that originate Medallion Loans and
Commercial Installment Loans. The Company's loan officers regularly receive
referrals from medallion brokers and make use of an extensive referral network
in the retail dry cleaning and coin operated laundromat industry. Equipment
vendors are the single most important source of Commercial Installment Loan
referrals and the Company attributes its excellent relations with these
vendors in part to its success in financing the purchase of retail dry
cleaning and coin operated laundromat equipment.
Each loan application is individually reviewed through analysis of a number
of factors, including loan-to-value ratios, a review of the borrower's credit
history, public records, personal interviews, trade references and personal
inspection of the premises and TLC approval, if applicable. The Company also
requires each applicant to provide personal and corporate tax returns and
premises leases or property deeds. The Company's Credit Committee establishes
loan origination criteria. Loans that conform to such criteria may be
processed by a loan officer and non-conforming loans must be approved by three
of the four members of the Company's Credit Committee.
GROSS LOANS RECEIVABLE
The following table sets forth the Company's gross loans receivable:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans Receivable
Tri-Magna.............. $ 62,564 48% $ 69,785 53% $ 82,014 57% $ 90,343 62% $96,956 64%
Edwards................ 40,431 31 43,020 32 44,141 30 43,487 30 43,799 29
TCC.................... 27,881 21 20,192 15 18,074 13 10,981 8 9,797 7
-------- --- -------- --- -------- --- -------- --- -------- ---
Total.................. $130,876 100% $132,997 100% $144,229 100% $144,811 100% $150,552 100%
======== === ======== === ======== === ======== === ======== ===
</TABLE>
During the year ended December 31, 1995, the Company originated 798 loans in
the aggregate principal amount of $52.7 million. For that period, the
Company's realized losses of principal were less than 0.01% of its loan
portfolio. During the year ended December 31, 1994, the Company originated
loans in the aggregate principal amount of $61.4 million. For that year, the
Company's realized losses of principal were approximately 0.11% of its loan
portfolio. See Pro Forma Selected Financial Data of the Company for additional
information concerning the Company's loan portfolios.
52
<PAGE>
LOAN ACTIVITY
The following table sets forth the Company's loans originated, renewed and
repaid on a combined basis for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loans originated............................................ $ 61,357 $ 52,714
Loan repayments (including renewals)........................ (60,610) (46,983)
Decrease in unrealized depreciation......................... 871 195
Loans (written off) recovered, net.......................... (166) 11
-------- --------
Increase (decrease) in loans receivable--net................ 1,452 5,937
Loans receivable-net (beginning of period).................. 141,590 143,042
-------- --------
Loans receivable-net (end of period)........................ $143,042 $148,979
======== ========
</TABLE>
DELINQUENCY AND LOAN LOSS EXPERIENCE
While operating Tri-Magna, management of the Company developed the following
collection practices which it intends to continue to follow in operating the
Company. When a borrower fails to make a required monthly payment, the
borrower is notified by mail after approximately 10 days, and a collection
officer generally contacts the borrower if the payment remains unpaid after 10
additional days. The Company generally follows a practice of discontinuing the
accrual of interest income on loans which are in arrears as to interest
payments for a period in excess of 90 days. The Company delivers a default
notice and begins foreclosure and liquidation proceedings when management
determines that pursuit of these remedies is the most appropriate course of
action in the circumstances.
At December 31, 1995, the Company had 69 loans with an aggregate principal
balance of $6.4 million, or 4.3% of the portfolio, for which accrued interest
and principal payments of $512,000 were delinquent for 90 days or more,
compared to 70 loans with an aggregate principal balance of $4.6 million, or
3.2% of the portfolio, for which accrued interest and principal payments of
$601,000 were delinquent for 90 days or more at December 31, 1994. Although
the aggregate principal balance of delinquent loans increased from 3.2% of the
portfolio at December 31, 1994 to 4.3% at December 31, 1995, the amount of
accrued interest and principal which was delinquent decreased $89,000 from
$601,000 at December 31, 1994 to $512,000 at December 31, 1995. Of the 69
loans which were delinquent at December 31, 1995, 36, in the aggregate
principal amount of $5.0 million, were Medallion Loans. The Company considers
a loan to be delinquent if the borrower fails to make payments for 10 days or
more; however, the Company may agree with a borrower that cannot make payments
in accordance with the original loan agreement to modify the payment terms of
the loan. Based upon the Company's assessment of its collateral position, the
Company anticipates that a substantial portion of the principal amount of its
delinquent loans would be collected upon foreclosure of such loans, if
necessary. There can be no assurance, however, that the collateral securing
such loans will be adequate in the event of foreclosure.
The Company monitors delinquent loans for possible exposure to loss. In its
analysis, the Company reviews various factors, including the value of the
collateral securing the loan and the borrower's prior payment history. Based
upon these factors and the Company's analysis of the yield and maturity of
loans in the portfolio relative to current and projected market interest
rates, the Company determines net unrealized depreciation of investments or
the amount by which the Company's estimate of the current realizable value of
its portfolio is below the cost basis thereof.
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<PAGE>
The following table sets forth the Company's unrealized depreciation of
investments and the loan loss experience on a combined, rather than pro forma,
basis:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year........................... $ 2,639 $ 1,768
Change in unrealized depreciation of investments..... (415) (145)
Realized loan losses................................. (200) (62)
Recoveries........................................... 33 12
Interest income received............................. (289) --
----------- -----------
Balance, end of year................................. $ 1,768 $ 1,573
=========== ===========
</TABLE>
TAXICAB ROOFTOP ADVERTISING
Media provides taxicab rooftop advertising which is a relatively undeveloped
segment of the out-of-home advertising industry. Out-of-home advertising
includes (i) traditional outdoor advertising, such as billboards and posters,
(ii) transit advertising, such as taxicabs, buses, bus shelters, subway,
commuter train and airport advertising and (iii) in-store point of sale
advertising. The Company entered this business in November 1994 with the
organization of Media as a subsidiary of Tri-Magna and since that time the
business has grown rapidly. The Company intends to continue to expand this
business through internally generated growth and to consider acquisitions of
taxicab rooftop advertising businesses.
The Company currently provides taxicab rooftop advertising in New York City,
Philadelphia, Miami and Boston. The Company has only recently established
operations in Atlanta and Los Angeles and intends to expand in the Atlanta
market prior to the 1996 Summer Olympic Games. The Company's goal is to become
the leading national provider of taxicab rooftop advertising by establishing a
presence in several major U.S. metropolitan markets. In furtherance of this
goal, the Company has recently hired a National Sales Director with 27 years
of management experience in the outdoor advertising industry. The Company
believes that no provider currently operates nationwide. On December 31, 1995,
the Company had 1,670 installed Displays. For the year ended December 31,
1995, Media accounted for 4.4% of the Company's net investment income on a
combined, rather than pro forma, basis.
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<PAGE>
The following bar graph indicates the number of Displays installed at the
end of each fiscal quarter indicated:
[GRAPH APPEARS HERE]
Each Display is attached to the rooftop of a taxicab by the Company and the
Company also performs all ongoing Display maintenance and repair. The Display
remains the property of the Company. The Display serves as a platform or frame
for advertising copy which is preprinted on vinyl sheets with adhesive backing
and provided by the advertiser. The advertising copy adheres to the Display
and is illuminated whenever the taxicab is in operation. The vinyl sheet is
durable and is generally left on the Display for up to 90 days. The
advertising copy is replaced at the advertiser's discretion and cost when
advertising campaigns change. The standard size of the vinyl advertising copy,
14 inches high and 48 inches long, was designed to be proportionally similar
to "bulletins" or "billboards" to permit advertisers to conveniently translate
billboard copy to Display copy.
Generally, the Company enters into agreements with taxicab associations,
fleets or individuals to lease taxicab rooftop space for five-year terms.
Typically, under these agreements, the Company is only required to make lease
payments upon receipt of payment from the relevant advertiser; accordingly,
unoccupied Displays, which generate no revenue for the Company, remain on
taxicab rooftops rent-free. The Company markets the Displays to companies
promoting products, advertising agencies and outdoor advertising buying
agencies. Advertising contracts generally vary from 30 days to one year and
provide for monthly payments of rent by the advertiser. The Company's
advertising accounts have included HBO; R. J. Reynolds Tobacco Company; CBS,
Inc.; NEC; NYNEX Corporation; Metro-Goldwyn-Mayer Inc. and Brown & Williamson
Tobacco Corporation.
The Company believes the inherent in-motion nature of taxicabs and their
concentration and distribution throughout densely populated metropolitan areas
enhance their effectiveness as an advertising medium. Displays can be placed
throughout an area, effectively covering the population and providing
continuous exposure. Moreover, taxicab rooftop advertising is not zoned out of
any of the areas in New York City, such as Park Avenue and Central Park, where
stationary advertising is generally prohibited. Unlike other forms of transit
advertising in New York City such as buses, bus shelters and subway and
commuter train stations, which are prohibited from advertising tobacco
products, taxicabs are not restricted by New York City from advertising
55
<PAGE>
tobacco products. In addition, the Company believes that taxicab rooftop
advertising compares favorably with other forms of outdoor advertising, which
in general have among the lowest cost-per-thousand impressions or "CPM", a
standard measurement of effectiveness among media, of all advertising media.
Currently, substantially all of the Company's taxicab rooftop advertising
revenue is derived from tobacco products advertising. The FDA has proposed new
rules, which, among other things, regulate advertising of tobacco products.
The Company cannot predict whether the proposed rules restricting tobacco
products advertising will be adopted, or whether the proposed rules will, if
adopted, restrict taxicab rooftop advertising. The Company believes, however,
it could replace revenue lost due to government regulations if rules
restricting the advertising of tobacco products are adopted and restrict
taxicab rooftop advertising. See "Risk Factors -- Government Regulation of
Tobacco Advertising".
SOURCES OF FUNDS
Overview
The Company funds its operations through credit facilities with bank
syndicates and, to a lesser degree, through fixed rate, long-term subordinated
debentures issued to or guaranteed by the SBA. The determination of funding
sources is established by the Company's management, based upon analysis of the
respective financial and other costs and burdens associated with funding
sources. SBA financing offers very attractive rates, for example currently as
low as 4.0%, but such financing is restricted in its application and its
availability is uncertain. In addition, SBA financing subjects its recipients
to limits on the amount of secured bank debt they may incur. Accordingly, the
Company plans to limit its use of SBA funding and will seek such funding only
when advantageous, such as to fund loans that qualify under SBA Regulations
through subsidiaries already subject to SBA restrictions. At December 31,
1995, $90.1 million of the Company's debt consisted of bank debt,
substantially all of which was at variable effective rates of interest
averaging below the Prime Rate and $31.7 million consisted of subordinated SBA
debentures, with fixed rates of interest with a weighted average rate of
7.44%. An additional $5.1 million of debt was available at December 31, 1995
at variable effective rates of interest averaging below the Prime Rate under
the Company's $95.2 million in bank credit facilities. After the Offering, the
Company intends to negotiate an increase in the amount available under such
facilities. The Company believes that this increase will not affect the
interest rate currently charged under its credit facilities. A table appearing
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" illustrates each
of the Founding Companies' sources of available funds at December 31, 1995.
The Company funds its fixed rate loans with variable rate bank debt and
fixed rate subordinated SBA debentures. The mismatch between maturities and
interest-rate sensitivities of these balance sheet items results in interest
rate risk. See "Risk Factors -- Interest Rate Spread; Prepayment Risk." The
Company seeks to manage its exposure to increases in market rates of interest
to an acceptable level by (i) purchasing interest rate caps to hedge a portion
of its variable rate debt against increases in interest rates, (ii) incurring
fixed-rate debt and (iii) originating adjustable rate loans. Nevertheless, the
Company accepts varying degrees of interest rate risk depending on market
conditions and believes that the resulting asset/liability interest rate
mismatch results in opportunities for higher net interest income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset/Liability Management."
Tri-Magna Funding
Tri-Magna has a $2.0 million revolving line of credit with a bank syndicate.
At December 31, 1995, $1.9 million was outstanding under this facility,
bearing interest at 7.59%. Tri-Magna also has outstanding a $3.2 million term
loan which will be repaid with the proceeds from the Offering. The term loan
bears interest at 8.50%. The Company expects that the revolving line of credit
will be transferred to Medallion Financial after the Offering.
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<PAGE>
Edwards Funding
Edwards has a $12.5 million revolving line of credit with a bank syndicate.
Under an agreement with the SBA, Edwards was restricted from borrowing more
than $10.0 million in bank debt without the prior approval of the SBA. In
January 1996, this amount was increased to $11.5 million.
As an SBIC, Edwards is eligible to obtain low cost financing from the SBA
through the issuance of subordinated SBA debentures and has outstanding such
debentures in the principal amount of $25.0 million. Following the Offering,
Edwards intends to seek to issue additional subordinated SBA debentures. SBA
Regulations limit the amount of subordinated SBA debentures or "leverage"
SBICs may issue. Generally, under SBA Regulations, the maximum principal
amount of subordinated SBA debentures Edwards is permitted to issue is equal
to 300% of its private or non-SBA paid-in capital and paid-in surplus
("Leveragable Capital"). SBA Regulations generally also limit the aggregate
amount of leverage SBICs and SSBICs under common control, such as Edwards, MFC
and TCC, have outstanding to no more than $90 million. Accordingly, Edwards,
MFC and TCC collectively may not issue subordinated SBA debentures and
preferred stock in an aggregate amount that exceeds $90 million and at
December 31, 1995, the aggregate amount outstanding was $31.7 million. The
interest rates payable on outstanding subordinated SBA debentures at December
31, 1995 ranged from 5.00% to 9.80% with a weighted average of 7.44%.
At December 31, 1995, Edwards had Leveragable Capital of $8.4 million and
had issued $25.0 million in principal amount of subordinated SBA debentures
that carry fixed rates of interest and have ten-year terms. These debentures
have maturities ranging from September 1, 1996 to September 1, 2004 and rates
of interest varying from 7.15% to 9.80% per annum. Subject to the limitations
discussed above, Edwards was eligible on December 31, 1995, to issue $250,000
in aggregate principal amount of additional subordinated SBA debentures.
MFC Funding
MFC intends to rely on its bank credit facilities rather than on SBA
financing to fund its operations. MFC has a credit facility with a bank
syndicate consisting of a $78.0 million revolving line of credit and a $2.0
million term loan. Amounts outstanding under the revolving line of credit bear
interest at the agent bank's prime rate or, at MFC's option, a rate based on
LIBOR. At December 31, 1995, the average interest rate was 7.40% which was 110
basis points below the Prime Rate and 178 basis points above 90-day LIBOR as
of such date. The revolving line of credit is secured by all of MFC's assets
and matures on September 30, 1996. As of December 31, 1995, there was an
outstanding balance of $73.2 million under the revolving line of credit. The
term loan bears interest at the rate of 7.50% and matures on July 31, 1997.
SBA financing is limited and so long as an SBIC or SSBIC has SBA financing
outstanding, the SBA restricts the amount of secured bank debt such SBIC or
SSBIC may have outstanding. As a result of these SBA limitations, debt
financing from all sources is effectively limited. To eliminate this funding
cap, MFC has repurchased all of its outstanding subordinated SBA debentures
and preferred stock and thereby terminated SBA limitations on the amount of
secured bank debt MFC can incur. The Company believes that MFC will be able to
obtain more funding from banks than it was able to obtain from the SBA and
banks under SBA limitations, and that this will permit MFC to more effectively
expand its operations. See "Business -- Sources of Funds -- Preferred Stock
Repurchase Agreements."
Media Funding
Media has a $275,000 demand loan from a bank. The loan is secured and bears
interest at the rate of 10.25%.
TCC Funding
As an SSBIC, TCC is eligible to obtain low cost financing from the SBA
through the issuance of subordinated SBA debentures and the issuance of non-
voting cumulative preferred stock to, or guaranteed by, the SBA. TCC has $6.7
million of subordinated SBA debentures outstanding and presently has no
preferred stock outstanding.
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<PAGE>
Following the Offering, TCC intends to seek to issue preferred stock and
additional subordinated SBA debentures. SBA Regulations limit the amount of
subordinated SBA debentures and preferred stock or "leverage" SSBICs may
issue. Generally, under SBA Regulations, the maximum principal amount of
subsidized subordinated SBA debentures and preferred stock TCC is permitted to
issue is the lesser of (i) an amount equal to 300% of its Leveragable Capital,
or (ii) $35.0 million. All 300% of this leverage is permitted to consist of
subordinated SBA debentures, while no more than 100% is permitted to consist
of preferred stock. The $90 million limit on the aggregate amount of leverage
permitted for SBICs and SSBICs under common control referred to above also
applies. The cumulative dividend currently payable on shares of preferred
stock issued by SSBICs to the SBA is 4.00% and at December 31, 1995 the
weighted average interest rate payable on subordinated SBA debentures was
5.38%. As a result of an SBA subsidy program available to SSBICs, the
effective interest rate on such debentures is 3.00% below the stated interest
rate for the first five years such debentures are outstanding.
At December 31, 1995, TCC had Leveragable Capital of $7.7 million and had
issued $6.7 million in principal amount of subordinated SBA debentures that
carry fixed rates of interest, ten-year terms and may be prepaid after five
years without penalty. These debentures have maturities ranging from May 7,
1996 to June 1, 2002 and rates of interest varying from 5.00% to 7.38% per
annum. Future issuances of subordinated SBA debentures by TCC, including any
refinancing or rollover of currently outstanding subordinated SBA debentures,
are also limited by the SBA to the aggregate amount of TCC's outstanding non-
Medallion Loans and the aggregate amount of non-Medallion Loans originated in
connection with such financing. At December 31, 1995, TCC had $1.8 million in
principal amount of non-Medallion Loans outstanding. Subject to the foregoing
limitations, TCC was eligible on December 31, 1995, to issue $16.4 million in
aggregate amount of additional subordinated SBA debentures and preferred
stock.
Preferred Stock Repurchase Agreements
MFC and TCC have repurchased all of their previously issued preferred stock
from the SBA for an aggregate price of $4.4 million, representing a discount
of 65% from the original aggregate issuance price of $12.6 million. The
repurchase price discount of $8.2 million reflects the below market 3%
dividend rate and the fact that the preferred stock was not subject to
mandatory redemption at any time. The repurchase has resulted in the
termination of SBA limits on the amount of secured bank debt MFC can incur and
a realized gain in retained earnings in the amount of the repurchase discount
which will be accreted to paid-in capital on a straight-line basis over 60
months, commencing August 12, 1994. However, if MFC or TCC is liquidated or
loses its SBA license during the accretion period, the SBA will receive the
remaining unaccreted amount of the realized gain attributable to the
subsidiary liquidating or losing its license. At December 31, 1995, the
aggregate remaining unaccreted amount of the realized gain for MFC and TCC was
$6.2 million.
COMPETITION
Banks, credit unions and finance companies, some of which are SSBICs and
SBICs, compete with the Company in originating Medallion Loans and Commercial
Installment Loans. Finance subsidiaries of equipment manufacturers also
compete with the Company. Many of these competitors have greater resources
than the Company and certain competitors are subject to less restrictive
regulations than the Company. As a result, there can be no assurance that the
Company will be able to identify and complete the financing transactions that
will permit it to compete successfully. The Company's taxicab rooftop
advertising business competes with other taxicab rooftop advertisers as well
as all segments of the out-of-home advertising industry and other types of
advertising media, including cable and network television, radio, newspapers,
magazines and direct mail marketing. Many of these competitors have greater
financial resources than the Company and offer several forms of advertising as
well as production facilities.
FORMATION TRANSACTIONS
Simultaneously with the closing of the Offering, Medallion Financial will
acquire the Founding Companies, and the Offering is contingent upon the
successful acquisition of each of the Founding Companies. In connection with
the Acquisitions, the Company has filed an application for an exemptive order
under the 1940 Act with the
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Commission. The Acquisitions and the Offering are contingent upon receipt of
such exemptive order. See "Additional Information." The aggregate
consideration to be paid by Medallion Financial in these transactions consists
of (i) approximately $38.9 million in cash; (ii) the assumption of
approximately $90.1 million in bank debt; and (iii) the assumption of
approximately $31.7 million in subordinated SBA debentures. The Company will
also assume Media's $275,000 demand loan. See "Certain Transactions" and "Use
of Proceeds." The consideration to be paid for the Founding Companies was
determined through arm's-length negotiations between Medallion Financial and
representatives of each Founding Company. The factors considered by the
parties in determining the consideration to be paid included, among others,
the history of and prospects for the business in which the particular Founding
Company operates, the Founding Company's past and present operations, loan
portfolio quality, past and present revenue and earnings and the trends in
such revenue and earnings, expert opinion, revenue and earnings prospects and
stock prices of comparable finance companies and out-of-home advertising
companies. Each Founding Company was represented by independent counsel in the
negotiation of the terms and conditions of the Acquisitions.
The consummation of each Acquisition is subject to customary closing
conditions. These conditions include the continuing accuracy on the closing
date of the Acquisitions of the representations and warranties of the Founding
Companies and Medallion Financial, the performance of all covenants included
in the agreements relating to the Acquisitions, the nonexistence of any
material adverse change in the results of operations, financial condition or
business of the Founding Companies and stockholder approval in the case of
Tri-Magna and TCC and general and limited partner approval in the case of
Edwards. The acquisitions of Tri-Magna, TCC and Edwards are also contingent
upon SBA approval.
The agreements relating to the Acquisitions may be terminated, under certain
circumstances, prior to the consummation of the Acquisitions. Specifically,
each agreement may be terminated: (i) by mutual consent of the parties; (ii)
by either party if the Acquisitions of Tri-Magna, Edwards and TCC are not
consummated by June 30, 1996, in the case of Tri-Magna, June 14, 1996, in the
case of Edwards and May 31, 1996, in the case of TCC; (iii) if a material
breach or default under the agreements occurs and is not cured within 20 days
of notice of such breach; or (iv), in the case of the Tri-Magna acquisition,
by the Tri-Magna Board of Directors if it is required by its fiduciary duties
to terminate the Tri-Magna merger agreement as a result of another acquisition
offer or by the Company if the Tri-Magna board fails to recommend the
acquisition to its stockholders.
There can be no assurance that the conditions to the closing of the
Acquisitions will be satisfied, or, if not satisfied, waived or that the
Acquisition agreements will not be terminated. If any of the Acquisitions is
terminated for any reason, Medallion Financial will not consummate the
Offering.
Tri-Magna. Under an agreement with Tri-Magna, Tri-Magna will be merged with
and into Medallion Financial and Tri-Magna's wholly owned subsidiaries, MFC
and Media, will become wholly owned subsidiaries of Medallion Financial. In
connection with the merger, Tri-Magna will file an application on Form N-8F
with the Commission to deregister as an investment company under the 1940 Act.
The aggregate consideration to be paid by Medallion Financial for Tri-Magna is
approximately (i) $13.4 million in cash and (ii) the assumption of $80.3
million in bank debt. The Company will also assume Media's $275,000 demand
loan. See "Certain Transactions" and "Use of Proceeds."
Edwards. Under an agreement with Edwards, a newly organized, wholly owned
subsidiary of Medallion Financial will acquire all of the assets of Edwards.
The aggregate consideration to be paid by Medallion Financial for Edwards is
approximately (i) $15.2 million in cash, (ii) the assumption of approximately
$25.0 million in subordinated SBA debentures and (iii) the assumption of
approximately $9.8 million in bank debt. In connection with this transaction,
Edwards, its general partner and an affiliate of Edwards will enter into non-
competition agreements with Medallion Financial pursuant to which they will
agree not to compete with the Company for three years after the consummation
of this transaction.
TCC. Under an agreement with TCC and certain of its affiliates, Medallion
Financial or a wholly owned subsidiary of Medallion Financial will acquire all
of the issued and outstanding common stock of TCC. Upon
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<PAGE>
consummation of this transaction, TCC will become a wholly owned subsidiary of
Medallion Financial. The aggregate consideration to be paid by Medallion
Financial for TCC is approximately (i) $10.3 million in cash and (ii) the
assumption of $6.7 million in subordinated SBA debentures. In connection with
this transaction, Leucadia will enter into a non-competition agreement with
Medallion Financial pursuant to which it will agree that it and all of its
affiliates will not compete with the Company for three years after the
consummation of this transaction.
EMPLOYEES
As of December 31, 1995, the Company employed a total of 30 employees. The
Company believes that its relations with all of its employees are good, but
that its future success will depend, in part, on its ability to continue to
recruit, retain and motivate qualified personnel at all levels.
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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The Company's investment objectives will be to provide a high level of
current income for its stockholders through quarterly distributions,
consistent with preservation of capital, as well as long term growth of net
asset value. The Company will seek to achieve its investment objectives by
maximizing net interest income and fee income from operations and expanding
operations. There can be no assurance that the Company will achieve its
investment objectives.
The Company's only fundamental policies, that is, policies that cannot be
changed without the approval of the holders of a majority of the Company's
outstanding voting securities, as defined under the 1940 Act, are the
restrictions described in the following seven paragraphs. A "majority of the
Company's outstanding voting securities" as defined under the 1940 Act means
the lesser of (i) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (ii) more than 50% of
the outstanding shares. The other policies and investment restrictions
referred to in this Prospectus, including the Company's investment objectives,
are not fundamental policies of the Company and may be changed by the
Company's Board of Directors without stockholder approval. Unless otherwise
noted, whenever an investment policy or limitation states a maximum percentage
of the Company's assets that may be invested in any security or other asset,
or sets forth a policy regarding quality standards, such standard or
percentage limitation will be determined immediately after and as a result of
the Company's acquisition of such security or other asset. Accordingly, any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the Company's
investment policies and limitations. The Company's fundamental policies are as
follows:
1. The Company will at all times conduct its business so as to retain its
status as a business development company under the 1940 Act. In order to
retain that status, the Company may not acquire any assets (other than non-
investment assets necessary and appropriate to its operations as a business
development company) if, after giving effect to such acquisition, the value
of its "Qualifying Assets," as such term is described under the caption
"Regulation," amount to less than 70% of the value of its total assets. The
Company believes that the securities it has acquired and it proposes to
acquire in connection with the acquisition of the Founding Companies, as
well as temporary investments it makes with its funds, will generally be
Qualifying Assets.
2. MFC, TCC, Edwards, and any subsidiaries of the Company organized in
the future that are SBA licensees, may issue the maximum principal amount
of subordinated SBA debentures and preferred stock permitted under the SBIA
and SBA Regulations. As SSBICs under common control, the maximum principal
amount of subsidized subordinated debentures and preferred stock MFC and
TCC are permitted to issue is the lesser of (i) an amount equal to 300% of
their Leveragable Capital (generally non-SBA paid-in capital and paid-in
surplus), or (ii) $35 million. All 300% of this leverage is permitted to
consist of subordinated debentures, while no more than 100% is permitted to
consist of preferred stock. As an SBIC, the maximum principal amount of
subordinated debentures Edwards is permitted to issue is equal to 300% of
its Leveragable Capital. In addition, SBA Regulations also limit the
aggregate principal amount of subordinated SBA debentures and preferred
stock or "leverage" SSBICs and SBICs under common control, such as the RIC
Subsidiaries, may have outstanding to no more than $90 million. At December
31, 1995, TCC and Edwards had, in aggregate, $31.7 million in principal
amount of subordinated debentures and no preferred stock outstanding. At
that date, TCC and Edwards had, in aggregate, $16.1 million in Leveragable
Capital and accordingly the maximum aggregate principal amount of
additional SBA leverage TCC and Edwards could issue on that date was $16.8
million. At December 31, 1995, MFC had Leveragable Capital of $14.5 million
but had no subordinated SBA debentures outstanding and has no intention of
issuing any; however, MFC reserves the right to issue subordinated
debentures to the maximum extent permitted under the SBIA or SBA
Regulations.
3. The Company may borrow funds and issue "senior securities" to the
maximum extent permitted under the 1940 Act. As a business development
company, the Company may issue senior securities if,
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<PAGE>
immediately after such issuance, the senior securities will have an asset
coverage of at least 200%. Under the 1940 Act, subordinated debentures
issued to or guaranteed by the SBA and preferred stock issued to the SBA by
the RIC Subsidiaries may be considered senior securities issued by the
Company requiring asset coverage of 200%; however, pursuant to an exemptive
order of the Commission requested under the Application, such debentures
and preferred stock are exempt from the asset coverage requirements of the
1940 Act.
4. The Company will not (i) underwrite securities issued by others
(except to the extent that it may be considered an "underwriter" within the
meaning of the Securities Act in the disposition of restricted securities),
(ii) purchase or sell real estate or real estate mortgage loans unless
acquired as a result of ownership of securities or other instruments
(except that the Company may purchase and sell real estate or interests in
real estate in connection with the orderly liquidation of investments or
the foreclosure of mortgages held by the Company), (iii) engage in short
sales of securities, (iv) purchase securities on margin (except to the
extent that it may purchase securities with borrowed money), (v) write or
buy put or call options or (vi) engage in the purchase or sale of
commodities or commodity contracts, including futures contracts (except
where necessary in working out distressed loan or investment situations).
The Company and the RIC Subsidiaries may purchase interest rate caps and
swaps covering up to 100% of their variable rate debt. In addition, the
Company may sponsor the securitization of loan portfolios.
5. The Company and the RIC Subsidiaries may originate loans and loans
with equity features. To the extent permitted under SBA Regulations, the
Company may also make loans as permitted (i) under the 1996 Plan, (ii)
under plans providing for options for disinterested directors that might be
adopted by the Company in the future and (iii) to officers and directors
for the purchase of Common Stock. The Company will hold all of the
outstanding common stock of the Founding Companies and may organize
additional subsidiaries in the future. The Company may acquire restricted
securities of small businesses.
6. Each RIC Subsidiary shall not originate loans to, or invest in the
securities of, any entity if, immediately after such loan or investment,
more than 5% of the total assets of the RIC Subsidiary originating such
loan or making such investment (taken at current value) would be loaned to,
or invested in the securities of such entity, or acquire more than 10% of
the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to
interest and principal by the U.S. Government or its agencies or
instrumentalities or to repurchase agreements secured by such obligations,
and that up to 25% of each RIC Subsidiary's total assets (at current value)
may be invested without regard to this limitation.
7. The Company and the RIC Subsidiaries shall lend or invest at least 25%
of their total assets (taken at current value) to or in entities primarily
engaged in the taxicab industry and shall not lend or invest more than 25%
of their total assets (taken at current value) to or in entities primarily
engaged in any other single industry, provided that this limitation does
not apply to obligations issued or guaranteed as to interest and principal
by the U.S. Government or its agencies or instrumentalities or to
repurchase agreements secured by such obligations or to bank money-market
instruments.
PORTFOLIO TURNOVER
During the year ended December 31, 1994, the Company originated loans
totalling $61.4 million in aggregate principal amount and experienced
prepayments totalling $60.6 million in aggregate principal amount. During the
year ended December 31, 1995, the Company originated loans totalling $52.7
million in aggregate principal amount and experienced prepayments totalling
$46.9 million in aggregate principal amount. All borrowers have the right to
prepay loans made by the Company at any time. Although the Company experiences
more prepayments when interest rates are falling and fewer prepayments when
interest rates are rising, the Company is unable to predict the level of
prepayments it will experience during any period of time.
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THE INVESTMENT ADVISER
The Company is managed by its executive officers under the supervision of
its Board of Directors. In addition, under the terms of a sub-advisory
agreement (the "Sub-Advisory Agreement") between the Company and FMC, the
Company has retained FMC to consult with management upon reasonable request in
the review and refinement of the Company's strategies.
Myron Cohen, Robert Fanger and Michael Miller control FMC and will provide
the advisory services to the Company on behalf of FMC. They have served as
directors and executive officers of Tri-Magna and MFC since inception and,
along with Alvin Murstein, comprised Tri-Magna's Executive Committee. Messrs.
Cohen, Fanger and Miller will resign their offices with Tri-Magna and MFC
effective upon the closing of the Acquisitions. Upon the request of the
officers of the Company, FMC will consult with respect to strategic decisions
concerning originations, credit quality assurance, development of financial
products, leverage, funding, geographic and product diversification, the
repurchase of participations, acquisitions, regulatory compliance and
marketing.
Under the Sub-Advisory Agreement, the Company will pay FMC monthly in
arrears, as compensation for the services to be rendered by it, a fee of
$18,750. Unless earlier terminated as described below, the Sub-Advisory
Agreement will remain in effect until May 1998 and from year to year
thereafter only if approved annually by (i) a majority of the non-interested
directors of the Company and (ii) the Board of Directors, or by a majority of
the outstanding voting securities of the Company, as defined in the 1940 Act.
The Sub-Advisory Agreement may be terminated without penalty on 60 days'
written notice by either party or by vote of a majority of the outstanding
voting securities of the Company, as defined in the 1940 Act, and will
terminate if assigned. Under the Sub-Advisory Agreement, FMC will not be
liable for any loss suffered by the Company, except a loss resulting from
FMC's willful malfeasance, bad faith or gross negligence.
The Murstein Trusts will enter into an escrow agreement with FMC at the
closing of the Offering. Under the escrow agreement, the Murstein Trusts will
deposit into escrow Common Stock valued at $1.8 million, at the price per
share set forth on the cover page of this Prospectus. Subject to certain
limitations, the Murstein Trusts have agreed to maintain in escrow Common
Stock worth 200% of the advisory fees payable by the Company under the Sub-
Advisory Agreement during the first 48 months of service, thereby assuring FMC
of the payment of $900,000 in advisory fees. In the event that the Company or
its stockholders terminate or do not renew the Sub-Advisory Agreement during
this period for any reason other than (i) breach of the Sub-Advisory Agreement
by FMC or (ii) FMC's willful malfeasance, bad faith or gross negligence, the
escrow agent will assign to FMC Common Stock in escrow equal in value to the
amount of the fees payable over the balance of the 48-month period. If the
value of the Common Stock required to be deposited in escrow is less than the
value of the fees payable, FMC will have no further recourse against the
Murstein Trusts.
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MANAGEMENT
The business and affairs of the Company are managed under the direction of
its Board of Directors. The Board of Directors is divided into three classes,
each with a term of three years. Only one class of directors stands for
election in any year. Messrs. Kreitman and Rudnick are in the first class and
stand for election in 1997; Messrs. Cuomo and Andrew Murstein are in the
second class and stand for election in 1998 and Messrs. Alvin Murstein and
Ward are in the third class and stand for election in 1999. The Board of
Directors has two committees, a Compensation Committee comprised of Messrs.
Kreitman, Alvin Murstein and Ward and an Audit Committee comprised of Messrs.
Kreitman, Rudnick and Ward. The directors will each be paid $10,000 a year for
each year they serve and shall each receive $2,000 for each Board meeting
attended and $1,000 for each committee meeting attended and are reimbursed for
expenses relating thereto. The Board of Directors elects the Company's
officers who serve at the pleasure of the Board of Directors.
The Company's directors and officers are as set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD WITH THE COMPANY
---------------- ----- ---------------------------------
<S> <C> <C>
Alvin Murstein*............ 61 Chairman, Chief Executive Officer and Director
Andrew Murstein*........... 31 President and Director
Marie Russo*............... 71 Senior Vice President and Secretary
Daniel F. Baker*........... 32 Treasurer and Chief Financial Officer
Michael Fanger*............ 38 Executive Vice President
Michael J. Kowalsky*....... 50 Executive Vice President
Michael Leible*............ 58 Vice President
Mario M. Cuomo............. 63 Director
Stanley Kreitman........... 62 Director
David L. Rudnick........... 55 Director
Benjamin Ward.............. 69 Director
</TABLE>
- - - ----------
An asterisk (*) indicates an "interested person" as such term is defined in
(S) 2(a)(19) of the 1940 Act.
Alvin Murstein has been Chairman of the Board of Directors, Chief Executive
Officer and President of Tri-Magna since its founding in 1989 and of MFC since
its founding in 1979. Mr. Murstein has also been Chairman of the Board of
Directors and Chief Executive Officer of Media since its founding in 1994.
Upon completion of the Offering and the Acquisitions, Mr. Murstein will be
Chairman of the Board of Directors and Chief Executive Officer of MFC,
Edwards, TCC and Media. Mr. Murstein received a B.A. and an M.B.A. from New
York University and has been an executive in the taxicab industry for over 40
years. Mr. Murstein has served on the Board of Directors of the Strober
Organization, Inc., a building supply company, since 1988. Alvin Murstein is
the father of Andrew Murstein.
Andrew Murstein has been Tri-Magna's Director of New Business Development
since 1991. Mr. Murstein has also been a Director of Media since 1994 and was
President of Media from inception through January 1996. Mr. Murstein is Tri-
Magna's liaison with the TLC and the New York City Mayor's office. Upon
completion of the Offering and the Acquisitions, Mr. Murstein will be a
Director of Media and a Director of MFC, Edwards and TCC. Mr. Murstein
received a B.A. in economics, cum laude, from Tufts University and an M.B.A.
in finance from New York University. Mr. Murstein serves on the New York City
Small Business Task Force. Andrew Murstein is the son of Alvin Murstein and
the son-in-law of Mr. Rudnick, and is the third generation of his family to be
active in the taxicab industry.
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Marie Russo has been the Vice President of Operations of Tri-Magna since its
founding in 1989 and of MFC since 1986. From 1983 to 1986 she was Controller
of MFC. Upon completion of the Offering and the Acquisitions, Ms. Russo will
be Senior Vice President and Secretary of MFC, Edwards and TCC. Ms. Russo
received a B.S. in accounting from Hunter College.
Daniel F. Baker has been Tri-Magna's Vice President of Finance since 1992.
From 1989 through 1991, Mr. Baker was Controller of Tri-Magna and from 1988
through 1991 he was Controller of MFC. Prior to joining MFC, Mr. Baker was
employed by Arthur Andersen & Co. Upon completion of the Offering and the
Acquisitions, Mr. Baker will be Treasurer and Chief Financial Officer of MFC,
Edwards, TCC and Media. Mr. Baker received a B.S. in accounting from Husson
College.
Michael Fanger has been Tri-Magna's Vice President of Commercial Lending
since its founding in 1989 and of MFC since 1987. Upon completion of the
Offering and the Acquisitions, Mr. Fanger will be President of TCC, Executive
Vice President of MFC and Senior Vice President of Edwards. Prior to joining
MFC, Mr. Fanger was a Vice President, Commercial Lending at Shawmut Bank, NA.
Mr. Fanger received a B.A. from Colby College.
Michael J. Kowalsky has been Edwards' Chief Operating Officer since 1992.
Prior to joining Edwards in 1990, Mr. Kowalsky was a Senior Vice President at
General Cigar Co. Inc., a cigar manufacturing company. Upon completion of the
Offering and the Acquisitions, Mr. Kowalsky will be President of MFC and of
Edwards. Mr. Kowalsky received a B.A. and M.A. in economics from the
University of Kentucky and an M.B.A. from the New York University Graduate
School of Business.
Michael Leible has been Vice President and National Sales Director of Media
since 1994. Prior to joining Media, Mr. Leible was Executive Vice President
and National Sales Manager at Metropolitan Outdoor Advertising, Inc. where he
worked from April 1990 until March 1995. From 1979 through 1989 he was Vice
President--National Sales at Transportation Displays, Inc. ("TDI"). Prior to
joining TDI, Mr. Leible was Vice President--National Sales at Metromedia,
Inc., where he worked from 1967 through 1979.
Mario M. Cuomo served as Governor of the State of New York from January 1983
through 1994. Governor Cuomo has been a partner in the law firm of Willkie
Farr & Gallagher since February 1995. Willkie Farr & Gallagher serves as
counsel to the Underwriters in connection with this Offering. Mr. Cuomo
received a B.A., summa cum laude, from St. John's University and a J.D., magna
cum laude, from St. John's University School of Law.
Stanley Kreitman serves as Vice Chairman of Manhattan Associates, an
investment banking company. Mr. Kreitman served as a Director of Tri-Magna
from 1991 until the completion of the Offering and the Acquisitions. Mr.
Kreitman served as President of the United States Banknote Corporation, a
securities printing company, from 1975 until his retirement in 1994. Mr.
Kreitman is Chairman of the Board of Trustees of the New York Institute of
Technology. Mr. Kreitman received an A.B. from New York University and an
M.B.A. from New York University Graduate School of Business.
David L. Rudnick serves as President of Century Properties, Inc., a national
commercial real estate concern. Mr. Rudnick joined Century Properties, Inc. in
1966. Mr. Rudnick was a director of West Side Federal Savings & Loan
Association. Mr. Rudnick received an A.B. in economics from Harvard University
and an M.B.A. from Columbia University Graduate School of Business. Mr.
Rudnick is Andrew Murstein's father-in-law.
Benjamin Ward served as a Director of Tri-Magna from 1992 until the
completion of the Offering and the Acquisitions. Mr. Ward served as Police
Commissioner of New York City from 1984 until 1989. Mr. Ward received a B.A.
in sociology, magna cum laude, from Brooklyn College and a J.D. from Brooklyn
Law School.
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COMPENSATION
The following table sets forth for the fiscal year ending December 31, 1996,
the estimated compensation to be paid to the three most highly compensated
officers of the Company. The Company does not anticipate paying any director
aggregate compensation in excess of $30,000 during fiscal 1996 from Medallion
Financial and the Founding Companies for such individual's service as a
director.
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION FROM
NAME OF PERSON, POSITION THE COMPANY(1)
------------------------ -----------------
<S> <C>
Alvin Murstein, $250,000
Chairman and Chief Executive Officer
Andrew Murstein, $155,000
President and Director
Michael Kowalsky $150,000
Executive Vice President
</TABLE>
- - - ----------
(1) Estimates for the fiscal year ending December 31, 1996.
EMPLOYMENT AGREEMENTS
Upon the completion of the Offering, Alvin Murstein and Andrew Murstein will
enter into employment agreements with the Company. The agreements will
automatically renew annually for a five-year term unless either party
terminates the agreement. The agreements contain non-competition covenants in
favor of the Company. Michael Kowalsky will also enter into an employment
agreement with the Company at such time. This agreement includes a three-year
term and contains non-competition covenants in favor of the Company.
1996 STOCK OPTION PLAN
The 1996 Plan was adopted by the Board of Directors, including a majority of
the non-interested directors, in 1996. The 1996 Plan authorizes the grant of
incentive stock options within the meaning of Section 422 of the Code and non-
qualified stock options for the purchase of an aggregate of 750,000 shares
(subject to adjustment for stock splits and similar capital changes) of Common
Stock to employees of the Company. As of March 31, 1996, no non-qualified
options to purchase shares of Common Stock and no incentive stock options had
been granted under the 1996 Plan. Accordingly, as of April 26, 1996, 750,000
shares of Common Stock were available for future awards under the 1996 Plan.
It is anticipated that upon the closing of the Offering, Daniel F. Baker,
the Treasurer and Chief Financial Officer, Michael Fanger, an Executive Vice
President and Michael Kowalsky, an Executive Vice President, will be granted
stock options exercisable for the number of shares of Common Stock determined
by dividing $750,000, $750,000 and $500,000, respectively, by the public
offering price per share set forth on the cover page of this Prospectus and
currently estimated to be 68,000, 68,000 and 45,000 shares of Common Stock,
respectively. These options will begin to become exercisable one year after
the date of this Prospectus in five equal annual installments at an exercise
price per share equal to the public offering price, except in the case of Mr.
Kowalsky's shares which will vest in three equal annual installments.
The Board of Directors has appointed the Compensation Committee of the Board
of Directors to administer the 1996 Plan. Awards of options under the 1996
Plan are granted at the discretion of the Compensation Committee, which
determines the eligible persons to whom, and the times at which, awards shall
be granted, the type of award to be granted, and all other related terms,
conditions and provisions of each award granted. In addition, all questions of
interpretation of the 1996 Plan are determined by the Compensation Committee.
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NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
In order to attract and retain highly qualified directors, and to ensure
close identification of interests between non-employee directors and the
Company's stockholders, the Board of Directors of the Company adopted and the
stockholders approved the Director Plan, which provides for the automatic
grant of options to directors of the Company who are not employees, officers
or interested persons of the Company (an "Eligible Director"). In accordance
with the provisions of the 1940 Act, the automatic grant of options under the
Director Plan will not occur until after the date of the approval of the plan
by the Commission (the "Approval Date"). There can be no assurance that the
Commission will approve the Plan.
The Director Plan provides that Eligible Directors serving on the Company's
Board of Directors prior to the Approval Date will each automatically receive
on the Approval Date the grant of an option to purchase the number of shares
of Common Stock determined by dividing $100,000 by the fair market value of
the Common Stock on the Approval Date. With respect to any Eligible Director
who is elected as a director of the Company after the Approval Date such
director will automatically receive on the date of such election an option to
purchase the number of shares of Common Stock determined by dividing $100,000
by the fair market value of the Common Stock on the date of such election.
The total number of shares which may be granted from time to time under the
Director Plan is 100,000 shares. The Director Plan will be administered by a
committee of the Board of Directors comprised of directors who are not
eligible for grants or awards of options under the Director Plan. Options
granted under the Director Plan will be exercisable at a price equal to the
fair market value of the shares at the time the option is granted. Options
become exercisable with respect to one third of such shares granted on the
date of each annual stockholders meeting following the date on which the
option was granted, so long as the optionee remains an Eligible Director. No
option may be exercised more than five years after the date on which it is
granted. The number of shares available for options, the number of shares
subject to outstanding options and their exercise prices will be adjusted for
changes in outstanding shares such as stock splits and combinations of shares.
Shares purchased upon exercise of options, in whole or in part, must be paid
for in cash or by means of unrestricted shares of Common Stock or any
combination thereof.
Options granted under the Director Plan will not be transferable other than
by the laws of descent and during the optionee's life may be exercised only by
the optionee. All rights to exercise options will terminate after the optionee
ceases to be an Eligible Director for any reason, other than death, three
months following the date such director ceases to be an Eligible Director. If
the optionee dies before expiration of the option, his legal successors may
have the right to exercise the option in whole or in part within one year of
death.
The Director Plan may be terminated at any time by the Board of Directors,
and will terminate ten years after the effective date of the Director Plan.
The Board of Directors may not materially increase the number of shares
authorized under the plan or materially increase the benefits accruing to
participants under the plan without the approval of the stockholders of the
Company.
401(K) PLAN
In 1996, the Company adopted the Medallion Financial Corp. 401(k) Investment
Plan (the "401(k) Plan") which covers all full and part-time employees of the
Company who have attained the age of 21 and have a minimum of one-half year of
service. Under the 401(k) Plan, an employee may elect to defer not less than
1% and no more than 15% of the total annual compensation that would otherwise
be paid to the employee, provided, however, that employees' contributions may
not exceed certain maximum amounts determined under Section 402(g) of the
Code. Employee contributions are invested in various mutual funds, according
to the directions of the employee.
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PRINCIPAL STOCKHOLDERS
At April 26, 1996, of the 15,000,000 shares of Common Stock authorized,
there were 2,500,000 shares of Common Stock outstanding and two holders of
record. The following table sets forth certain ownership information with
respect to the Common Stock for (i) those persons who directly or indirectly
beneficially own 5% or more of the outstanding Common Stock and (ii) all
officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
PERCENTAGE OWNED
---------------------------------------
TYPE OF OWNERSHIP BEFORE AFTER
NAME AND ADDRESS (RECORD/BENEFICIAL/BOTH) SHARES OFFERING OFFERING
- - - ---------------- ------------------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Alvin Murstein Second Both(1) 1,250,000(2) 50% 16.67%(2)
Family Trust...........
205 East 42nd Street,
Suite 2020
New York, NY 10017
Andrew Murstein Family Both(3) 1,250,000 50% 16.67%
Trust..................
205 East 42nd Street,
Suite 2020
New York, NY 10017
All officers and
directors as a group
(11 persons)........... 2,500,000(2) 100% 33.33%(2)
</TABLE>
- - - ----------
(1) Alvin Murstein is a trustee and beneficiary of the Alvin Murstein Second
Family Trust.
(2) Alvin Murstein will use all of the net proceeds from his sale of Tri-Magna
common stock to the Company to purchase shares of Common Stock of the
Company at a price per share equal to the public offering price. At an
assumed initial public offering price of $11.00 per share, Mr. Murstein
would purchase 90,909 shares and he would beneficially own 1,340,909 or
17.88% of the shares outstanding after the Offering. Giving effect to Mr.
Murstein's purchase, all officers and directors as a group would hold
2,590,909 or 34.55% of the shares outstanding after the Offering.
(3) Andrew Murstein is a trustee and beneficiary of the Andrew Murstein Family
Trust.
CERTAIN TRANSACTIONS
Approximately $13.4 million of the net proceeds from the Offering will be
used by the Company to purchase all of the issued and outstanding shares of
Common Stock of Tri-Magna. Of this amount, approximately $1.7 million,
representing 12.7% of the Tri-Magna purchase price, will be paid to purchase
the Tri-Magna common stock beneficially owned by certain stockholders of Tri-
Magna who are or will become officers, directors or 5% stockholders of the
Company as follows: Alvin Murstein -- $1.4 million; Andrew Murstein --
$105,000; Marie Russo -- $24,000; Michael Fanger -- $93,000; Stanley
Kreitman -- $10,000 and Benjamin Ward -- $10,000. Alvin Murstein will use all
of the net proceeds from his sale of Tri-Magna common stock to the Company to
purchase shares of Common Stock of the Company at a price per share equal to
the public offering price set forth on the cover page of this Prospectus. In
addition, approximately $2.5 million, representing 18.7% of the Tri-Magna
purchase price will be paid to certain stockholders of Tri-Magna who are also
directors and officers of Tri-Magna as follows: Myron Cohen -- $652,000;
Robert Fanger -- $686,000; Richard Giesser -- $253,000; Barnet Lieberman --
$212,000; Michael Miller -- $663,980 and T. Lincoln Morison, Jr. -- $10,000.
Messrs. Cohen, Fanger, Giesser, Lieberman, Miller and Morison will not become
officers, directors or 5% stockholders of the Company.
The Company and FMC will enter into the Sub-Advisory Agreement upon the
closing of the Offering. Under the Sub-Advisory Agreement, the Company will
pay FMC monthly in arrears, as compensation for the services to be rendered by
FMC, a fee of $18,750. Myron Cohen, Robert Fanger and Michael Miller control
FMC. They have served as directors and executive officers of Tri-Magna and MFC
since inception and, along with Alvin Murstein, comprised Tri-Magna's
Executive Committee. Messrs. Cohen, Fanger and Miller will resign their
offices with Tri-Magna and MFC effective upon the closing of the Acquisitions.
Subject to certain limitations, the Murstein Trusts have agreed to maintain in
escrow Common Stock worth 200% of the advisory fees payable by the Company
under
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the Sub-Advisory Agreement during the first 48 months of service, thereby
assuring FMC of the payment of $900,000 in advisory fees. In the event that
the Company or its stockholders terminate or do not renew the Sub-Advisory
Agreement during this period for any reason other than (i) breach of the Sub-
Advisory Agreement by FMC or (ii) FMC's willful malfeasance, bad faith or
gross negligence, the escrow agent will assign to FMC Common Stock in escrow
equal in value to the amount of the fees payable over the balance of the 48-
month period. If the value of the Common Stock required to be deposited in
escrow is less than the value of the fees payable, FMC will have no further
recourse against the Murstein Trusts. See "Investment Objectives, Policies and
Restrictions -- The Investment Adviser."
Since December 1994, EVEREN Securities, Inc., one of the Company's principal
underwriters, has provided financial advisory services to the Company with
respect to the Acquisitions, the structure of the Company, the capital markets
and the Offering. For these services, the Company will pay EVEREN Securities,
Inc. a financial advisory fee of $225,000. See "Underwriting."
DETERMINATION OF NET ASSET VALUE
The net asset value per share of Common Stock will be determined quarterly,
as soon as practicable after and as of the end of each calendar quarter, by
dividing the value of total assets minus liabilities by the total number of
shares of Common Stock outstanding on a fully diluted basis at that date.
A substantial portion of the Company's assets will consist of the loans held
in the portfolios of the RIC Subsidiaries. The RIC Subsidiaries' respective
Boards of Directors will value their respective loans in connection with their
respective determinations of net asset value. The net asset value per share of
each subsidiary's common stock will be determined quarterly, as soon as
practicable after and as of the end of each calendar quarter, by dividing the
value of total assets minus liabilities by the total number of shares
outstanding on a fully diluted basis at that date.
In making its valuation determination, each of the Boards of Directors of
the RIC Subsidiaries will adhere to a valuation policy approved by the SBA and
adopted by such Board of Directors. In calculating the value of the relevant
subsidiary's total assets, loans will be valued at fair value as determined in
good faith by that subsidiary's Board of Directors. In making such
determinations, the Board of Directors will value loans and nonconvertible
debt securities for which there exists no public trading market at cost plus
amortized original issue discount, if any, unless adverse factors lead to a
determination of a lesser value, at which time net unrealized depreciation of
investments would be recognized. Convertible debt securities and warrants are
valued to reflect the worth of the underlying equity security less the
conversion or exercise price. In valuing equity securities for which there
exists no public trading market, investment cost is presumed to represent fair
value except in cases where the valuation policy provides that the Board of
Directors may determine fair value on the basis of (i) financings by
unaffiliated investors, (ii) a history of positive cash flow from operations
for two years using conservative financial measures such as earnings ratios or
cash flow multiples, (iii) the market value of comparable companies which are
publicly traded (discounted for illiquidity) and (iv) other pertinent factors.
A substantial portion of each of the RIC Subsidiaries' assets will consist
of loans carried at fair values determined by such subsidiary's Board of
Directors. Independent public accountants will review and express an opinion
as to the reasonableness of the basis used by such Boards of Directors in
determining the valuation of loans and investments, the adequacy of the
procedures applied by the directors in valuing such loans and investments and
the appropriateness of the underlying documentation. However, determination of
fair values involves subjective judgment not susceptible to substantiation by
auditing procedures. Accordingly, under current standards, the accountants'
opinion on the Financial Statements included in this Prospectus refers to the
uncertainty with respect to the possible effect on such Financial Statements
of such valuations.
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<PAGE>
DIVIDEND REINVESTMENT PLAN
Pursuant to the Company's Dividend Reinvestment Plan (the "Reinvestment
Plan"), a stockholder whose shares are registered in his own name can have all
distributions reinvested in additional shares of Common Stock by The First
National Bank of Boston (the "Plan Agent") if the stockholder enrolls in the
Reinvestment Plan by delivering an Authorization Form to the Plan Agent prior
to the corresponding dividend declaration date. The Plan Agent will effect
purchases of Common Stock under the Reinvestment Plan in the open market.
Holders of Common Stock who do not elect to participate in the Reinvestment
Plan will receive all distributions in cash paid by check mailed directly to
the stockholder of record (or if the Common Stock is held in street or other
nominee name, then to the nominee) as of the relevant record date, by the Plan
Agent, as dividend disbursing agent. Stockholders whose shares are held in the
name of a broker or nominee or stockholders transferring such an account to a
new broker or nominee should contact the broker or nominee to determine
whether and how they may participate in the Reinvestment Plan.
The Plan Agent serves as agent for the holders of Common Stock in
administering the Reinvestment Plan. After the Company declares a dividend,
the Plan Agent will, as agent for the participants, receive the cash payment
and use it to buy Common Stock on the Nasdaq National Market or elsewhere for
the participants' accounts. The price of the shares will be the average market
price at which such shares were purchased by the Plan Agent.
Participants in the Reinvestment Plan may withdraw from the Reinvestment
Plan upon written notice to the Plan Agent. Such withdrawal will be effective
immediately if received not less than ten days prior to a dividend record
date; otherwise, it will be effective the day after the related dividend
distribution date. When a participant withdraws from the Reinvestment Plan or
upon termination of the Reinvestment Plan as provided below, certificates for
whole shares of Common Stock credited to his or her account under the
Reinvestment Plan will be issued and a cash payment will be made for any
fractional share of Common Stock credited to such account.
The Plan Agent will maintain each participant's account in the Reinvestment
Plan and will furnish monthly written confirmations of all transactions in
such account, including information needed by the stockholder for personal and
tax records. Common Stock in the account of each Reinvestment Plan participant
will be held by the Plan Agent in non-certificated form in the name of such
participant. Proxy materials relating to stockholders' meetings of the Company
will include those shares purchased as well as shares held pursuant to the
Reinvestment Plan.
In the case of participants whose beneficially owned shares are held in the
name of banks, brokers or other nominees, the Plan Agent will administer the
Reinvestment Plan on the basis of the number of shares of Common Stock
certified from time to time by the record holders as the amount held for the
account of such beneficial owners. Shares of Common Stock may be purchased by
the Plan Agent through any of the Underwriters, acting as broker or, after the
completion of this offering, dealer.
The Plan Agent's fees for the handling or reinvestment of dividends and
other distributions will be paid by the Company. Each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of
distributions. There are no other charges to participants for reinvesting
distributions.
Distributions are taxable whether paid in cash or reinvested in additional
shares, and the reinvestment of distributions pursuant to the Reinvestment
Plan will not relieve participants of any U.S. federal income tax or state
income tax that may be payable or required to be withheld on such
distributions. See "Federal Income Tax Considerations."
Experience under the Reinvestment Plan may indicate that changes are
desirable. Accordingly, the Company reserves the right to amend or terminate
the Reinvestment Plan as applied to any distribution paid subsequent to
written notice of the change sent to all stockholders of the Company at least
90 days before the record date for such distribution.
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<PAGE>
The Reinvestment Plan also may be amended or terminated by the Plan Agent by
at least 90 days' written notice to all stockholders of the Company. All
correspondence concerning the Reinvestment Plan should be directed to, and
additional information can be obtained from, the Plan Agent at 160 Royal
Street, Canton, Massachusetts 02021 (telephone 617-575-2000).
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of material federal income tax considerations is based
on current law and does not purport to deal with all aspects of taxation that
may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders
(including insurance companies, financial institutions, non-profit
institutions, ERISA plans and broker-dealers) subject to special treatment
under the federal income tax laws. Each prospective purchaser is advised to
consult his own tax adviser regarding the specific tax consequences to him of
the purchase, ownership and sale of the shares.
The Company plans to make an election to be taxed as a RIC under Sections
851 through 855 of the Code. The Company intends, during this and subsequent
taxable years, to operate in a manner that permits it to satisfy the
requirements for taxation as a RIC under the applicable provisions of the
Code, but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified. The sections of the Code relating to
qualification and operation as a RIC are highly technical and complex. The
following sets forth the material aspects of the Code sections that govern the
federal income tax treatment of a RIC and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations thereunder, and administrative and judicial interpretations
thereof.
In brief, if certain detailed conditions of the Code are met, business
development companies, such as the Company, that otherwise would be treated
for federal income tax purposes as corporations are generally not taxed at the
corporate level on their "investment company taxable income" that is currently
distributed to stockholders. This treatment substantially eliminates the
"double taxation" (i.e., taxation at both the corporate and stockholder
levels) that generally results from the use of corporate investment vehicles.
A RIC is, however, generally subject to federal income tax at regular
corporate rates on undistributed investment company taxable income.
Furthermore, in order to avoid a 4% nondeductible federal excise tax on
undistributed income and capital gains, the Company must distribute (or be
deemed to have distributed) by December 31 of each year at least 98% of its
ordinary income for such year, at least 98% of its capital gain net income
(which is the excess of its capital gain over its capital loss and is
generally computed on the basis of the one-year period ending on October 31 of
such year) and any amounts that were not distributed in the previous calendar
year and on which no income tax has been paid.
If the Company fails to qualify as a RIC in any year, it will be subject to
federal income tax as if it were a domestic corporation, and its stockholders
will be taxed in the same manner as stockholders of ordinary corporations. In
this event, the Company could be subject to potentially significant tax
liabilities and the amount of cash available for distribution to its
stockholders could be reduced.
REQUIREMENTS FOR QUALIFICATION
The Code defines the term "RIC" to include a domestic corporation that has
elected to be treated as a business development company under the 1940 Act and
meets certain requirements. These requirements include that (a) the company
derive at least 90% of its gross income for each taxable year from dividends,
interest, interest payments with respect to securities loans and gains from
the sale or other disposition of stocks or securities or foreign currencies,
or other income derived from its business of investing in such stocks,
securities or currencies; (b) the company derives less than 30% of its gross
income for each taxable year from the sale or
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<PAGE>
other disposition of any of the following that are held for less than three
months: (i) stock or securities and (ii) certain other financial interests
(the "short-short test"); and (c) the company diversifies its holdings so
that, at the close of each quarter of its taxable year, (i) at least 50% of
the value of its total assets is represented by (A) cash, and cash items
(including receivables), U.S. Government securities and securities of other
RICs, and (B) other securities limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the
company and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of total assets is invested in
the securities (other than U.S. Government securities or securities of other
RICs) of any one issuer or two or of more issuers controlled by the company
and engaged in the same, similar or related trades or businesses. The
foregoing diversification requirements under the Code could restrict the
Company's expansion of its taxicab rooftop advertising business. See "Risk
Factors -- Possible Loss of Pass-Through Tax Treatment."
Furthermore, in order to qualify as a RIC under the Code, each taxable year,
a company also must distribute to its stockholders at least 90% of (a) its
investment company taxable income and (b) the excess of its tax-exempt
interest income over certain disallowed deductions.
TAXATION OF THE COMPANY
Provided that the Company satisfies the above requirements, neither the
investment company taxable income it distributes to stockholders nor any net
capital gain that is distributed to stockholders should subject the Company to
federal income tax. Investment company taxable income and/or net capital gains
that are retained by the Company should be subject to federal income tax at
regular corporate income tax rates; provided, however, that to the extent that
the Company retains any net long-term capital gains, it may designate them as
"deemed distributions" and pay a tax thereon for the benefit of its
stockholders. The Company currently intends to distribute to its stockholders
for each of its taxable years substantially all of its investment company
taxable income and may or may not distribute any capital gains.
If the Company acquires debt obligations that were originally issued at a
discount, or that bear interest rates that do not call for payments at fixed
rates (or certain "qualified variable rates") at regular intervals over the
life of the obligation, it will be required to include as interest income each
year a portion of the "original issue discount" that accrues over the life of
the obligation regardless of whether it receives the income, and it will be
obligated to make distributions accordingly. In this event, the Company may
borrow funds or sell assets to meet the distribution requirements. However,
under the 1940 Act, the Company will not be permitted to make distributions to
stockholders while senior securities are outstanding unless it meets certain
asset coverage requirements. If the Company is unable to make the required
distributions, it may fail to qualify as a RIC and may be subject to the
nondeductible 4% excise tax. Furthermore, the SBA restricts the distributions
that may be made to an amount equal to undistributed net realized earnings
less the allowance for unrealized loan losses (which in the case of the
Company is included in unrealized depreciation).
TAXATION OF STOCKHOLDERS
As long as the Company qualifies as a RIC, distributions made to its taxable
domestic stockholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them
as ordinary income. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed the Company's actual net long-term capital gain for the taxable year)
without regard to the period for which the stockholder has held its stock.
Corporate stockholders however, are subject to tax on capital gain dividends
at the same rate as ordinary income. To the extent that the Company makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's Common Stock by the
amount of such distribution (but not below zero), with distributions in excess
of the stockholders's tax basis taxable as capital gains (if the Common Stock
is held as a capital asset). In addition, any dividends declared by the
Company in October, November or December of any year and payable to a
stockholder of record on a specific date in any such month shall be treated as
both paid by the Company and received by the
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stockholder on December 31 of such year, provided that the dividend is
actually paid by the Company during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company.
If the Company chooses to retain and pay tax on any net capital gain rather
than distribute such gain to its stockholders, the Company will designate such
deemed distribution in a written notice to stockholders prior to the
expiration of 60 days after the close of the taxable year. Each stockholder
would then be treated for federal income tax purposes as if the Company had
distributed to such stockholder on the last day of its taxable year the
stockholder's pro rata share of the net long-term capital gain retained by the
Company and the stockholder had paid its pro rata share of the taxes paid by
the Company and reinvested the remainder in the Company.
In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as long-term capital loss, to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gains.
BACKUP WITHHOLDING
The Company will report to its domestic stockholders and to the Internal
Revenue Service the amount of dividends paid during each calendar year and the
amount of tax withheld, if any, with respect thereto. Under backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such stockholder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A stockholder that
does not provide the Company with its correct taxpayer identification number
may also be subject to penalties imposed by the Internal Revenue Service. Any
amount paid as backup withholding will be creditable against the stockholder's
federal income tax liability.
OTHER TAX CONSIDERATIONS
Reinvestment Plan
Stockholders participating in the Reinvestment Plan will be deemed to have
received the gross amount of any cash distributions which would have been paid
by the Company to such stockholders had they not elected to participate. These
deemed distributions will be treated as actual distributions from the Company
to the participating stockholders and will retain the character and tax effect
applicable to distributions from the Company generally. Participants in the
Reinvestment Plan are subject to federal income tax on the amount of the
deemed distributions to the extent that such distributions represent dividends
or gains, even though they receive no cash. Shares of Common Stock received
under the Reinvestment Plan will have a holding period beginning with the day
after purchase, and a tax basis equal to their cost (which is the gross amount
of the deemed distribution). See "Dividend Reinvestment Plan."
State, Local and Foreign Taxes
The Company and its stockholders may be subject to state, local or foreign
taxation in various jurisdictions, including those in which it or they
transact business or reside. The state, local and foreign tax treatment of the
Company and its stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisers regarding the effect of state, local and
foreign tax laws on an investment in the Common Stock of the Company.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 1,000,000 shares of
Preferred Stock, par value $.01 per share and 15,000,000 shares of Common
Stock, par value $.01 per share. Upon completion of the Offering, the Company
will have outstanding 7,500,000 shares of Common Stock (8,250,000 shares of
Common Stock if the Underwriters' over-allotment option is exercised in full)
and no shares of Preferred Stock. As of April 26, 1996, there were no shares
of Preferred Stock outstanding and 2,500,000 shares of Common Stock
outstanding and two record holders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then outstanding shares of Preferred Stock, the
holders of the Common Stock are entitled to such dividends as may be declared
in the discretion of the Board of Directors out of funds legally available
therefor. See "Distributions." Holders of Common Stock are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no
preemptive rights to purchase shares of stock of the Company. Shares of Common
Stock are not subject to any redemption provisions and are not convertible
into any other securities of the Company. All outstanding shares of Common
Stock are, and the shares of Common Stock to be issued pursuant to the
Offering will be upon payment therefor, fully paid and non-assessable.
PREFERRED STOCK
Subject to the asset coverage requirements of the 1940 Act, Preferred Stock
may be issued from time to time by the Board of Directors as shares of one or
more classes or series. Subject to the provisions of the Company's Certificate
and limitations prescribed by law, the Board of Directors is expressly
authorized to adopt resolutions to issue the shares, to fix the number of
shares and to change the number of shares constituting any series, and to
provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of the
Preferred Stock, in each case without any further action or vote by the
stockholders. The Company has no current plans to issue any shares of
Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of the Preferred Stock pursuant to the
Board of Directors' authority described above may adversely affect the rights
of the holders of Common Stock. For example, Preferred Stock issued by the
Company may rank prior to the Common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares
of Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to the Company's Certificate and under Delaware law, directors of
the Company are not liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty, except for liability in connection with
a breach of duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, for dividend
payments or stock repurchases illegal under Delaware law or any transaction in
which a director has derived an improper personal benefit.
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AUTHORIZED AND OUTSTANDING COMMON STOCK
The following table illustrates authorized and outstanding securities of the
Company on April 26, 1996:
AUTHORIZED AND OUTSTANDING SECURITIES
<TABLE>
<CAPTION>
(1) (2) (3) (4)
AMOUNT HELD BY
THE COMPANY OR AMOUNT
TITLE OF CLASS AMOUNT AUTHORIZED FOR ITS ACCOUNT OUTSTANDING(1)
-------------- ----------------- --------------- --------------
<S> <C> <C> <C>
Common Stock................... 15,000,000 -- 2,500,000
Preferred Stock................ 1,000,000 -- --
</TABLE>
- - - ----------
(1) Assumes a 12,500 for one stock split but does not give effect to the
Offering.
DELAWARE LAW AND CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
THE BY-LAWS
The Company's Certificate and By-Laws include provisions that could make
more difficult the acquisition of the Company by means of a merger, tender
offer, a proxy contest or otherwise. These provisions, as described below, are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control
of the Company first to negotiate with the Company. These provisions may also,
however, inhibit a change in control of the Company in circumstances that
could give the holders of the Common Stock the opportunity to realize a
premium over the then prevailing market price of the Common Stock. In
addition, such provisions could adversely affect the market price for the
Common Stock. The Company believes that the benefits of increased protection
of its potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure the Company outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiations with respect to such proposals could result in an improvement of
their terms.
The Certificate and the By-Laws provide that the Board of Directors (the
"Board") will be divided into three classes of directors, with the term of
each class expiring in a different year. See "Management." The By-Laws provide
that the number of directors will be fixed from time to time exclusively by
the Board, but shall consist of not more than 15 nor less than three
directors. A majority of the Board then in office has the sole authority to
fill any vacancies on the Board. The Certificate provides that directors may
be removed only by the affirmative vote of holders of at least 75% of the
voting power of all of the then outstanding shares of stock entitled to vote
generally in the election of directors ("Voting Stock"), voting together as a
single class.
The Certificate provides that stockholder action can be taken only at an
annual or special meeting of stockholders and prohibits stockholder action by
written consent in lieu of a meeting. The Certificate and By-Laws provide that
special meetings of stockholders can be called by the Chairman of the Board of
the Company, pursuant to a resolution approved by a majority of the total
number of directors which the Company would have if there were no vacancies on
the Board, or by the stockholders owning at least 20% of the stock entitled to
vote at the meeting. The business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
by the Chairman of the Board, or at the request of a majority of the members
of the Board, or as specified in the stockholders' notice of a meeting.
The By-Laws set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board, of candidates for
election as directors and with regard to business brought before an annual
meeting of stockholders of the Company.
The Certificate and By-Laws contain provisions requiring the affirmative
vote of the holders of at least 75% of the Voting Stock, voting together as a
single class, to amend certain provisions of the Certificate relating
primarily to anti-takeover provisions and to the limitations on director
liability.
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The Certificate empowers the Board, when considering a tender offer or
merger or acquisition proposal, to take into account factors in addition to
potential economic benefits to stockholders. Such factors may include
(i) comparison of the proposed consideration to be received by stockholders in
relation to the then current market price of the capital stock, the estimated
current value of the Company in a freely negotiated transaction, and the
estimated future value of the Company as an independent entity; (ii) the
impact of such a transaction on the customers and employees of the Company,
and its effect on the communities in which the Company operates; and (iii) the
ability of the Company to fulfill its objectives under applicable statutes and
regulations.
The Certificate prohibits the Company from purchasing any shares of the
Company's stock from any person, entity or group that beneficially owns 5% or
more of the Company's Voting Stock at a price exceeding the average closing
price for the 20 trading days prior to the purchase date, unless a majority of
the Company's disinterested stockholders approve the transaction. This
restriction on purchases by the Company does not apply to any offer to
purchase shares of a class of the Company's stock which is made on the same
terms and conditions to all holders of that class of stock, to any purchase of
stock owned by such a 5% stockholder occurring more than two years after such
stockholder's last acquisition of the Company's stock, to any purchase of the
Company's stock in accordance with the terms of any stock option or employee
benefit plan, or to any purchase at prevailing market prices pursuant to a
stock purchase program.
Section 203 of the Delaware General Corporation Law ("DGCL") is applicable
to corporations organized under the laws of the State of Delaware. Subject to
certain exceptions set forth therein, Section 203 of the DGCL provides that a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless (a) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares) or (c) on or
subsequent to such date, the business combination is approved by the Board of
Directors of the corporation and by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified therein, an interested stockholder is defined
to mean any person that (i) is the owner of 15% or more of the outstanding
voting stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the
relevant date, and the affiliates and associates of such person referred to in
clause (i) or (ii) of this sentence. Under certain circumstances, Section 203
of the DGCL makes it more difficult for an interested stockholder to effect
various business combinations with a corporation for a three-year period,
although the stockholders may, by adopting an amendment to the corporation's
certificate of incorporation or by-laws, elect not to be governed by this
section, effective twelve months after adoption. The Company's Certificate and
By-Laws do not exclude the Company from the restrictions imposed under Section
203 of the DGCL. It is anticipated that the provisions of Section 203 of the
DGCL may encourage companies interested in acquiring the Company to negotiate
in advance with the Board.
REGULATION
The Company is a closed-end, non-diversified management investment company
that has elected to be treated as a business development company and, as such,
is subject to regulation under the 1940 Act. The 1940 Act contains
prohibitions and restrictions relating to transactions between investment
companies and their affiliates, principal underwriters and affiliates of those
affiliates or underwriters. In addition, the 1940 Act provides that the
Company may not change the nature of its business so as to cease to be, or to
withdraw its election as, a business development company unless so authorized
by the vote of a "majority of the Company's outstanding voting securities," as
defined under the 1940 Act.
The Company is permitted, under specified conditions, to issue multiple
classes of indebtedness and one class of stock (collectively, "senior
securities," as defined under the 1940 Act) senior to the shares of Common
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Stock offered hereby if the Company's asset coverage of such indebtedness and
all senior securities is at least 200% immediately after each such issuance.
Subordinated debentures and preferred stock guaranteed by or issued to the SBA
by the RIC Subsidiaries, are not subject to this asset coverage test. In
addition, while senior securities are outstanding, provision must be made to
prohibit the declaration of any dividend or other distribution to stockholders
(except stock dividends) or the repurchase of such securities or shares unless
the Company meets the applicable asset coverage ratios at the time of the
declaration of the dividend or distribution or repurchase.
Under the 1940 Act, a business development company may not acquire any asset
other than assets of the type listed in Section 55(a) of the 1940 Act
("Qualifying Assets") unless, at the time the acquisition is made, certain
Qualifying Assets represent at least 70% of the value of the company's total
assets. The principal categories of Qualifying Assets relevant to the proposed
business of the Company are the following:
(1) Securities purchased in transactions not involving a public offering
from the issuer of such securities, which issuer is an eligible
portfolio company. An "eligible portfolio company" is defined in the
1940 Act as any issuer which:
(a) is organized under the laws of, and has its principal place of
business in, the United States;
(b) is not an investment company other than an SBIC or SSBIC wholly-
owned by the business development company; and
(c) does not have any class of securities with respect to which a
broker or dealer may extend margin credit.
(2) Securities of any eligible portfolio company which is controlled by
the business development company.
(3) Securities received in exchange for or distributed on or with respect
to securities described in (1) or (2) above, or pursuant to the
exercise of options, warrants or rights relating to such securities.
(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.
In addition, a business development company must have been organized (and
have its principal place of business) in the United States for the purpose of
making investments in the types of securities described in (1) or (2) above.
In order to count securities as Qualifying Assets for the purpose of the 70%
test, the business development company must either control the issuer of the
securities or must make available to the issuer of the securities significant
managerial assistance; except that, where the business development company
purchases such securities in conjunction with one or more other persons acting
together, one of the other persons in the group may make available the
required managerial assistance. The Company believes that the common stock of
the Founding Companies held by Medallion Financial will be Qualifying Assets.
Edwards is a small business investment company or "SBIC" and MFC and TCC are
specialized small business investment companies or "SSBICs." The SBIA
authorizes the organization of SBICs as vehicles for providing equity capital,
long term financing and management assistance to small business concerns. A
small business concern, as defined in the SBIA and the SBA Regulations, is a
business that is independently owned and operated and which is not dominant in
its field of operation. The SBIA further authorizes the organization of SSBICs
as vehicles for providing the same forms of assistance to small business
concerns which are at least 50% owned and managed by persons whose
participation in the free enterprise system is hampered because of social or
economic disadvantages. Disadvantaged Borrowers include African Americans,
Asian Sub-Continent Americans, Eskimos, Hispanic Americans, Native Americans,
Vietnam War era veterans and other groups identified by the SBA. A small
business concern must either (i) have a tangible net worth, together with any
affiliates, of $18.0 million or less and an average annual net income after
U.S. federal income taxes for the preceding two years of $6.0 million or less
(average annual net income is computed without the benefit of any carryover
loss) or (ii) satisfy alternative criteria under the SBA Regulations that
focus on the industry in which the business is engaged and the number of
persons employed by the business or its gross revenues. In addition, at the
end of each fiscal year, at least 20% of the total amount of loans made since
April 25, 1994 by each SBIC
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and SSBIC must be made to a subclass of small business concerns that (i) have
a net worth, together with any affiliates, of $6.0 million or less and average
annual net income after U.S. federal income taxes for the preceding two years
of $2.0 million or less (average annual net income is computed without the
benefit of any carryover loss), or (ii) satisfy alternative criteria under SBA
Regulations that focus on the industry in which the business is engaged and
the number of persons employed by the business or its gross revenues. SBA
Regulations also prohibit an SBIC from providing funds to a small business
concern for certain purposes, such as re-lending and reinvestment.
Under current SBA Regulations and subject to local usury laws, the maximum
rate of interest that MFC, TCC or Edwards may charge may not exceed (i) the
higher of 19% and (ii) the sum of (a) the higher of (I) that company's
weighted average cost of qualified borrowings, as determined under SBA
Regulations, or (II) the current subordinated SBA debenture rate, plus (b)
11%, rounded off to the next lower eighth of one percent. The maximum rate of
interest permitted on loans originated by the RIC Subsidiaries during December
31, 1995 was 15% per annum. Effective January 31, 1996, the maximum permitted
rate was increased to 19%. At December 31, 1995, the Company's outstanding
Medallion Loans had a weighted average rate of interest of 9.90% and
outstanding Commercial Installment Loans had a weighted average rate of
interest of 13.53%. See "Business." SBA Regulations also require that each
loan originated by SBICs have a term of between five years and 20 years;
however, loans to Disadvantaged Borrowers may be for a minimum of four years.
SBA Regulations require that each loan originated by an SSBIC have a term of
between four years and 20 years and that 50% of such loans have terms of at
least five years.
The SBA restricts the ability of SBICs and SSBICs to repurchase their
capital stock, to retire their subordinated SBA debentures and to lend money
to their officers, directors and employees or invest in affiliates thereof.
The SBA also prohibits, without prior SBA approval, a "change of control" or
transfers which would result in any person (or group of persons acting in
concert) owning 10% or more of any class of capital stock of an SBIC or SSBIC.
A "change of control" is any event which would result in the transfer of the
power, direct or indirect, to direct the management and policies of an SBIC or
SSBIC, whether through ownership, contractual arrangements or otherwise.
Under SBA Regulations, without prior SBA approval, loans by licensees with
outstanding SBA leverage to any single small business concern may not exceed
20% of an SBIC's Leveragable Capital or 30% of an SSBIC's Leveragable Capital.
SSBICs and SBICs must invest funds that are not being used to make loans in
investments permitted under SBA Regulations. These permitted investments
include direct obligations of, or obligations guaranteed as to principal and
interest by, the government of the United States with a term of 15 months or
less and deposits maturing in one year or less issued by an institution
insured by the FDIC. The percentage of an SSBICs or SBICs assets so invested
will depend on, among other things, loan demand, timing of equity infusions
and SBA funding and availability of funds under credit facilities.
SSBICs and SBICs may purchase voting securities of small business concerns
in accordance with SBA Regulations. SBA Regulations prohibit SSBICs and SBICs
from controlling a small business concern except where necessary to protect an
investment. SBA Regulations presume control when SSBICs and SBICs purchase (i)
50% or more of the voting securities of a small business concern if the small
business concern has less than 50 stockholders or (ii) more than 20% (and in
certain situations up to 25%) of the voting securities of a small business
concern if the small business concern has 50 or more stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
market prices prevailing from time to time. As described below, only a limited
number of shares
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will be available for sale shortly after the Offering because of certain
contractual and legal restrictions on resale. Sales of substantial amounts of
Common Stock in the public market after these restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of the Offering, the Company will have outstanding 7,500,000
shares of Common Stock (8,250,000 if the Underwriter's over-allotment option
is exercised in full). Of these shares, the 5,000,000 shares offered hereby
(5,750,000 if the Underwriters' over-allotment option is exercised in full)
will be freely tradeable without restriction or registration under the
Securities Act (except to the extent purchased by affiliates of the Company).
SALES OF RESTRICTED SHARES
The remaining 2,500,000 shares (the "Restricted Shares") were issued and
sold by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act and are restricted securities under Rule
144 of the Securities Act. These shares were issued and sold at the Company's
inception on October 23, 1995 at their fair value at the time of $2,000 or,
after giving effect to a 12,500 for one stock split expected to be effected
prior to completion of the Offering, less than one cent per share. All of the
Restricted Shares are subject to Lock-up Agreements for a period of two years
from the date of this Prospectus as described below. The Restricted Shares
will not be eligible for sale pursuant to Rule 144 until the expiration of the
two-year holding period from the date such Restricted Shares were acquired.
Accordingly they will become eligible for sale subject to the Rule 144 resale
limitations, including the volume restrictions discussed in the following
paragraph, on October 23, 1997. The Commission has proposed amendments to Rule
144 that would, if adopted, retroactively reduce the two-year holding period
to one year.
Restricted Shares may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including pursuant to Rule 144. In general, under Rule 144 as
currently in effect, beginning 90 days after the Offering, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least two years, including affiliates of the Company, would be
entitled to sell in brokers' transactions or to market makers within any
three-month period a number of Restricted Shares that does not exceed the
greater of one percent (1.0%) of the then outstanding shares of the Company's
Common Stock (approximately 75,000 shares, based on the number of shares
outstanding after the Offering assuming no exercise of the Underwriters' over-
allotment option) or the average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date
on which notice of the sale is filed with the Commission. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. No
stockholder of the Company will have held his or her shares for two years
until October 23, 1997.
Restricted Shares held by affiliates of the Company eligible for sale in the
public market under Rule 144 are subject to the foregoing volume limitations
and other restrictions. Affiliates may sell shares not constituting Restricted
Shares only in accordance with the foregoing volume limitations and other Rule
144 restrictions, but without regard to the two-year holding period.
A person who is not an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned Restricted Shares for at
least three years, would be entitled to sell such Restricted Shares under Rule
144(k) without regard to the availability of current public information,
volume limitations, manner of sale provisions or notice requirements. No
stockholder of the Company will have held Common Stock for three years until
October 23, 1998.
Rule 144A provides a non-exclusive safe harbor exemption from the
registration requirements of the Securities Act for specified resales of
restricted securities to certain institutional investors. Rule 144A allows
unregistered resales of restricted securities to a qualified institutional
buyer, which generally includes an entity, acting for its own account or the
account of other qualified institutional buyers, that in the aggregate owns
and invests on a discretionary basis at least $100 million in securities of
unaffiliated issuers. Rule 144A does not
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extend an exemption to the offer or sale of securities that, when issued, were
of the same class as securities listed on a national securities exchange or
quoted in an automated interdealer quotation system. Because the Restricted
Shares, when they were issued, were not of the same class as any listed or
quoted securities, all of such securities are eligible for resale under Rule
144A.
LOCK-UP AGREEMENTS
Pursuant to Lock-up Agreements with the Company's directors and officers and
certain other stockholders, all of the 2,500,000 Restricted Shares are subject
to certain resale restrictions in addition to those imposed under Rule 144.
Each party to the Lock-up Agreements has agreed that he or she will not,
directly or indirectly, offer for sale, sell, contract to sell, grant an
option to purchase or otherwise dispose of any shares of the Company's Common
Stock, except (i) shares escrowed by the Murstein Trusts for the benefit of
FMC or (ii) gifts to family members or charitable institutions, provided that
such family member or charitable institution agrees to be bound by such Lock-
up Agreement, for a period of two years from the date of this Prospectus
without the prior written consent of Furman Selz LLC. The consent of Furman
Selz LLC will not affect the resale restrictions under Rule 144. In addition,
the Company has agreed that for a period of 180 days following the date of
this Prospectus, the Company will not, without the prior written consent of
Furman Selz LLC, directly or indirectly, offer for sale, sell, contract to
sell, or grant any option to purchase or otherwise dispose of or transfer any
shares of the Company's Common Stock other than options granted under the 1996
Plan, the Director Plan or shares issued pursuant to the exercise of
outstanding options. See "Underwriting."
OPTIONS
It is anticipated that prior to the closing of the Offering, Daniel F.
Baker, the Treasurer and Chief Financial Officer, Michael Fanger, an Executive
Vice President and Michael Kowalsky, an Executive Vice President, will be
granted stock options currently estimated to be exercisable for 68,000, 68,000
and 45,000 shares of Common Stock respectively. The exercise price per share
for such shares will be equal to the public offering price. These options will
become exercisable in five equal annual installments commencing one year after
the date of this Prospectus, except in the case of Mr. Kowalsky whose options
shall become exercisable in three equal annual installments. Including the
shares reserved for issuance in connection with that option, the Company will
reserve a total of 750,000 additional shares of Common Stock for issuance with
respect to the future grant of options under the 1996 Plan.
In addition, a total of 100,000 additional shares of Common Stock will be
reserved for issuance with respect to the grant of options under the Director
Plan. It is anticipated that upon Commission approval of the Director Plan,
the Company's four disinterested directors will be granted stock options to
purchase the number of shares of Common Stock determined by dividing $100,000
by the fair market value of the Common Stock on the date the plan is approved
by the Commission. Additional disinterested directors elected in the future
will receive a similar grant upon election.
Following the completion of the Offering, the Company currently expects to
file a registration statement under the Securities Act to register shares
reserved for issuance under the 1996 Plan and the Director Plan. Shares issued
upon exercise of outstanding stock options after the effective date of such
registration statement generally will be tradeable without restriction under
the Securities Act.
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UNDERWRITING
Furman Selz LLC, J.C. Bradford & Co. and EVEREN Securities, Inc. are acting
as representatives (the "Representatives") of each of the underwriters named
below (the "Underwriters"). Subject to the terms and conditions set forth in
the underwriting agreement dated as of the date hereof (the "Underwriting
Agreement"), the Underwriters named below have severally agreed to purchase,
and the Company has agreed to sell to them, the aggregate number of shares of
Common Stock set forth opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Furman Selz LLC................................................
J.C. Bradford & Co. ...........................................
EVEREN Securities, Inc. .......................................
---------
Total........................................................ 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel
and various other conditions. The nature of the Underwriters' obligations is
such that they are committed to purchase all of the above shares if any are
purchased. The Underwriters propose to offer the shares of Common Stock
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other dealers. After the Offering, the offering price and other
selling terms may be changed by the Representatives.
Prior to the consummation of the Offering, there has been no public market
for the Common Stock. Accordingly, the initial public offering price has been
determined by negotiation between the Company and the Representatives. Among
the factors considered in determining the initial public offering price were
the history of and prospects for the businesses in which the Company operates,
the Company's past and present operations, the Founding Companies' loan
portfolio quality, past and present revenue and earnings and the trends in
such revenue and earnings, previous valuations of the Company, expert opinion,
the prospects for the Company's revenue and earnings, an assessment of the
Company's management, stock prices of comparable finance companies and out-of-
home advertising companies and the general condition of the securities markets
at the time of the Offering. There can be no assurance that any active trading
market will develop for the Common Stock or as to the price at which the
Common Stock may trade in the public market from time to time subsequent to
the Offering made hereby.
The Company has granted to the Underwriters an option, expiring 30 days from
the date of this Prospectus, to purchase up to 750,000 additional shares of
Common Stock on the same terms as set forth on the cover page of this
Prospectus, solely to cover over-allotments, if any, incurred in the sale of
the shares of Common Stock offered hereby. If the Underwriters exercise the
option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase such number of additional shares of Common Stock as is
proportionate to such Underwriter's initial commitment to purchase shares from
the Company.
Since December 1994, EVEREN Securities, Inc. has provided financial advisory
services to the Company with respect to the Acquisitions, the structure of the
Company, the capital markets and the Offering. For these services, the Company
will pay EVEREN Securities, Inc. a financial advisory fee of $225,000. See
"Certain Transactions."
Pursuant to Lock-up Agreements with the Company's directors and officers and
certain other stockholders, each party to a Lock-up Agreement has agreed that
he or she will not, directly or indirectly, offer for sale, sell, contract to
sell, grant an option to purchase or otherwise dispose of any shares of the
Company's Common Stock,
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except (i) shares escrowed by the Murstein Trusts for the benefit of FMC or
(ii) gifts to family members or charitable institutions, provided that such
family member or charitable institution agrees to be bound by such Lock-up
Agreement, for a period of two years from the date of this Prospectus, without
the prior written consent of Furman Selz LLC. In addition, the Company has
agreed that for a period of 180 days from the date of this Prospectus, the
Company will not, without the prior written consent of Furman Selz LLC,
directly or indirectly, offer for sale, sell, contract to sell, or grant any
option to purchase or otherwise dispose of or transfer any shares of Common
Stock other than options granted under the 1996 Plan, the Director Plan or
shares issued pursuant to the exercise of outstanding options.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Common Stock has been approved, subject to official notice of issuance,
on the Nasdaq National Market under the symbol "TAXI."
The principal address of Furman Selz LLC is 230 Park Avenue, New York, New
York 10169, the principal address of J.C. Bradford & Co. is 330 Commerce
Street, Nashville, Tennessee 37201 and the principal address of EVEREN
Securities, Inc. is 77 West Wacker Drive, Chicago, Illinois 60601.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING
AGENT AND REGISTRAR
The First National Bank of Boston, 160 Royal Street, Canton, Massachusetts
02021, serves as the custodian, transfer agent, dividend disbursing agent and
registrar for the Company's Common Stock.
REPORTS TO STOCKHOLDERS
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited consolidated financial information for the first three quarters of
each fiscal year.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts, and for the
Underwriters by Willkie Farr & Gallagher, New York, New York. Mario M. Cuomo,
a partner in the firm of Willkie Farr & Gallagher, is a director of the
Company.
EXPERTS
The balance sheet of Medallion Financial as of December 31, 1995; the
financial statements of Tri-Magna as of December 31, 1995 and 1994 and for the
years ended December 31, 1995, 1994 and 1993; the financial statements of
Edwards as of December 31, 1995 and for the year ended December 31, 1995, and
the financial statements of TCC as of December 31, 1995, and for the year
ended December 31, 1995, included in this Prospectus have been so included in
reliance on the report of Arthur Andersen LLP, Boston, Massachusetts
independent accountants, given on the authority of said firm as experts in
auditing and accounting. The financial statement of Edwards as of December 31,
1994 and for the years ended December 31, 1994 and 1993 included in this
Prospectus have been so included in reliance on the report of Friedman, Alpren
& Green LLP, New York, New York. The balance sheet of TCC, including the
financial statement schedules, as of December 31, 1994 and the related
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period then ended, included in this Prospectus, have been
included herein in reliance on the report of Coopers & Lybrand LLP, New York,
New York, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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MEDALLION FINANCIAL CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MEDALLION FINANCIAL CORP.
Introduction to Pro Forma Combined Financial Statements.................. F-3
Pro Forma Balance Sheet as of December 31, 1995 (unaudited).............. F-4
Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 (unaudited)........................................... F-5
Pro Forma Combined Statement of Operations for the three months ended
December 31, 1995 (unaudited)........................................... F-6
Pro Forma Combined Statement of Operations for the three months ended
September 30, 1995 (unaudited).......................................... F-7
Pro Forma Combined Statement of Operations for the three months ended
June 30, 1995 (unaudited)............................................... F-8
Pro Forma Combined Statement of Operations for the three months ended
March 31, 1995 (unaudited).............................................. F-9
Notes to the Unaudited Pro Forma Combined Financial Statements........... F-10
MEDALLION FINANCIAL CORP.
Report of Arthur Andersen LLP, Independent Public Accountants............ F-13
Balance Sheet as of December 31, 1995.................................... F-14
Notes to Balance Sheet................................................... F-15
TRI-MAGNA CORPORATION AND SUBSIDIARIES
Report of Arthur Andersen LLP, Independent Public Accountants............ F-18
Consolidated Balance Sheets as of December 31, 1995 and December 31,
1994.................................................................... F-19
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993..................................................... F-20
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993........................................ F-21
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993........................................ F-22
Notes to Consolidated Financial Statements............................... F-23
EDWARDS CAPITAL COMPANY (A LIMITED PARTNERSHIP)
Report of Friedman, Alpren & Green LLP, Independent Public Accountants... F-33
Report of Arthur Andersen LLP, Independent Public Accountants............ F-34
Balance Sheets as of December 31, 1995 and 1994.......................... F-35
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-36
Statements of Changes in Partners' Capital for the years ended
December 31, 1995, 1994 and 1993........................................ F-37
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-38
Notes to Financial Statements............................................ F-39
TRANSPORTATION CAPITAL CORP.
Report of Coopers & Lybrand LLP, Independent Public Accountants.......... F-46
Report of Arthur Andersen LLP, Independent Public Accountants............ F-47
Balance Sheets as of December 31, 1995 and 1994.......................... F-48
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-49
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993........................................ F-50
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-51
Notes to Financial Statements............................................ F-52
</TABLE>
F-1
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED FINANCIAL STATEMENTS
F-2
<PAGE>
MEDALLION FINANCIAL CORP.
INTRODUCTION TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- UNAUDITED
The following unaudited pro forma combined balance sheet as of December 31,
1995 and unaudited pro forma combined statements of operations for the year
ended December 31, 1995 and for each quarter in the year ended December 31,
1995 have been prepared to reflect the Offering, the application of the
proceeds of the Offering (including the acquisitions of Tri-Magna, Edwards and
TCC, which will be acquired by the Company simultaneously with the closing of
the Offering and the application of the cash acquired in connection with the
Acquisitions) and the adjustments described in the accompanying notes. The pro
forma combined financial information is based on the historical financial
statements of Medallion Financial, Tri-Magna, Edwards and TCC and should be
read in conjunction with those financial statements and the notes thereto, as
well as the estimates and assumptions set forth below and in the notes to the
pro forma combined financial statements. The pro forma combined balance sheet
was prepared as if the Offering and the application of the proceeds of the
Offering occurred on December 31, 1995. The pro forma combined statements of
operations were prepared as if the Offering and the application of the
proceeds of the Offering occurred on January 1, 1995.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. Pro
forma purchase price adjustment allocations are based on the preliminary
results of the Company's due diligence, but are subject to change, since the
preliminary estimates of the fair value of assets acquired as a result of the
Acquisitions may change upon completion of the final analysis. The Company
does not expect any such changes to result in a material variation from the
information set forth in the pro forma combined balance sheet. The pro forma
combined financial information is not necessarily indicative of the financial
position or results of operations which actually would have occurred if such
transactions had been consummated on January 1, 1995 or December 31, 1995, as
applicable, nor does it purport to represent the Company's future financial
position or results of operations. Neither expected benefits and cost
reductions anticipated by the Company nor future corporate costs that are not
under contract have been reflected in the accompanying pro forma financial
statements.
F-3
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR ACQUISITIONS
ADJUSTMENTS --------------------------------------------
FOR TRI-MAGNA EDWARDS TCC
MEDALLION TRI-MAGNA EDWARDS TCC OFFERING ADJUSTMENTS(G) ADJUSTMENTS(H) ADJUSTMENTS(I)
--------- ----------- ----------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Medallion
loans.......... $ -- $66,337,669 $43,177,063 $ 7,988,404 $ -- $ -- $ -- $ (13,920)
Commercial
installment
loans.......... -- 30,618,747 621,728 1,808,324 -- (910,000) (20,000) (628,669)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Gross
investments..... -- 96,956,416 43,798,791 9,796,728 -- (910,000) (20,000) (642,589)
Unrealized
depreciation on
investments.... -- (910,000) (20,000) (642,589) -- 910,000 20,000 642,589
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Net investments.. -- 96,046,416 43,778,791 9,154,139 -- -- -- --
Investment in
subsidiaries.... -- -- -- -- 38,923,961(d) (13,378,000) (15,196,725) (10,349,236)
Investment in
unconsolidated
subsidiary...... -- 145,335 -- -- -- (145,335) -- --
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
investments..... -- 96,191,751 43,778,791 9,154,139 38,923,961 (13,523,335) (15,196,725) (10,349,236)
49,300,000 (a)
(49,300,000)(b)
Cash and cash
equivalents..... 2,000 1,177,166 115,571 7,780,717 (7,055,861)(c) (334,000) (115,571) --
Accrued interest
receivable...... -- 844,350 396,000 133,722 -- -- -- --
Deferred
financing
costs........... -- -- 353,683 -- -- -- (353,683) --
Fixed assets,
net............. -- 87,925 66,826 16,253 -- (87,925) (66,826) --
Goodwill......... -- -- -- -- -- -- 6,300,000 4,100
Other assets..... 716,217 1,486,974 373,116 72,877 (716,217)(f) (474,688) (262,468) --
Deferred income
taxes........... -- -- -- 257,900 -- -- -- (257,900)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total assets..... $718,217 $99,788,166 $45,083,987 $17,415,608 $31,151,883 $(14,419,948) $(9,695,273) $(10,603,036)
======== =========== =========== =========== =========== ============ =========== ============
LIABILITIES
Accounts payable
and accrued
expenses........ $716,217 $ 1,290,267 $ 1,167,156 $ 171,888 $ (716,217)(f) $ -- $ (578,442) $ 129,413
Accrued interest
payable......... -- 889,147 -- 35,071 -- -- -- --
Notes payable to
bank and demand
notes .......... -- 80,294,900 9,850,000 -- (17,431,900)(e) -- -- --
SBA debentures
payable......... -- -- 24,950,000 6,730,000 -- -- -- (253,800)
Negative
goodwill........ -- -- -- -- -- 2,893,904 -- --
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
liabilities..... 716,217 82,474,314 35,967,156 6,936,959 (18,148,117) 2,893,904 (578,442) (124,387)
Stockholders'
equity
Common stock..... 2,000 6,689 -- 13 49,300,000 (a) (6,689) -- (13)
Partners'
capital......... -- -- 9,116,831 -- -- -- (9,116,831) --
Additional paid-
in capital...... -- 10,594,241 -- 7,749,456 -- (10,594,241) -- (7,749,456)
Restricted
capital......... -- 6,002,100 -- 2,199,166 -- (6,002,100) -- (2,199,166)
Accumulated
undistributed
income (loss)... -- 710,822 -- 530,014 -- (710,822) -- (530,014)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total
stockholders'
equity.......... 2,000 17,313,852 9,116,831 10,478,649 49,300,000 (17,313,852) (9,116,831) (10,478,649)
-------- ----------- ----------- ----------- ----------- ------------ ----------- ------------
Total liabilities
and
stockholders'
equity.......... $718,217 $99,788,166 $45,083,987 $17,415,608 $31,151,883 $(14,419,948) $(9,695,273) $(10,603,036)
======== =========== =========== =========== =========== ============ =========== ============
<CAPTION>
PRO FORMA
------------
<S> <C>
ASSETS
Investments
Medallion
loans.......... $117,489,216
Commercial
installment
loans.......... 31,490,130
------------
Gross
investments..... 148,979,346
Unrealized
depreciation on
investments.... --
------------
Net investments.. 148,979,346
Investment in
subsidiaries.... --
Investment in
unconsolidated
subsidiary...... --
------------
Total
investments..... 148,979,346
Cash and cash
equivalents..... 1,570,022
Accrued interest
receivable...... 1,374,072
Deferred
financing
costs........... --
Fixed assets,
net............. 16,253
Goodwill......... 6,304,100
Other assets..... 1,195,811
Deferred income
taxes........... --
------------
Total assets..... $159,439,604
============
LIABILITIES
Accounts payable
and accrued
expenses........ $ 2,180,282
Accrued interest
payable......... 924,218
Notes payable to
bank and demand
notes .......... 72,713,000
SBA debentures
payable......... 31,426,200
Negative
goodwill........ 2,893,904
------------
Total
liabilities..... 110,137,604
Stockholders'
equity
Common stock..... 49,302,000
Partners'
capital......... --
Additional paid-
in capital...... --
Restricted
capital......... --
Accumulated
undistributed
income (loss)... --
------------
Total
stockholders'
equity.......... 49,302,000
------------
Total liabilities
and
stockholders'
equity.......... $159,439,604
============
</TABLE>
See accompanying notes to unaudited pro forma combined balance sheet.
F-4
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- ---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $9,802,560 $4,316,669 $1,411,116 $15,530,345 $ -- $15,530,345
Interest Income on
Treasury Bills........ -- -- -- 425,318 425,318 (265,900)(l) 159,418
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Investment
Income................ -- 9,802,560 4,316,669 1,836,434 15,955,663 (265,900) 15,689,763
---- ---------- ---------- ---------- ----------- ---------- -----------
Interest Expense
Notes Payable to Bank.. -- 5,253,924 754,404 -- 6,008,328 (448,766)(k) 5,559,562
SBA Debentures......... -- 780,254 1,993,075 450,071 3,223,400 (780,254)(k) 2,443,146
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Interest
Expense............... -- 6,034,178 2,747,479 450,071 9,231,728 (1,229,020) 8,002,708
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Interest Income..... -- 3,768,382 1,569,190 1,386,363 6,723,935 963,120 7,687,055
---- ---------- ---------- ---------- ----------- ---------- -----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 125,956 -- -- 125,956 -- 125,956
Accretion of Negative
Goodwill.............. -- -- -- -- -- 771,708 (j) 771,708
Other Income............ -- 446,209 443,190 -- 889,399 -- 889,399
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Non-Interest
Income................ -- 572,165 443,190 -- 1,015,355 771,708 1,787,063
---- ---------- ---------- ---------- ----------- ---------- -----------
Expenses
Professional Fees...... -- 344,311 204,071 350,178 898,560 (182,346)(o) 716,214
Salaries and Benefits.. -- 1,170,577 387,277 259,986 1,817,840 (330,000)(n) 1,712,840
225,000 (o) --
Other Operating Ex-
penses................ -- 1,099,906 293,948 150,166 1,544,020 (72,056)(p) 1,427,732
(44,232)(q) --
Amortization of Good-
will.................. -- -- -- -- -- 420,000 (j) 420,000
---- ---------- ---------- ---------- ----------- ---------- -----------
Total Expenses......... -- 2,614,794 885,296 760,330 4,260,420 16,366 4,276,786
---- ---------- ---------- ---------- ----------- ---------- -----------
Dividends on Minority
Interest............... -- 207,774 -- -- 207,774 (207,774)(m) --
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Investment Income
before income taxes.... -- 1,517,979 1,127,084 626,033 3,271,096 1,926,236 5,197,332
Income Taxes............ -- -- 40,111 381,224 421,335 (421,335)(r) --
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Investment Income
after income taxes..... -- 1,517,979 1,086,973 244,809 2,849,761 2,347,571 5,197,332
Change in unrealized
depreciation........... -- (140,000) -- 335,261 195,261 -- 195,261
Net realized gain (loss)
on investments......... -- 61,194 -- (50,055) 11,139 -- 11,139
---- ---------- ---------- ---------- ----------- ---------- -----------
Net Increase in Net
Assets resulting from
Operations............. $-- $1,439,173 $1,086,973 $ 530,015 $ 3,056,161 $2,347,571 $ 5,403,732
==== ========== ========== ========== =========== ========== ===========
Pro forma net increase
in net assets resulting
from operations per
share.................. $ 0.72
===========
Pro forma weighted
average shares
outstanding............ 7,500,000
===========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
F-5
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,610,642 $1,047,174 $338,972 $3,996,788 $ -- $3,996,788
Interest Income on
Treasury
Bills................. -- -- -- 97,177 97,177 (66,475)(l) 30,702
---- ---------- ---------- -------- ---------- --------- ----------
Total Investment
Income................ -- 2,610,642 1,047,174 436,149 4,093,965 (66,475) 4,027,490
---- ---------- ---------- -------- ---------- --------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,603,727 175,914 -- 1,779,641 (351,293)(k) 1,428,348
SBA Debentures......... -- -- 498,269 91,342 589,611 -- 589,611
---- ---------- ---------- -------- ---------- --------- ----------
Total Interest
Expense............... -- 1,603,727 674,183 91,342 2,369,252 (351,293) 2,017,959
---- ---------- ---------- -------- ---------- --------- ----------
Net Interest Income..... -- 1,006,915 372,991 344,807 1,724,713 284,818 2,009,531
---- ---------- ---------- -------- ---------- --------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 20,376 -- -- 20,376 -- 20,376
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,926 (j) 192,926
Other Income........... -- 131,492 132,068 -- 263,560 -- 263,560
---- ---------- ---------- -------- ---------- --------- ----------
Total Non-Interest
Income................ -- 151,868 132,068 -- 283,936 192,926 476,862
---- ---------- ---------- -------- ---------- --------- ----------
Expenses
Professional Fees...... -- -- 77,716 80,761 158,477 (45,587)(o) 112,890
Salaries and Benefits.. -- 337,867 100,124 58,541 496,532 (82,500)(n) 470,282
56,250 (o) --
Other Operating
Expenses.............. -- 283,517 65,090 35,077 383,684 (18,014)(p) 354,612
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- --------- ----------
Total Expenses......... -- 621,384 242,930 174,379 1,038,693 4,091 1,042,784
---- ---------- ---------- -------- ---------- --------- ----------
Dividends on Minority
Interest............... -- -- -- -- -- -- --
---- ---------- ---------- -------- ---------- --------- ----------
Net Investment Income
before
income taxes........... -- 537,399 262,129 170,428 969,956 473,653 1,443,609
Income Taxes............ -- -- 7,000 76,600 83,600 (83,600)(r) --
---- ---------- ---------- -------- ---------- --------- ----------
Net Investment Income
after
income taxes........... -- 537,399 255,129 93,828 886,356 557,253 1,443,609
Change in unrealized
depreciation........... -- (30,000) -- 46,687 16,687 -- 16,687
Net realized gain (loss)
on
investments............ -- 56,804 -- (22,463) 34,341 -- 34,341
---- ---------- ---------- -------- ---------- --------- ----------
Net Increase in Net
Assets
resulting from
Operations............. $-- $ 564,203 $ 255,129 $118,052 $ 937,384 $ 557,253 $1,494,637
==== ========== ========== ======== ========== ========= ==========
Pro forma net increase
in net
assets resulting from
operations per share... $ 0.20
==========
Pro forma weighted
average
shares outstanding..... 7,500,000
==========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
F-6
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,436,130 $1,104,389 $333,805 $3,874,324 $ -- $3,874,324
Interest Income on
Treasury
Bills................. -- -- -- 107,428 107,428 (66,475)(l) 40,953
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,436,130 1,104,389 441,233 3,981,752 (66,475) 3,915,277
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,183,964 178,765 -- 1,362,729 (32,491)(k) 1,330,238
SBA Debentures......... -- 268,959 498,268 116,542 883,769 (268,959)(k) 614,810
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,452,923 677,033 116,542 2,246,498 (301,450) 1,945,048
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income..... -- 983,207 427,356 324,691 1,735,254 234,975 1,970,229
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 18,727 -- -- 18,727 -- 18,727
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,928(j) 192,928
Other Income........... -- 109,143 90,307 -- 199,450 -- 199,450
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 127,870 90,307 -- 218,177 192,928 411,105
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 160,039 32,567 101,670 294,276 (45,587)(o) 248,689
Salaries and Benefits.. -- 242,983 99,302 61,334 403,619 (82,500)(n) 377,369
56,250 (o) --
Other Operating
Expenses.............. -- 276,744 69,523 34,389 380,656 (18,014)(p) 351,584
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses......... -- 679,766 201,392 197,393 1,078,551 4,091 1,082,642
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest............... -- 69,264 -- -- 69,264 (69,264)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before
income taxes........... -- 362,047 316,271 127,298 805,616 493,076 1,298,692
Income Taxes............ -- -- 11,000 166,900 177,900 (177,900)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after
income taxes........... -- 362,047 305,271 (39,602) 627,716 670,976 1,298,692
Change in unrealized
depreciation........... -- (55,000) -- 183,932 128,932 -- 128,932
Net realized gain (loss)
on
investments............ -- -- -- (11,402) (11,402) -- (11,402)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets
resulting from
Operations............. $-- $ 307,047 $ 305,271 $132,928 $ 745,246 $670,976 $1,416,222
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net
assets resulting from
operations per share... $ 0.19
==========
Pro forma weighted
average
shares outstanding..... 7,500,000
==========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
F-7
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,393,293 $1,092,369 $368,001 $3,853,663 $ -- $3,853,663
Interest Income on
Treasury Bills........ -- -- -- 113,385 113,385 (66,475)(l) 46,910
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,393,293 1,092,369 481,386 3,967,048 (66,475) 3,900,573
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,215,104 194,052 -- 1,409,156 (32,491)(k) 1,376,665
SBA Debentures......... -- 262,716 498,269 121,763 882,748 (262,716)(k) 620,032
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,477,820 692,321 121,763 2,291,904 (295,207) 1,996,697
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income..... -- 915,473 400,048 359,623 1,675,144 228,732 1,903,876
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 55,809 -- -- 55,809 -- 55,809
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,927(j) 192,927
Other Income........... -- 89,018 109,125 -- 198,143 -- 198,143
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 144,827 109,125 -- 253,952 192,927 446,879
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 79,081 36,361 77,929 193,371 (45,586)(o) 147,785
Salaries and Benefits.. -- 267,409 101,479 72,982 441,870 (82,500)(n) 415,620
56,250 (o) --
Other Operating
Expenses.............. -- 294,148 83,778 40,032 417,958 (18,014)(p) 388,886
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (k) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses......... -- 640,638 221,618 190,943 1,053,199 4,092 1,057,291
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest............... -- 69,255 -- -- 69,255 (69,255)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before income taxes.... -- 350,407 287,555 168,680 806,642 486,822 1,293,464
Income Taxes............ -- -- 12,000 70,700 82,700 (82,700)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after income taxes..... -- 350,407 275,555 97,980 723,942 569,522 1,293,464
Change in unrealized
depreciation........... -- (35,000) -- 78,675 43,675 -- 43,675
Net realized gain (loss)
on investments......... -- -- -- (7,926) (7,926) -- (7,926)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets resulting from
Operations............. $-- $ 315,407 $ 275,555 $168,729 $ 759,691 $569,522 $1,329,213
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net assets resulting
from operations per
share.................. $ 0.18
==========
Pro forma weighted
average shares
outstanding............ 7,500,000
==========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
F-8
<PAGE>
MEDALLION FINANCIAL CORP.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR OFFERING AND
MEDALLION TRI-MAGNA EDWARDS TCC TOTAL USE OF PROCEEDS PRO FORMA
--------- ---------- ---------- -------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest Income on
Investments........... $-- $2,362,495 $1,072,737 $370,338 $3,805,570 $ -- $3,805,570
Interest Income on
Treasury Bills........ -- -- -- 107,328 107,328 (66,475)(l) 40,853
---- ---------- ---------- -------- ---------- -------- ----------
Total Investment
Income................ -- 2,362,495 1,072,737 477,666 3,912,898 (66,475) 3,846,423
---- ---------- ---------- -------- ---------- -------- ----------
Interest Expense
Notes Payable to Bank.. -- 1,251,129 205,673 -- 1,456,802 (32,491)(k) 1,424,311
SBA Debentures......... -- 248,579 498,269 120,424 867,272 (248,579)(k) 618,693
---- ---------- ---------- -------- ---------- -------- ----------
Total Interest
Expense............... -- 1,499,708 703,942 120,424 2,324,074 (281,070) 2,043,004
---- ---------- ---------- -------- ---------- -------- ----------
Net Interest Income.... -- 862,787 368,795 357,242 1,588,824 214,595 1,803,419
---- ---------- ---------- -------- ---------- -------- ----------
Non-Interest Income
Equity in earnings of
unconsolidated
subsidiary............ -- 31,044 -- -- 31,044 -- 31,044
Accretion of Negative
Goodwill.............. -- -- -- -- -- 192,927(j) 192,927
Other Income........... -- 116,556 111,690 -- 228,246 -- 228,246
---- ---------- ---------- -------- ---------- -------- ----------
Total Non-Interest
Income................ -- 147,600 111,690 -- 259,290 192,927 452,217
---- ---------- ---------- -------- ---------- -------- ----------
Expenses
Professional Fees...... -- 105,191 57,427 89,818 252,436 (45,586)(o) 206,850
Salaries and Benefits.. -- 322,318 86,372 67,129 475,819 (82,500)(n) 449,569
56,250 (o) --
Other Operating
Expenses.............. -- 245,497 75,557 40,668 361,722 (18,014)(p) 332,650
(11,058)(q) --
Amortization of
Goodwill.............. -- -- -- -- -- 105,000 (j) 105,000
---- ---------- ---------- -------- ---------- -------- ----------
Total Expenses........ -- 673,006 219,356 197,615 1,089,977 4,092 1,094,069
---- ---------- ---------- -------- ---------- -------- ----------
Dividends on Minority
Interest.............. -- 69,255 -- -- 69,255 (69,255)(m) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
before income taxes... -- 268,126 261,129 159,627 688,882 472,685 1,161,567
Income Taxes........... -- -- 10,111 67,024 77,135 (77,135)(r) --
---- ---------- ---------- -------- ---------- -------- ----------
Net Investment Income
after income taxes.... -- 268,126 251,018 92,603 611,747 549,820 1,161,567
Change in unrealized
depreciation.......... -- (20,000) -- 25,967 5,967 -- 5,967
Net realized gain
(loss) on
investments........... -- 4,390 -- (8,264) (3,874) -- (3,874)
---- ---------- ---------- -------- ---------- -------- ----------
Net Increase in Net
Assets resulting from
Operations............ $-- $ 252,516 $ 251,018 $110,306 $ 613,840 $549,820 $1,163,660
==== ========== ========== ======== ========== ======== ==========
Pro forma net increase
in net assets
resulting from
operations per share.. $ 0.15
==========
Pro forma weighted
average shares
outstanding........... 7,500,000
==========
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations.
F-9
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. Unaudited pro forma combined balance sheet adjustments (all dollars in
thousands, except per share amounts)
(a) Adjustment to reflect the expected proceeds raised from the Offering
based on the initial public offering price of $11.00 per share, an
underwriter's discount of 7% ($3,850) and estimated expenses of $1,850 and
the issuance of 5,000,000 shares of common stock for a total of 7,500,000
shares of common stock outstanding.
(b) Adjustment to reflect the use of a portion of the net proceeds of the
Offering to pay the purchase price of the Acquisitions (estimated to be
$13,378 for Tri-Magna; $15,197 for Edwards; $10,349 for TCC) and an
obligation to repay a Tri-Magna loan ($3,232) due upon consummation of the
Offering and to repay a portion of existing debt ($7,144).
(c) Adjustment to reflect the use of a portion of the surplus cash
resulting from the Acquisitions ($7,056) to reduce debt. The ability to use
excess cash from the Acquisitions to reduce bank debt is contingent upon
regulatory approval for the Founding Companies to make loans and advances
to Medallion Financial. If regulatory approval is not received, it is
assumed that the excess cash would be used to fund additional loans. The
effect on pro forma earnings of these two different uses of cash is
insignificant.
(d) Adjustment to reflect the elimination of investments in Tri-Magna,
Edwards and TCC.
(e) Adjustment to reflect the use of a portion of the net proceeds of the
Offering ($10,376), plus surplus cash resulting from the Acquisitions
($7,056), to reduce debt.
(f) Adjustment to reflect the elimination of the accrual of the Company's
deferred offering costs incurred prior to December 31, 1995 in conjunction
with the Offering, net of costs that will be reimbursed in connection with
the Acquisition agreements, as all of the Offering costs have been paid
with a portion of the proceeds from the Offering.
(g) Adjustment to reflect purchase price adjustments, including assumed
distributions to Tri-Magna stockholders, associated with the acquisition of
Tri-Magna. This acquisition is to be accounted for under the purchase
method of accounting. As Tri-Magna was an investment company under the 1940
Act, its historic balance sheet is reflected at fair market value.
Accordingly, no fair market value adjustments are required. Because the
acquisition of Tri-Magna results in the net fair value assigned to the
assets exceeding the acquisition cost, the excess is allocated to
proportionately reduce the values assigned to noncurrent assets with any
remaining value constituting negative goodwill. As a result of this
allocation, Tri-Magna's investment in unconsolidated subsidiary and fixed
assets were written down to zero. The resulting negative goodwill will be
accreted to earnings over approximately 4 years.
(h) Adjustment to reflect purchase price adjustments associated with the
acquisition of certain assets and the assumption of certain liabilities of
Edwards. This acquisition is to be accounted for under the purchase method
of accounting. Edwards' historic balance sheet is reflected at fair market
value. Accordingly, no fair market value adjustments are required. Goodwill
will be amortized over 15 years.
(i) Adjustment to reflect purchase price adjustments associated with the
acquisition of TCC. This acquisition is to be accounted for under the
purchase method of accounting. Goodwill will be amortized to earnings over
15 years. Adjustments have been made to record the fair value of assets
including the write-off of the deferred tax asset which will not be
realized.
F-10
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
2. Unaudited pro forma combined statement of operations adjustments (all
dollars in thousands)
(j) Adjustments to record the amortization of the goodwill (excess of
cost over the fair value of net assets of business acquired) and accretion
of negative goodwill (excess of fair value of net assets over cost of
business acquired), respectively, recorded in purchase accounting related
to the goodwill resulting from the Edwards and TCC acquisitions and the
negative goodwill arising in the acquisition of Tri-Magna. The goodwill
related to Edwards and TCC is being amortized on a straight line basis over
15 years, and the negative goodwill related to Tri-Magna is being accreted
on a straight line basis over approximately 4 years.
(k) Adjustment to reflect the reduction in subordinated SBA debenture
interest expense resulting from the repayment from the net proceeds of the
Offering and the cash acquired in the acquisitions of all of Tri-Magna's
subordinated SBA debentures held during 1995. An adjustment is also made to
reflect the reduction in bank debt interest expense resulting from the
repayment of a portion of bank debt from the net proceeds of the Offering
and the cash acquired in the acquisitions, bearing interest at a weighted
average rate of 7.60% per annum. The combined repayment of SBA and bank
debt is equal to $14,200. In addition, an adjustment was made for the
interest expense savings on the repayment of a Tri-Magna loan ($3,232) due
upon consummation of the Offering.
(l) Adjustment to reflect the reduction in interest income related to the
payment of $7,056 of excess cash in conjunction with the paydown of bank
debt, bearing interest at an assumed rate of approximately 4.0% per annum,
respectively.
(m) Adjustment to record the elimination of the preferred stock dividend
resulting from Tri-Magna's repurchase of preferred stock. This transaction
occurred on September 29, 1995 and the repurchase was considered by the
Company in its determination of negative goodwill. The buyback was funded
by additional debt ($3,232) which will be repaid with proceeds from the
Offering. The interest expense savings which will result from the repayment
of this debt was considered by the Company as a reduction in interest
expense.
TCC also participated in the SBA preferred stock buyback program on
August 14, 1995. There are no dividends to eliminate, as TCC did not elect
to pay them. Further, no interest income adjustment was reflected related
to the funding of this buyback as the amount was considered nominal.
(n) Adjustment to reflect the reduction in executive compensation and
pension expense, as a result of the elimination of three senior vice
president executive positions at Tri-Magna.
(o) Adjustment to reflect the increase in salaries and benefits expense
due to the investment advisory fees to be paid monthly, in arrears, to FMC
Advisers, Inc. This increase in expense is partially offset by the
reduction in professional fee expense due to the elimination of the
management agreement previously in place with the parent company of TCC.
(p) Adjustment to eliminate certain operating expenses of Edwards. These
expenses will not recur, as the related assets and liabilities were not
acquired by the Company as part of the acquisition of Edwards. These
expenses include the elimination of depreciation and the elimination of
amortization of deferred financing costs.
(q) Adjustment to eliminate certain operating expenses of Tri-Magna in
connection with the accounting for the Company's negative goodwill. These
expenses will not recur, as the related assets were written off by the
Company as part of the acquisition, including the elimination of Tri-
Magna's depreciation.
(r) Adjustment to eliminate income and other corporate tax expenses for
TCC and Edwards. Both companies intend to be treated as regulated
investment companies, and therefore, no taxes will be assessed to them.
F-11
<PAGE>
MEDALLION FINANCIAL CORP.
BALANCE SHEET
F-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Medallion Financial Corp.:
We have audited the accompanying balance sheet of Medallion Financial Corp.
(a Delaware Corporation) as of December 31, 1995. This financial statement is
the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Medallion Financial Corp. as of
December 31, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
February 21, 1996
F-13
<PAGE>
MEDALLION FINANCIAL CORP.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
<TABLE>
<S> <C>
Cash................................................................. $ 2,000
Deferred Offering Costs.............................................. 716,217
--------
Total assets......................................................... $718,217
--------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities (Note 2).................... $716,217
--------
Commitments and Contingencies (Note 4)
Shareholders' Equity:
Common stock (3,000 shares of $.01 par value stock authorized --
200 shares outstanding at December 31, 1995) (Note 3)............ 2
Capital in excess of par value (Note 2)............................ 1,998
--------
Total shareholders' equity........................................... 2,000
--------
Total liabilities and shareholders' equity........................... $718,217
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-14
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995
(1) FORMATION OF MEDALLION FINANCIAL CORP.
Medallion Financial Corp. (Medallion) is a closed-end management investment
company organized as a Delaware corporation in 1995. In 1996, Medallion
intends to complete an initial public offering (IPO) of its common stock and
intends to file an election under Section 54 of the Investment Company Act of
1940, as amended (the 1940 Act), to be regulated as a business development
company. In parallel with the IPO, Medallion will merge with Tri-Magna
Corporation and subsidiaries (TMC); acquire substantially all of the assets of
Edwards Capital Company, L.P. (ECC); and acquire all of the outstanding voting
stock of Transportation Capital Corp. (TCC) (collectively, the Acquisitions).
In connection with the Acquisitions, Medallion has filed an application for an
exemptive order under the 1940 Act with the Securities and Exchange
Commission. The Acquisitions and the IPO are contingent upon the receipt of
such exemptive order, as well as approval of the Small Business Administration
(SBA). Medallion will engage directly and/or through its principal
subsidiaries primarily in the business of making loans to small businesses
and, to a lesser degree, in the business of taxicab rooftop advertising.
TMC is a closed-end management investment company registered under the 1940
Act and is the sole shareholder of Medallion Funding Corp. (MFC) and Medallion
Taxi Media, Inc. (Media). MFC is a closed-end management investment company
registered under the 1940 Act and is licensed as a specialized small business
investment company (SSBIC) by the SBA. As an adjunct to MFC's taxicab
medallion finance business, Media operates a taxicab rooftop advertising
business. In accordance with the merger agreement between Medallion and TMC
signed on December 21, 1995 (the Merger Agreement), TMC will be acquired by
being merged into Medallion, and as a result, MFC and Media will become wholly
owned subsidiaries of Medallion.
ECC is licensed as a small business investment company (SBIC) by the SBA.
ECC is an unrelated, privately held limited partnership. Upon consummation of
the acquisition of substantially all of ECC's assets through a newly formed
subsidiary of Medallion, the newly formed, wholly owned subsidiary will be
registered as a closed-end management investment company under the 1940 Act.
TCC is licensed as an SSBIC by the SBA. TCC has operated as a wholly owned,
indirect subsidiary of a public company. Medallion will acquire all of the
outstanding voting common stock of TCC. Upon consummation of the acquisitions,
TCC will be a closed-end management investment company registered under the
1940 Act and will be a wholly owned subsidiary of Medallion.
(2) ACCOUNTING TREATMENT
Medallion's acquisitions will be accounted for under the purchase method of
accounting. Under this accounting method, Medallion will record as its cost
the fair value of the acquired assets and liabilities assumed. The difference
between the cost of acquired companies and the sum of the fair values of
tangible and identifiable intangible assets less liabilities assumed will be
recorded as goodwill or negative goodwill.
Deferred offering costs incurred by Medallion in connection with the sale of
shares will be recorded as a reduction of capital upon completion of the
offering. These costs are recorded, net of $200,000 payable by TMC in
accordance with the Merger Agreement.
(3) AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of Medallion consists of 3,000 shares of common
stock at $.01 par value. All of the outstanding 200 shares of common stock
were issued in connection with the incorporation of Medallion at a price
reflecting the fair market value of Medallion at inception. It is anticipated
that immediately preceding
F-15
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO BALANCE SHEET -- (CONTINUED)
DECEMBER 31, 1995
the IPO, Medallion will amend its charter to increase the number of authorized
shares of common stock and effect a stock split to increase the number of the
outstanding shares of common stock. The exact number of shares to be offered
in the IPO and the exact ratio of the stock split has not been determined and
will depend on the valuation of Medallion by the underwriters and the per
share offering price of the common stock in the IPO.
(4) COMMITMENTS AND CONTINGENCIES
Medallion plans on entering into a sub-advisory agreement (the Sub-Advisory
Agreement) with FMC Advisers, Inc. (FMC) in which FMC will provide investment
advisory services to Medallion.
FMC will regularly consult with management of Medallion with respect to
strategic decisions concerning originations, credit quality assurance,
development of financial products, leverage, funding, geographical and product
diversification, the repurchase of participations, acquisitions, regulatory
compliance and marketing.
Unless terminated earlier as described below, the Sub-Advisory Agreement
will remain in effect for a period of two years following execution and
delivery by the parties. The term will continue from year to year thereafter,
if approved annually by (i) a majority of Medallion's noninterested directors
and (ii) the Board of Directors, or by a majority of Medallion's outstanding
voting securities. The Sub-Advisory Agreement will be terminable without
penalty to Medallion on 60 days' written notice by either party or by vote of
a majority of Medallion's outstanding voting securities, and will terminate if
assigned by FMC.
Two trusts affiliated with two officers, directors and shareholders of
Medallion have agreed to personally assure FMC of payment for the first 48
months of service under the Sub-Advisory Agreement pursuant to an escrow
arrangement under which they will maintain in escrow common stock of Medallion
worth 200% of the advisory fees remaining to be paid by FMC to Medallion
during the first 48 months of service under the Sub-Advisory Agreement.
It is anticipated that in connection with the IPO of the Company's stock (as
discussed in Note 1), the Company will implement a Stock Option Plan and enter
into employment contracts with certain individuals who are employees,
directors and/or shareholders of the Company (see Management section of the
Prospectus).
(5) RELATED PARTY TRANSACTIONS
A director, officer and shareholder of TMC is also a director, officer and
shareholder of Medallion. An employee and shareholder of TMC is also a
director, officer and shareholder of Medallion.
The officers, directors and shareholders of FMC also serve as officers,
directors and shareholders of TMC. In connection with the merger of TMC with
and into Medallion, the officers, directors and shareholders of FMC will
resign as officers and directors of TMC and will sell their shares of TMC to
Medallion.
(6) SUBSEQUENT EVENTS
On February 12, 1996, Medallion entered into a stock purchase agreement with
Transportation Capital Corp. (TCC). Under the agreement, Leucadia (the parent
of TCC) will sell, and Medallion will purchase, all of the outstanding shares
of capital stock of the Company for a purchase price based upon net book
value, as defined in the agreement (approximately $10,000,000).
On February 21, 1996, Medallion entered into an asset purchase agreement
with Edwards Capital Company, a limited partnership (the Partnership). Under
the agreement, the Partnership will sell certain assets to Medallion for a
purchase price of approximately $15,000,000 plus certain liabilities, which
will be assumed by Medallion.
F-16
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Tri-Magna Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Tri-Magna
Corporation (a Delaware corporation) and subsidiaries (collectively referred
to as the Company) as of December 31, 1995 and 1994, including the
consolidated summary of investments as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of loans receivable as of September 30, 1995
by correspondence with the borrowers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tri-Magna
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 2, the consolidated financial statements include loans
receivable valued at $96,046,416 (96% of total assets) and at $89,572,393 (96%
of total assets) as of December 31, 1995 and 1994, respectively, whose values
have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at its estimates of value of such loans and have
inspected underlying documentation, and in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.
Arthur Andersen LLP
Boston, Massachusetts
March 15, 1996
F-18
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments (Note 2)................................ $90,342,393 $96,956,416
Less unrealized depreciation on investments (Note
7)................................................. (770,000) (910,000)
----------- -----------
89,572,393 96,046,416
Investment in unconsolidated subsidiary (Note 2).... 19,379 145,335
Cash................................................ 1,268,324 1,177,166
Accrued interest receivable......................... 778,098 844,350
Furniture and fixtures, net......................... 111,543 87,925
Other assets........................................ 839,950 1,486,974
----------- -----------
Total Assets........................................ $92,589,687 $99,788,166
=========== ===========
LIABILITIES
Notes payable to banks and demand notes (Note 3).... $59,025,000 $80,294,900
Accounts payable and accrued expenses............... 253,687 1,290,267
Accrued interest payable............................ 631,817 889,147
Dividends payable (Note 5).......................... 69,255 --
Subordinated debentures payable (Note 4)............ 12,500,000 --
----------- -----------
Total Liabilities................................... 72,479,759 82,474,314
Minority Interest (Note 5)........................... 9,234,000 --
Commitments and Contingencies (Note 10)
Shareholders' Equity
Common stock (1,000,000 shares of $.01 par value
stock authorized,
668,900 shares outstanding at December 31, 1994 and
1995) (Note 6)..................................... 6,689 6,689
Capital in excess of par value (Note 6)............. 11,276,811 10,594,241
Accumulated undistributed (loss) income (Note 6).... (407,572) 710,822
----------- -----------
10,875,928 11,311,752
Restricted capital surplus (Note 5)................. -- 6,002,100
----------- -----------
Total Shareholders' Equity.......................... 10,875,928 17,313,852
----------- -----------
Total Liabilities and Shareholders' Equity.......... $92,589,687 $99,788,166
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income
Interest on investments................... $8,333,400 $8,820,273 $9,802,560
---------- ---------- ----------
Total Investment Income................... 8,333,400 8,820,273 9,802,560
---------- ---------- ----------
Interest Expense
Interest on SBA debentures (Note 4)....... 1,046,417 974,105 780,254
Interest on bank debt (Note 3)............ 2,614,859 3,781,910 5,253,924
---------- ---------- ----------
Total Interest Expense.................... 3,661,276 4,756,015 6,034,178
---------- ---------- ----------
Net Interest Income....................... 4,672,124 4,064,258 3,768,382
---------- ---------- ----------
Non-Interest Income
Equity in earnings of unconsolidated
subsidiary (Note 2)...................... -- 18,379 125,956
Other income.............................. 540,778 519,030 446,209
---------- ---------- ----------
Total Non-Interest Income................. 540,778 537,409 572,165
---------- ---------- ----------
Expenses
Administration and advisory fees.......... 27,520 33,905 13,149
Legal and accounting fees................. 391,279 367,484 344,311
Directors' fee (Note 9)................... 22,000 76,500 46,000
Officers' and employees' salaries......... 1,347,666 1,028,627 1,086,569
Employee benefit plans (Note 8)........... 227,000 136,000 70,008
Other operating expenses.................. 1,081,519 1,057,797 1,054,757
---------- ---------- ----------
Total Expenses............................ 3,096,984 2,700,313 2,614,794
---------- ---------- ----------
Dividends paid on minority interest (Note
5)....................................... 277,020 277,020 207,774
---------- ---------- ----------
Net Investment Income..................... 1,838,898 1,624,334 1,517,979
---------- ---------- ----------
Realized and Unrealized Gain (Loss) on
Investments
Realized gain (loss) on investments (Note
7)....................................... (114,507) (21,938) 61,194
Change in unrealized depreciation (Note
7)....................................... (53,000) 58,000 (140,000)
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments.............................. (167,507) 36,062 (78,806)
---------- ---------- ----------
Net Increase in Net Assets resulting from
Operations................................ $1,671,391 $1,660,396 $1,439,173
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OF CAPITAL ACCUMULATED RESTRICTED
COMMON STOCK COMMON STOCK IN EXCESS UNDISTRIBUTED CAPITAL
OUTSTANDING $.01 PAR VALUE OF PAR VALUE INCOME (LOSS) SURPLUS
------------ -------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... 665,900 $6,659 $11,227,341 $ (206,789) $ --
------- ------ ----------- ----------- ----------
Dividends paid,
common................ -- -- -- (1,864,520) --
Distributable net
income................ -- -- -- 1,724,391 --
Change in unrealized
depreciation.......... -- -- -- (53,000) --
------- ------ ----------- ----------- ----------
Balance at December 31,
1993................... 665,900 6,659 11,227,341 (399,918) --
Dividends paid,
common................ -- -- -- (1,668,050) --
Distributable net
income................ -- -- -- 1,602,396 --
Sale of common stock... 3,000 30 49,470 -- --
Change in unrealized
depreciation.......... -- -- -- 58,000 --
------- ------ ----------- ----------- ----------
Balance at December 31,
1994................... 668,900 6,689 11,276,811 (407,572) --
Dividends paid,
common................ -- -- -- (1,003,349) --
Distributable net
income................ -- -- -- 1,579,173 --
SOP 93-2 Cumulative
reclassification
(Note 6).............. -- -- (682,570) 682,570 --
Gain on minority
interest buyback (Note
5).................... -- -- 6,002,100
Change in unrealized
depreciation.......... -- -- -- (140,000) --
------- ------ ----------- ----------- ----------
Balance at December 31,
1995................... 668,900 $6,689 $10,594,241 $ 710,822 $6,002,100
======= ====== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income............................. $ 1,671,391 $ 1,660,396 $ 1,439,173
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 63,237 64,848 43,594
Change in unrealized depreciation..... 53,000 (58,000) 140,000
Realized loss (gain) on investments... 114,507 21,938 (61,194)
Increase in investment in
unconsolidated subsidiary............ -- (19,379) (125,956)
Increase in accrued interest
receivable........................... (12,719) (64,697) (66,252)
Decrease (increase) in other assets... 100,199 (99,434) (794,721)
Increase (decrease) in accounts
payable and accrued expenses......... 77,972 (90,565) 1,036,580
Increase (decrease) in dividends
payable minority interest............ 138,510 (69,255) (69,255)
Increase (decrease) in accrued
interest payable..................... (86,969) 143,725 257,330
----------- ----------- -----------
Net cash provided by operating activ-
ities............................... 2,119,128 1,489,577 1,799,299
Cash Flows from Investing Activities:
Increase in investments............... (30,678,530) (33,103,213) (30,667,520)
Proceeds from investment maturities
and terminations..................... 18,335,808 24,753,080 24,114,690
Proceeds from liquidation of other
assets............................... -- 414,884 144,100
Capital expenditures.................. (13,126) (6,991) (16,378)
----------- ----------- -----------
Net cash used for investing activi-
ties................................ (12,355,848) (7,942,240) (6,425,108)
Cash Flows from Financing Activities:
Proceeds from long-term debt.......... 10,700,000 8,325,000 21,269,900
Payments of SBA debentures............ -- -- (12,500,000)
Buyback of minority interest.......... -- -- (3,231,900)
Sale of common stock.................. -- 49,500 --
Dividends paid on common stock........ (1,864,520) (1,668,050) (1,003,349)
----------- ----------- -----------
Net cash provided by financing activ-
ities............................... 8,835,480 6,706,450 4,534,651
----------- ----------- -----------
Net Increase (Decrease) in Cash........ (1,401,240) 253,787 (91,158)
Cash, beginning of year................ 2,415,777 1,014,537 1,268,324
----------- ----------- -----------
Cash, end of year...................... $ 1,014,537 $ 1,268,324 $ 1,177,166
=========== =========== ===========
Supplemental Information:
Cash paid during the period for
interest (Includes dividends paid on
minority interest) (Note 5).......... $ 3,886,755 $ 4,958,565 $ 6,053,877
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION
On February 3, 1989, Tri-Magna Corporation, a newly formed Delaware
corporation, (referred to as Tri-Magna or the Parent Company) and its
subsidiary, Medallion Funding Corp. (Medallion) entered into an Agreement and
Plan of Share Exchange (the Share Exchange). Tri-Magna and its wholly-owned
subsidiaries Medallion, F.A.P. Holding Corp. (FAP) and Medallion Taxi Media,
Inc. (Media) are collectively referred to as the Company. Under the Share
Exchange, 100 shares of common stock of the Parent Company were exchanged for
each of the outstanding shares of common stock of Medallion. On May 18, 1989,
the shareholders of Medallion voted in favor of the Share Exchange Plan. This
transaction was accounted for as a pooling of interests.
The Parent Company was formed in January 1989 for the purpose of acquiring
all of the outstanding shares of Medallion common stock pursuant to the Share
Exchange. The Parent Company is a closed-end, diversified management
investment company registered under the Investment Company Act of 1940 (the
1940 Act), and has elected to be treated as a regulated investment company
under the Internal Revenue Code of 1986, as amended.
Medallion was formed in 1979 for the purpose of operating as a Specialized
Small Business Investment Company (SSBIC), licensed, regulated and financed in
part by the U.S. Small Business Administration (SBA). Medallion was granted a
license to operate as a SSBIC by the SBA on June 23, 1980. On February 2,
1982, Medallion registered as a closed-end, nondiversified investment company
under the 1940 Act.
On June 22, 1992, Medallion established a wholly-owned subsidiary, FAP. This
subsidiary was established for the purpose of acquiring and managing property
purchased in foreclosure from Medallion.
On August 23, 1994, Media, a New York corporation was formed. Media is
engaged in the outdoor media advertising business and is a wholly-owned
subsidiary of Tri-Magna.
The accompanying consolidated financial statements include the accounts of
Tri-Magna and Medallion after elimination of all intercompany amounts. (See
Note 2)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company, which conform with
generally accepted accounting policies and accounting principles and
procedures generally accepted in the investment company industry, include the
following:
Investments
Medallion's investments consist primarily of long-term loans to persons
defined by SBA regulations as being socially or economically disadvantaged, or
to entities that are at least 50% owned by such persons. Approximately 73% and
68% of Medallion's loan portfolio at December 31, 1994, and 1995,
respectively, have arisen in connection with the financing of taxicab
medallions, taxicabs and related assets, substantially all in the metropolitan
New York area. These loans are secured by the medallions, taxicabs and related
assets and are personally guaranteed by the borrowers, or in the case of
corporations, personally guaranteed by the owners. The remaining portion of
Medallion's portfolio represents loans to various commercial enterprises,
including dry cleaners, garages, gas stations and laundromats. These loans are
secured by various equipment and/or real estate and are generally guaranteed
by the owners, and in certain cases, by the equipment dealers. These loans are
made primarily in the metropolitan New York City area.
F-23
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Tri-Magna began funding loans in March, 1995. Since then, Tri-Magna has
funded 50 loans totaling $4,272,212; of this amount, Tri-Magna participated
out a total of $2,538,721.
Under the 1940 Act, the Company's long-term loans are considered investments
and are recorded at their fair value. Since no ready market exists for these
loans, fair value is determined by the Board of Directors in good faith. In
determining fair value, the directors take into consideration the financial
condition of the borrower, the adequacy of the collateral, and the
relationships between market rates and portfolio rates. Loans were valued at
cost, less unrealized depreciation of $770,000 and $910,000 at December 31,
1994 and 1995, respectively. The directors have determined that this valuation
approximates fair value.
The principal portion of loans serviced for others by the Company at
December 31, 1994 and 1995 amounted to approximately $3,967,690 and
$15,799,777, respectively.
The Company offsets loan origination fees against related direct loan
origination costs. The net amount is deferred and amortized over the life of
the loan in accordance with the Statement of Financial Accounting Standards
No. 91 (SFAS No. 91), "Accounting for Nonrefundable Fees and Costs Associated
with Originating or Acquiring Loans and Initial Direct Costs of Leases," which
addresses the accounting by creditors for initial fees and costs associated
with the origination of loans. At December 31, 1994 and 1995, the net deferred
asset totaled $83,591 and $293,400, respectively. Amortization expense was
$22,117 and $14,684 for the years ended December 31, 1994 and 1995,
respectively. There was no amortization expense in 1993.
Investment in Unconsolidated Subsidiary
Tri-Magna owns 100% of the outstanding stock of Media. Tri-Magna's
investment in Media is accounted for under the equity method because as a non-
investment company, Media, cannot be consolidated with an investment company,
Tri-Magna. Financial information for Media is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
BALANCE SHEET 1994 1995
------------- -------- --------
<S> <C> <C>
Cash................... $ 6,193 $ --
Accounts receivable.... 211,500 214,238
Equipment, net......... 214,042 559,786
Other.................. 23,625 55,720
-------- --------
Total Assets........... $455,360 $829,744
======== ========
Notes payable.......... $275,000 $275,000
Accrued expenses....... 160,981 409,409
-------- --------
Total Liabilities...... 435,981 684,409
-------- --------
Common stock........... 1,000 1,000
Retained earnings...... 18,379 144,335
-------- --------
Total equity........... 19,379 145,335
-------- --------
Total Liabilities and
Shareholders equity... $455,360 $829,744
======== ========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
STATEMENT OF OPERATIONS 1994 1995
----------------------- ------------ ------------
<S> <C> <C>
Advertising
revenue.. $227,756 $1,542,013
Cost
of
services.. 83,341 483,721
-------- ----------
Gross
margin.. 144,415 1,058,292
Other
operating
expenses.. 126,036 829,293
-------- ----------
Income
before
taxes.. 18,379 228,999
Income
taxes.. -- 103,043
-------- ----------
Net
income.. $ 18,379 $ 125,956
======== ==========
</TABLE>
On March 8, 1995, Tri-Magna guaranteed a demand loan for Media. At December
31, 1995, $275,000 was outstanding at an interest rate of 2.00% over prime or
10.50%. The loan matured on March 5, 1996 and was extended at the option of
the bank and acceptance of both Tri-Magna and Media.
F-24
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Federal Income Taxes
It is the Company's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies, which require the
Company to distribute at least 90% of its investment company taxable income to
its shareholders. Therefore, no provision for federal income tax has been
made.
FAP and Media have elected to be taxed as regular corporations and, for the
year ended December 31, 1995, recorded a provision for income taxes totaling
approximately $103,000. This amount has been reflected in equity in earnings
of unconsolidated subsidiary on the accompanying consolidated statement of
operations.
Income Recognition
When, in the judgment of management, collection of any portion of the
interest or principal amount of a receivable is in doubt, accrual of interest
income is discontinued, and interest is recorded when received. At December
31, 1994 and 1995, nonaccrual loans totaled approximately $1,063,901 and
$1,299,357, respectively, and the related foregone interest income amounted to
approximately $250,439 and $218,853, respectively. Additionally, at December
31, 1994 and 1995, restructured loans totaled approximately $477,469 and
$380,002, of which $90,000 and $0 were included in nonaccrual loans,
respectively. Other income on the accompanying consolidated statements of
operations consists of late fees, prepayment penalties and fee income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(3) NOTES PAYABLE TO BANKS
At December 31, 1994 and 1995, the Company had outstanding bank borrowings
under the following agreements:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
DESCRIPTION 1994 1995
- - - ----------- ----------- -----------
<S> <C> <C>
Revolving Credit Agreement............................. $57,025,000 $73,150,000
Term Loan Agreements................................... 2,000,000 5,231,900
Short-Term Note........................................ -- 1,913,000
----------- -----------
Total.................................................. $59,025,000 $80,294,900
=========== ===========
</TABLE>
Borrowings under these agreements are secured by all assets of the Company.
Revolving Credit Agreement
On March 27, 1992 (and as subsequently amended), the Company entered into a
committed revolving credit agreement (the Revolver) with a group of banks. The
Company extended the Revolver until September 30, 1996 at an aggregate credit
commitment amount of $78,000,000 pursuant to the Renewal and Extension
Agreement dated September 29, 1995. The Revolver may be extended annually
thereafter upon the option of the
F-25
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
participating banks and acceptance by the Company. Should any participating
bank not extend its committed amount, the Revolver agreement provides that
each bank shall extend a term loan equal to its share of the principal amount
outstanding of the revolving credit note. Maturity of the term note shall be
the earlier of two years or any other date on which it becomes payable in
accordance with the Revolver. Interest and principal payments are to be made
monthly. Interest is calculated monthly at either the bank's prime rate or a
rate based on the adjusted London Interbank Offered Rate of interest (LIBOR)
at the option of the Company. Substantially all promissory notes evidencing
the Company's investments are held by a bank, as collateral agent under the
agreement. Outstanding borrowings under the Revolver were $57,025,000 and
$73,150,000, at December 31, 1994 and 1995, at an average interest rate of
7.81% and 7.40%, respectively. During the years ended December 31, 1994, and
1995, the Company's weighted average borrowings were approximately $54,485,000
and $62,203,800 and the maximum outstanding borrowings were $63,000,000 and
$73,150,000, respectively. The weighted average interest rates on the weighted
average borrowings were 6.73% and 7.64% during the years ended December 31,
1994 and 1995, respectively.
The Company is required to pay an annual facility fee of 1/4% effective
prospectively as of March 28, 1995 on the Revolver aggregate commitment. For
the year ended December 31, 1994 and up through March 27, 1995, the Company
was required to pay an annual facility fee of 3/8%. Additionally, effective
prospectively as of September 29, 1995, the Company is required to pay an
additional annual fee of $62,500.
Term Loan Agreements
At December 31, 1994 and 1995, the Company had borrowed a total of
$2,000,000 under a term loan agreement (Term Loan) with a bank. The $2,000,000
was outstanding at December 31, 1994 and 1995. During fiscal 1995, the fixed
interest rate of 5.88% was increased to 7.5%. Interest payments are due
quarterly. The weighted average interest rate paid on such borrowings was
5.88%, and 6.68%, respectively, during the years ended December 31, 1994 and
1995, respectively. The total term borrowings outstanding at December 31, 1995
under this agreement are due in July 1997.
On September 29, 1995, Tri-Magna entered into a $3,231,900 term loan with a
certain bank maturing on April 1, 1996. Interest is paid monthly at the prime
rate. The loan is secured by all assets of Tri-Magna. The proceeds of this
loan were invested in Medallion as a capital contribution to facilitate the
repurchase of its preferred stock from the SBA. (See Note 5)
Short-Term Note
On December 19, 1994, Tri-Magna entered into a demand promissory note
(Demand Note) with a certain bank. As of December 31, 1994, there were no
outstanding borrowings under the Demand Note. On September 1, 1995 the Demand
Note was converted into a $2,000,000 short-term secured note (Short-Term Note)
which matures on August 31, 1996. Interest is calculated monthly at either the
bank's prime rate or a rate based upon adjusted LIBOR at the option of the
Company. Substantially all promissory notes evidencing Tri-Magna's investments
are pledged to the bank as collateral. The Company is required to pay an
annual facility fee of 1/4% effective prospectively as of September 29, 1995
on the aggregate amount of the note. Outstanding borrowings under the Short-
Term Note were $1,913,000 at December 31, 1995, at an average interest rate of
7.59%. During the year ended December 31, 1995, Tri-Magna's weighted average
borrowings were approximately $1,025,500 and the maximum outstanding
borrowings were $1,913,000. The weighted average interest rate on such
borrowings was 8.49% during the year ended December 31, 1995.
F-26
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Interest Rate Cap Agreements
On July 15, 1992, the Company entered into two interest rate cap agreements
to reduce the impact of changes in interest rates on its floating long-term
debt. These agreements limit the Company's maximum LIBOR exposure on
$10,000,000 of its revolving credit facility to 6%. The premiums paid in under
these agreements were $69,000 and $69,750, respectively. The premiums were
capitalized and were amortized over the three-year term of the agreements,
with both agreements terminating on July 17, 1995. Amortization related to
these agreements was included in interest expense in the accompanying
consolidated statements of operations.
On April 7, 1995, the Company entered into three interest rate cap
agreements to reduce the impact of changes in interest rates on its floating
rate long-term debt. These agreements limit the Company's maximum LIBOR
exposure on $20,000,000 of its revolving credit facility to 7.5%. The premiums
paid under these agreements were $46,875, $31,000 and $46,687, respectively.
The premiums have been capitalized and are being amortized over the two-year
term of the agreements, which expires on April 7, 1997. The Company is exposed
to credit loss in the event of nonperformance by the counterparties on these
interest rate cap agreements. The Company does not anticipate nonperformance
by any of these parties.
On November 16, 1995, the Company entered into three additional interest
rate cap agreements to reduce the impact of changes in interest rates on its
floating rate long-term debt. These agreements limit the Company's maximum
LIBOR exposure on an additional $20,000,000 of its revolving credit facility
to 7.0%. The premiums paid under these agreements were $13,000, $25,000 and
$12,500, respectively. The premiums have been capitalized and are being
amortized over the two-year terms of the agreements, which expire on
November 16, 1997. The Company is exposed to credit loss in the event of
nonperformance by the counterparties on these interest rate cap agreements.
The Company does not anticipate nonperformance by any of these parties.
(4) INDEBTEDNESS TO THE SMALL BUSINESS ADMINISTRATION
Indebtedness to the Small Business Administration is composed of the
following long-term subordinated debentures at December 31, 1994:
<TABLE>
<S> <C>
9 3/8% interest only, payable semiannually, principal due
January 9, 1996............................................ $ 2,000,000
7 3/8% interest only, payable semiannually, principal due
May 15, 1996............................................... 2,000,000
9 1/8% interest only, payable semiannually, principal due
October 17, 1998........................................... 2,000,000
Demand Note................................................. 1,000,000
Demand Note................................................. 1,500,000
Demand Note................................................. 4,000,000
-----------
$12,500,000
===========
</TABLE>
On January 23, 1991, a $1,000,000 subordinated debenture matured and was
converted to the $1,000,000 demand note. On September 27, 1992, a $1,500,000
subordinated debenture matured and was converted to the $1,500,000 demand
note. On September 19, 1993, a $4,000,000 subordinated debenture matured and
was converted to the $4,000,000 demand note. The interest rate on all three
demand notes was 7.5% at December 31, 1994. All the outstanding debentures
were paid in full on September 29, 1995 and the SBA has removed all
restrictions on third party debt.
F-27
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(5) MINORITY INTEREST
At December 31, 1994, The Company's minority interest consisted of 3%
cumulative, preferred nonvoting stock of Medallion, with a par value of $1,000
per share, which Medallion had sold to the SBA. The preferred stock dividend
of Medallion is reflected as a dividend on preferred stock in the accompanying
consolidated statements of operations. The Small Business Administration
imposes certain restrictions on transfers of stock and payments of dividends
by its licensees.
On September 29, 1995, Medallion repurchased and retired all of its 3%
preferred stock owned by the SBA at a discount of 65%, under an SBA preferred
stock repurchase agreement. The effective date of the buyback was August 12,
1994. The purchase price of the preferred stock was $3,231,900. The amount of
the discount, $6,002,100, was recorded as an increase in capital in an account
separate from other paid-in capital accounts, as restricted capital surplus
account. Under the repurchase agreement, the SBA retains a liquidating
interest in the amount of the discount on the repurchase, which expires on a
straight line basis over five years or on a later date if an event of default,
as defined in the agreement, has occurred and such default has been cured or
waived. Upon the occurrence of any event of default, the SBA's liquidating
interest will become fixed at the level immediately preceeding the event of
default and will not accrete further until the default is cured or waived. In
the event of Medallion's liquidation, the unexpired portion of the liquidating
interest becomes immediately payable to the SBA.
At December 31, 1995, the unaccreted amount of the SBA's liquidating
interest in the restricted capital surplus was $4,351,523.
(6) SHAREHOLDERS' EQUITY
On July 20, 1994, the Board of Directors of the Company voted to rescind the
issuance of 3,000 shares of common stock approved on April 19, 1994, and
approved the sale of 3,000 shares of common stock at a price of $16.50 per
share. The sale of the stock was completed in November 1994.
On December 21, 1995, the Company entered into a merger agreement with
Medallion Financial Corp. Under the agreement, subject to the approval of the
shareholders, the Company will be merged into Medallion Financial Corp. and
all of the outstanding shares of capital stock of the Company will be
cancelled in exchange for $20.00 per share.
Direct costs associated with the merger agreement with Medallion Financial
Corp. are deferred by the Company. For the year ended December 31, 1995,
direct costs totaled approximately $475,000 and are included in other assets.
These costs will be recognized in the period the merger occurs.
As discussed in Note 5, under the terms of the preferred stock repurchase
agreement with the SBA, a change in ownership of the Company could result in
the unexpired portion of the liquidating interest becoming payable to the SBA.
The transaction with Medallion Financial Corp. is subject to SBA approval. It
is anticipated that such approval will include a waiver of this provision.
In accordance with Statement of Position 93-2, "Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies," $682,570 has been reclassified
from capital in excess of par value to accumulated undistributed income on the
accompanying consolidated balance sheets. This reclassification has no impact
on the Company's total shareholders' equity and is designed to present the
Company's capital accounts on a tax basis.
F-28
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(7) REALIZED LOSSES (GAINS) AND UNREALIZED DEPRECIATION ON INVESTMENTS
A summary of realized losses and unrealized depreciation on investments for
the years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
UNREALIZED DEPRECIATION 1995 1994 1993
----------------------- --------- --------- ---------
<S> <C> <C> <C>
Balance at Beginning of Period............... $(770,000) $(828,000) $(775,000)
Change in Unrealized Depreciation............ (140,000) 58,000 (53,000)
--------- --------- ---------
Balance at End of Period..................... $(910,000) $(770,000) $(828,000)
========= ========= =========
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, realized losses
(gains) were $(61,194), $21,938 and $114,507, respectively.
(8) EMPLOYEE BENEFIT PLANS
The Company maintains two defined contribution employee benefit plans, the
Medallion Funding Corp. Pension Plan and the Medallion Funding Corp. Profit-
Sharing Retirement Plan, under which substantially all Tri-Magna and Medallion
employees and officers are covered. The Company's management acts as trustee
of both plans. At year end, the Company has no obligation for postretirement
or postemployment agreements.
Under the noncontributory pension plan, the Company contributes up to 10% of
each participant's annual compensation. Under the profit-sharing plan,
voluntary employee contributions as well as Company contributions are allowed.
The Company's policy is to fund pension costs accrued.
Total employer contributions to both plans are limited to the lesser of 10%
of each participant's compensation or $10,000 for the years ended December 31,
1995 and 1994, and the lesser of 20% of each participant's compensation or
$20,000 for the year ended December 31, 1993.
The expense for employee benefit plans was approximately $70,000, $136,000
and $227,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.
(9) TRANSACTIONS WITH RELATED PARTIES
Certain officers and directors of Medallion are also shareholders of Tri-
Magna. Officers' salaries are set by the Board of Directors. Directors who are
not officers receive a fee of $1,000 per meeting. Directors who are members of
committees receive $500 for each meeting attended. Directors who are members
of the independent committee receive $1,000 for each meeting attended. One
loan receivable has been guaranteed by a related party.
(10) COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company's unfunded commitments were approximately
$2,447,800 for 35 loans that will bear interest at rates ranging from 9.0% to
16.0%.
In September 1987, the Company entered into a 10-year lease for its
executive and general offices. The lease calls for an annual rental of
approximately $140,000, subject to certain escalation clauses. During the
years ended December 31, 1995, 1994 and 1993, rental expenses totaled
$194,279, $195,777 and $187,679, respectively, and are included in other
operating expenses.
The Company is a party to various legal proceedings arising from the normal
course of business, none of which, in management's opinion, is expected to
have a material adverse impact on the Company's financial position or results
of operations.
F-29
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments," which is effective for the Company
as of the fiscal year ending December 31, 1995, requires disclosure of fair
value information about certain financial instruments, whether assets,
liabilities or off-balance sheet commitments, if practicable. The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments. Where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
In addition, SFAS 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Company.
(a) Investments--As described in Note 2, the carrying amount of investments is
the estimated fair value of such investments.
(b) Notes payable to banks and demand notes--Due to the short-term nature of
these instruments, the carrying amount approximates fair value.
(c) Commitments to Extend Credit--The fair value of commitments to extend
credit is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
present creditworthiness of the counterparties. For fixed rate loan
commitments, fair value also includes a consideration of the difference
between the current levels of interest rates and the committed rates. At
December 31, 1995, the estimated fair value of these off-balance sheet
instruments was not material.
(d) Interest Rate Cap Agreements--The fair value is estimated based on market
prices or dealer quotes. At December 31, 1995, the estimated fair value of
these off-balance sheet instruments was not material.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------
CARRYING AMOUNT FAIR VALUE
--------------- -----------
<S> <C> <C>
Financial Assets:
Investments........................................ $96,046,416 $96,046,416
Cash............................................... 1,177,166 1,177,166
Financial Liabilities:
Notes payable to banks and demand notes............ 80,294,900 80,294,900
</TABLE>
(12) SUBSEQUENT EVENTS
On January 22, 1996 the Company declared a dividend on common stock of $0.35
per share, payable on January 29, 1996 to shareholders of record as of January
22, 1996. Medallion also declared a dividend of $80.00 per share on common
stock payable on January 29, 1996 to the Parent Company for purposes of
funding the Company's dividend.
On March 15, 1996 the Board of Directors of Medallion Funding Corp. voted to
terminate the Medallion Funding Corp. Pension Plan to be effective as of March
31, 1996. No benefits will accrue and no contributions will be made by the
Company for service after that date.
F-30
<PAGE>
TRI-MAGNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST RANGE OF
OF LOANS OUTSTANDING RATE MATURITY DATES
-------- ----------- -------- ----------------
<S> <C> <C> <C>
1 $ 77,550 5.000% 3/1/00
1 24,082 7.000 7/1/98
18 3,715,031 8.000 3/1/97-1/1/09
3 298,833 8.250 1/1/98
21 3,279,235 8.500 5/1/96-5/1/00
9 1,331,792 8.750 2/1/97-7/1/99
56 8,152,656 9.000 12/31/95-7/1/04
70 7,111,900 9.250 5/1/96-9/1/10
116 13,814,980 9.500 12/31/95-1/1/06
2 120,696 9.625 8/1/96-8/1/04
24 2,677,911 9.750 7/1/96-12/1/99
150 12,175,743 10.000 12/31/95-12/1/04
33 3,207,015 10.250 12/1/96-9/1/02
1 130,055 10.375 2/1/00
41 4,181,332 10.500 7/1/96-1/1/03
31 2,959,616 10.750 3/1/99-8/1/02
1 65,064 10.900 11/1/99
41 3,930,343 11.000 12/31/95-8/1/03
3 194,996 11.250 6/1/96-10/1/98
4 257,395 11.500 1/1/97-2/1/99
2 162,483 11.750 4/1/96-9/1/99
58 4,260,742 12.000 12/31/95-10/1/03
9 490,107 12.500 12/31/95-7/1/00
3 333,757 12.750 1/1/97-9/1/00
1 72,605 12.950 1/1/99
96 5,426,944 13.000 12/31/95-2/1/04
3 630,453 13.250 6/1/96-2/1/00
20 1,114,053 13.500 1/1/99-7/1/02
2 47,009 13.750 2/1/98-1/1/99
1 13,517 13.870 9/1/96
86 4,316,872 14.000 6/1/96-10/1/02
1 41,995 14.050 1/1/01
1 47,046 14.200 6/1/00
1 8,181 14.250 12/1/98
1 16,166 14.300 5/1/99
15 1,000,341 14.500 12/1/96-4/1/02
1 32,625 14.750 11/1/00
6 194,802 14.840 6/1/99-10/1/00
206 9,123,581 15.000 12/31/95-9/1/02
8 723,762 15.200 3/1/99-2/1/01
8 250,164 15.250 12/31/95-6/1/98
7 134,764 15.500 2/1/96-7/1/99
1 1,419 15.625 2/1/96
1 100,239 15.750 7/1/98
8 289,662 16.000 1/1/96-12/1/00
1 10,712 16.250 3/1/96
2 2,886 16.500 12/31/95-1/1/96
1 47,990 16.750 7/1/98
2 61,914 18.000 9/1/97-11/1/00
---- -----------
Total: 1,178 $96,663,016 10.88
Plus: Loan Origination
Costs, Net................. 293,400
-----------
Total Investments at Cost... 96,956,416
Less -- Unrealized deprecia-
tion
on investments............. (910,000)
-----------
Total Investments at direc-
tors'
valuation.................. $96,046,416
===========
</TABLE>
F-31
<PAGE>
EDWARDS CAPITAL COMPANY
FINANCIAL STATEMENTS
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Edwards Capital Company:
We have audited the accompanying balance sheet of Edwards Capital Company (a
limited partnership) as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for each of the two
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Edwards Capital Company as
of December 31, 1994, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
Friedman, Alpren & Green LLP
New York, New York
January 28, 1995
F-33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Edwards Capital Company:
We have audited the accompanying balance sheet of Edwards Capital Company (a
New York limited partnership), including the schedule of loans as of December
31, 1995, and the related statements of operations, changes in partners'
capital and cash flows for the year ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Edwards Capital Company as
of December 31, 1995, and the results of its operations and its cash flows for
the year ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 1, the financial statements include finance receivables
valued at $43,778,791 (97% of total assets) as of December 31, 1995, the
values of which have been estimated by the General Partner in the absence of
readily ascertainable market values. We have reviewed the procedures used by
the General Partner in arriving at its estimates of value of such loans and
have inspected the underlying documentation, and in the circumstances, we
believe that the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been used had
a ready market for the loans existed, and the differences could be material.
Arthur Andersen LLP
Boston, Massachusetts
March 14, 1996
F-34
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER
DECEMBER 31, 31,
1994 1995
------------ -----------
<S> <C> <C>
Cash................................................. $ 170,725 $ 115,571
Finance Receivables:
Medallions........................................... 42,739,897 43,177,063
Other, less allowance for doubtful accounts of
$20,000 in 1994 and 1995............................ 726,945 601,728
Accrued Interest Receivable.......................... 329,000 396,000
Deferred Financing Costs, net of accumulated
amortization of $123,507 in 1994 and $176,967 in
1995................................................ 407,143 353,683
Property and Equipment, at cost, net of accumulated
depreciation and amortization of $115,645 in 1994
and $133,937 in 1995................................ 75,349 66,826
Prepaid Expenses and Other Assets.................... 125,468 373,116
----------- -----------
Total Assets......................................... $44,574,527 $45,083,987
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Bank Loans Payable................................... $10,000,000 $ 9,850,000
Subordinated Debentures Payable...................... 24,950,000 24,950,000
Accounts Payable and Accrued Expenses................ 1,048,459 1,167,156
----------- -----------
35,998,459 35,967,156
Partners' Capital.................................... 8,576,068 9,116,831
----------- -----------
Total Liabilities and Partners' Capital.............. $44,574,527 $45,083,987
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Interest from finance receivables.......... $4,954,502 $4,334,100 $4,316,669
Other income............................... 476,192 619,716 443,190
---------- ---------- ----------
Total Revenues............................ 5,430,694 4,953,816 4,759,859
---------- ---------- ----------
Operating Expenses:
Interest on subordinated debentures........ 2,230,415 2,136,807 1,993,075
Interest on bank loans..................... 511,008 627,700 754,404
Salaries................................... 385,676 351,715 354,041
Employee benefits.......................... 38,383 35,280 33,236
Payroll and other taxes.................... 29,119 28,576 28,266
Professional fees.......................... 306,732 393,513 204,071
Rent....................................... 39,996 39,996 39,996
Office expense............................. 39,298 45,082 42,762
Computer expense........................... 8,760 48,859 44,642
Telephone.................................. 8,860 9,963 9,685
Entertainment.............................. 23,005 17,378 9,901
Amortization of deferred financing costs... 42,701 79,118 53,460
Processing and collection services......... 69,276 57,950 42,448
Depreciation and amortization.............. 27,471 22,586 18,292
New York City unincorporated business tax.. 50,972 21,289 40,111
Reduction in allowance for doubtful radio
loans..................................... -- (23,415) --
Sundry..................................... 2,010 1,511 4,496
---------- ---------- ----------
Total Operating Expenses.................. 3,813,682 3,893,908 3,672,886
---------- ---------- ----------
Income Before Extraordinary Charge........ 1,617,012 1,059,908 1,086,973
Extraordinary Charge -- Premium on
Prepayment of Subordinated Debentures...... -- 526,287 --
---------- ---------- ----------
Net Income................................ $1,617,012 $ 533,621 $1,086,973
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Cumulative Capital Contributions........... $7,200,000 $ 7,200,000 $7,200,000
========== =========== ==========
SBA Permanent Capital...................... $8,400,000 $ 8,400,000 $8,400,000
========== =========== ==========
Balance, Beginning of Period............... $8,918,704 $ 9,550,947 $8,576,068
Net income............................... 1,617,012 533,621 1,086,973
Distributions --
General Partner........................ -- (16,000) --
Limited Partners....................... (984,769) (1,492,500) (546,210)
---------- ----------- ----------
Balance, end of period..................... $9,550,947 $ 8,576,068 $9,116,831
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $ 1,617,012 $ 533,621 $ 1,086,973
Adjustments to reconcile net income
to net cash provided by operating
activities --
Extraordinary charge................. -- 526,287 --
Amortization of deferred financing
costs............................... 42,701 79,118 53,460
Depreciation and amortization........ 27,471 22,586 18,292
Reduction in allowance for doubtful
radio loans......................... -- (23,415) --
Changes in assets and liabilities --
Accrued interest receivable......... 10,515 (339) (67,000)
Prepaid expenses and other assets... (70,902) 91,806 (247,648)
Accounts payable and accrued ex-
penses............................. (331,582) (21,710) 118,697
Deferred income..................... (29,370) (5,332) --
------------ ------------ -----------
Net cash provided by operating ac-
tivities.......................... 1,265,845 1,202,622 962,774
Cash flows from investing activities:
Origination of new finance receiv-
ables............................... (14,473,522) (15,573,645) (8,348,655)
Repayments of finance receivables.... 13,344,455 16,228,136 8,036,706
Collection of notes receivable....... 126,633 272,546 --
Purchase of property and equipment... (20,202) (5,041) (9,769)
Collection of receivables from radio
groups.............................. 67,858 -- --
------------ ------------ -----------
Net cash (used in) provided by in-
vesting activities................ (954,778) 921,996 (321,718)
Cash flows from financing activities:
Premium on prepayment of subordinated
debentures.......................... -- (526,287) --
Proceeds from bank loans............. 12,800,000 22,425,000 11,925,000
Principal payments of bank loans..... (12,025,000) (22,325,000) (12,075,000)
Deferred financing costs............ -- (254,625) --
Distributions to partners --
General partner...................... -- (16,000) --
Limited partners..................... (984,769) (1,492,500) (546,210)
------------ ------------ -----------
Net cash used in financing activi-
ties.............................. (209,769) (2,189,412) (696,210)
------------ ------------ -----------
Net increase (decrease) in cash....... 101,298 (64,794) (55,154)
Cash, beginning of year............... 134,221 235,519 170,725
------------ ------------ -----------
Cash, end of year..................... $ 235,519 $ 170,725 $ 115,571
============ ============ ===========
Supplemental disclosure of cash flow
information:
Interest paid........................ $ 2,679,856 $ 2,885,512 $ 2,699,890
============ ============ ===========
New York City unincorporated business
tax................................. $ 70,038 $ 27,939 $ 14,058
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Edwards Capital Company (the Partnership) is organized under the laws of the
State of New York as a Small Business Investment Company, subject to the rules
and regulations of the Federal Small Business Administration (the SBA). The
Partnership's principal activity is the financing of loans collateralized by
New York City taxicab medallions.
The Partnership has one General Partner and six classes of limited partners.
Allocations of income or loss and cash distributions are based on formulas, as
set forth in the Partnership Agreement. The formulas utilize the average prime
rate for the year, net cash receipts, as defined, and the weighted average
capital for each class of partner.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Finance Receivables and the Allowance for Doubtful Accounts
Finance receivables, net of participation sold to others and an allowance
for doubtful accounts, are stated at fair value. The fair value of such loans
is determined in good faith by the General Partner. The allowance for doubtful
accounts is maintained at a level that, in the General Partner's judgment, is
adequate to absorb losses inherent to the portfolio.
Finance receivables collateralized by New York City taxicab medallions are
considered fully collectible, as the value of the collateral is deemed
sufficient to assure full collection in the event of foreclosure. At
December 31, 1995, there is an allowance for doubtful accounts on receivables
collateralized by radio rights, as the value of the collateral on certain
loans is deemed insufficient.
The allowance is reviewed and adjusted periodically by the General Partner
on the basis of available information, including the fair value of the
underlying collateral; individual credit risks; past loss experience; the
volume, composition and growth of the portfolio; and current and projected
financial and economic conditions.
Interest is continued to be recognized as income on all finance receivables
that are past due, as to principal and interest, when the value of the
underlying collateral is deemed sufficient to assure full collection of the
principal and associated interest in the event of foreclosure. At December 31,
1995, the value of the underlying collateral on finance receivables was deemed
adequate.
The principal amount of loans serviced for others at December 31, 1994 and
1995 amounted to approximately $34,918,209 and $30,995,006, respectively.
Deferred Financing Costs
Costs incurred in connection with obtaining subordinated debenture financing
have been deferred and are being amortized on the effective interest rate
method over the terms of the loans.
F-39
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed on an
accelerated method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the estimated useful life of the asset or, if
less, the life of the lease.
Origination Fees
Origination fees (included in other income) for loans are deferred and
amortized on a straight-line basis over the terms of the loans. At December
31, 1995, loan origination fees were fully amortized.
Income Taxes
The Partnership is not a taxpaying entity for income tax purposes, and
accordingly, no provision has been made for income taxes. The partners'
allocable shares of the Partnership's taxable income or loss are reportable on
their income tax returns. A provision is made for New York City unincorporated
business tax.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
(2) FINANCE RECEIVABLES
Finance receivables are interest-bearing loans that are secured by mortgages
collateralized by New York City taxicab medallion rights, taxicabs or radio
group rights, and the personal guarantees of individuals or stockholders of
corporate borrowers.
Maximum original terms of finance receivables at December 31, 1994 and
December 31, 1995 are as follows:
(ROUNDED TO 000'S)
<TABLE>
<CAPTION>
DECEMBER
DECEMBER 31, 31,
1994 1995
------------ -----------
<S> <C> <C>
60 months........................................ $41,118,000 $42,307,000
84 months........................................ 1,657,000 1,027,000
120 months....................................... 692,000 465,000
----------- -----------
$43,467,000 $43,799,000
=========== ===========
</TABLE>
Contractual maturities of finance receivables at December 31, 1994 and 1995
are approximately as follows:
(ROUNDED TO 000'S)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
1995.................... $ 2,520,000
1996.................... 5,924,000
1997.................... 5,502,000
1998.................... 8,519,000
1999.................... 20,174,000
Thereafter.............. 828,000
-----------
$43,467,000
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
1996................... $ 2,623,000
1997................... 4,482,000
1998................... 7,046,000
1999................... 15,329,000
2000................... 11,450,000
Thereafter............. 2,869,000
-----------
$43,799,000
===========
</TABLE>
F-40
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Actual maturities may differ, as loans are often paid in advance of their
maturities, and loans with participation sold to others contain subordinate
prepayment provisions. During the years ended December 31, 1994 and 1995,
collections of loans, including prepayments, were approximately $16,228,000
and $8,692,000, respectively.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1994 and
1995:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Furniture and Equipment....................... $152,931 $162,700
Leasehold Improvements........................ 38,063 38,063
-------- --------
190,994 200,763
Less -- Accumulated Depreciation and Amortiza-
tion......................................... 115,645 133,937
-------- --------
$ 75,349 $ 66,826
======== ========
</TABLE>
(4) BANK LOANS PAYABLE
The Partnership has lines of credit with four banks totaling $12,500,000, of
which $10,000,000 and $9,850,000 were drawn upon at December 31, 1994 and
1995, respectively. Interest is charged at the borrower's option, at either
the lender's prime rate or at a rate based on the adjusted London Interbank
Offered Rate (LIBOR). Under an agreement with the SBA, Edwards was restricted
from borrowing more than $10.0 million in bank debt without the prior approval
of the SBA. In January 1996, this amount was increased to $11.5 million.
The average amount of borrowings for the year ended December 31, 1994 and
1995 was $9,740,000 and $9,585,000, respectively.
The loans are secured by all of the Partnership's assets. Under an
intercreditor agreement, all banks share in the collateral. In addition, all
bank indebtedness is senior to SBA-guaranteed indebtedness pursuant to SBA
rules and regulations.
F-41
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(5) SUBORDINATED DEBENTURES PAYABLE
Outstanding subordinated debentures, which are guaranteed by the SBA, are as
follows at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
INTEREST
DUE DATE RATE AMOUNT
-------- -------- -----------
<S> <C> <C>
September 1, 1996................................... 8.75% $ 1,200,000
April 1, 1997....................................... 8.95 1,500,000
June 1, 1998........................................ 9.80 3,000,000
September 1, 2002................................... 7.15 3,500,000
September 1, 2002................................... 7.15 6,050,000
June 1, 2004........................................ 7.80 4,600,000
September 1, 2004................................... 8.20 5,100,000
-----------
$24,950,000
===========
</TABLE>
On June 29, 1994 and September 28, 1994, the Partnership refinanced
$4,600,000 and $5,100,000, respectively, of subordinated debentures, bearing
interest rates of 9.615% to 11.505% and 10.35%, respectively, and with
maturity dates of February 1, 1995 to December 1, 1995 and September 1, 1997,
respectively. The newly incurred debt of $4,600,000 and $5,100,000, included
above, bears interest at 7.80% and 8.20%, respectively, and matures on June 1,
2004 and September 1, 2004, respectively. The prepayment premium of $526,287,
paid in connection with these refinancings, is presented as an extraordinary
item in the accompanying statements of operations.
(6) RELATED PARTY TRANSACTIONS
The law firm of Herrick, Feinstein LLP provides legal services to the
Partnership and subleases office space to it under a lease that commenced on
June 1, 1992 and expires on April 30, 1997. The lease requires minimum annual
rental payments of $40,000 and additional rentals based on increases in real
estate taxes and operating expenses over base period amounts. It is cancelable
by the firm upon giving 60 days' notice. Certain principals of the firm are
limited partners of the Partnership and are shareholders of the corporate
General Partner of the Partnership.
Rent expense and legal fees paid and accrued to Herrick, Feinstein LLP for
the years ended December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Rent expense................................... $ 39,996 $ 39,996 $ 39,996
Legal fees..................................... 183,295 288,985 92,501
-------- -------- --------
$223,291 $328,981 $132,497
======== ======== ========
</TABLE>
Legal fees of $225,000 were incurred and accrued to Herrick, Feinstein in
connection with the proposed sale of assets by the Partnership to Medallion
Financial Corp. (see Note 8). These costs have been deferred and are included
in prepaid expenses and other assets in the accompanying balance sheet at
December 31, 1995. These costs will be expensed in the period that the sale of
the assets occurs.
(7) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, there are outstanding commitments and
contingent liabilities that are not reflected in the financial statements.
F-42
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
At December 31, 1994 and September 30, 1995, the Partnership had an
operating lease for office space which expires on April 30, 1997 (see Note 6).
There are lawsuits pending against the Partnership in the normal course of
business. Based on its review of current litigation and discussions with legal
counsel, management does not expect that the resolution of such matters will
have a material adverse effect on the Partnership's financial condition or
results of operations.
(8) SUBSEQUENT EVENT
On February 21, 1996, the Partnership entered into an asset purchase
agreement with Medallion Financial Corp. Under the agreement, the Partnership
will sell certain assets to Medallion Financial Corp. for a purchase price of
approximately $15,000,000 plus certain liabilities, which will be assumed by
Medallion Financial Corp.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective for years ended after December 15, 1995, Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments", requires all entities with total assets of less than $150
million in the current statement of financial position to disclose the fair
value of specified financial instruments for which it is practicable to
estimate that value. It was not practicable to estimate the fair value of the
finance receivables, bank loans payable and subordinated debentures payable
because quoted market prices do not exist and estimates could not be made
through other means without incurring excessive costs.
F-43
<PAGE>
EDWARDS CAPITAL COMPANY
(A LIMITED PARTNERSHIP)
SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS
DECEMBER 31, 1995
The distribution of loans at December 31, 1995 by rate of interest is as
follows:
<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
1 $ 570,207 7.820%
17 1,132,000 8.250
6 239,000 8.300
8 392,000 8.375
7 515,461 8.440
4 200,000 8.490
14 475,750 8.500
4 161,200 8.600
2 368,000 8.750
1 605,265 8.780
9 507,500 8.875
49 2,729,873 9.000
12 746,361 9.125
15 1,957,713 9.250
2 280,012 9.385
65 6,982,190 9.500
6 447,920 9.600
3 793,091 9.625
52 7,336,160 9.750
2 168,256 9.800
15 1,858,397 9.900
49 6,225,055 10.000
41 5,241,320 10.250
5 600,951 10.375
10 862,401 10.500
2 122,266 10.750
12 862,662 11.000
3 191,531 11.250
2 297,291 11.500
4 256,300 11.750
6 373,899 12.000
1 4,110 12.500
2 125,942 13.250
1 36,910 13.500
1 58,196 13.550
1 14,831 14.000
2 11,874 14.500
2 46,896 15.000
--- -----------
438 43,798,791 9.695%
===
Less Allowance for Doubtful
Accounts on Radio Loans.... (20,000)
-----------
$43,778,791
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
TRANSPORTATION CAPITAL CORP.
FINANCIAL STATEMENTS
Neither TCC nor the entities that were its direct or indirect parents prior
to the closing of the Acquisitions, or any officer or director thereof has
commented upon, has reviewed, has knowledge with respect to, or takes any
responsibility for, any financial statements or other financial or business
information concerning any third party or parties.
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Transportation Capital Corp.:
We have audited the accompanying balance sheet of Transportation Capital
Corp. (a New York corporation), including the financial statement schedules as
of December 31, 1994, and the related statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December
31, 1994. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of loans receivable as of December 31, 1994
by correspondence with the borrowers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Transportation Capital
Corp. as of December 31, 1994, and the results of its operations and cash
flows for each of the two years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be included
therein.
As explained in Note 1, the financial statements include loans receivable
valued at $10,003,050 (53% of total assets) as of December 31, 1994, whose
values have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at their estimates of value of such loans and have
inspected underlying documentation and, in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.
Coopers & Lybrand LLP
New York, New York
October 24, 1995
F-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Transportation Capital Corp.:
We have audited the accompanying balance sheet of Transportation Capital
Corp. (a New York corporation) as of December 31, 1995, including the schedule
of investments other than investments in affiliates and schedule of loans as
of December 31, 1995, the related statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included the confirmation of loans receivable as of September 30,
1995 by correspondence with the borrowers. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Transportation Capital
Corp. as of December 31, 1995, and the results of its operations and cash
flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 1, the financial statements include loans receivable
valued at $9,154,139 (53% of total assets) as of December 31, 1995, whose
values have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at their estimates of value of such loans and have
inspected underlying documentation, and in the circumstances, we believe that
the procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the loans existed, and the differences could be material.
Arthur Andersen LLP
Boston, Massachusetts
March 14, 1996
F-47
<PAGE>
TRANSPORTATION CAPITAL CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Loans Receivable.................................... $10,980,900 $ 9,796,728
Allowance for Loan Losses........................... (977,850) (642,589)
----------- -----------
Loans receivable, at fair value.................... 10,003,050 9,154,139
Cash and Cash Equivalents........................... 8,199,210 7,780,717
Accrued Interest Receivable......................... 147,938 133,722
Furniture, Fixtures and Leasehold Improvements, at
cost, less accumulated depreciation of $7,960 and
$12,256............................................ 16,210 16,253
Other Assets........................................ 188,274 72,877
Deferred Income Taxes............................... 396,200 257,900
----------- -----------
Total Assets........................................ $18,950,882 $17,415,608
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to the Small Business Adminis-
tration........................................... $ 7,930,000 $ 6,730,000
Accrued interest payable........................... 73,388 35,071
Accrued expenses................................... 125,511 171,888
----------- -----------
Total Liabilities................................... 8,128,899 6,936,959
----------- -----------
Commitments and Contingencies
Shareholders' Equity:
3% Cumulative preferred stock, $1,000 par value--
Authorized--9,000 shares
Issued and outstanding--3,383 1/3 shares in 1994
and none in 1995.................................. 3,383,333 --
Common stock, $.125 par value--
Authorized--5,000,000 shares
Issued and outstanding--100 shares................. 13 13
Additional paid-in capital.......................... 6,565,289 7,749,456
Restricted contributed capital surplus.............. -- 2,199,166
Accumulated undistributed net investment income..... 5,577,636 5,060,597
Accumulated undistributed net realized loan losses.. (4,116,938) (4,144,594)
Net unrealized depreciation on loans................ (587,350) (385,989)
----------- -----------
Total Shareholders' Equity.......................... 10,821,983 10,478,649
----------- -----------
Total Liabilities and Shareholders' Equity.......... $18,950,882 $17,415,608
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
TRANSPORTATION CAPITAL CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income:
Interest from small business concerns (net
of interest to participants)............. $2,995,747 $2,001,527 $1,411,116
Interest from treasury bills.............. 114,302 215,353 425,318
---------- ---------- ----------
3,110,049 2,216,880 1,836,434
---------- ---------- ----------
Expenses:
Interest.................................. 1,063,563 708,695 450,071
Salaries.................................. 256,833 246,874 227,343
Legal and other professional fees......... 719,248 356,162 350,178
Rent expense.............................. 115,072 58,046 23,999
General and administrative................ 178,746 50,533 158,810
---------- ---------- ----------
2,333,462 1,420,310 1,210,401
---------- ---------- ----------
Investment Income Before Income Taxes...... 776,587 796,570 626,033
Income Tax (Provision) Benefit............. 204,930 (342,948) (269,723)
---------- ---------- ----------
Net Investment Income.................... 981,517 453,622 356,310
---------- ---------- ----------
Realized Loan Losses Before Income Taxes... (68,933) (144,058) (50,055)
Income Tax Benefit......................... 18,138 59,748 22,399
---------- ---------- ----------
Net Realized Loan Losses................. (50,795) (84,310) (27,656)
---------- ---------- ----------
Change in Unrealized Depreciation on Loans
Before Income Taxes....................... 231,867 790,283 335,261
Deferred Income Tax (Provision) Benefit.... 760,200 (369,700) (133,900)
---------- ---------- ----------
Net Change in Unrealized Depreciation on
Loans..................................... 992,067 420,583 201,361
---------- ---------- ----------
Increase in Net Assets from Operations.... $1,922,789 $ 789,895 $ 530,015
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
TRANSPORTATION CAPITAL CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
PREFERRED STOCK COMMON STOCK RESTRICTED UNDISTRIBUTED UNDISTRIBUTED
------------------------ ---------------------- ADDITIONAL CONTRIBUTED NET NET
SHARES SHARES PAID-IN CAPITAL INVESTMENT REALIZED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL SURPLUS INCOME LOAN LOSSES
----------- ----------- ----------- --------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1993........ 3,383 1/3 $ 3,383,333 2,364,723 $ 295,590 $6,265,790 $ -- $4,142,497 $(3,981,833)
Net investment
income......... -- -- -- -- -- -- 981,517 --
Net realized
loan losses.... -- -- -- -- -- -- -- (50,795)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
Issuance of
common stock,
$4.50 per
share.......... -- -- 122,081 15,261 534,107 -- -- --
Distributions on
3% cumulative
preferred
stock.......... -- -- -- -- (64,600) -- -- --
Distributions on
common stock,
$.205 per
share.......... -- -- -- -- (484,768) -- -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1993........... 3,383 1/3 3,383,333 2,486,804 310,851 6,250,529 -- 5,124,014 (4,032,628)
Merger of TCC
Purchase Co.... -- -- (2,486,704) (310,838) 314,760 -- -- --
Net investment
income......... -- -- -- -- -- -- 453,622 --
Net realized
loan losses.... -- -- -- -- -- -- -- (84,310)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1994........... 3,383 1/3 3,383,333 100 13 6,565,289 -- 5,577,636 (4,116,938)
Net investment
income......... -- -- -- -- -- -- 356,310 --
Net realized
loan losses.... -- -- -- -- -- -- -- (27,656)
Net change in
unrealized
depreciation on
loans.......... -- -- -- -- -- -- -- --
Capital
contribution... -- -- -- -- 310,818 -- -- --
Capitalization
of accumulated
undistributed
net investment
income......... -- -- -- -- 873,349 -- (873,349) --
Repurchase of 3%
preferred
stock.......... (3,383 1/3) (3,383,333) -- -- -- 2,199,166 -- --
---------- ----------- ---------- --------- ---------- ---------- ---------- -----------
Balance,
December 31,
1995........... -- $ -- 100 $ 13 $7,749,456 $2,199,166 $5,060,597 $(4,144,594)
========== =========== ========== ========= ========== ========== ========== ===========
<CAPTION>
NET
UNREALIZED TOTAL
DEPRECIATION SHAREHOLDERS'
ON LOANS EQUITY
------------- -------------
<S> <C> <C>
Balance, January
1, 1993........ $(2,000,000) $ 8,105,377
Net investment
income......... -- 981,517
Net realized
loan losses.... -- (50,795)
Net change in
unrealized
depreciation on
loans.......... 992,067 992,067
Issuance of
common stock,
$4.50 per
share.......... -- 549,368
Distributions on
3% cumulative
preferred
stock.......... -- (64,600)
Distributions on
common stock,
$.205 per
share.......... -- (484,768)
------------- -------------
Balance,
December 31,
1993........... (1,007,933) 10,028,166
Merger of TCC
Purchase Co.... -- 3,922
Net investment
income......... -- 453,622
Net realized
loan losses.... -- (84,310)
Net change in
unrealized
depreciation on
loans.......... 420,583 420,583
------------- -------------
Balance,
December 31,
1994........... (587,350) 10,821,983
Net investment
income......... -- 356,310
Net realized
loan losses.... -- (27,656)
Net change in
unrealized
depreciation on
loans.......... 201,361 201,361
Capital
contribution... -- 310,818
Capitalization
of accumulated
undistributed
net investment
income......... -- --
Repurchase of 3%
preferred
stock.......... -- (1,184,167)
------------- -------------
Balance,
December 31,
1995........... $ (385,989) $10,478,649
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
TRANSPORTATION CAPITAL CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Increase in net assets from
operations.......................... $ 1,922,789 $ 789,895 $ 530,015
Adjustments to reconcile increase in
net assets from operations to net
cash provided by (used for)
operating activities --
Change in unrealized depreciation on
loans............................... (231,867) (790,283) (335,261)
Effect of change in tax status....... (1,057,000) -- --
Provision for deferred taxes......... 111,000 549,800 138,300
Depreciation and amortization........ 13,500 14,199 14,570
Realized loan losses................. 68,933 144,058 50,055
Net change in --
Accrued interest receivable......... (20,752) 141,191 14,216
Other assets........................ (196,428) (102,185) 116,687
Accrued interest payable............ (36,290) (148,943) (38,317)
Accrued expenses.................... 35,695 (462,757) 46,377
------------ ------------ -----------
Net cash provided by operating
activities.......................... 609,580 134,975 536,642
------------ ------------ -----------
Cash Flows from Investing Activities:
Principal collected on loans......... 15,501,264 19,628,701 14,820,116
Advances on loans.................... (13,175,044) (12,682,418) (13,697,563)
Furniture, fixtures and office
equipment........................... (8,878) 3,500 (4,339)
------------ ------------ -----------
Net cash provided by investing
activities.......................... 2,317,342 6,949,783 1,118,214
------------ ------------ -----------
Cash Flows from Financing Activities:
Repurchase of preferred stock from
SBA................................. -- -- (1,184,167)
Repayment of debentures payable to
SBA................................. (675,000) (2,800,000) (1,200,000)
Repayment of bank debt............... (4,131,500) -- --
Capital contribution................. -- -- 310,818
Merger of TCC Purchase Co............ -- 3,922 --
Distributions on preferred stock..... (64,600) -- --
Distributions on common stock........ (484,768) -- --
Issuance of common stock............. 549,368 -- --
------------ ------------ -----------
Net cash used for financing
activities.......................... (4,806,500) (2,796,078) (2,073,349)
------------ ------------ -----------
Net Increase (Decrease) in Cash and
Cash Equivalents..................... (1,879,578) 4,288,680 (418,493)
Cash and Cash Equivalents, Beginning
of Year.............................. 5,790,108 3,910,530 8,199,210
------------ ------------ -----------
Cash and Cash Equivalents, End of
Year................................. $ 3,910,530 $ 8,199,210 $ 7,780,717
============ ============ ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for --
Interest............................. $ 1,099,851 $ 857,638 $ 488,388
============ ============ ===========
Net income tax payments.............. $ -- $ 132,852 $ 205,322
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Transportation Capital Corp. (the Company), a New York corporation, is an
indirect wholly owned subsidiary of Leucadia National Corporation (Leucadia)
and is licensed by the Small Business Administration (SBA) to operate as a
specialized small business investment company (SSBIC) under the Small Business
Investment Act of 1958, as amended. The Company was also registered as an
investment company under the Investment Company Act of 1940, as amended (the
Investment Company Act). On January 4, 1994, pursuant to the Company's
application, the Securities and Exchange Commission issued a conditional order
under Section 8(f) of the Investment Company Act declaring that the Company
had ceased to be a registered investment company. Termination of the Company's
registration under the Investment Company Act has not affected the Company's
regulation by the SBA, its status as a SSBIC, or its results of operation or
financial position. On August 30, 1994, TCC Purchase Co., an indirect wholly
owned subsidiary of Leucadia, merged with the Company and concurrently
increased Leucadia's ownership of the Company's common shares from 99% to
100%.
In 1993, the Company changed its year-end from June 30 to December 31. The
1993 statements of operations, changes in shareholders' equity and cash flows
present results for the 12 months ended December 31, 1993.
The 1993 financial statements present captions that are consistent with
those used for 1994 and 1995. In certain cases, they differ from captions
presented in previously issued financial statements as of and for the year
ended June 30, 1993 and as of and for the six months ended December 31, 1993.
Such changes include presenting net realized loan losses and the change in
unrealized depreciation on loans separately in the statement of operations.
Additionally, accumulated undistributed net realized loan losses and net
unrealized depreciation on loans are presented separately in the balance sheet
and the statement of changes in shareholders' equity.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Loans and the Allowance for Loan Losses
Loans, net of participation sold to other lenders and an allowance for
possible losses, are stated at fair value. The fair value of such loans is
determined in good faith by the Board of Directors. The allowance for loan
losses is maintained at a level that, in the Board of Director's judgment, is
adequate to absorb losses inherent in the portfolio.
The allowance is reviewed and adjusted periodically by the Board of
Directors on the basis of available information, including the fair value of
the underlying collateral; individual credit risks; past loss experience; the
volume, composition and growth of the portfolio; and current and projected
economic conditions. Assets acquired in satisfaction of loans are carried at
estimated net realizable value.
A fully collateralized loan is placed on nonearning status once it becomes
180 days past due as to principal and interest. Loans that are not fully
collateralized are placed on nonearning status when they are 90 days past due
as to principal or interest. Interest on nonearning loans is recognized as
income when collected.
F-52
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Realized Loan Losses
Realized loan losses consist of write-offs of loans or assets acquired in
satisfaction of loans, net of recoveries.
Unrealized Depreciation on Loans
All unrealized changes in the value of loans, including the provision for
losses, are included in the caption net change in unrealized depreciation on
loans, which is net of income tax effect. Net unrealized depreciation on loans
at December 31, 1994 and December 31, 1995 is net of deferred income taxes of
$390,500 and $256,600, respectively.
Depreciation and Amortization
Depreciation and amortization of furniture, fixtures, office equipment and
leasehold improvements is computed using straight-line and accelerated methods
at rates adequate to allocate the cost of applicable assets over their
estimated useful lives or, if less, the term of the lease. Depreciation and
amortization amounted to $4,296, $3,925 and $3,226 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Income Taxes
For the period January 1, 1993 through June 30, 1993, the Company qualified
as a regulated investment company (RIC) under the Internal Revenue Code of
1986, as amended. To avoid a federal income tax liability, a RIC is required
to distribute to its shareholders, as dividends, at least 90% of its
investment company taxable income for each fiscal year, as well as meet
certain other requirements. The Company was not taxable during this period.
Upon termination of the Company's registration under the Investment Company
Act, its status as a nontaxable RIC was also terminated retroactive to July 1,
1993. Beginning July 1, 1993, the Company's results of operations are reported
in the consolidated federal income tax return filed by its ultimate parent
company, Leucadia.
The Company and Leucadia have entered into a tax sharing agreement pursuant
to which the Company makes payments to (or receives payments from) Leucadia
consisting of the tax liability that the Company would incur if it filed a
separate federal income tax return.
The Company provides for income taxes using the liability method under
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Under the liability method, deferred income taxes are provided
at the statutory rates for differences between the tax and accounting bases of
substantially all assets and liabilities and for carryforwards. A valuation
allowance is provided if deferred tax assets are not considered more likely
than not to be realized.
Cash and Cash Equivalents
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
loan receivables.
The Company considers short-term instruments with original maturities of
three months or less, measured from their acquisition date, to be cash
equivalents. Cash and cash equivalents consist of cash in banks and U.S.
Treasury bills at market value.
Noncash Investing Activities
During the years ended 1995, 1994 and 1993, the Company refinanced loans
amounting to $740,826, $1,041,933 and $7,222,212, respectively.
F-53
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(2) LOANS RECEIVABLE
Nonearning and reduced rate loans outstanding were approximately $224,000
and $88,200 at December 31, 1994 and 1995, respectively. At December 31, 1994
and 1995, there were no commitments to loan additional funds to borrowers
whose loans were classified as nonearning or reduced rate.
Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning........................ $2,000,000 $1,768,133 $ 977,850
Charge-offs............................... (232,360) (176,975) (61,672)
Recoveries................................ 163,427 32,917 11,617
Interest income deferred (received)....... 289,430 (289,430) --
Reduction in allowance.................... (452,364) (356,795) (285,206)
---------- ---------- ---------
Balance, ending........................... $1,768,133 $ 977,850 $ 642,589
========== ========== =========
</TABLE>
The 1993 provision for deferred interest income is against interest not
previously recognized on 1992 nonearning loans. These loans were subsequently
restructured in 1993 to include the interest in the loan principal, but
management considered their recovery doubtful. The provision was reversed in
1994 upon collection of the restructured loans.
(3) DEBENTURES PAYABLE TO THE SMALL BUSINESS ADMINISTRATION
Debentures payable to the SBA at December 31, 1994 and 1995 consisted of
subordinated debentures with the following maturities and interest rates
(interest is payable semi-annually):
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
-----------------------------
1994 1995 DUE DATE INTEREST RATE
---------- ---------- -------- ----------------
<S> <C> <C> <C>
$1,200,000 $ -- 09/11/95 10.50% per annum
1,090,000 1,090,000 05/07/96 7.375% per annum
5,640,000 5,640,000 06/01/02 5.000% per annum
---------- ---------- through 5/31/97,
8% thereafter
$7,930,000 $6,730,000
========== ==========
</TABLE>
Under the terms of the subordinated debentures, the Company may not
repurchase or retire any of its capital stock, make any distributions to its
shareholders other than dividends out of accumulated undistributed net
investment income (as computed in accordance with SBA regulations) or increase
salaries under certain conditions without the prior written approval of the
SBA.
In 1993, the SBA permitted the Company to make the recorded distributions
from additional paid-in capital on the condition that the Company paid all
current and accrued preferred dividends and that the Company's shareholders
contributed additional capital in the aggregate amount of all dividends paid.
As a result, during the year ended December 31, 1993, the Company's then
largest shareholder acquired from the Company 122,081 newly issued common
shares for an aggregate purchase price of $549,368 ($4.50 per share).
F-54
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(4) SHAREHOLDERS' EQUITY
Effective February 19, 1986, the Company adopted an Employee Incentive Stock
Option Plan (the Plan), that expires on February 18, 1996. Under the Plan, the
Company may grant options to purchase 24,000 shares of common stock at not
less than the fair market value of the shares on the date of grant. There are
no outstanding options issued under the Plan, and the Company does not intend
to issue any.
At December 31, 1994, the Company had 3,383 1/3 shares of preferred stock
issued to the SBA, which bear dividends of 3% per annum. Dividends are not
required to be paid to the SBA on an annual or other periodic basis as long as
cumulative dividends are paid to the SBA before any other payments are made to
investors. Cumulative dividends not declared or paid as of December 31, 1994
were $143,400.
On August 14, 1995, the Company repurchased and retired all of its 3%
preferred stock owned by the SBA at a discount of 65% under an SBA 3%
preferred stock repurchase agreement dated March 22, 1995. The purchase price
of the preferred stock was $1,184,167. The funds paid to the SBA were obtained
from a $310,818 capital contribution from the Company's sole shareholder, LNC
Investments, Inc., and a $873,349 capitalization of accumulated undistributed
net investment income, in accordance with Appendix I to Part 107 of the SBA
rules and regulations. As a result, the accumulated undistributed net
investment income was reduced, and the additional paid-in capital was
increased by $873,349; the net effect was the same as if the Company had made
a distribution to its shareholders, who then reinvested the same amount in the
Company.
The amount of the discount was recorded as an increase in capital in an
account separate from additional paid-in capital, as restricted contributed
capital surplus account. Under the repurchase agreement, the SBA retains a
liquidating interest in the amount of the discount on the repurchase, which
expires on a straight-line basis over five years or on a later date if an
event of default, as defined in the repurchase agreement, has occurred and
such default has been cured or waived. Upon the occurrence of any event of
default, the SBA's liquidating interest will become fixed at the level
immediately preceding the event of default and will not amortize further until
the default is cured or waived.
While the liquidating interest expires over a five-year period, the balance
in the restricted contributed capital surplus account remains unchanged in
accordance with the SBA requirements. The SBA requires this treatment because
the additional equity obtained as a result of the repurchase transaction is
subject to certain restrictions that remain even after the liquidating
interest has been eliminated.
In the event of the Company's liquidation, the unexpired portion of the
liquidating interest becomes immediately payable to the SBA. In addition, the
SBA retains a residual interest in the preferred dividends in arrears at March
22, 1995 in the amount of $152,250, which also expires on a straight-line
basis over five years. In the event of a change in ownership or liquidation of
the Company, unexpired dividends become immediately payable to the SBA.
At December 31, 1995, the unamortized amounts of the SBA's liquidating
interest in the restricted contributed capital surplus was $1,869,291, and the
residual interest in the cumulative dividends not declared or paid was
$129,413.
There are 9,000 shares of redeemable preferred stock authorized, of which
none has been issued. Such shares, which may be issued only to the SBA, would
have a par value of $1,000 per share, bear cumulative annual dividends of 4%
and would be required to be redeemed 15 years after issuance.
F-55
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(5) INCOME TAXES
The provisions (benefits) for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net investment income --
Current --
Federal...................................... $ (38,107) $110,233 $181,347
State........................................ 18,977 52,615 83,976
--------- -------- --------
(19,130) 162,848 265,323
--------- -------- --------
Deferred --
Federal...................................... (146,900) 142,500 3,400
State........................................ (38,900) 37,600 1,000
--------- -------- --------
(185,800) 180,100 4,400
--------- -------- --------
$(204,930) $342,948 $269,723
========= ======== ========
Net realized loan losses --
Current --
Federal...................................... $ (17,155) $(43,433) $(14,247)
State........................................ (983) (16,315) (8,152)
--------- -------- --------
$ (18,138) $(59,748) $(22,399)
========= ======== ========
Net change in unrealized depreciation on
loans --
Deferred --
Federal...................................... $(601,100) $298,600 $103,700
State........................................ (159,100) 71,100 30,200
--------- -------- --------
$(760,200) $369,700 $133,900
========= ======== ========
</TABLE>
The following is a reconciliation of income taxes at the expected statutory
federal income tax to the actual income tax provision (benefit):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net investment income --
Expected federal income tax...................... $ 264,039 $270,834 $212,851
State income taxes, net of federal income tax
benefit......................................... 968 59,542 56,084
Effect of change in tax status................... (156,500) -- --
Benefit from nontaxable RIC status............... (257,960) -- --
Other............................................ (55,477) 12,572 788
--------- -------- --------
$(204,930) $342,948 $269,723
========= ======== ========
</TABLE>
Included in other in 1993 is the reversal of $57,000, which was accrued as
of December 31, 1992, in anticipation of a change to taxable status at that
date. Ultimately, the Company retained its nontaxable status through June 30,
1993 and reversed the 1992 accrual in 1993.
F-56
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Net realized loan losses --
Expected federal income tax.................... $ (23,437) $(48,980) $(17,019)
State income taxes, net of federal income tax
benefit....................................... (86) (10,768) (5,380)
Other.......................................... 5,385 -- --
--------- -------- --------
$ (18,138) $(59,748) $(22,399)
========= ======== ========
Net change in unrealized depreciation on
loans --
Expected federal income tax.................... $ 78,835 $268,696 $113,989
State income taxes, net of federal income tax
benefit....................................... 16,900 46,926 19,932
Effect of change in tax status................. (900,500) -- --
Other.......................................... 44,565 54,078 (21)
--------- -------- --------
$(760,200) $369,700 $133,900
========= ======== ========
</TABLE>
The principal components of the deferred tax asset at December 31, 1994 and
1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
--------------------------- ---------------------------
FEDERAL STATE TOTAL FEDERAL STATE TOTAL
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan loss-
es..................... $302,494 $88,006 $390,500 $198,800 $57,800 $256,600
Interest................ 5,672 1,604 7,276 2,300 600 2,900
Depreciation............ (1,266) (310) (1,576) (1,300) (300) (1,600)
-------- ------- -------- -------- ------- --------
$306,900 $89,300 $396,200 $199,800 $58,100 $257,900
======== ======= ======== ======== ======= ========
</TABLE>
The Company believes it is more likely than not that the recorded deferred
tax asset will be realized; such realization is expected to result principally
from taxable income generated by profitable operations.
(6) TRANSACTIONS WITH AFFILIATES
In May 1994, the Company entered into a one-year management agreement with a
subsidiary of Leucadia pursuant to which the subsidiary agreed to perform
certain general, administrative and accounting functions for an annual fee of
$180,000 with subsequent annual increases to be determined according to
increases in the consumer price index. This agreement shall continue in full
force and effect after the initial one-year term so long as it is approved on
an annual basis by the Company's Board of Directors. This agreement may be
terminated by either party at any time, without the payment of any penalty, on
thirty days' written notice.
Prior to May 1994, the Company reimbursed Leucadia for providing the
services of one of its officers who serves as the Chairman of the Board,
President and Chief Executive Officer of the Company.
Amounts charged to results of operations under these arrangements were
$182,815 during the year ended December 31, 1995 and $180,000 during each of
the years ended December 31, 1994 and 1993.
(7) DIRECTORS' AND OFFICERS' COMPENSATION
Directors' Compensation amounted to $3,000, $6,900 and $25,000 and Officers'
compensation amounted to $182,709, $159,466 and $123,945 during the years
ended December 31, 1995, 1994 and 1993, respectively.
F-57
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(8) PENSION PLAN
The Company maintained a defined benefit pension plan to provide retirement
benefits for those employees who were eligible to participate in the plan.
Benefits accrued under the plan were frozen on July 14, 1990, and all
participating employees became fully vested. On December 31, 1994, the
Company's plan was merged into Leucadia's defined benefit pension plan. As of
the merger date, the Company recorded a net asset of $113,814 and reduced
pension expense. The net asset reflects the overfunding of the Company's plan
as of the merger date, reduced by the projected benefit obligation liability
associated with granting the Company's employees retroactive coverage under
the Leucadia formula for service after July 14, 1990. During the year ended
December 31, 1995, the Company made contributions to Leucadia's plan based on
its allocable share of expenses in the amount of $10,676.
(9) COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are outstanding commitments and
contingent liabilities that are not reflected in the financial statements. At
December 31, 1995, the Company had outstanding loan commitments of $403,000,
which bear interest at rates ranging from 13% to 14%. Management does not
expect any material losses to result from these matters.
At December 31, 1994 and 1995, the Company had operating leases for office
space expiring through July 1997. Future minimum annual rental commitments are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------- -------
<S> <C> <C>
1995............................................................ $20,900 $ --
1996............................................................ 19,800 19,800
1997............................................................ 8,800 8,800
------- -------
$49,500 $28,600
======= =======
</TABLE>
In addition, the Company is subject to additional rent based upon increases
in the Consumer Price Index.
There are various lawsuits pending against the Company. In the opinion of
management, after consultation with counsel, it is remote that losses, if any,
arising from such claims will be material to the financial position or results
of operations of the Company.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about certain financial
instruments, whether or not recognized on the balance sheet. Where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In addition, SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
purport to represent and should not be considered representative of the
underlying market or franchise value of the Company.
The methods and assumptions used to estimate the fair value of each class of
the financial instruments are described below:
Loans Receivable -- As described in Note 1, the carrying amount of loans
receivable is the estimated fair value of such loans.
F-58
<PAGE>
TRANSPORTATION CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Cash and Cash Equivalents -- For short-term investments, the carrying amount
approximates fair value.
Debentures Payable to SBA -- The fair value of the debentures payable to SBA
is estimated based upon current market interest rates for similar debt.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets --
Loans receivable................. $10,003,050 $10,003,050 $9,154,139 $9,154,139
Cash and cash equivalents........ 8,199,210 8,199,210 7,780,717 7,780,717
Financial liabilities --
Debentures payable to SBA........ 7,930,000 7,794,000 6,730,000 7,189,000
</TABLE>
(11) SHAREHOLDER LITIGATION
The Company has settled certain litigation related to past allegations of
violations of SBA regulations and securities laws. Related settlements
required that former officers of the Company pay $677,000 to the Company in
the year ended December 31, 1992 and that the Company pay plaintiffs' legal
fees amounting to $368,788 in the year ended December 31, 1994. Of the amount
paid by the Company, $66,000 was reimbursed by former officers of the Company.
As a result of the allegations, the Division of Enforcement of the
Securities and Exchange Commission (SEC) conducted an informal investigation
into the Company's affairs. In the year ended December 31, 1994, a former
officer of the Company settled federal charges with the SEC, concluding the
SEC's investigation.
(12) SUBSEQUENT EVENT
On February 12, 1996, the Company entered into a stock purchase agreement
with Medallion Financial Corp. Under the agreement, Leucadia will sell, and
Medallion Financial Corp. will purchase, all of the outstanding shares of
capital stock of the Company for a purchase price based upon net book value,
as defined in the agreement (approximately $10,000,000).
As discussed in Note 4, under the terms of the preferred stock repurchase
agreement with the SBA, a change in ownership of the Company would result in
the unexpired portion of the dividends becoming payable to the SBA. The
transaction with Medallion Financial Corp. is subject to SBA approval.
F-59
<PAGE>
TRANSPORTATION CAPITAL CORP.
SCHEDULE OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
---------------------------------------------- -------------------------------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
LOANS BY COLLATERAL TYPE OF LOANS BALANCE FAIR VALUE BOOK VALUE OF LOANS BALANCE FAIR VALUE BOOK VALUE
------------------------ -------- ----------- ----------- ----------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MEDALLIONS:
New York............... 20 $ 1,271,544 $ 1,271,544 $ 1,271,544 17 $ 797,932 $ 797,932 $ 797,932
Boston................. 91 4,383,344 4,357,462 4,357,462 80 3,400,557 3,400,557 3,400,557
Cambridge.............. 37 1,375,401 1,374,401 1,374,401 45 1,984,198 1,971,598 1,971,598
Chicago................ 82 1,549,963 1,537,560 1,537,560 87 1,647,561 1,647,561 1,647,561
Newark................. 17 218,989 186,019 186,019 12 158,157 156,836 156,836
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Total medallions....... 247 8,799,241 8,726,986 8,726,986 241 7,988,405 7,974,484 7,974,484
NEW YORK RADIO CARS..... 49 924,856 387,444 387,444 35 599,694 238,198 238,198
MINUTEMAN RECEIVABLES... 3 1,254,460 886,315 886,315 3 1,217,371 950,199 950,199
OTHERS.................. 2 6,108 6,070 6,070 -- -- -- --
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Subtotal............... 301 10,984,665 10,006,815 10,006,815 279 9,805,470 9,162,881 9,162,881
RECEIVABLE FOR
FORECLOSURE EXPENSES... -- 21,707 21,707 21,707 -- 10,144 10,144 10,144
UNAPPLIED COLLECTIONS... -- (25,472) (25,472) (25,472) -- (18,886) (18,886) (18,886)
--- ----------- ----------- ----------- --- ---------- ---------- ----------
Total loans receivable,
net................... 301 $10,980,900 $10,003,050 $10,003,050 279 $9,796,728 $9,154,139 $9,154,139
=== =========== =========== =========== === ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
TRANSPORTATION CAPITAL CORP.
SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS
DECEMBER 31, 1994
It is the Company's policy to make loans to persons who qualify under Small
Business Administration regulations as socially or economically disadvantaged
and to entities which are at least 50%-owned by such persons.
Substantially all of the Company's loans are for the purpose of financing
the purchase of New York City, Boston, Cambridge, Chicago and Newark taxi
medallions, taxi cabs, car radio rights, radio cars and related assets (the
Collateral). It is the Company's policy that these loans are collateralized by
a first priority perfected security interest in the collateral.
The distribution of loans at December 31, 1994 by rate of interest is as
follows:
<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
2 $ 135,205 9.50%
3 231,174 10.00
1 108,059 10.50
10 529,752 11.00
63 3,013,981 12.00
2 92,082 12.50
16 505,202 13.00
4 68,126 13.25
63 2,317,243 13.50
8 364,819 13.75
31 1,481,519 14.00
21 560,112 14.25
6 92,796 14.50
5 202,875 14.75
29 638,383 15.00
2 51,821 15.25
6 161,570 15.50
14 173,937 15.75
1 21,656 16.00
1 761 16.25
5 79,102 16.50
7 141,332 16.75
1 13,158 17.00
-----------
301 10,984,665 13.16
RECEIVABLES FOR
FORECLOSURE EXPENSES............................... 21,707
UNAPPLIED COLLECTIONS............................... (25,472)
-----------
$10,980,900
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
TRANSPORTATION CAPITAL CORP.
SCHEDULE OF LOANS TO SMALL BUSINESS CONCERNS
DECEMBER 31, 1995
The distribution of loans at December 31, 1995 by rate of interest is as
follows:
<TABLE>
<CAPTION>
NUMBER BALANCE INTEREST
OF LOANS OUTSTANDING RATE
-------- ----------- --------
<S> <C> <C>
2 $ 115,650 9.50%
3 125,384 10.00
10 361,560 11.00
51 1,231,411 12.00
2 64,923 12.50
48 1,234,511 13.00
4 22,065 13.25
50 1,740,372 13.50
5 210,120 13.75
50 2,516,760 14.00
18 393,213 14.25
6 1,254,777 14.50
1 55,707 14.75
16 217,328 15.00
2 65,072 15.50
4 27,918 15.75
1 13,296 16.00
2 61,934 16.50
3 88,006 16.75
1 5,463 17.00
----------
279 9,805,470 13.46
RECEIVABLES FOR FORECLOSURE EXPENSES................... 10,144
UNAPPLIED COLLECTIONS.................................. (18,886)
----------
$9,796,728
==========
<CAPTION>
PERCENT
--------
<S> <C> <C>
COMPOSITION OF LOAN PORTFOLIO:
New York medallions................................... $ 797,932 8.14
New York radios and others............................ 599,694 6.12
New York minuteman receivables........................ 1,217,371 12.41
Newark medallions..................................... 158,157 1.61
Boston medallions..................................... 3,400,557 34.68
Cambridge medallions.................................. 1,984,198 20.24
Chicago medallions.................................... 1,647,561 16.80
---------- ------
Total composition of loan portfolio.................. $9,805,470 100.00%
========== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
<PAGE>
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY MEDALLION FINANCIAL CORP. OR BY ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER AT ANY TIME IMPLIES THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
The Company.............................................................. 19
Additional Information................................................... 22
Distributions............................................................ 23
Use of Proceeds.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 26
Selected Financial Data.................................................. 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 34
Business................................................................. 47
Investment Objectives, Policies and Restrictions......................... 61
Management............................................................... 64
Principal Stockholders................................................... 68
Certain Transactions..................................................... 68
Determination of Net Asset Value......................................... 69
Dividend Reinvestment Plan............................................... 70
Federal Income Tax Considerations ....................................... 71
Description of Capital Stock............................................. 74
Regulation............................................................... 76
Shares Eligible for Future Sale.......................................... 78
Underwriting............................................................. 81
Custodian, Transfer Agent, Dividend Disbursing Agent and Registrar....... 82
Reports to Stockholders.................................................. 82
Validity of Shares....................................................... 82
Experts.................................................................. 82
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
5,000,000 SHARES
[LOGO] MEDALLION
FINANCIAL CORP.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------
PROSPECTUS
----------------
FURMAN SELZ
J.C. BRADFORD & CO.
EVEREN SECURITIES, INC.
, 1996
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
<PAGE>
PART C
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements.
The following financial statements are included in the Prospectus on
the identified pages.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MEDALLION FINANCIAL CORP.
Introduction to Pro Forma Combined Financial Statements.................. F-3
Pro Forma Balance Sheet at December 31, 1995 (unaudited)................. F-4
Pro Forma Combined Statement of Operations for the year ended
December 31, 1995 (unaudited)........................................... F-5
Pro Forma Combined Statement of Operations for the three months ended
December 31, 1995 (unaudited)........................................... F-6
Pro Forma Combined Statement of Operations for the three months ended
September 30, 1995 (unaudited).......................................... F-7
Pro Forma Combined Statement of Operations for the three months ended
June 30, 1995 (unaudited)............................................... F-8
Pro Forma Combined Statement of Operations for the three months ended
March 31, 1995 (unaudited).............................................. F-9
Notes to the Unaudited Pro Forma Combined Financial Statements........... F-10
MEDALLION FINANCIAL CORP.
Report of Arthur Andersen LLP, Independent Public Accountants............ F-13
Balance Sheet as of December 31, 1995.................................... F-14
Notes to Balance Sheet................................................... F-15
TRI-MAGNA CORPORATION AND SUBSIDIARIES
Report of Arthur Andersen LLP, Independent Public Accountants............ F-18
Consolidated Balance Sheets as of December 31, 1995 and December 31,
1994.................................................................... F-19
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993..................................................... F-20
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994, 1993 and 1992.................................. F-21
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993........................................ F-22
Notes to Consolidated Financial Statements............................... F-23
EDWARDS CAPITAL COMPANY (A LIMITED PARTNERSHIP)
Independent Auditors' Report of Friedman, Alpren & Green LLP............. F-33
Report of Arthur Andersen LLP, Independent Public Accountants............ F-34
Balance Sheets as of December 31, 1995 and 1994.......................... F-35
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-36
Statements of Changes in Partners' Capital for the years ended
December 31, 1995, 1994 and 1993........................................ F-37
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-38
Notes to Financial Statements............................................ F-39
TRANSPORTATION CAPITAL CORP.
Report of Coopers & Lybrand LLP, Independent Public Accountants.......... F-46
Report of Arthur Andersen LLP, Independent Public Accountants............ F-47
Balance Sheets as of December 31, 1995 and 1994.......................... F-48
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.................................................................... F-49
Statements of Changes in Shareholders' Equity for each year in the two
year period ended
December 31, 1994....................................................... F-50
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... F-51
Notes to Financial Statements............................................ F-52
</TABLE>
II-1
<PAGE>
2. Exhibits.
a. --Medallion Financial Corp. Certificate of Incorporation*
b. --Medallion Financial Corp. By-Laws*
e. --Medallion Financial Corp. Dividend Reinvestment Plan++
f.1
--Debenture due September 1, 1996 in the amount of $1,200,000
issued by Edwards Capital Company and payable to the U.S.
Small Business Administration+
f.2
--Debenture due April 1, 1997 in the amount of $1,500,000
issued by Edwards Capital Company and payable to Chemical
Bank as Trustee under the Trust Agreement dated January 15,
1987 among the Trustee, the U.S. Small Business
Administration and SBIC Funding Corporation (the "Trust
Agreement")+
f.3
--Debenture due June 1, 1998 in the amount of $3,000,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Trust Agreement+
f.4
--Debenture due September 1, 2002 in the amount of $3,500,000
issued by Edwards Capital Company and payable to Chemical
Bank as Trustee under the Amended and Restated Trust
Agreement dated March 1, 1990 among the Trustee, the U.S.
Small Business Administration and SBIC Funding Corporation
(the "Amended Trust Agreement")+
f.5
--Debenture due September 1, 2002 in the amount of $6,050,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.6
--Debenture due June 1, 2004 in the amount of $4,600,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.7
--Debenture due September 1, 2004 in the amount of $5,100,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.8
--Letter Agreement, dated September 8, 1992, between the U.S.
Small Business Administration and Edwards Capital Company
regarding limit on incurrence of senior indebtedness, as
amended on January 17, 1996+
f.9
--Subordinated Debenture due May 7, 1996 in the amount of
$1,090,000 issued by Transportation Capital Corp. and payable
to the U.S. Small Business Administration+
f.10
--Debenture due June 1, 2002 in the amount of $5,640,000
issued by Transportation Capital Corp. and payable to
Chemical Bank under the Amended Trust Agreement+
g. --Investment Advisory Agreement between Medallion Financial Corp.
and FMC Advisers, Inc.*
h.1
--Form of Underwriting Agreement++
h.2
--Form of Master Agreement Among Underwriters+
h.3
--Form of Master Selected Dealer Agreement+
i.1 --Medallion Financial Corp. 1996 Stock Option Plan*
i.2
--Medallion Financial Corp. 401(k) Investment Plan++
i.3
--Medallion Financial Corp. 1996 Non-Employee Directors Stock
Option Plan++
j. --Form of Custodial Services Agreement with The First National Bank
of Boston, dated , 1996++
k.1 --Stock Purchase Agreement among Medallion Financial Corp.,
Transportation Capital Corp., LNC Investments, Inc., Leucadia,
Inc. and Leucadia National Corporation, dated February 12, 1996*
k.2
--Asset Purchase Agreement between Medallion Financial Corp., and
Edwards Capital Company, dated February 21, 1996*
II-2
<PAGE>
k.3(i) --Agreement of Merger between Medallion Financial Corp. and Tri-
Magna Corporation, dated December 21, 1995, as amended on February
22, 1996*
k.3(ii) --Amendment Number 2 to Agreement of Merger between Medallion
Financial Corp. and Tri-Magna Corporation, dated April 26, 1996+
k.4 --Form of Promissory Note from Edwards Capital Company payable
to Israel Discount Bank of New York+
k.5 --Schedule of Promissory Notes from Edwards Capital Company
payable to Israel Discount Bank of New York++
k.6 --Form of Secured Note from Edwards Capital Company payable to
Sterling National Bank & Trust Company of New York+
k.7 --Schedule of Secured Notes from Edwards Capital Company
payable to Sterling National Bank & Trust Company of New
York++
k.8 --Promissory Note dated July 31, 1993 in the principal amount
of $5,000,000 from Edwards Capital Company payable to NatWest
Bank N.A. (formerly National Westminster Bank USA) as
endorsed by Endorsement No. 1 dated July 31, 1994 and
Endorsement No. 2 dated July 31, 1995++
k.9 --Committed Line of Credit Agreement in the principal amount
of $3,000,000 dated as of July 29, 1993, as amended May 31,
1994, October 31, 1994 and September 30, 1995 between Edwards
Capital Company and Bank Hapoalim B.M.+
k.10 --Inter-Creditor Agreement among and between Edwards Capital
Company and Bank Hapoalim B.M., Chemical Bank, Israel
Discount Bank of New York, NatWest Bank N.A. (formerly
National Westminster Bank USA), Marine Midland Bank and
Sterling National Bank & Trust Company of New York dated as
of May 14, 1991+
k.11 --Security Agreement between Bank Hapoalim B.M. and Edwards
Capital Company dated May 1, 1989+
k.12 --Continuing General Security Agreement between NatWest Bank
N.A. (formerly National Westminster Bank USA) and Edwards
Capital Company dated June 17, 1987+
k.13 --General Loan and Security Agreement between Sterling
National Bank & Trust of New York and Edwards Capital Company
dated May 1, 1991+
k.14 --General Security Agreement between Israel Discount Bank of
New York and Edwards Capital Company dated May 2, 1991+
k.15 --Promissory Note dated March 5, 1996 in the principal amount
of $275,000 from Medallion Taxi Media, Inc. payable to Israel
Discount Bank of New York+
k.16 --Promissory Note dated September 1, 1995 in the principal
amount of $2,000,000 from Tri-Magna Corporation payable to
NatWest Bank N.A. (formerly National Westminster Bank USA)+
k.17 --Term Note dated September 29, 1995 in the principal amount
of $3,231,900 from Tri-Magna Corporation payable to NatWest
Bank N.A. (formerly National Westminister Bank USA)++
k.18 --Term Note in the principal amount of $2,000,000 dated July
16, 1990 as amended March 27, 1992, July 16, 1993 and
July 16, 1995 from Medallion Funding Corp. payable to NatWest
Bank N.A. (formerly National Westminster Bank USA)++
k.19 --Loan Agreement dated as of March 27, 1992 among Medallion
Funding Corp., the banks signatory thereto and NatWest Bank
N.A. (formerly National Westminster Bank USA), as amended
March 31, 1993, September 29, 1993, March 31, 1994, September
29, 1995 and March 28, 1996.+
II-3
<PAGE>
k.20 --Security Agreement between Medallion Funding Corp. and
NatWest Bank N.A. (formerly National Westminster Bank USA)
dated as of March 27, 1992 for the benefit of the banks
signatory to the Loan Agreement dated as of March 27, 1992,
among Medallion Funding Corp., the banks signatory thereto
and NatWest Bank N.A. (formerly National Westminster Bank
USA)+
k.21 --Revolving Credit Note dated September 29, 1995 in the amount
of $18,000,000 from Medallion Funding Corp. payable to
NatWest Bank N.A. (formerly National Westminster Bank USA)+
k.22 --Revolving Credit Note dated September 29, 1995 in the amount
of $17,500,000 from Medallion Funding Corp. payable to The
First National Bank of Boston+
k.23 --Revolving Credit Note dated September 29, 1995 in the amount
of $17,500,000 from Medallion Funding Corp. payable to Fleet
Bank of Massachusetts, N.A.+
k.24 --Revolving Credit Note dated September 29, 1995 in the amount
of $10,000,000 from Medallion Funding Corp. payable to The
Bank of Tokyo Trust Company+
k.25 --Revolving Credit Note dated September 29, 1995 in the amount
of $6,000,000 from Medallion Funding Corp. payable to Israel
Discount Bank of New York+
k.26 --Revolving Credit Note dated September 29, 1995 in the amount
of $6,000,000 from Medallion Funding Corp. payable to
European American Bank+
k.27 --Revolving Credit Note dated March 28, 1996 in the amount of
$3,000,000 from Medallion Funding Corp. payable to Harris
Trust and Savings Bank+
k.28 --Specialized Small Business Investment Company 3% Preferred
Stock Repurchase Agreement dated as of August 12, 1994
between Medallion Funding Corp. and the U.S. Small Business
Administration+
k.29 --Specialized Small Business Investment Company 3% Preferred
Stock Repurchase Agreement dated as March 22, 1995 between
Transportation Capital Corp. and the U.S. Small Business
Administration as amended by letter agreement dated June 1,
1995+
l. --Opinion and consent of Palmer & Dodge LLP++
n.1 --Consent of Arthur Andersen LLP relating to its report dated
February 21, 1996+
n.2 --Consent of Arthur Andersen LLP relating to its report dated March
14, 1996
n.3 --Consent of Arthur Andersen LLP relating to its report dated March
14, 1996
n.4 --Consent of Arthur Andersen LLP relating to its report dated March
15, 1996
n.5 --Consent of Coopers & Lybrand LLP relating to its report dated
October 24, 1995+
n.6 --Consent of Friedman, Alpren & Green LLP relating to its report
dated January 28, 1995+
p.1 --Subscription Agreement between the Alvin Murstein Second Family
Trust and Medallion Financial Corp.++
p.2 --Subscription Agreement between the Andrew Murstein Family Trust
and Medallion Financial Corp.++
r. --Medallion Financial Corp. Financial Data Schedule+
- - - ----------------
* Filed on February 26, 1996.
+ Filed herewith.
++ To be filed by amendment.
II-4
<PAGE>
ITEM 25. MARKETING ARRANGEMENTS
See Section 12 of the Underwriting Agreement which is filed as Exhibit h.1
hereto, Sections 12 and 15 of the Master Agreement Among Underwriters which is
filed as Exhibit h.2 hereto and Section 3(c) of the Master Selected Dealer
Agreement which is filed as Exhibit h.3 hereto.
In connection with the Offering, the Underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the Common Stock
at a level above that which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
Pursuant to Lock-up Agreements with the Company's directors and officers and
certain other stockholders, each party to a Lock-up Agreement has agreed that
he or she will not, directly or indirectly, offer for sale, sell, contract to
sell, grant an option to purchase or otherwise dispose of any shares of the
Company's Common Stock, except for shares escrowed by the Murstein Trusts for
the benefit of FMC or gifts to family members or charitable institutions,
provided that such family member or charitable institution agrees to be bound
by such Lock-up Agreement, for a period of two years from the date of this
Prospectus without the prior written consent of Furman Selz LLC. In addition,
the Company has agreed that for a period of 180 days from the date of this
Prospectus, the Company will not, without the prior written consent of Furman
Selz LLC, directly or indirectly, offer for sale, sell, contract to sell, or
grant any option to purchase or otherwise dispose of or transfer any shares of
Common Stock other than options granted under the 1996 Plan, the Director Plan
or shares issued pursuant to the exercise of outstanding options.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses expected to be
incurred in connection with the Offering:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 23,793.10
NASD fees....................................................... 7,400.00
Nasdaq initial listing fee......................................
Blue Sky fees and expenses......................................
Financial advisory fees......................................... 225,000.00
Accounting fees and expenses....................................
Legal fees and expenses.........................................
Printing and engraving fees..................................... 120,000.00
Registrar and transfer agent's fees.............................
Miscellaneous fees and expenses.................................
-----------
Total......................................................... $
===========
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
MEDALLION FINANCIAL CORP.
---------------------------------------------------------------
Medallion Medallion Edwards Transportation
Funding Corp. Media, Inc. Capital Capital Corp.
Company
All of the subsidiaries are 100% owned by Medallion Financial and they are
Delaware corporations. The financial statements for Edwards Capital Company
and Transportation Capital Corp. are included in the Prospectus which forms a
part of this Registration Statement. The financial statements of Medallion
Funding Corp. are consolidated with the financial statements of Tri-Magna
Corporation included in the Prospectus. Summary financial statements of
Medallion Media, Inc. are included in the notes to the financial statements of
Tri-Magna Corporation and have not been consolidated because Medallion Media,
Inc. is not an investment company and its results of operations may not be
consolidated with the results of operations of Tri-Magna Corporation which is
an investment company.
II-5
<PAGE>
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth the number of record holders of the Company's
Common Stock as of April 26, 1996.
<TABLE>
<CAPTION>
NAME OF CLASS NUMBER OF RECORD HOLDERS
------------- ------------------------
<S> <C>
Common Stock, $.01 par value per
share 2
</TABLE>
ITEM 29. INDEMNIFICATION
Section 145 of the Delaware General Corporation Law grants the Company the
power to indemnify each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Company, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, no indemnification shall be made in connection with any
proceeding brought by or in the right of the Company where the person involved
is adjudged to be liable to the Company except to the extent approved by a
court. Article TENTH of the Company's Certificate of Incorporation as
currently in effect provides that the Company shall, to the fullest extent
permitted by the Delaware General Corporation Law, as amended from time to
time, indemnify each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Company, or is or was serving, or has agreed to serve, at the
request of the Company, as a director, officer or trustee of, or in a similar
capacity with, another corporation, partnership, joint venture, trust or other
enterprise. The indemnification provided for in Article TENTH is expressly not
exclusive of any other rights to which those seeking indemnification may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and shall inure to the benefit of the heirs, executors
and administrators of such persons. Article TENTH permits the Board of
Directors to authorize the grant of indemnification rights to other employees
and agents of the Company and such rights may be equivalent to, or greater or
less than, those set forth in Article TENTH.
Article V, Section 2 of the Company's By-Laws provides that the Company
shall have the power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against and incurred by such person in any such capacity.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
Article NINTH of the Company's Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Company and its
stockholders for breaches of fiduciary duty as a director, except to the
extent that the elimination or limitation of liability is not then permitted
under the Delaware General Corporation Law.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Information as to the directors and officers of FMC Advisers, Inc. is
included in its Form ADV filed with the Commission (File No. 801-50981), as
amended as of the date hereof, and is incorporated herein by reference.
II-6
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
The Company maintains at its principal office physical possession of each
account, book or other document required to be maintained by Section 31(a) of
the 1940 Act as applicable, pursuant to Section 64 of the 1940 Act.
ITEM 32. MANAGEMENT SERVICES.
Not applicable.
ITEM 33. UNDERTAKINGS.
(1) The Company hereby undertakes:
(a) to suspend the Offering until the Prospectus is amended if (1)
subsequent to the effective date of this Registration Statement, its net
asset value declines more than ten percent from its net asset value as of
the effective date of this Registration Statement or (2) the net asset
value increases to an amount greater than its net proceeds as stated in the
Prospectus.
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of Prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Company under Rule 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(c) that, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the provisions of the Certificate of Incorporation and
By-Laws, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication for such issue.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, AND STATE OF NEW YORK, ON THE 30TH DAY OF APRIL 1996.
Medallion Financial Corp.
/s/ Alvin Murstein
By: _________________________________
Alvin Murstein
Chairman and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Alvin Murstein Chairman and Chief Executive April 30, 1996
____________________________________ Officer (Principal Executive
Alvin Murstein Officer)
* Andrew Murstein President and Director April 30, 1996
____________________________________
Andrew Murstein
* Daniel Baker Treasurer and Chief April 30, 1996
____________________________________ Financial Officer
Daniel Baker
* Mario M. Cuomo Director April 30, 1996
____________________________________
Mario M. Cuomo
* Stanley Kreitman Director April 30, 1996
____________________________________
Stanley Kreitman
* David L. Rudnick Director April 30, 1996
____________________________________
David L. Rudnick
* Benjamin Ward Director April 30, 1996
____________________________________
Benjamin Ward
</TABLE>
/s/ Alvin Murstein
*By:______________________
Alvin Murstein Attorney-in-
fact
April 30,
1996
II-8
<PAGE>
EXHIBIT INDEX
PAGE
Exhibit Number and Description
a. --Medallion Financial Corp. Certificate of Incorporation*
b. --Medallion Financial Corp. By-Laws*
e. --Medallion Financial Corp. Dividend Reinvestment Plan++
f.1 --Debenture due September 1, 1996 in the amount of $1,200,000
issued by Edwards Capital Company and payable to the U.S.
Small Business Administration+
f.2 --Debenture due April 1, 1997 in the amount of $1,500,000
issued by Edwards Capital Company and payable to Chemical
Bank as Trustee under the Trust Agreement dated January 15,
1987 among the Trustee, the U.S. Small Business
Administration and SBIC Funding Corporation (the "Trust
Agreement")+
f.3 --Debenture due June 1, 1998 in the amount of $3,000,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Trust Agreement+
f.4 --Debenture due September 1, 2002 in the amount of $3,500,000
issued by Edwards Capital Company and payable to Chemical
Bank as Trustee under the Amended and Restated Trust
Agreement dated March 1, 1990 among the Trustee, the U.S.
Small Business Administration and SBIC Funding Corporation
(the "Amended Trust Agreement")+
f.5 --Debenture due September 1, 2002 in the amount of $6,050,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.6 --Debenture due June 1, 2004 in the amount of $4,600,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.7 --Debenture due September 1, 2004 in the amount of $5,100,000
issued by Edwards Capital Company and payable to Chemical
Bank under the Amended Trust Agreement+
f.8 --Letter Agreement, dated September 8, 1992, between the U.S.
Small Business Administration and Edwards Capital Company
regarding limit on incurrence of senior indebtedness, as
amended on January 17, 1996+
f.9 --Subordinated Debenture due May 7, 1996 in the amount of
$1,090,000 issued by Transportation Capital Corp. and
payable to the U.S. Small Business Administration+
f.10 --Debenture due June 1, 2002 in the amount of $5,640,000
issued by Transportation Capital Corp. and payable to
Chemical Bank under the Amended Trust Agreement+
g. --Investment Advisory Agreement between Medallion Financial
Corp. and FMC Advisers, Inc.*
h.1 --Form of Underwriting Agreement++
h.2
--Form of Master Agreement Among Underwriters+
h.3 --Form of Master Selected Dealer Agreement+
i.1 --Medallion Financial Corp. 1996 Stock Option Plan*
i.2 --Medallion Financial Corp. 401(k) Investment Plan++
i.3 --Medallion Financial Corp. 1996 Non-Employee Directors Stock
Option Plan++
j. --Form of Custodial Services Agreement with The First
National Bank of Boston, dated , 1996++
k.1 --Stock Purchase Agreement among Medallion Financial Corp.,
Transportation Capital Corp., LNC Investments, Inc.,
Leucadia, Inc. and Leucadia National Corporation, dated
February 12, 1996*
k.2 --Asset Purchase Agreement between Medallion Financial Corp.,
and Edwards Capital Company, dated February 21, 1996*
<PAGE>
Page
Exhibit Number and Description
k.3(i) --Agreement of Merger between Medallion Financial Corp. and
Tri-Magna Corporation, dated December 21, 1995, as amended on
February 22, 1996*
k.3(ii) --Amendment Number 2 to Agreement of Merger between Medallion
Financial Corp. and Tri-Magna Corporation, dated April 26,
1996+
k.4 --Form of Promissory Note from Edwards Capital Company payable
to Israel Discount Bank of New York+
k.5 --Schedule of Promissory Notes from Edwards Capital Company
payable to Israel Discount Bank of New York++
k.6 --Form of Secured Note from Edward Capital Company payable to
Sterling National Bank & Trust Company of New York+
k.7 --Schedule of Secured Notes from Edwards Capital Company
payable to Sterling National Bank & Trust Company of New
York++
k.8 --Promissory Note dated July 31, 1993 in the principal amount
of $5,000,000 from Edwards Capital Company payable to NatWest
Bank N.A. (formerly National Westminster Bank USA) as
endorsed by Endorsement No. 1 dated July 31, 1994 and
Endorsement No. 2 dated July 31, 1995++
k.9 --Committed Line of Credit Agreement in the principal amount
of $3,000,000 dated as of July 29, 1993, as amended May 31,
1994, October 31, 1994 and September 30, 1995 between Edwards
Capital Company and Bank Hapoalim B.M.+
k.10 --Inter-Creditor Agreement among and between Edwards Capital
Company and Bank Hapoalim B.M., Chemical Bank, Israel
Discount Bank of New York, NatWest Bank N.A. (formerly
National Westminster Bank USA), Marine Midland Bank and
Sterling National Bank & Trust Company of New York dated as
of May 14, 1991+
k.11 --Security Agreement between Bank Hapoalim B.M. and Edwards
Capital Company dated May 1, 1989+
k.12 --Continuing General Security Agreement between NatWest Bank
N.A. (formerly National Westminster Bank USA) and Edwards
Capital Company dated June 17, 1987+
k.13 --General Loan and Security Agreement between Sterling
National Bank & Trust of New York and Edwards Capital Company
dated May 1, 1991+
k.14 --General Security Agreement between Israel Discount Bank of
New York and Edwards Capital Company dated May 2, 1991+
k.15 --Promissory Note dated March 5, 1996 in the principal amount
of $275,000 from Medallion Taxi Media, Inc. payable to Israel
Discount Bank of New York+
k.16 --Promissory Note dated September 1, 1995 in the principal
amount of $2,000,000 from Tri-Magna Corporation payable to
NatWest Bank N.A. (formerly National Westminster Bank USA)+
k.17 --Term Note dated September 29, 1995 in the principal amount
of $3,231,900 from Tri-Magna Corporation payable to NatWest
Bank N.A. (formerly National Westminister Bank USA)++
k.18 --Term Note in the principal amount of $2,000,000 dated July
16, 1990 as amended March 27, 1992, July 16, 1993 and
July 16, 1995 from Medallion Funding Corp. payable to NatWest
Bank N.A. (formerly National Westminster Bank USA)++
<PAGE>
PAGE
Exhibit Number and Description
k.19 --Loan Agreement dated as of March 27, 1992 among Medallion
Funding Corp., the banks signatory thereto and NatWest Bank
N.A. (formerly National Westminster Bank USA), as amended
March 31, 1993, September 29, 1993, March 31, 1994, September
29, 1995 and March 28, 1996+
k.20 --Security Agreement between Medallion Funding Corp. and
NatWest Bank N.A. (formerly National Westminster Bank USA)
dated as of March 27, 1992 for the benefit of the banks
signatory to the Loan Agreement dated as of March 27, 1992,
among Medallion Funding Corp., the banks signatory thereto
and NatWest Bank N.A. (formerly National Westminster Bank
USA)+
k.21 --Revolving Credit Note dated September 29, 1995 in the amount
of $18,000,000 from Medallion Funding Corp. payable to
NatWest Bank N.A. (formerly National Westminster Bank USA)+
k.22 --Revolving Credit Note dated September 29, 1995 in the amount
of $17,500,000 from Medallion Funding Corp. payable to The
First National Bank of Boston+
k.23 --Revolving Credit Note dated September 29, 1995 in the amount
of $17,500,000 from Medallion Funding Corp. payable to Fleet
Bank of Massachusetts, N.A.+
k.24 --Revolving Credit Note dated September 29, 1995 in the amount
of $10,000,000 from Medallion Funding Corp. payable to The
Bank of Tokyo Trust Company+
k.25 --Revolving Credit Note dated September 29, 1995 in the amount
of $6,000,000 from Medallion Funding Corp. payable to Israel
Discount Bank of New York+
k.26 --Revolving Credit Note dated September 29, 1995 in the amount
of $6,000,000 from Medallion Funding Corp. payable to
European American Bank+
k.27 --Revolving Credit Note dated March 28, 1996 in the amount of
$3,000,000 from Medallion Funding Corp. payable to Harris
Trust and Savings Bank+
k.28 --Specialized Small Business Investment Company 3% Preferred
Stock Repurchase Agreement dated as of August 12, 1994
between Medallion Funding Corp. and the U.S. Small Business
Administration+
k.29 --Specialized Small Business Investment Company 3% Preferred
Stock Repurchase Agreement dated as March 22, 1995 between
Transportation Capital Corp. and the U.S. Small Business
Administration as amended by letter agreement dated June 1,
1995+
l. --Opinion and consent of Palmer & Dodge LLP++
n.1 --Consent of Arthur Andersen LLP relating to its report dated
February 21, 1996+
n.2 --Consent of Arthur Andersen LLP relating to its report dated March
14, 1996+
n.3 --Consent of Arthur Andersen LLP relating to its report dated March
14, 1996+
n.4 --Consent of Arthur Andersen LLP relating to its report dated March
14, 1996+
n.5 --Consent of Coopers & Lybrand LLP relating to its report dated
October 24, 1995+
n.6 --Consent of Friedman, Alpren & Green LLP relating to its
report dated January 28, 1995+
p.1 --Subscription Agreement between the Alvin Murstein Second
Family Trust and Medallion Financial Corp.++
p.2 --Subscription Agreement between the Andrew Murstein Family
Trust and Medallion Financial Corp.++
r. --Medallion Financial Corp. Financial Data Schedule+
- - - ----------------
* Filed on February 26, 1996.
+ Filed herewith.
++ To be filed by amendment.
<PAGE>
SBIC License No. 02/02-0366-29 Loan No. 046012-00-02
----------------- ---------------
DEBENTURE
****************
$1,200,000 DATE OF ISSUANCE September 24, 1986
- - - ---------- ---------------------
Edwards Capital Company (the "Company")
215 Lexington Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of the Small
Business Administration (the "SBA") as the Holder hereof the principal sum of
One Million Two Hundred Thousand and 00/100 ($1,200,000.00) (the "Original
Principal Amount") on September 1, 1996 at such location as SBA may direct and
to pay interest semiannually on March 1 and September 1 (the "Payment Dates")
of each year, as herein provided, at the rate of 8.75% per annum in the basis of
a year of 365 days, for the actual number of days (including the first day but
excluding the last day) elapsed (the "Stated Interest Rate"), on said principal
sum from the date of issuance hereof until payment of such principal sum has
been made or duly provided for. The Company shall deposit all payments with
respect to this debenture not later than 12:00 noon (Washington, D.C. time) on
the applicable payment date of the next business day if the payment date is not
a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303(a) and (b)(1) of the Small Business Investment Act of
1958, as amended (the "Act") (15 U.S.C. (S) 683). This debenture is subject to
the regulations under the Act, as mended from time to time (the "Regulations"),
provided however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein
as if fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the product of the Stated
Interest Rate times the Original Principal Amount in accordance with the
following table (the "Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
10th or 11th 100%
12th or 13th 80%
14th or 15th 60%
16th or 17th 40%
18th or 19th 20%
</TABLE>
<PAGE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(INDIVIDUAL GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, this debenture has been signed by the Company's general
partner as of the date of issuance stated above
Edwards Capital Company
By: /s/ Edward H. Teitelbaum
----------------------------
Edward H. Teitelbaum
General Partner
<PAGE>
SBIC License No. 02/02-0366 Loan No. 046063-00-02
-------------- ---------------
DEBENTURE
*************
$1,500,000.00 DATE OF ISSUANCE April 29, 1987
- - - ------------- ----------------
Edwards Capital Company (the "Company")
215 Lexington Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Trust Agreement dated as of
January 15, 1987, by and among the Trustee, the U.S. Small Business
Administration ("SBA") and SBIC Funding Corporation, as the Holder hereof the
principal sum of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) (the "Original Principal Amount") on April 1, 1997 at such
location as SBA, as guarantor of this debenture, may direct and to pay interest
semiannually on April 1st and October 1st (the "Payment Dates") of each year, as
herein provided, at the rate of 8.95% per annum in the basis of a year of 365
days, for the actual number of days (including the first day but excluding the
last day) elapsed (the "Stated Interest Rate"), on said principal sum from the
date of issuance hereof until payment of such principal sum has been made or
duly provided for. The Company shall deposit all payments with respect to this
debenture not later than 12:00 noon (Washington, D.C. time) on the applicable
payment date of the next business day if the payment date is not a business day,
all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303(a) and (b)(1) of the Small Business Investment Act of
1958, as amended (the "Act") (15 U.S.C. (S) 683). This debenture is subject to
the regulations under the Act, as mended from time to time (the "Regulations"),
provided however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein
as if fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the product of the Stated
Interest Rate times the Original Principal Amount in accordance with the
following table (the "Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
10th or 11th 100%
12th or 13th 80%
14th or 15th 60%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
16th or 17th 40%
18th or 19th 20%
</TABLE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(CORPORATE GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and the corporate seal of the general
partner to be affixed and attested by its Secretary or Assistant Secretary as of
the date of issuance stated above.
CORPORATE SEAL
<PAGE>
Edwards Capital Company
By: /s/ Harvey S. Feuerstein
----------------------------
Vice President of
----------------------------
HARVARD SERVICING CORP.,
General Partner
----------------------------
ATTEST
/s/ Michael T. Heitner
- - - ------------------------
Secretary
<PAGE>
SBIC License No. 02/02-0366 Loan No. 0461460001
------------- -------------
DEBENTURE
*************
$3,000,000.00 DATE OF ISSUANCE June 8, 1988
- - - ------------- ----------------
Edwards Capital Company (the "Company")
215 Lexington Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Trust Agreement dated as of
January 15, 1987, by and among the Trustee, the U.S. Small Business
Administration ("SBA") and SBIC Funding Corporation, as the Holder hereof the
principal sum of Three Million and 00/100 Dollars ($3,000,000.00) (the "Original
Principal Amount") on June 1, 1998 at such location as SBA, as guarantor of this
debenture, may direct and to pay interest semiannually on December 1st and June
1st (the "Payment Dates") of each year, as herein provided, at the rate of 9.80%
per annum in the basis of a year of 365 days, for the actual number of days
(including the first day but excluding the last day) elapsed (the "Stated
Interest Rate"), on said principal sum from the date of issuance hereof until
payment of such principal sum has been made or duly provided for. The Company
shall deposit all payments with respect to this debenture not later than 12:00
noon (Washington, D.C. time) on the applicable payment date of the next business
day if the payment date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303(a) and (b) of the Small Business Investment Act of 1958,
as amended (the "Act") (15 U.S.C. (S) 683). This debenture is subject to the
regulations under the Act, as mended from time to time (the "Regulations"),
provided however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein
as if fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price shall be an amount equal to
the outstanding principal balance of this debenture, plus interest accrued and
unpaid thereon to the Payment date selected for prepayment, plus a prepayment
premium (the "Prepayment Premium") calculated as a declining percentage (the
"Applicable Percentage") of the dollar amount of the product of the Stated
Interest Rate times the Original Principal Amount in accordance with the
following table (the "Prepayment Price"):
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
10th or 11th 100%
12th or 13th 80%
14th or 15th 60%
16th or 17th 40%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
18th or 19th 20%
</TABLE>
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(INDIVIDUAL GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, this debenture has been signed by the Company's general
partner as of the date of issuance stated above.
Edwards Capital Company
By: /s/ Edward H. Teitelbaum
---------------------------
Edward H. Teitelbaum
General Partner
<PAGE>
SBIC License No. 02/02-0366 Loan No. 04633100-06
------------- --------------
DEBENTURE
*************
$3,500,000.00 DATE OF ISSUANCE September 23, 1992
- - - ------------- --------------------
Edwards Capital Company (the "Company")
2 Park Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, by and among the Trustee, the U.S. Small
Business Administration ("SBA") and SBIC Funding Corporation, as the Holder
hereof the principal sum of Three Million Five Hundred Thousand and 00/100
Dollars ($3,500,000.00) (the "Original Principal Amount") on September 1, 2002
(the "Maturity Date") at such location as SBA, as guarantor of this debenture,
may direct and to pay interest semiannually on March 1st and September 1st (the
"Payment Dates") of each year, as herein provided, at the rate of 7.15% per
annum in the basis of a year of 365 days, for the actual number of days
(including the first day but excluding the last day) elapsed (the "Stated
Interest Rate"), on said principal sum from the date of issuance hereof until
payment of such principal sum has been made or duly provided for. The Company
shall deposit all payments with respect to this debenture not later than 12:00
noon (Washington, D.C. time) on the applicable payment date of the next business
day if the payment date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. (S) 683). This debenture is subject to the regulations
under the Act, as mended from time to time (the "Regulations"), provided
however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein as if
fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price (the "Prepayment Price")
shall be an amount equal to the outstanding principal balance of this debenture,
plus interest accrued and unpaid thereon to the Payment date selected for
prepayment, plus a prepayment premium (the "Prepayment Premium"). The
Prepayment Premium amount is calculated as a declining percentage (the
"Applicable Percentage") multiplied by the Original Principal Amount of this
debenture calculated in accordance with the following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
1st or 2nd 5%
3rd or 4th 4%
5th or 6th 3%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7th or 8th 2%
9th or (10th-If not also Maturity Date) 1%
</TABLE>
No Prepayment Premium is required to repay this debenture on its Maturity Date.
No Prepayment Premium is required when the prepayment occurs on a Payment Date
that is on or after the 11th consecutive payment of this debenture, if this
debenture has a 20 consecutive Payment Date term.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(CORPORATE GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and the corporate seal of the general
partner to be affixed and attested by its Secretary or Assistant Secretary as of
the date of issuance stated above.
<PAGE>
CORPORATE SEAL
Edwards Capital Company
By: Harvard Servicing Corp
------------------------------
(Corporate General Partner)
General Partner
By: /s/ Edward M. Abramson
------------------------------
Edward M. Abramson, President
ATTEST
/s/ Michael T. Heitner
- - - -------------------------
Secretary
<PAGE>
SBIC License No. 02/02-0366 Loan No. 04633200-09
------------- ---------------
DEBENTURE
*************
$6,050,000.00 DATE OF ISSUANCE September 23, 1992
- - - ------------- --------------------
Edwards Capital Company (the "Company")
2 Park Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, by and among the Trustee, the U.S. Small
Business Administration ("SBA") and SBIC Funding Corporation, as the Holder
hereof the principal sum of Six Million Fifty Thousand and 00/100 Dollars
($6,050,000.00) (the "Original Principal Amount") on September 1, 2002 (the
"Maturity Date") at such location as SBA, as guarantor of this debenture, may
direct and to pay interest semiannually on March 1st and September 1st (the
"Payment Dates") of each year, as herein provided, at the rate of 7.15% per
annum in the basis of a year of 365 days, for the actual number of days
(including the first day but excluding the last day) elapsed (the "Stated
Interest Rate"), on said principal sum from the date of issuance hereof until
payment of such principal sum has been made or duly provided for. The Company
shall deposit all payments with respect to this debenture not later than 12:00
noon (Washington, D.C. time) on the applicable payment date of the next business
day if the payment date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. (S) 683). This debenture is subject to the regulations
under the Act, as mended from time to time (the "Regulations"), provided
however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein as if
fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price (the "Prepayment Price")
shall be an amount equal to the outstanding principal balance of this debenture,
plus interest accrued and unpaid thereon to the Payment date selected for
prepayment, plus a prepayment premium (the "Prepayment Premium"). The
Prepayment Premium amount is calculated as a declining percentage (the
"Applicable Percentage") multiplied by the Original Principal Amount of this
debenture calculated in accordance with the following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
1st or 2nd 5%
3rd or 4th 4%
5th or 6th 3%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7th or 8th 2%
9th or (10th-If not also Maturity Date) 1%
</TABLE>
No Prepayment Premium is required to repay this debenture on its Maturity Date.
No Prepayment Premium is required when the prepayment occurs on a Payment Date
that is on or after the 11th consecutive payment of this debenture, if this
debenture has a 20 consecutive Payment Date term.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(CORPORATE GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and the corporate seal of the general
partner to be affixed and attested by its Secretary or Assistant Secretary as of
the date of issuance stated above.
<PAGE>
CORPORATE SEAL
Edwards Capital Company
By: Harvard Servicing Corp
------------------------------
(Corporate General Partner)
General Partner
By: /s/ Edward M. Abramson
----------------------------
Edward M. Abramson, President
ATTEST
/s/ Michael T. Heitner
- - - ------------------------
Secretary
<PAGE>
SBIC License No. 02/02-0366 Loan No. 04636600-06
------------- -------------
DEBENTURE
*************
$4,600,000 DATE OF ISSUANCE June 29, 1994
- - - ----------- ----------------
Edwards Capital Company (the "Company")
2 Park Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, by and among the Trustee, the U.S. Small
Business Administration ("SBA") and SBIC Funding Corporation, as the Holder
hereof the principal sum of Four Million Six Hundred Thousand and 00/100 Dollars
($4,600,000.00) (the "Original Principal Amount") on June 1, 2004 (the "Maturity
Date") at such location as SBA, as guarantor of this debenture, may direct and
to pay interest semiannually on June 1st and December 1st (the "Payment Dates")
of each year, as herein provided, at the rate of 7.80% per annum in the basis of
a year of 365 days, for the actual number of days (including the first day but
excluding the last day) elapsed (the "Stated Interest Rate"), on said principal
sum from the date of issuance hereof until payment of such principal sum has
been made or duly provided for. The Company shall deposit all payments with
respect to this debenture not later than 12:00 noon (Washington, D.C. time) on
the applicable payment date of the next business day if the payment date is not
a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. (S) 683). This debenture is subject to the regulations
under the Act, as mended from time to time (the "Regulations"), provided
however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein as if
fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price (the "Prepayment Price")
shall be an amount equal to the outstanding principal balance of this debenture,
plus interest accrued and unpaid thereon to the Payment date selected for
prepayment, plus a prepayment premium (the "Prepayment Premium"). The
Prepayment Premium amount is calculated as a declining percentage (the
"Applicable Percentage") multiplied by the Original Principal Amount of this
debenture calculated in accordance with the following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
1st or 2nd 5%
3rd or 4th 4%
5th or 6th 3%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7th or 8th 2%
9th or (10th-If not also Maturity Date) 1%
</TABLE>
No Prepayment Premium is required to repay this debenture on its Maturity Date.
No Prepayment Premium is required when the prepayment occurs on a Payment Date
that is on or after the 11th consecutive payment of this debenture, if this
debenture has a 20 consecutive Payment Date term.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(CORPORATE GENERAL PARTNER)
_______________________________________________________
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and the corporate seal of the general
partner to be affixed and attested by its Secretary or Assistant Secretary as of
the date of issuance stated above.
<PAGE>
CORPORATE SEAL
Edwards Capital Company
By: Harvard Servicing Corp
--------------------------
(Corporate General Partner)
By: /s/ Edward M. Abramson
----------------------------
Edward M. Abramson, President
ATTEST
/s/ Michael T. Heitner
- - - ------------------------
Secretary
<PAGE>
SBIC License No. 02/02-0366 Loan No. 04637100-08
------------- -------------
DEBENTURE
*************
$5,100,000 DATE OF ISSUANCE September 28, 1994
- - - ----------- ---------------------
Edwards Capital Company (the "Company")
2 Park Avenue New York, New York 10016
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, by and among the Trustee, the U.S. Small
Business Administration ("SBA") and SBIC Funding Corporation, as the Holder
hereof the principal sum of Five Million One Hundred Thousand and 00/100 Dollars
($5,100,000.00) (the "Original Principal Amount") on September 1, 2004 (the
"Maturity Date") at such location as SBA, as guarantor of this debenture, may
direct and to pay interest semiannually on March 1st and September 1st (the
"Payment Dates") of each year, as herein provided, at the rate of 8.20% per
annum in the basis of a year of 365 days, for the actual number of days
(including the first day but excluding the last day) elapsed (the "Stated
Interest Rate"), on said principal sum from the date of issuance hereof until
payment of such principal sum has been made or duly provided for. The Company
shall deposit all payments with respect to this debenture not later than 12:00
noon (Washington, D.C. time) on the applicable payment date of the next business
day if the payment date is not a business day, all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. (S) 683). This debenture is subject to the regulations
under the Act, as mended from time to time (the "Regulations"), provided
however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein as if
fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price (the "Prepayment Price")
shall be an amount equal to the outstanding principal balance of this debenture,
plus interest accrued and unpaid thereon to the Payment date selected for
prepayment, plus a prepayment premium (the "Prepayment Premium"). The
Prepayment Premium amount is calculated as a declining percentage (the
"Applicable Percentage") multiplied by the Original Principal Amount of this
debenture calculated in accordance with the following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
1st or 2nd 5%
3rd or 4th 4%
5th or 6th 3%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7th or 8th 2%
9th or (10th-If not also Maturity Date) 1%
</TABLE>
No Prepayment Premium is required to repay this debenture on its Maturity Date.
No Prepayment Premium is required when the prepayment occurs on a Payment Date
that is on or after the 11th consecutive payment of this debenture, if this
debenture has a 20 consecutive Payment Date term.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provisions were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this
address only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
COMPANY ORGANIZED AS A LIMITED PARTNERSHIP
(CORPORATE GENERAL PARTNER)
______________________________________________
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and the corporate seal of the general
partner to be affixed and attested by its Secretary or Assistant Secretary as of
the date of issuance stated above.
<PAGE>
CORPORATE SEAL
Edwards Capital Company
By: Harvard Servicing Corp
------------------------------
(Corporate General Partner)
By: /s/ Edward M. Abramson
----------------------------
Edward M. Abramson, President
ATTEST
/s/ Michael T. Heitner
- - - ------------------------
Secretary
<PAGE>
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
Mr. Edward M. Abramson
President
Harvard Servicing Corporation
General Partner
Edwards Capital Company
2 Park Avenue, 2Oth Floor
New York, New York 10016
Re: SBIC License No. 02/02-0366 Application for Leverage,
dated August 3, 1992 ("Leverage Application")
Dear Mr. Abramson:
This is to confirm our understanding as to the conditions under which the
Small Business Administration ("SBA") will agree to consider the application of
Edwards Capital Company ("Edwards") for $9,550,000 of SBA-guaranteed debentures,
$6,050,000 of which would be roll-overs or debentures presently on demand and
$3,500,000 of which would be debentures representing new indebtedness.
Subject to a favorable credit and regulatory review of Edwards' Leverage
Application, any decision by SBA to approve Edwards' request for $9,550,000 of
guaranteed debentures would be subject to the following additional conditions:
1. Senior Indebtedness. The proceeds of any debentures approved for
-------------------
guarantee by SBA based on the Leverage Application shall be used, in part, to
immediately reduce the amount of Edwards' senior indebtedness to no more than
$10 million. Edwards hereby agrees that at no time subsequent to the funding of
such debentures (the "Funding Date") shall the amount of its senior indebtedness
exceed the lesser of $10 million or twice its private capital (as defined in 13
C.F.R. (S) 107.3) unless the prior written approval of SBA is obtained. As used
herein, "senior indebtedness" shall mean any indebtedness to which SBA would be
subordinated pursuant to 13 C.F.R. (S) 107.201(b)(2).
2. Secured Debt. Edwards hereby agrees that at no time subsequent to the
------------
Funding Date shall the amount of Edwards' secured debt exceed the lesser of $10
million or twice its private capital unless the prior written approval of SBA is
obtained. As used herein, "secured debt" shall mean any indebtedness which is
secured by a lien on any asset(s) of Edwards or for which any asset(s) of
Edwards is pledged as collateral.
<PAGE>
3. Notwithstanding the foregoing, the following is understood:
(a) Following the funding of the subject application, the parties
contemplate that SBA will continue to process leverage funding
applications of Edwards on the same basis as heretofore. In the event
that Edwards shall have increased its private Capital and SBA shall
decline to fund any subsequent leverage application by Edwards, or in
the event that Edwards shall have submitted an application for a
refunding of existing leverage and SBA shall decline to fund any such
refunding application, then in either or such events, SBA will not
unreasonably withhold or delay its consent to Edwards' Obtaining
financing in such amount from other sources on a secured basis
provided that Edwards is in compliance with all material applicable
regulations and with the above two paragraphs or any waiver thereof.
(b) This letter is not intended to affect the subordinated status of any
currently outstanding SBA guaranteed debentures of Edwards until such
debentures are either paid in full or refunded, nor is it intended to
affect the amount of unsecured indebtedness which may be incurred by
Edwards on a pari passu basis with any SBA guaranteed debentures.
---- -----
(c) This letter is not intended to impose any limit on the amount to
Edwards' secured indebtedness which is, by its terms, subordinate or
junior to any SBA guaranteed debentures in liquidation or bankruptcy
proceedings.
(d) The provisions of this letter shall not become effective until the
subject $9,550,000 Leverage Application is fully funded.
This letter, if countersigned by Edwards, will constitute a written
agreement within the meaning of 13 C.F.R. (S) 107.906(a) and any failure to
comply with the terms hereof will constitute nonperformance of this letter.
Subsequent to the execution of this letter, it is the intention or the
parties to strive in good faith to establish a procedure whereby Edwards will be
able to obtain the continuing funding necessary for the expansion of its
business by way of either (i) an inter-creditor agreement with third party
secured lenders recognizing a second priority security interest which would be
granted to SBA or (ii) a formula whereby the limits on Edwards' secured
indebtedness will be increased in accordance with reasonable criteria to be
established. Until such procedures are agreed upon by Edwards and SBA, the terms
of this letter shall govern.
<PAGE>
This letter represents the full and complete understanding of SBA and
Edwards on this subject and supersedes any earlier Communications on this
subject, whether written or oral.
Very truly yours,
/s/ Wayne S. Foren
--------------------------------------
Associate Administrator for Investment
Please indicate your agreement with the terms and conditions of this letter
by signing and returning one copy to Patrick Tunison by Tuesday, September 8, or
this letter will be considered null and void and of no legal effect whatsoever.
AGREED AND ACCEPTED:
Edwards Capital Company
By: Harvard Servicing Corp.
By: /s/ Edward M. Abramson
-------------------------
President
<PAGE>
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
License No. 02/02-0366
Mr. Edward M. Abramson
President
Harvard Servicing Corporation
General Partner
Edwards Capital Company
2 Park Avenue, 20th Floor
New York, New York 10016
Dear Mr. Abramson:
The Office of SBIC Operations has reviewed the Licensee's letter dated
November 7, 1995 requesting a $5 million increase in the limit of its senior
secured bank indebtedness (indebtedness). The request was submitted as a result
of SBA's current policy of not providing new SBIC leverage for the purposes of
financing New York City taxi medallions, for which the Licensee was prepared to
submit a leverage application for a total of $1.5 million.
Currently, the Licensee's indebtedness is limited to the lesser of $ 10
million or twice its leveragable capital, per letter agreement (Agreement)
entered into and dated September 8, 1992. The Agreement provided for SBA's
consent for the Licensee to obtain financing from other sources on a secured
basis should SBA decline to fund a leverage application submitted by the
Licensee.
The Licensee is hereby approved for an increase in the limit of its
indebtedness of $ 1.5 million. As a result, the Licensee's limit of its
indebtedness is limited to the lesser of $11.5 million or twice its leveragable
capital.
If there are any questions, please call Fonda Stephens-Kelly at (202) 205-
7596,
Sincerely,
/s/ Ronald Cibolski
-------------------------
Director
Office of SBIC Operations
<PAGE>
Loan Number: 02/02-5388-7
--------------
SUBORDINATED DEBENTURE
$1,090,000.00 Date of Issuance: May 7, 1986
Name of Section 310(d) Licensee: Transportation Capital Corp.
60 East 42nd Street
New York, NY 10165
For value received, the Company promises to pay to the Small Business
Administration (SBA) ten (10) years from the date of issuance above-stated, the
principal sum of $1,090,000.00 at the office of SBA in Washington, D.C., with
interest at the rate of 4 3/8 percent per annum payable semiannually beginning
from the date of issuance above-stated until May 7, 1991, after which time the
interest shall ne at the rate of 7 3/8 percent per annum payable semiannually
until all principal and interest shall have been paid.
This Debenture is issued pursuant and subject to Section 303(c) of the
Small Business Investment Act of 1958, as amended (Act) (15 U.S.C. 683(c)). This
Debenture is also subject to the Regulations under said Act, as amended from
time to time: Provided, however, That Regulation 13 C.F.R. 107.203(b) in effect
-------- -------
at the date of issuance hereof, is incorporated herein as if fully set forth and
shall continue to apply to this Debenture, irrespective of subsequent amendments
thereof.
All notices to the Company which are required or which may be given under
this Debenture shall be sufficient in all respects if sent to the above-noted
address of the Company. For the purposes of this Debenture, Company may change
this address only upon written approval by SBA.
This Debenture shall be deemed made in the District of Columbia as of the
day, month, and year stated above. The terms and conditions of this Debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form
1022A related to this Debenture are incorporated herein as if fully set forth.
Should any provisions of this Debenture be declared illegal or
unenforceable by a court of competent jurisdiction, the remaining provisions
shall remain in full force and effect and this Debenture shall be construed as
if said provisions were not contained therein.
IN WITNESS WHEREOF, Company has caused this Debenture to be signed by its
duly authorized officer and its corporate seal to be affixed and attested by its
Secretary or Assistant Secretary as of the date of issuance stated above.
<PAGE>
(CORPORATE SEAL)
TRANSPORTATION CAPITAL CORP.
By: /s/ Melvin L. Hirsch, President
-------------------------------
Melvin L. Hirsch, President
ATTEST:
/s/ Dorothy T. Hirsch
- - - ------------------------
Secretary
<PAGE>
SBIC License No. 02/02-5388 Loan No. 08002500-03
-------------- ---------------
DEBENTURE
*************
$5,640,000.00 DATE OF ISSUANCE June 24, 1992
- - - ------------- ---------------
Transportation Capital Corp. (the "Company")
60 East 42nd Street New York, New York 10165
For value received, the Company hereby promises to pay to the order of Chemical
Bank, as Trustee (the "Trustee") under that certain Amended and Restated Trust
Agreement dated as of March 1, 1990, by and among the Trustee, the U.S. Small
Business Administration ("SBA") and SBIC Funding Corporation, as the Holder
hereof the principal sum of Five Million Six Hundred and Forty Thousand and
00/100 Dollars ($5,640,000.00) (the "Original Principal Amount") on June 1, 2002
(the "Maturity Date") at such location as SBA, as guarantor of this debenture,
may direct and to pay interest semiannually on June 1st and December 1st (the
"Payment Dates") of each year, as herein provided. This debenture shall bear
interest at the rate of 8% per annum (the "Stated Interest Rate"). The Company
promises to pay interest at the rate of 5.00% per annum (supplemented by
interest payments made by SBA of 3% per annum) beginning from the date of
issuance above stated through June 1, 1997, after which time the Company shall
pay the Stated Interest Rate, on the basis od a year of 365 days, for the actual
number of days (including the first day but excluding the last day) elapsed, on
said principal sum until payment of such principal sum has been made or duly
provided for. The Company shall deposit all payments with respect to this
debenture not later than 12:00 noon (Washington, D.C. time) on the applicable
payment date of the next business day if the payment date is not a business day,
all as directed by SBA.
This debenture is issued by the Company and guaranteed by the SBA, pursuant and
subject t Section 303 of the Small Business Investment Act of 1958, as amended
(the "Act") (15 U.S.C. (S) 683). This debenture is subject to the regulations
under the Act, as mended from time to time (the "Regulations"), provided
however, that Regulation 13 C.F.R. (S) 107.203 is incorporated herein as if
fully set forth.
The Company may elect to prepay this debenture, as a whole and not in part, on
any Payment Date after the ninth consecutive Payment Date in the manner and at
the price as next described. The prepayment price (the "Prepayment Price") shall
be an amount equal to the outstanding principal balance of this debenture, plus
interest accrued and unpaid thereon to the Payment date selected for prepayment,
plus a prepayment premium (the "Prepayment Premium"). The Prepayment Premium
amount is calculated as a declining percentage (the "Applicable Percentage")
multiplied by the Original Principal Amount of this debenture calculated in
accordance with the following table:
<TABLE>
<CAPTION>
Consecutive Payment Dates Applicable Percentages
--------------------------- ------------------------
<S> <C>
</TABLE>
<PAGE>
<TABLE>
<S> <C>
1st or 2nd 5%
3rd or 4th 4%
5th or 6th 3%
7th or 8th 2%
9th or (10th-If not also Maturity Date) 1%
</TABLE>
No Prepayment Premium is required for a prepayment that occurs on a Payment Date
that is on or after the 11th consecutive Payment Date.
The amount of the Prepayment Price shall be sent to SBA or such agent as SBA
shall direct, by wire payment in immediately available funds, not less than
three business days prior to the regular payment date. Until the Company is
notified otherwise in writing by SBA, any prepayment Price shall be paid to the
account maintained by Chemical Bank, New York, New York, entitled the SBA
Prepayment Subaccount and shall include an identification of the Company by name
and an SBA-assigned license number, the loan number appearing on the face
hereof, and such other information as SBA or its agent may specify.
This debenture shall be deemed issued in the District of Columbia as of the day,
month, and year first stated above. The terms and conditions of this debenture
shall be construed in accordance with, and its validity and enforcement governed
by, the laws of the District of Columbia.
The warranties, representations, or certifications made to SBA on SBA Form 1022
related to this debenture are incorporated herein as if fully set forth.
Should any provision of this debenture or any of the documents incorporated by
reference herein be declared illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall remain in full force and effect and
this debenture shall be construed as if said provision were not contained
herein.
All notices to Company which are required or may be given under this debenture
shall be sufficient in all respects if sent to the above-noted address of the
Company. For the purposes of this debenture, the Company may change this address
only upon written approval of SBA.
Execution of this debenture by the Company's general partner, in the case that
the Company is organized as a limited partnership, shall not subject the
Company's general partner to liability, as such, for the payment of any part of
the debt evidenced by this debenture.
IN WITNESS WHEREOF, the Company's general partner has caused this debenture to
be signed by its duly authorized officer and its corporate seal to be hereunto
affixed and attested by its Secretary or Assistant Secretary as of the date of
issuance stated above.
CORPORATE SEAL
<PAGE>
Transportation Capital Company
By: /s/ Paul J. Borden
-------------------------
Paul J. Borden, President
ATTEST
/s/ Jonathan Hirsch
- - - ----------------------
Secretary
<PAGE>
FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
MASTER AGREEMENT AMONG UNDERWRITERS
-----------------------------------
January 2, 1996
Gentlemen:
In connection with certain public offerings of securities after the date
hereof for which we are acting as representative or one of the representatives
of the members of the underwriting syndicate, you may be offered the opportunity
to join the underwriting syndicate. This will confirm our mutual agreement as
to the general terms and conditions applicable to your participation in any such
underwriting syndicate.
1. Applicability of this Agreement. The terms and conditions of this
Agreement shall be applicable to any negotiated offering of securities
("Securities"), pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the "Securities Act"), or exempt from registration
thereunder, wherein we are responsible for managing or otherwise implementing
the sale of the Securities and organizing an underwriting syndicate (including
any such offering where we are acting with others as representatives of the
underwriters) and have expressly informed you that the terms and conditions of
this Agreement shall be applicable. This Agreement shall not apply to any
offering of securities effected wholly outside the United States of America.
Any such offering in which you have been invited to participate as an
underwriter and with respect to which we have informed you that the terms and
conditions of this Agreement apply is hereinafter called an "Offering."
We shall advise you by telecopy, telegram, telex, graphic scanning
communication or other written form of communication that you have been invited
to participate in an Offering (the "Invitation"). The Invitation will also
contain information regarding certain terms of the Securities which are the
subject of the Offering, and the amount of the Securities which you are invited
to underwrite. The Invitation will include instructions for advising us of your
acceptance (the "Acceptance") of the Invitation.
Prior to the time of the Offering, we shall also advise you, to the extent
applicable, of the amount of Securities to be underwritten by you, the
anticipated offering and closing dates, the initial offering price or prices,
the interest or dividend
<PAGE>
rate (or the method by which such rate is to be determined), the conversion
price and certain other terms relating to the Securities, whether the
underwriters will be granted an option to purchase additional Securities (the
"Additional Securities"), and, if so, the amount of Additional Securities which
you will be obligated to purchase, whether the seller of the Securities proposes
to authorize the Underwriters (as hereinafter defined) to solicit offers to
purchase Securities from the seller pursuant to delayed delivery contracts (such
contracts being hereinafter called "Delayed Delivery Contracts" and such an
Offering being hereinafter called a "Delayed Delivery Offering"), whether the
seller of the Securities proposes to offer Securities through one or more
underwriting syndicates (which may be composed of a single underwriter) other
than the underwriting syndicate composed of the Underwriters and the extent to
which the Underwriters may become obligated to purchase Securities from, or sell
Securities to, such other underwriting syndicate or syndicates pursuant to one
or more agreements between the Representatives (as hereinafter defined) and the
representatives or managers of such other syndicate or syndicates (or such
single underwriter) (any such agreement being hereinafter referred to as an
"Inter-Syndicate Agreement," and any Securities subject to purchase by the
Underwriters pursuant to an Inter-Syndicate Agreement being referred to herein
as "Other Securities"), and the gross spread and breakdown of management fee,
underwriting compensation and selling concession, and the dealer's reallowance,
except that, if the initial offering price of the Securities is to be determined
by a formula based upon the market price of certain securities (such procedure
being hereinafter called "Formula Pricing"), we shall so indicate in lieu of
specifying an initial offering price or prices (and other applicable terms of
the Securities) and shall specify only the maximum gross spread and maximum
management fee, instead of the initial fixed amounts and components thereof. The
foregoing information will be included in the Invitation or be conveyed to you
in one or more separate written communications (collectively, the "Final
Communication"). The Invitation and the Final Communication may also contain
additional provisions which supplement or amend the terms of this Agreement as
they apply to the Offering.
The terms and conditions of this Agreement, as amended or supplemented by
the Invitation and the Final Communication, shall become effective with respect
to your participation in an Offering if we have received your Acceptance and if
we do not receive a written communication revoking your Acceptance prior to the
date and time specified in the Invitation or the Final Communication (your
unrevoked Acceptance after expiration of such date and time being hereinafter
referred to as your "Final Acceptance").
2. Underwriting Arrangements. In connection with each Offering, the
issuer, any other seller (a "Selling Securityholder") and any guarantor of the
Securities shall enter
-2-
<PAGE>
into an underwriting agreement (the "Underwriting Agreement") (with such
additions, modifications and deletions as we shall, acting as sole
representative or as lead representative of one or more other representatives of
the Underwriters, in our sole discretion deem appropriate) which we shall as
soon as practicable send to you (or make available for your review in our
office) or which shall have been filed with, and publicly available from, the
Securities and Exchange Commission (the "Commission"), with us acting either as
sole representative or as lead representative of one or more other
representatives of the underwriters named in the Underwriting Agreement (the
"Underwriters"). We, in either such capacity, and one or more other
representatives of the Underwriters as are named in the Invitation or the Final
Communication, as the case may be, are herein referred to as the
"Representatives". By your Final Acceptance, you agree and authorize us to agree
on your behalf to purchase, in accordance with the terms of the Underwriting
Agreement or any Inter-Syndicate Agreements, as the case may be, (a) the amount
of the Securities (the "Firm Securities") set forth opposite your name in the
Underwriting Agreement (which amount may exceed the amount set forth in the
Invitation or Final Communication by not more than 20% as a result of an
increase in the aggregate amount of the Securities or a reallotment of the
Securities among the Underwriters), exclusive of any Additional Securities (the
maximum amount of which, after a corresponding increase, will also be set forth
opposite your name therein), plus such amount of Securities, if any, which you
may become obligated to purchase pursuant to Section 15 hereof (the "Initial
Commitment"), plus (b) such amount of Additional Securities, if any, which you
may become obligated to purchase by reason of the exercise of the option
provided in the Underwriting Agreement, plus (c) the amount of Other Securities,
if any, which you may, subject to the limitation provided in Section 4 hereof,
become obligated to purchase by reason of purchases for your account made
pursuant to such Inter-Syndicate Agreements, less (d) such amount, if any, of
Securities as are contracted to be sold pursuant to any Delayed Delivery
Contracts ("Contract Securities") allocated to you in accordance with the last
paragraph of Section 5 hereof. The Securities which, after any such increase or
reduction of your Initial Commitment, you are obligated to purchase pursuant to
the Underwriting Agreement and such Inter-Syndicate Agreements are referred to
herein as "your Securities.
In the event that the Securities consist in whole or in part of debt
obligations maturing serially, the serial Securities being purchased by each
Underwriter pursuant to the Underwriting Agreement will consist, subject to
adjustment as provided in the Underwriting Agreement, of serial Securities of
each maturity in a principal amount which bears the same proportion to the
aggregate principal amount of serial Securities of such maturity to be purchased
by all the Underwriters as the respective principal amount of serial Securities
set forth opposite such Underwriter's name in the Underwriting Agreement bears
to the
-3-
<PAGE>
aggregate principal amount of the serial Securities to be purchased by all the
Underwriters.
3. Registration Statement and Prospectus. With respect to each Offering
of Securities, we shall either (i) provide you with the file numbers of the
registration statement and any additional registration statement pursuant to
Rule 462(b) under the Securities Act which are filed with the Commission with
respect to the Securities or (ii) as soon as practicable send to you (or make
available for your review in our office) a copy of such registration statement
and any such additional registration statement (other than any documents
incorporated by reference in either of the foregoing). Your Final Acceptance
shall constitute your acknowledgment that you are familiar with such
registration statement, as amended to the date of the Offering, including any
documents incorporated therein by reference and the forms of Underwriting
Agreement and indenture or other document describing the terms of the Securities
filed as exhibits thereto, with any such additional registration statement, as
amended to the date of the Offering, including any documents incorporated
therein by reference, with any preliminary prospectus, prospectus supplement,
prospectus, term sheet or abbreviated term sheet relating to the Securities
theretofore filed with the Commission and with the information to be set forth
in an amendment to such registration statement, any such additional registration
statement or a prospectus, prospectus supplement, term sheet or abbreviated term
sheet proposed to be filed with the Commission. Further, your Final Acceptance
shall constitute your representation that the information to be set forth in
such amendments, prospectus supplement, prospectus, term sheet or abbreviated
term sheet is correct and is not misleading insofar as it relates to you and
your consent to being named as an Underwriter therein. By your Acceptance, you
agree that, if requested by the Representatives, you will furnish a copy of any
amended preliminary prospectus, prospectus supplement, prospectus, term sheet or
abbreviated term sheet to each person to whom you shall have furnished a
previous preliminary prospectus, prospectus supplement, prospectus, term sheet
or abbreviated term sheet. By your Final Acceptance, you confirm that you have
delivered and agree that you will deliver all preliminary and final
prospectuses, all supplements thereto, and all term sheets and abbreviated term
sheets required for compliance with the provisions of Rule 15c2-8 (or any
successor provision) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
4. Authority and Compensation of Representatives. You authorize the
Representatives on your behalf (a) to execute and deliver the Underwriting
Agreement with the issuer, any Selling Securityholder and any guarantor of the
Securities with such changes therein as in their judgment will not be materially
adverse to the Underwriters (except as to the purchase price (unless the initial
offering price is to be determined by Formula Pricing) and the amount of your
Securities (except for increases
-4-
<PAGE>
in such amount permitted under Section 2 hereof)), (b) to execute and deliver
any Inter-Syndicate Agreements with the representatives or managers of such
other syndicate or syndicates (or a single underwriter), in the form that shall
have been filed with, and be publicly available from, the Commission or any such
other regulatory authority as we shall specify in the Invitation or that we
shall send to you as soon as practicable (or make available for your review in
our office), with such changes therein as in their judgment will not be
materially adverse to the Underwriters, (c) to exercise all the authority and
discretion vested in the Underwriters and in them by the provisions of the
Underwriting Agreement and any Inter-Syndicate Agreements, (d) to take all such
action as they in their discretion may deem necessary or advisable in order to
carry out the provisions of the Underwriting Agreement, of any Inter-Syndicate
Agreement and of this Agreement, and the sale and distribution of the
Securities, including the right to determine the terms of the proposed Offering,
the concession to Selected Dealers (as hereinafter defined) and the reallowance,
if any, to other dealers, the right to exercise any option in the Underwriting
Agreement relating to the purchase of Additional Securities and the right to
make any judgment relating to the satisfaction of the conditions to the
obligations of the Underwriters under the Underwriting Agreement or any Inter-
Syndicate Agreement, and (e) to determine all matters relating to the public
advertisement of the Securities.
You also authorize the Representatives on your behalf (a) to determine
whether to purchase, and, if such determination is made, to purchase, any Other
Securities for the account of the Underwriters pursuant to the terms of any
Inter-Syndicate Agreement and (b) to determine whether to sell, and, if such
determination is made, to sell, Securities for the account of the Underwriters
pursuant to any Inter-Syndicate Agreement. Any Other Securities purchased or
any Securities sold pursuant to any Inter-Syndicate Agreement shall be purchased
or sold, as the case may be, at the offering price then in effect for the
Securities less all or any part of the concession to Selected Dealers, all as
determined by the Representatives. In the event of the exercise by the
Representatives of an option to purchase any Other Securities or to sell any
Securities pursuant to any Inter-Syndicate Agreement, the Representatives shall
promptly so notify each Underwriter and advise each Underwriter of the number of
Other Securities to be purchased or the number of Securities to be sold. The
Representatives shall not, without your consent, make net purchases of Other
Securities for your account in excess of 20% of your Initial Commitment, except
as may be provided in the Invitation or Final Communication. In connection with
any Offering involving one or more Inter-Syndicate Agreements, you agree to be
bound by, and all offers to sell and sales by you of Securities shall be subject
to, such limitations on offers to sell and sales of Securities as may be
contained in the Invitation or Final Communication or in the Underwriting
Agreement or any Inter-Syndicate Agreement as executed and you
-5-
<PAGE>
further agree that any sales made by you to dealers shall be made only to such
dealers as agree, in their offers to sell and sales, to be bound by the same
limitations.
As compensation for the Representatives' services, you agree to pay to them
with respect to each Offering, and authorize them to charge your account with, a
management commission not in excess of such management fee as they shall advise
you in the Invitation or the Final Communication. If there is more than one
Representative, such compensation will be divided among the Representatives in
such proportions as they shall determine.
5. Public Offering of Securities. The sale of the Securities to the
public is to be made, as herein provided, as soon after the registration
statement relating to the Securities and any additional registration statement
relating to the Securities which may be filed with the Commission pursuant to
Rule 462(b) become effective as in the Representatives' judgment is advisable.
The purchase price to be paid by the Underwriters for the Securities and the
initial public offering price are to be determined by agreement between the
Representatives and the issuer. The Securities shall be first offered to the
public at the initial public offering price as so determined. The
Representatives will advise you by telex, telecopy, telegraph or telephone when
the Securities shall be released for offering, when the registration statement
and any additional registration statement relating to the Securities shall
become effective, the price at which the Securities are initially to be offered
and the date that payment for the Securities shall be made to the seller or
sellers pursuant to the Underwriting Agreement. You agree not to sell any of
the Securities until the Representatives have released them for that purpose.
You authorize the Representatives, after the initial public offering, to change
the public offering price, the concession and the reallowance if, in their sole
discretion, such action becomes desirable by reason of changes in general market
conditions or otherwise. The public offering price at the time in effect is
herein called the "Offering Price." After notice from the Representatives that
the Securities are released for public sale, you will offer to the public in
conformity with the provisions hereof and with the terms of the Offering set
forth in the prospectus those Securities as the Representatives advise you are
not reserved.
In the case of a Delayed Delivery Offering, you authorize the
Representatives to make all arrangements for the solicitation of offers to
purchase Securities from the issuer pursuant to Delayed Delivery Contracts. To
the extent that the Representatives in their sole discretion shall determine,
Contract Securities which have been directed by institutional investors to
particular Underwriters or which were contracted for pursuant to arrangements
made by particular Underwriters through them shall be allocated to such
Underwriters and all other Contract Securities shall be allocated to the
accounts of the respective Underwriters as nearly as practicable in proportion
to
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their respective Initial Commitments; provided, however, that the amount of
Contract Securities so allocated to any Underwriter shall not exceed such
Underwriter's Initial Commitment, and any Contract Securities which would
otherwise have been allocated to such Underwriter (the "Excess Contract
Securities") shall be allocated among the other Underwriters in such manner as
the Representatives shall, in their sole discretion, determine to be equitable
and practicable. The Representatives may pay a commission to any Selected
Dealer for services rendered in respect of Contract Securities.
6. Offering to Dealers and Retail Sales. You authorize the
Representatives to reserve for offering and sale, and on your behalf to sell, to
retail purchasers (such sales being herein called "Retail Sales") and to dealers
selected by them (such dealers, among whom any Underwriter may be included,
being herein called "Selected Dealers") all or any part of your Securities as
they, in their sole discretion, shall determine. Such sales, if any, shall be
made (a) in the case of Retail Sales, at the Offering Price, and (b) in the case
of sales to Selected Dealers, at the Offering Price less such concession or
concessions as the Representatives, in their sole discretion, shall determine.
Except for such sales as are designated by a purchaser to be for the account of
a particular Underwriter or Selected Dealer, any sales to Selected Dealers made
for your account shall be as nearly as practicable in the ratio that the
Securities reserved for your account for offering to Selected Dealers bears to
the aggregate of all Securities of all Underwriters so reserved.
The Representatives agree to notify you promptly on the date of the public
offering as to the amount of Securities, if any, which you may retain for direct
sale by you. Prior to the termination of the provisions referred to in Section
16 hereof, the Representatives may reserve for offering and sale as hereinbefore
provided any Securities theretofore retained by you remaining unsold and you
may, with their consent, retain any Securities theretofore reserved by them
remaining unsold.
You agree that, from time to time prior to the termination of the
provisions referred to in Section 16 hereof, you shall furnish to the
Representatives such information as they may request in order to determine the
amount of Securities purchased by you under the Underwriting Agreement which
then remain unsold, and you shall upon their request sell to them for the
account of any Underwriter as many of such unsold Securities as they may
designate at the Offering Price, less all or any part of the concession to
Selected Dealers as they in their sole discretion, shall determine. The
provisions of Section 7 hereof shall not be applicable in respect of any such
sale.
You authorize the Representatives to determine the form and manner of any
communications or agreements with Selected Dealers. In the event that there
shall be any agreements with Selected Dealers, the Representatives are
authorized to act as manager
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thereunder and they agree, in such event, to be governed by the terms and
conditions of such agreements.
It is understood that any Selected Dealer to whom an offer may be made as
hereinbefore provided shall be actually engaged in the investment banking or
securities business and shall be either (i) a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or (ii) a dealer
with its principal place of business located outside the United States, its
territories and its possessions and not registered as a broker or dealer under
the Exchange Act, who agrees not to make any sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein. Each Selected Dealer shall agree to comply with the
provisions of Section 24 of Article III of the Rules of Fair Practice of the
NASD, and each foreign Selected Dealer who is not a member of the NASD also
shall agree to comply with the NASD's interpretation with respect to free-riding
and withholding, to comply, as though it were a member of the NASD, with the
provisions of Sections 8 and 36 of Article III of such Rules of Fair Practice,
and to comply with Section 25 of Article III thereof as that Section applies to
a non-member foreign dealer. The several Underwriters may allow, and the
Selected Dealers, if any, may re-allow, such concession or concessions as the
Representatives may determine from time to time on sales of Securities to any
qualified dealer, all subject to the Rules of Fair Practice of the NASD.
The Representatives, and any of the several Underwriters with their prior
consent, may make purchases or sales of Securities from or to any of the other
Underwriters, at the offering Price less all or any part of the gross spread,
and from or to any of the Selected Dealers at the Offering Price less all or any
part of the concession to Selected Dealers.
Upon the request of the Representatives, you will advise them of the
identity of any dealer to whom you allow such a discount and any Underwriter or
Selected Dealer from whom you receive such a discount.
7. Repurchase in the Open Market. Any Securities sold by you (otherwise
than through the Representatives) which shall be contracted for or purchased in
the open market by the Representatives on behalf of any Underwriter or
Underwriters shall be repurchased by you on demand at a price equal to the cost
of such purchase plus commissions and taxes on redelivery. Any Securities
delivered on such repurchase need not be the identical Securities originally
sold by you. In lieu of delivery of such Securities to you, the Representatives
may sell such Securities in any manner for your account and charge you with the
amount of any loss or expense or credit you with the amount of any profit, less
any expense, resulting from such sale, or charge your account with an amount not
in excess of the concession to Selected Dealers.
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8. Delivery and Payment. Upon the request of the Representatives, you
shall deliver to them, as and at such time and place as they direct in the
Invitation or Final Communication, a certified or official bank check in such
clearing house funds as indicated therein, as payment for the Securities to be
purchased by you under the Underwriting Agreement in an amount equal to the
Offering Price for such Securities plus any accrued interest, amortization of
original issue discount or accumulated dividends required to be paid to the
seller or sellers pursuant to the Underwriting Agreement less the concession to
Selected Dealers (or, in the case of Other Securities to be purchased by you
under any Inter-Syndicate Agreement, the price specified in such Inter-Syndicate
Agreement). Such payment shall be made in such form and at such time and place
as may be specified in such request, and you authorize the Representatives to
make payment for your Securities against delivery thereof for your account
hereunder. You authorize the Representatives to accept delivery of your
Securities in definitive form upon exchange of any Securities in temporary form
received by them on the Closing Date pursuant to the preceding sentence. If you
are a member of or clear through a member of The Depository Trust Company
("DTC"), the Representatives may, in their discretion, deliver your Securities
through the facilities of DTC.
The Representatives shall remit to you, as promptly as practicable, the
amounts received by them from Selected Dealers and retail purchasers as payment
in respect of Securities sold by them for your account pursuant to Section 6
hereof for which payment has been received. Securities purchased by you under
the Underwriting Agreement and not reserved or sold by the Representatives for
your account pursuant to Section 6 hereof shall be delivered to you as promptly
as practicable after receipt by them. Any Securities purchased by you and so
reserved which remain unsold at any time prior to the settlement of accounts
hereunder may, in the Representatives' discretion, and shall, upon your request,
be delivered to you, but, until termination of the Selected Dealer agreements
pursuant to their terms, such delivery shall be for carrying purposes only. In
case any Securities reserved for sale in Retail Sales or to Selected Dealers
shall not be purchased and paid for in due course as contemplated hereby, you
agree (a) to accept delivery when tendered by the Representatives of any
Securities so reserved for your account and not so purchased and paid for, and
(b) in case you shall have received payment from the Representatives in respect
of any such Securities, to reimburse them on demand for the full amount which
they shall have paid you in respect of such Securities.
In the case of a Delayed Delivery Offering, the commission payable by the
issuer in respect of any Contract Securities allocated to you pursuant to the
last paragraph of Section 5 hereof shall be credited (after deducting any
commissions paid by the Representatives to any Selected Dealer for services
rendered
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in respect of such Contract Securities) to your account and, in addition, you
shall be treated as a Selected Dealer in respect of your Excess Contract
Securities, if any.
In the event of your failure to tender payment for Securities as provided
in the Underwriting Agreement, the Representatives shall have the right under
the provisions thereof to arrange for other persons, who may include them and
any other Underwriter, to purchase such Securities which you had agreed to
purchase, but without relieving you from liability for your default.
9. Authority to Borrow. You authorize the Representatives to advance
their funds for your account (charging current interest rates) and to arrange
loans for your account or the account of the Underwriters for the purpose of
carrying out this Agreement and the Underwriting Agreement, and in connection
therewith to execute and deliver any notes or other instruments and to hold or
pledge as security therefor all or any part of your Securities and Securities
purchased hereunder for your account. Any lender is hereby authorized to accept
the Representatives' instructions in all matters relating to such loans. Any
part of your Securities and Securities so held by the Representatives may be
delivered to you for carrying purposes and, if so delivered, will be redelivered
to them, upon demand.
10. Allocation of Expenses and Liability. You authorize the
Representatives to charge your account with and you agree to pay (a) all
transfer taxes on sales made by the Representatives for your account, except as
herein otherwise provided, and (b) your proportionate share (based on your
Initial Commitment) of all expenses incurred by the Representatives in
connection with the purchase, carrying, sale and distribution of the Securities
(including, without limitation, any expenses to be borne by the Underwriters in
accordance with any Inter-Syndicate Agreements) and all other expenses arising
under the terms of the Underwriting Agreement, this Agreement or any Inter-
Syndicate Agreements. The Representatives' determination of all such expenses
and your allocation thereof shall be final and conclusive. The Representatives
may at any time make partial distributions of credit balances or call for
payment of debit balances. Funds for your account at any time in the
Representatives' hands may be held in their general funds without accountability
for interest. As soon as practicable after such time as this Agreement shall no
longer be applicable to an Offering, the net credit or debit balance in your
account, after proper charge and credit for all interim payments and receipts,
shall be paid to or paid by you, provided that the Representatives may establish
such reserves as they, in their sole discretion, shall deem advisable to cover
possible additional expenses chargeable to the several Underwriters.
Notwithstanding any settlement, you will remain liable for any taxes on
transfers for your account and for your proportionate share (based on your
Initial Commitment) of all expenses and
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liabilities that may be incurred for the accounts of the Underwriters.
11. Liability for Future Claims. Neither any statement by the
Representatives of any credit or debit balance in your account nor any
reservation from distribution to cover possible additional expenses relating to
the Securities shall constitute any representation by them as to the existence
or nonexistence of possible unforeseen expenses or liabilities of or charges
against the several Underwriters. Notwithstanding the distribution of any net
credit balance to you or after such time as this Agreement shall no longer be
applicable to an Offering or both, you shall be and remain liable for, and will
pay on demand, (a) your proportionate share (based on your Initial Commitment)
of all expenses and liabilities which may be incurred by or for the accounts of
the Underwriters, or any of them, based on the claim that the Underwriters (and
any underwriters, representatives or managers party to any Inter-Syndicate
Agreements) constitute an association, unincorporated business, partnership or
any separate entity, and (b) any transfer taxes paid after such settlement on
account of any sale or transfer for your account.
12. Stabilization and Over-Allotment. You authorize the Representatives
on your behalf and for your account, prior to the time that this Agreement shall
cease to be applicable to an Offering, in their discretion, and without
obligating them to do so, to buy and sell Securities, or any other securities of
the issuer or any guarantor of the Securities named in the Invitation or the
Final Communication, in the open market or otherwise for either long or short
account, on such terms and at such prices as they may determine and, in
arranging for sales, to over-allot and cover such over-allotments, provided that
at no time shall your net commitment under authority of this Section, either for
long or short account, exceed an amount equivalent to 20% of the aggregate
initial offering price of your Securities to be purchased by you under the
Underwriting Agreement. The Representatives may cover any short position
incurred under the preceding sentence by purchase of Additional Securities
pursuant to the option which may be contained in the Underwriting Agreement or
otherwise. All purchases, sales and over-allotments under authority of this
Section 12 shall be for the accounts of each of the several Underwriters as
nearly as practicable in proportion to their respective Initial Commitments.
You agree to take up at cost on demand any Securities so purchased for your
account and to deliver on demand any Securities so sold or over-allotted for
your account. You also authorize the Representatives to deliver your
Securities, and any other Securities purchased by them for your account pursuant
to this Section 12, against sales made by the Representatives for your account
pursuant to any provision of this Agreement.
In the event that the Representatives effect any stabilizing purchases
pursuant to this Section 12, they will notify each Underwriter promptly of the
date and time when the first
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<PAGE>
stabilizing purchase is effected and the date and time when stabilizing is
terminated. You agree that if you effect any stabilizing purchases, you will,
not later than three business days following the day on which any such
stabilizing purchase is effected, notify the Representatives of the price, date
and time at which such stabilizing purchase was effected and you will promptly
notify them of the date and time when such stabilizing was terminated. You
authorize the Representatives to file with the Commission all notices and
reports which may be required as a result of any transactions made pursuant to
this Section 12.
You agree to advise the Representatives, from time to time upon their
request during the term of this Agreement with respect to an Offering, of the
amount of Securities retained by you or purchased by you from other Underwriters
and Selected Dealers remaining unsold, and you will, upon their request, release
to them for the accounts of one or more of the several Underwriters, such amount
of Securities as they may designate at such price, not less than the net price
to Selected Dealers nor more than the public offering price, as they may
determine.
If, pursuant to the provisions of the first paragraph of this Section 12
and prior to such time as this Agreement shall cease to be applicable to an
Offering (or such earlier date as the Representatives may have determined on
notice to the Underwriters), the Representatives purchase or contract to
purchase any Securities which were retained by or released to you for direct
sale, which Securities were theretofore not effectively placed for investment by
you, you authorize them in their discretion either to charge your account with
an amount equal to the concession to Selected Dealers with respect thereto or to
require you to repurchase such Securities at a price equal to the total cost of
such purchase, including commissions, if any, and transfer tax on the
redelivery. Securities delivered on such repurchase need not be the identical
Securities originally purchased by and delivered to you.
Upon such time as this Agreement shall cease to be applicable to an
Offering, the Representatives are authorized in their discretion, in lieu of
delivering to the several Underwriters any Securities then held for their
respective accounts pursuant to this Section 12, to sell such Securities for the
accounts of each of the Underwriters at such price or prices as they may
determine and debit or credit your account for the loss or profit resulting from
such sale.
13. Open Market Transactions. You agree that you will not make bids or
offers, or make or induce purchases or sales for your own account or the
accounts of customers, in the open market or otherwise, either before or after
the purchase of the Securities and for either long or short account, of any
security of the same class or series, or any right to purchase any such security
except (i) as provided in this Agreement, the Underwriting Agreement and the
Selected Dealer agreements or
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otherwise approved by the Representatives, (ii) in brokerage transactions not
involving solicitation of the customer's order, and (iii) in connection with
option and option-related transactions that are consistent with the "no-action"
position set forth in Release 17609 of the Commission under the Exchange Act.
You further agree that you will not lend, either before or after the purchase of
the Securities, to any customer, Underwriter, Selected Dealer or to any other
securities broker or dealer any Securities. Prior to the completion (as defined
in Rule 10b-6 under the Exchange Act) of your participation in the Offering, you
will otherwise comply with Rule 10b-6.
14. Blue Sky. Prior to the initial offering by the Underwriters, the
Representatives will inform you as to the states and other jurisdictions under
the respective securities or blue sky laws of which it is believed that the
Securities have been qualified for sale or are exempt from such qualification,
but they do not assume any responsibility or obligation as to the accuracy of
such information or as to the right of any Underwriter or dealer to offer or
sell the Securities in any state or other jurisdiction. The Representatives
agree to file or cause to be filed, on behalf of the Underwriters, a Further
State Notice in respect of the Securities pursuant to Article 23-A of the
General Business Law of the State of New York, if necessary.
15. Default by Underwriters. Default by one or more Underwriters in
respect of their obligations under this Agreement, the Underwriting Agreement or
any Inter-Syndicate Agreement, shall not release you from any of your
obligations or in any way affect the liability of any defaulting Underwriter to
the other Underwriters for damages resulting from such default. In the event of
such default by one or more Underwriters, you agree (subject to any limitations
contained in the Underwriting Agreement, any Inter-Syndicate Agreement or any
Selected Dealer agreements) to assume your proportionate share, based upon the
proportion that the amount of the Securities set forth in the Underwriting
Agreement opposite your name bears to the aggregate amount of the Securities set
forth in the Underwriting Agreement opposite the names of all non-defaulting
Underwriters, of the obligations of such Underwriter without relieving such
Underwriter of its liability therefor.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any Securities purchased
by the Representatives for their respective accounts pursuant to Section 12
hereof, or to deliver any such Securities sold or over-allotted by the
Representatives for their respective accounts pursuant to any provision of this
Agreement, and to the extent that arrangements shall not have been made by the
Representatives for other persons to assume the obligations of such defaulting
Underwriter
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<PAGE>
or Underwriters, each non-defaulting Underwriter shall assume its proportionate
share of the aforesaid obligations of each such defaulting Underwriter without
relieving any such defaulting Underwriter of its liability therefor.
16. Termination and Amendment. This Agreement may be terminated by either
party hereto upon five business days written notice to the other party;
provided, however, that with respect to any offering, if we receive any such
notice from you after your Final Acceptance, this Agreement shall remain in full
force and effect as to such Offering and shall terminate with respect to such
offering and all previous Offerings in accordance with the provisions of the
next paragraph of this Section 16.
Section 5, the second paragraph and the first sentence of the third
paragraph of Section 6, Section 7, the first sentence of Section 12 and Section
13 hereof will cease to be applicable to your participation in an Offering at
the close of business on the 30th calendar day after the Securities are first
released for public offering, unless extended or sooner terminated as
hereinafter provided. The Representatives may extend such provisions, or any of
them, for a period not to exceed 30 additional calendar days by notice to you to
such effect. The Representatives may terminate any of such provisions at any
time by notice to you, and they may terminate all such provisions with respect
to an offering at any time by notice to you to the effect that the offering
provisions with respect to an Offering of this Agreement will cease to be
applicable to such Offering.
This Agreement may be supplemented or amended by us by notice to you by
written communication and, except for supplements or amendments set forth in an
Invitation or Final Communication, any such supplement or amendment to this
Agreement shall be effective with respect to any Offering to which this
Agreement applies after the date of such supplement or amendment. Each
reference to "this Agreement" herein shall, as appropriate, be to this Agreement
as amended and supplemented.
17. General Position of the Representatives. In taking action under this
Agreement, any Underwriting Agreement or any Inter-Syndicate Agreements, the
Representatives shall act only as agent of the several Underwriters. The
Representatives' authority shall include the taking of such action as they may
deem advisable in respect of all matters pertaining to any and all offers and
sales of the Securities, including the right to make any modifications which
they consider necessary or desirable in the arrangements with Selected Dealers
or others. The Representatives shall be under no liability for or in respect of
the value of the Securities or the validity or the form thereof, the
registration statement, any additional registration statement which may be filed
with the Commission pursuant to Rule 462(b) of the Securities Act, the
prospectus, any term sheets, any abbreviated term sheets or agreements or other
instruments executed by the issuer or others; or for or in respect of the
delivery of the Securities; or for the performance by the issuer, any Selling
Securityholder, or others of any agreement on its or
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their part; nor shall we as Representatives or otherwise be liable under any of
the provisions hereof or for any matters connected herewith, except for want of
good faith, and except for any liability arising under the Securities Act; and
only obligations expressly assumed by us as Representatives herein shall be
implied from this Agreement. In representing the Underwriters hereunder, we
shall act as the Representatives of each of them respectively. Nothing herein
contained shall constitute the several Underwriters partners with us or with
each other or with any underwriters, representatives or managers party to any
Inter-Syndicate Agreements, or render any Underwriter liable for the commitments
of any other Underwriter or any underwriters, representatives or managers party
to any Inter-Syndicate Agreements, except as otherwise provided in Section 15
hereof. If the Underwriters shall be deemed to constitute a partnership for
federal income tax purposes, it is the intent of each Underwriter to be excluded
from the application of Subchapter K, Chapter 1, Subtitle A, of the Internal
Revenue Code of 1986, as amended. You shall elect to be so excluded and agree
not to take any position inconsistent with such election. You authorize us, in
our discretion, to execute and file on your behalf such evidence of election as
may be required by the Internal Revenue Service. The commitments and liabilities
of each of the several Underwriters are several in accordance with their
respective Initial Commitments and are not joint.
18. (a) Indemnity. You agree to indemnify and hold harmless us and each
other Underwriter, the officers, directors, partners, employees, agents and
counsel of us and each other Underwriter and each person, if any, who controls
us and any such other Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, and to reimburse our and
their expenses, to the extent and upon the terms that you agree to indemnify and
hold harmless the issuer and any Selling Securityholder and to reimburse their
expenses as set forth in the Underwriting Agreement.
(b) Claims Against Underwriters. You will pay, upon the
Representatives' request, as contribution, your proportionate share, based upon
the proportion that the amount of your Securities bears to the aggregate amount
of the Securities to the Offering as set forth in the Underwriting Agreement
(the "Proportionate Share"), of any loss, claim, damage or liability, joint or
several, paid or incurred by any Underwriter (including the Representatives,
individually or as representatives of the Underwriters) to any person other than
an Underwriter (including amounts paid by an Underwriter as contribution),
arising out of or based upon (i) an untrue statement or alleged untrue statement
of a material fact contained in a registration statement, any additional
registration statement which may be filed with the Commission pursuant to Rule
462(b) under the Securities Act or any amendment to either of the foregoing or
arising out of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
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the statements therein not misleading, (ii) an untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus,
prospectus, prospectus supplement, term sheet, abbreviated term sheet,
preliminary offering circular, proof of an offering circular, offering circular,
amendment or supplement to any of the foregoing, or any other selling or
advertising material used with the consent of the Representatives by the
Underwriters in connection with the sale of the Securities, or arising out of or
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and (iii) any act or omission to act
or any alleged act or omission to act by the Representatives, individually or as
representatives of the Underwriters, or by the Underwriters, as a group but not
individually, in connection with any transaction contemplated by this Agreement
or undertaken in preparing for the purchase, sale and delivery of the
Securities; and each Underwriter will pay its Proportionate Share of any legal
or other expenses reasonably incurred by the Representatives, or with their
consent, in connection with investigating or defending any such loss, claim,
damage or liability, or any action in respect thereof. In determining the amount
of any Underwriter's obligation under this paragraph, appropriate adjustment may
be made by the Representatives to reflect any amounts received by any one or
more Underwriters, pursuant to the Underwriting Agreement or otherwise, in
respect of the claim upon which such obligation is based. In respect of any
claim there shall be credited against the amount of any Underwriter's obligation
under this paragraph any loss, damage, liability or expense that is paid or
incurred by such Underwriter as a result of such claim being asserted against
it, and, if such loss, damage, liability or expense is paid or incurred by such
Underwriter subsequent to any payment by it pursuant to this paragraph,
appropriate provision shall be made to effect such credit, by refund or
otherwise. If any claim to which the provisions of this paragraph would be
applicable is asserted, the Representatives may take such action in connection
therewith as they deem necessary or desirable, including retention of counsel
for the Underwriters and separate counsel for any particular Underwriter or
group of Underwriters, and the fees and disbursements of any counsel so retained
by the Representatives shall be included in the amounts of the Underwriters'
obligations under this paragraph. The Representatives may consent to being named
as the representatives of a defendant class of underwriters. Any Underwriter may
elect to retain at its own expense its own counsel and, on advice of such
counsel and with the Representatives' consent, may settle or consent to the
settlement of any such claim. The Representatives may settle or consent to the
settlement of any such claim, on advice of counsel retained by them, with the
approval of a majority in interest of the Underwriters. Whenever any Underwriter
receives notice of the assertion of any claim to which the provisions of this
paragraph would be applicable, such Underwriter shall give prompt notice thereof
to the
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Representatives. Whenever the Representatives receive notice of the assertion
of any such claim, they shall give prompt notice thereof to each Underwriter.
The Representatives also shall furnish each Underwriter with periodic reports,
at such times as they deem appropriate, of the status of any such claim and the
action taken by them in connection therewith. In the event of the failure of
any Underwriter to fulfill its obligations under this paragraph, such
obligations may be charged against each nondefaulting Underwriters, without
relieving such defaulting Underwriter of its liability therefor. In determining
amounts payable pursuant to this paragraph, any loss, claim, damage, liability
or expense paid or incurred, and any amount received, by any person controlling
any Underwriter within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall be deemed to have been paid or incurred
or received by such Underwriter to the extent such amount has been paid or
incurred or received by reason of such control relationship. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
19. Capital Requirements. Your Acceptance will confirm that the
incurrence by you of your obligations under this Agreement and the Underwriting
Agreement will not place you in violation of the net capital requirements of
Rule 15c3-1 under the Exchange Act, of the NASD, if you are a member thereof, or
of any applicable rules relating to capital requirements of any securities
exchange to which you are subject.
20. Miscellaneous. Any notice hereunder from us to you or from you to us
shall be deemed to have been duly given if sent by registered mail, telecopy,
telegram or telex, to you at your address as set forth on the signature page of
this Agreement, or to us at 230 Park Avenue, New York, New York 10169,
Attention: Syndicate Department.
You understand that we are a member in good standing of the NASD. You
hereby confirm that you are actually engaged in the investment banking or
securities business and are either (i) a member in good standing of the NASD or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the Exchange Act who agrees not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein (except that you may participate in sales to
Selected Dealers and others under Section 6 of this Agreement). You hereby
agree to comply with the provisions of Section 24 of Article III of the Rules of
Fair Practice of the NASD, and, if you are a foreign dealer and not a member of
the NASD, you also hereby agree to comply with the NASD's interpretation with
respect to free-riding and withholding and to comply, as though you were a
member of the NASD, with the provisions of Section 8
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and 36 of Article III of such Rules of Fair Practice, and to comply with Section
25 of Article III thereof as that Section applies to a non-member foreign
dealer. In connection with sales and offers to sell Securities made by you
outside the United States, its territories and possessions (i) you will either
furnish to each person to whom any such sale or offer is made a copy of the then
current preliminary prospectus, together with any then current term sheet or
abbreviated term sheet, or the prospectus, as the case may be, or inform such
person that such preliminary prospectus and any such term sheet or abbreviated
term sheet or prospectus will be available upon request, and (ii) you will
furnish to each person to whom any such sale or offer is made such prospectus,
advertisement or other offering document containing information relating to the
Securities or the issuer as may be required under the law of the jurisdiction in
which such sale or offer is made. Any prospectus, term sheet, abbreviated term
sheet, advertisement or other offering document furnished by you to any person
in accordance with the preceding sentence and any such additional offering
material as you may furnish to any person (x) shall comply in all respects with
the law of the jurisdiction to which it is so furnished, (y) shall be furnished
at your sole risk and expense and (z) shall not contain information relating to
the Securities or the issuer or any Selling Securityholder which is inconsistent
in any respect with the information contained in the then current preliminary
prospectus or the prospectus, as the case may be.
Your Acceptance will confirm that the information that you have given or
are deemed to have given in response to the Master Underwriters' Questionnaire,
attached hereto as Exhibit A (which information will be furnished to the issuer
for use in and otherwise in connection with the registration statement, any
additional registration statement which may be filed with the Commission
pursuant to Rule 462(b) under the Securities Act, the prospectus, any term sheet
or any abbreviated term sheet) is correct. Your acceptance will also confirm
that you authorize us (i) to furnish the information that you have given or are
deemed to have given in response to the Master Underwriters' Questionnaire to
appropriate regulatory authorities and (ii) to make appropriate representations
based on such information to such regulatory authorities. You will notify us
promptly of any development which makes untrue or incomplete any information
that you have given or are deemed to have given in response to the Master
Underwriters' Questionnaire before such time as the terms of this Agreement
(other than as set forth in Section 16 hereof) cease to be applicable to an
Offering.
You agree that, if you are advised by the Representatives that the issuer
was not, immediately prior to the filing of the registration statement, subject
to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, you
will not, without their consent, sell any Securities to an account over which
you exercise discretionary authority.
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Unless you have promptly notified us in writing otherwise, your name as it
should appear in any prospectus (or any supplement thereto) and your address are
set forth on the signature page hereof.
Please confirm by signing and returning to us the enclosed copy of this
Agreement that your Acceptance or Final Acceptance, as the case may be, with
respect to an Offering shall constitute (a) your acceptance of and agreement to
the terms and conditions of this Agreement (as supplemented and amended pursuant
to Section 16 hereof), together with and subject to any supplementary terms and
conditions contained in the Invitation, the Final Communication and any other
written communication from the Representatives in connection with such Offering,
all of which shall constitute a binding agreement between you and us as
Representatives of the Underwriters and among you and the Underwriters, (b)
confirmation that your representations and warranties set forth in this
Agreement are true and correct as of the times or for the periods specified
therein and that your agreements set forth in this Agreement have been and will
be performed by you to the extent and at the times required thereby and (c)
acknowledgment of your familiarity with the offering documents, as set forth in
Section 3 hereof, with respect to such Offering.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
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<PAGE>
Please confirm that the foregoing correctly states the understanding
between us by signing and return to us a counterpart hereof.
Very truly yours,
FURMAN SELZ LLC
By: _______________________
Confirmed as of the date
first above written:
_________________________
(NAME OF UNDERWRITER)
By:______________________
Title:
(If signer is not an officer
or partner, please attach
evidence of authorization.)
Address: ___________________________
___________________________
___________________________
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<PAGE>
Exhibit A
MASTER UNDERWRITERS' QUESTIONNAIRE
----------------------------------
The terms used and not otherwise defined herein shall have the meanings
assigned thereto in the Master Agreement Among Underwriters, dated October 1,
1992, between you and Furman Selz LLC. Reference will be made to this Master
Underwriters' Questionnaire in each Invitation or Final Communication described
in Section 1 of the Master Agreement Among Underwriters received by you from
Furman Selz LLC in connection with offerings of securities in which Furman Selz
LLC is acting as sole or lead representative of the several Underwriters. Your
Acceptance of any such Invitation should respond to this Master Underwriters'
Questionnaire.
Except as indicated in your Acceptance with respect to the Securities:
(1) neither you nor any of your directors, officers or partners have
(nor have you or they had within the last three years) a material
relationship (as "material" is defined in Regulation C under the Securities
Act) with the issuer, its parent (if any), any other Selling Securityholder
or any guarantor, nor are you an affiliate of (within the meaning of the
By-laws of the NASD), controlled by, controlling or under common control
with the issuer;
(2) neither you nor any of your directors, officers or partners,
separately or as a group, owns of record or beneficially more than 5% of
any class of voting securities of the issuer, its parent (if any), any
other Selling Securityholder or any guarantor.
(3) if the Securities are to be issued under an indenture to be
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"):
(a) neither you nor any of your directors, officers or partners
is an affiliate (as "affiliate" is defined in Rule 0-2 under the Trust
Indenture Act) of the Trustee or its parent (if any) and neither the
Trustee nor its parent (if any) nor any of their directors or
executive officers is a "director, officer, partner, employee,
appointee or representative" of yours (as such terms are defined in
the Trust Indenture Act or in the relevant instructions to Form T-1
thereunder);
(b) neither you nor any of your directors, partners or executive
officers beneficially owned, as of the date specified in Item 7 on
Form T-1 or now own, separately or as a group more than 1% of the
<PAGE>
outstanding shares of any class of voting securities of the Trustee or
its parent (if any); and
(c) if you are a corporation, you do not have outstanding nor
have you assumed or guaranteed any securities issued otherwise than in
your present corporate name, and neither the Trustee nor its parent
(if any) is a holder of such securities;
(4) other than as is, or is to be, stated in the registration
statement, the Master Agreement Among Underwriters, the Underwriting
Agreement and the Furman Selz Selected Dealer Agreement relating to the
proposed offering, you do not know or have reason to believe that (a) there
are any discounts or commissions to be allowed or paid to underwriters or
any other items that would be deemed by the NASD to constitute underwriting
compensation for purposes of the NASD's Rules of Fair Practice, (b) there
are any discounts or commissions to be allowed or paid to dealers,
including any cash, securities, contracts or other consideration to be
received by any dealer in connection with the sale of the Securities, (c)
there is an intention to over-allot or (d) the price of any security may be
stabilized to facilitate the offering of the Securities.
(5) any proposed commitment you may make to purchase Securities will
not result in a violation of the financial responsibility requirements of
Section 15(c)(3) of the Exchange Act or the rules and regulations
thereunder, including Rule 15c3-1, or any provisions of the applicable
rules of the NASD or of any securities exchange to which you are subject or
of any restrictions imposed upon you by the NASD or any such exchange;
(6) neither you nor any related person (as defined by the NASD) has
(a) purchased any warrants, options or other securities of the issuer
within the preceding 12 months or (b) had any other dealings with the
issuer within the preceding 12 months as to which documents or other
information is required to be furnished to the NASD, and except as stated
in the registration statement relating to the Securities, as such may have
been or be amended, you have no knowledge of any private placement of the
issuer's Securities within the preceding 18 months; and
(7) you have not prepared nor had prepared for you any report or
memoranda for external use by you in connection with the proposed offering
of the Securities, and if the registration statement relating to the
Securities is on Form S-1, you have not prepared any engineering,
management or similar reports or memoranda relating to broad aspects of the
business, operations or products of the issuer within the past 12 months
(except for reports solely comprised of recommendations to buy, sell or
hold the securities of the
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<PAGE>
issuer which recommendations have not changed within the past six months).
(If any such report or memorandum has been prepared, furnish to Furman Selz
LLC (a) three copies thereof and (b) a statement as to the actual or
proposed use, identifying (i) each class of persons (institutional mailing
lists, retail clients, etc.) which has received or will receive such
material, (ii) the number of copies distributed to each such class and
(iii) the period of distribution.
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FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
Master Selected Dealer Agreement
January 2, 1996
Gentlemen:
In connection with certain public offerings of securities after the date
hereof for which we are acting as representative or one of the representatives
of the members of the underwriting syndicate, we may invite you to participate
as a selected dealer. This will confirm our mutual agreement as to the general
terms and conditions applicable to such participation.
1. Applicability of this Agreement. From time to time on or after the date
hereof we may be responsible (acting for our own account or for the account of
an underwriting or similar group or syndicate) for managing or otherwise
implementing the sale to selected dealers ("Selected Dealers") of securities
offered publicly pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the "Securities Act"), or offered pursuant to an
exemption from registration thereunder. The terms and conditions of this
Agreement shall be applicable to any such offering in which we have invited you
to participate as a Selected Dealer and have expressly informed you that the
terms and conditions of this Agreement shall apply. This Agreement shall not
apply to any offering of securities effected wholly outside the United States of
America. Any offering to which the terms and conditions of this Agreement apply
is herein referred to as an "Offering", and the securities offered in an
Offering are herein referred to as the "Securities" with respect to such
Offering. In the case of any Offering in which we are acting for the account of
an underwriting or similar group or syndicate ("Underwriters"), the terms and
conditions of this Agreement shall be for the benefit of, and binding upon, such
Underwriters, including, in the case of any Offering in which we are acting with
others as representatives of Underwriters, such other representatives. Some or
all of the Underwriters in any Offering may be included among the Selected
Dealers.
The following provisions of this Agreement shall apply separately to each
Offering.
2. Conditions of Offering; Acceptance and Purchase. Any Offering will be
subject to delivery of the Securities and their acceptance by us and any other
Underwriters, will be subject to
<PAGE>
prior sale, to the approval of all legal matters by counsel and the satisfaction
of other conditions, and may be made on the basis of a reservation of Securities
or an allotment against subscription. We reserve the right to reject any
acceptance in whole or in part, to make allotments and to close the subscription
books at any time without notice. You agree to act as principal in purchasing
any Securities.
We shall invite you to participate in an Offering and in connection
therewith shall advise you of the particular method and supplementary terms and
conditions of the Offering (including the amount of Securities to be allotted to
you, the amount of Securities reserved for purchase by the Selected Dealers, the
period of such reservation and the information as to prices and offering date
referred to in Section 3(b) hereof). Such invitation and additional
information, to the extent applicable and then determined, shall be conveyed to
you in a telecopy, telex or other written form of communication (any
communication in any such form being herein referred to as a "written
communication"). Such written communication will include instructions for
advising us of your acceptance of such invitation. Any such additional
information, to the extent applicable but not determined at the time such
invitation is conveyed to you, will be conveyed to you in a subsequent written
communication. To the extent such supplementary terms and conditions are
inconsistent with any provision herein, such terms and conditions shall
supersede any such provision, and you, by your acceptance, shall be bound
thereby. If we have received your acceptance, a subsequent written
communication from us shall state that you may reject your allotment of
Securities by notifying us prior to the time and in the manner specified in such
written communication. Unless otherwise indicated in any such written
communication, acceptances and other communications by you with respect to an
Offering should be sent to Furman Selz LLC, 230 Park Avenue, New York, New York
10169, Attention: Syndicate Department.
Unless you are notified otherwise by us, Securities purchased by you shall
be paid for on such date as we shall determine on one day's prior notice to you,
by certified or official bank check or checks drawn on a New York Clearing House
bank and payable in next day funds, in an amount equal to the Offering Price (as
hereinafter defined) or, if we shall so advise you, at such Offering Price less
the Concession (as hereinafter defined), and payable to or upon the order of
Furman Selz LLC, 230 Park Avenue, New York, New York 10169, against delivery of
the Securities. If Securities are purchased and paid for at such Public
Offering Price, such Concession will be paid after the termination of the
provisions of Section 3(b) hereof with respect to such Securities.
Unless you are notified otherwise by us, payment for and delivery of
Securities purchased by you shall be made through the facilities of The
Depository Trust Company, if you are a member,
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<PAGE>
unless you have otherwise notified us within one day after the date the
Securities are first released for public offering or, if you are not a member,
settlement may be made through a correspondent who is a member pursuant to
instructions you may send to us on or before the third business day preceding
the closing for the sale of the Securities.
3. Offering Documents.
(a) Registration Statement and Prospectus. With respect to each Offering of
Securities, we shall provide you with such number of copies of any
prospectus subject to completion, the prospectus, any term sheet, any
abbreviated term sheet and any amendment or supplement to any of the
foregoing as you may reasonably request for the purposes contemplated by
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the applicable rules and regulations of the Securities
and Exchange Commission (the "Commission") thereunder. You shall
familiarize yourself with the terms of the Securities and the other terms
of the Offering reflected in any such preliminary prospectus, prospectus,
term sheet, abbreviated term sheet, amendment or supplement. You agree
that in purchasing Securities in an Offering you will rely upon no
statements whatsoever, written or oral, other than the statements in the
prospectus and any term sheet or abbreviated term sheet delivered to you by
us. You understand that you will not be authorized by the issuer or any
seller other than the issuer, any guarantor or any insurer of Securities to
give any information or to make any representation not contained in a
preliminary prospectus, the prospectus or any term sheet or abbreviated
term sheet, as amended or supplemented, in connection with the Offering of
such Securities. You represent and warrant that you are familiar with
Securities Act Release No. 4968 and Rule 15c2-8 under the Exchange Act (or
any successor release or provision) and any applicable foreign laws (and
any applicable rules and regulations thereunder) and agree that you will
deliver all preliminary prospectuses, prospectuses, term sheets and
abbreviated term sheets required for compliance therewith. You agree to
make a record of your distribution of each preliminary prospectus,
prospectus, term sheet and abbreviated term sheet (including dates, numbers
of copies and persons to whom sent) and you shall, if requested by us,
furnish a copy of an amended or supplemented preliminary prospectus,
prospectus, term sheet or abbreviated term sheet to each person to whom you
have furnished a previous preliminary prospectus, prospectus, term sheet or
abbreviated term sheet and, if also requested by us, indicate to each such
person the changes reflected in such amended or supplemented preliminary
prospectus, prospectus, term sheet or abbreviated term sheet.
(b) Offer and Sale to the Public. With respect to any Offering of Securities,
we shall inform you by a written communication of the initial public
offering price, if any, the selling concession to Selected Dealers, the
reallowance (if any)
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<PAGE>
to other dealers and the time when you may commence selling Securities to
the public. After such public offering has commenced, we may change the
public offering price, the selling concession and the reallowance. The
public offering price, selling concession and reallowance (if any) at any
time in effect with respect to an Offering are hereinafter referred to,
respectively, as the "Offering Price," the "Concession" and the
"Reallowance." With respect to each Offering of Securities, until the
provisions of this Section 3(b) shall be terminated pursuant to Section 4
hereof, you agree to offer Securities to the public only at the Offering
Price, except that if a Reallowance is in effect, a reallowance from the
Offering Price not in excess of such Reallowance may be allowed. If such
Offering is subject to the By-Laws, rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD"), such Reallowance may
be allowed only as consideration for services rendered in distribution to
dealers which are actually engaged in the investment banking or securities
business, which execute the written agreement prescribed by Section 24(c)
of Article III of the Rules of Fair Practice of the NASD and which are
either members in good standing of the NASD or are foreign banks, dealers
or institutions not eligible for membership in the NASD who represent to
you that they will promptly reoffer such Securities at the Offering Price
and will abide by the conditions with respect to foreign banks, dealers and
institutions set forth in Section 3(d) hereof. Any dealer which is allowed
any Reallowance hereby agrees that such amount will be retained and not
reallowed in whole or in part. Upon our request, you will advise us of the
identity of any dealer to which you allowed a Reallowance and any
Underwriter or dealer from which you received a Reallowance.
(c) Over-allotment; Stabilization; Unsold Allotments. We may, with respect to
any Offering, be authorized (i) to over-allot in arranging for sales of
Securities to Selected Dealers and to institutions and other retail
purchasers and, if necessary, to purchase Securities or other securities of
the issuer at such prices as we may determine for the purpose of covering
such over-allotments and (ii) for the purpose of stabilizing the market in
the Securities, to make purchases and sales of Securities or of any other
securities of the issuer or any guarantor or insurer of the Securities as
we may advise you by written communication or otherwise, in the open market
or otherwise, for long or short account, on a when-issued basis or
otherwise, at such prices, in such amounts and in such manner as we may
determine. You agree that upon our request at any time and from time to
time prior to the termination of the provisions of Section 3(b) hereof with
respect to any Offering, you will report to us the amount of Securities
purchased by you pursuant to such Offering which then remain unsold by you
and will, upon our request at any such time, sell to us for our account or
the account of one or more Underwriters such amount of such unsold
Securities as we may designate at the Offering Price less an amount to be
determined by us not in excess of the Concession.
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<PAGE>
If, prior to the later of (i) the termination of the provisions of Section
3(b) hereof with respect to any Offering or (ii) the covering by us of any
short position created by us in connection with such Offering for our
account or the account of one or more Underwriters, we purchase or contract
to purchase for our account or the account of one or more Underwriters in
the open market or otherwise any Securities purchased by you under this
Agreement as part of such Offering, you agree to pay us on demand an amount
equal to the Concession with respect to such Securities (unless you shall
have purchased such Securities pursuant to Section 2 hereof at the Offering
Price, in which case we shall not be obligated to pay such Concession to
you pursuant to Section 2) plus, in each case, transfer taxes, broker's
commissions or dealer's mark-ups, if any, and accrued interest,
amortization of original issue discount or accumulated dividends, if any,
paid in connection with such purchase or contract to purchase.
(d) NASD. The provisions of this Section 3(d) shall apply to any Offering
subject to the By-Laws, rules and regulations of the NASD.
You represent and warrant that you are a dealer actually engaged in the
investment banking or securities business and you are either a member in good
standing of the NASD or, if you are not such a member, you are a foreign bank,
dealer or institution not eligible for membership in the NASD which agrees to
make no sales within the United States of America, its territories or
possessions or to persons who are citizens thereof or residents therein (other
than through us) and to comply with all applicable rules of the NASD, including
the NASD's Interpretation with Respect to Free-Riding and Withholding, in making
sales outside the United States of America. You agree that, in connection with
any purchase or sale of any of the Securities wherein a selling concession,
discount or other allowance is received or granted, (i) you will comply with the
provisions of Section 24 of Article III of the NASD's Rules of Fair Practice and
(ii) if you are a non-NASD member broker or dealer in a foreign country, you
will also comply, (A) as though you were an NASD member, with the provisions of
Sections 8 and 36 thereof and (B) with Section 25 thereof as that Section
applies to a non-NASD member broker or dealer in a foreign country. You
represent that you are fully familiar with the above provisions of the Rules of
Fair Practice of the NASD.
You represent, by your participation in an Offering, that neither you nor
any of your directors, officers, partners or "persons associated with" you (as
defined in the By-Laws of the NASD) nor, to your knowledge, any "related person"
(as defined in the By-Laws of the NASD, which definition includes counsel,
financial consultants and advisors, finders, members of the selling or
distribution group, and any other persons associated with or related to any of
the foregoing) or any broker-dealer (i) within the last eighteen months has
purchased in private transactions, or intends before, at or within six months
after
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<PAGE>
the commencement of the public offering of the Securities, to purchase in
private transactions, any securities (including warrants or options) of the
issuer, its parent (if any), any guarantor or insurer of the Securities or any
subsidiary of any of the foregoing or (ii) within the last twelve months had any
dealings with the issuer, any guarantor or insurer of the Securities, any seller
other than the foregoing or any subsidiary or controlling person of any of the
foregoing (other than in connection with the syndicate agreements relating to
such Offering) as to which documents or information are required to be filed
with the NASD pursuant to its Interpretation with Respect to Review of Corporate
Financing.
If we inform you that the NASD views the Offering as subject to Schedule E
to the By-Laws of the NASD, you agree that you shall, to the extent required,
offer the Securities in compliance with such Schedule and the NASD's
interpretation thereof.
If we inform you that the NASD views the Securities as interests in a
direct participation program, you agree that you shall, to the extent required,
offer the Securities in compliance with the NASD's interpretation of Appendix F
of its Rules of Fair Practice.
(e) Relationship among Underwriters and Selected Dealers. We shall have full
authority to take such action as we may deem advisable in respect of all
matters pertaining to an Offering. We may buy Securities from or sell
Securities to any Underwriter or Selected Dealer and, with our consent, the
Underwriters (if any) and the Selected Dealers may purchase Securities from
and sell Securities to each other at the Offering Price less all or any
part of the Concession. You are not authorized to act as agent for us or
any Underwriter or the issuer, any seller other than the issuer, or any
guarantor or insurer of any Securities in offering Securities to the public
or otherwise.
Neither we nor any Underwriter shall be under any obligation to you except
for obligations assumed hereby or in any written communication from us to you in
connection with an Offering. Furthermore, neither we nor any Underwriter shall
be under any liability for or in respect of the validity, value or delivery of,
or title to, any Securities or any securities issuable upon exercise, conversion
or exchange of any Securities; the form of, or the statements contained in, or
the validity of the registration statement, any preliminary prospectus, the
prospectus, any amendment or supplement to any of the foregoing or any materials
incorporated by reference in any of the foregoing or any letters or instruments
executed by or on behalf of the issuer, any seller other than the issuer, any
guarantor or insurer of the Securities or any other party; the form or validity
of any contract or agreement under which any Securities may be issued or which
governs the rights of holders of any Securities; the form or validity of any
agreement for the purchase of the Securities, any agreement among underwriters;
the
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<PAGE>
performance by the issuer, any seller other than the issuer, any guarantor
or insurer of the Securities and any other parties of any agreement on its or
their parts; the qualification for sale in any jurisdiction of any Securities or
securities issuable upon exercise, conversion or exchange of any Securities or
the legality for investment of the Securities or such securities under the laws
of any jurisdiction; or any matter in connection with any of the foregoing;
provided, however, that nothing in this paragraph shall be deemed to relieve us
or any Underwriter from any liability imposed by the Securities Act.
Nothing herein contained or in any written communication from us shall
constitute the Selected Dealers an association or partners with us or any
Underwriter or with one another or, in the case of an Offering involving the
public distribution of the Securities through two or more underwriting
syndicates, with any underwriter or manager participating in any such syndicate.
If the Selected Dealers, among themselves or with the Underwriters and/or such
other underwriters or managers, should be deemed to constitute a partnership for
federal income tax purposes, then you elect to be excluded from the application
of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as
amended, and agree not to take any position inconsistent with that election.
You authorize us, in our discretion, to execute and file on your behalf such
evidence of that election as may be required by the Internal Revenue Service.
In connection with an Offering you shall be liable for your proportionate amount
of any tax, claim, demand or liability that may be asserted against you alone or
against one or more Selected Dealers participating in such Offering, or against
us or the Underwriters and/or such other underwriters or managers, if any, based
upon the claim that the Selected Dealers, or any of them, constitute an
association, an unincorporated business or other entity, including, in each
case, your proportionate share of any expense incurred in defending against any
such tax, claim, demand or liability.
(f) Legal Qualifications. It is understood that neither we nor any Underwriter
assumes any responsibility with respect to the right of any Selected Dealer
to offer or to sell Securities in any jurisdiction, notwithstanding any
"Blue Sky" memorandum or survey or any other information that we or any
other Underwriter may furnish as to the jurisdictions under the securities
laws of which it is believed the Securities may be sold. You authorize us
to file with the Department of State of the State of New York a Further
State Notice with respect to the Securities, if necessary.
If you propose to offer Securities outside the United States of America,
its territories or its possessions, you will take, at your own expense and risk,
such action, if any, as may be necessary to comply with the laws of each foreign
jurisdiction in which you propose to offer Securities.
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<PAGE>
(g) Compliance with Law. You agree that in selling Securities pursuant to any
Offering (which agreement shall also be for the benefit of the issuer, any
seller other than the issuer and any guarantor or insurer of such
Securities) you will comply with the applicable provisions of the
Securities Act and the Exchange Act, the applicable rules and regulations
of the Commission thereunder, the applicable rules and regulations of the
NASD, the applicable rules and regulations of any securities exchange or
other self-regulatory organization having jurisdiction over the offering
and the applicable federal, state or foreign laws, rules and regulations
specified in Section 3 hereof.
You represent and agree that in connection with each Offering to which this
Agreement applies, you will comply with the provisions of Rule l0b-6 (or any
successor provision) under the Exchange Act, as amended or interpreted from time
to time by the Commission. You represent that you are fully familiar with the
provisions of said Rule.
4. Termination. This Agreement may be terminated by either party hereto upon
five business days' written notice to the other party; provided, however, that
with respect to any Offering, if we receive any such notice from you after you
have agreed to participate as a Selected Dealer in any Offering, this Agreement
shall remain in full force and effect as to such Offering and shall terminate
with respect to such Offering in accordance with the provisions of the following
paragraph.
Unless this Agreement or any provision hereof is earlier terminated by us,
and except as we may advise you in a written communication, the terms and
conditions of this Agreement will cease to be applicable to your participation
in an Offering at the close of business of the thirtieth day after the date the
Securities are first released for public offering, but in our discretion may be
extended by us by written communication for a further period or periods not
exceeding an aggregate of thirty days; provided, however, that the provisions of
this Agreement that contemplate obligations surviving the termination of its
effectiveness shall survive such termination with respect to any Offering.
5. Amendments. This Agreement may be amended or supplemented by us by written
notice to you and without need for further action on your part and, except for
amendments or supplements set forth in a written communication to you relating
solely to a particular Offering, any such amendment or supplement to this
Agreement shall be effective with respect to any Offering effected after this
Agreement is so amended or supplemented. Each reference herein to "this
Agreement" shall, as appropriate, be to this Master Selected Dealer Agreement as
so amended or supplemented.
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6. Successors and Assigns. This Agreement shall be binding on, and inure to
the benefit of, the parties hereto and the other persons specified in Sections 1
and 3 hereof, and the respective successors and assigns of each of them.
7. Applicable Law. This Agreement and the terms and conditions set forth
herein with respect to any Offering, together with such supplementary terms and
conditions with respect to such Offering as may be contained in any written
communication to you in connection therewith, shall be governed by and construed
in accordance with the laws of the State of New York.
8. Notices. Any notice from us to you shall be deemed to have been duly given
if conveyed to you by written communication or telephone at the address set
forth at the end of this Agreement, or at such other address as you shall have
advised us in writing. Any notice from you to us shall be deemed to have been
duly given if conveyed to us by written communication or telephone at 230 Park
Avenue, New York, New York 10169, Attention: Syndicate Department.
Please confirm, by signing and returning this Agreement to us, your
acceptance of and agreement to the terms and conditions of this Agreement (as
amended and supplemented from time to time pursuant to Section 5 hereof),
together with and subject to any supplementary or alternative terms and
conditions contained in any written communication from us in connection with any
offering, all of which shall constitute a binding agreement between you and us,
individually or as representative of any Underwriters. Your subscription to, or
your acceptance of any reservation of any Securities pursuant to an Offering
shall constitute (i) confirmation that your representations and warranties set
forth in this Agreement are true and correct as of the times or for the persons
specified herein, (ii) confirmation that your agreements set forth in this
Agreement have been and will be fully performed by you to the extent and at the
times
-9-
<PAGE>
required hereby and (iii) acknowledgment that you have requested and received
from us sufficient copies of each preliminary prospectus and the prospectus with
respect to such Offering in order to comply with your undertakings in Section
3(a) hereof.
Very truly yours,
FURMAN SELZ LLC
By: ___________________________
CONFIRMED as of the date
first above written:
_____________________________________________
By: _________________________________________
(If signer is not an officer or partner,
please attach evidence of authorization.)
Title: ______________________________________
Address: ____________________________________
____________________________________
____________________________________
____________________________________
-10-
<PAGE>
AMENDMENT NUMBER 2
TO
AGREEMENT OF MERGER
This Amendment Number 2 to Agreement of Merger is entered into this 26th
day of April, 1996 by and between Medallion Financial Corp. ("MFC"), a Delaware
---
corporation, and Tri-Magna Corporation ("TMC"), a Delaware corporation.
---
Reference is hereby made to the Agreement of Merger dated December 21, 1995, as
amended by Amendment Number 1 dated February 22, 1996, between MFC and TMC (the
"Merger Agreement"), pursuant to which TMC shall be merged with and into MFC.
----------------
Capitalized terms used in this Amendment that are not defined herein shall have
the same meanings as contained in the Merger Agreement.
MFC and TMC desire to amend the Merger Agreement in order to allow TMC to
pay certain dividends to its stockholders and to extend the time for performance
set forth in Section 7.1 of the Merger Agreement. Accordingly, in consideration
of the mutual promises and covenants contained in the Merger Agreement, as
amended hereby, MFC and TMC hereby agree as follows:
1. Amendments. The Merger Agreement is hereby amended as follows:
----------
a. Paragraph (1) of subparagraph 4.1.2 is hereby deleted and
replaced with the following:
"(1) TMC from declaring and paying (i) dividends to the holders
of TMC Stock from current earnings (reduced by any non-deductible
amounts payable by TMC pursuant to Section 8.3(i) or (iii)) in
accordance with TMC's customary practices and to the extent necessary
to preserve its tax status as a "regulated investment company" under
Subchapter M of the Code (which may include a special dividend of such
earnings (as so reduced) paid prior to the Closing), (ii) an
additional special dividend to the holders of TMC Stock of $0.50 per
share, and (iii) an additional special dividend in an amount equal to
the accumulated net earnings, if any, of Medallion Taxi Media, Inc.
from its inception to the date of Closing (and MFC agrees to cause the
Surviving Corporation to promptly pay following the Effective Time any
dividend declared by TMC which is permitted hereunder and which has
not been paid prior to the Effective Time);"
b. Subparagraph (g) of Section 7.1 is hereby deleted and replaced
with the following:
<PAGE>
(g) "by either party if, without fault of such party, the
Effective Time shall not have occurred by June 30, 1996, which
date may be extended by mutual agreement of the parties."
2. Entire Agreement. The Merger Agreement, as amended hereby, remains in
----------------
full force and effect and embodies the entire agreement and understanding
between the parties thereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
3. Counterparts. This Amendment may be executed simultaneously in any
------------
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment under
seal as of the day and year first above written.
MEDALLION FINANCIAL CORP.
By: /s/ Andrew Murstein
-------------------
TRI-MAGNA CORPORATION
By: /s/ Stanley Kreitman
--------------------
<PAGE>
FORM OF
PROMISSORY NOTE
(SINGLE PAYMENT - DEMAND OR TIME)
(FIXED RATE OF INTEREST)
[DATE]
$ ____________
__ days after date, for value received, the undersigned promise(s) to pay
ISRAEL DISCOUNT BANK OF NEW YORK (hereinafter called the "Bank") or order, at
its 511 Fifth Avenue Branch Office in New York, NY, in lawful money of the
United States _________________ Dollars _____________ with interest from the
date of this note to maturity (whether as stated above or by acceleration) or
demand at the rate of ___ per cent per annum (on the basis of a 360-day year and
actual number of days elapsed) but in no event in excess of the maximum rate
permitted by applicable law, payable monthly commencing _____________ and
continuing on the same day of each calendar month thereafter and at maturity and
with interest from and after maturity (whether as stated or by acceleration) or
demand at a rate of 2% per annum above the foregoing rate until paid in full or
if such rate shall not be lawful with respect to the undersigned at the highest
lawful rate then in effect.
As security for this note and all other liabilities of the undersigned to
the bank, the undersigned and any endorser of this note hereby give(s) the Bank
a continuing lien and/or right of set-off upon any and all deposit balances now
or hereafter maintained, any and all securities and other property of the
undersigned and any endorser and the proceeds thereof now or hereafter coming
into possession or control of the Bank, hereby authorizing the Bank at any time,
without prior notice, to appropriate and apply such deposits or the proceeds of
the sale of such securities or other property to any of such liabilities,
although contingent and although unmatured, it being understood that the Bank
shall be under no obligation to effect any such appropriation and application.
The unpaid balance of this note shall, at the option of the Bank, become
immediately due and payable with or without notice or demand, upon the happening
of any one of the following specified events, with respect to any one of the
undersigned, or with respect to any endorser or guarantor of this note: (i)
failure to pay any amount when due as herein agreed, (ii) the making of any
misrepresentation for the purpose of obtaining the loan evidenced by this note,
(iii) default in the payment or performance of any other obligation to the Bank,
(iv) death, (v) insolvency (however evidenced) or the commission of any act of
insolvency, (vi) the making of a general assignment for the benefit of
creditors, (vii) the filing of any petition or the commencement of any
proceeding by or against any of the undersigned or any such endorser or
guarantor for any relief under any bankruptcy or insolvency laws or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions or extensions, (viii) any proceeding, procedure or
remedy supplementary to, or in enforcement of judgements, or any writ or order
of attachment or garnishment is issued,
<PAGE>
made, resorted to or commenced against, or with respect to, any property of the
undersigned or any endorser or guarantor hereof, (ix) such a change in the
financial condition or affairs (personal or otherwise) which, in the opinion of
the Bank, impairs the collectibility of this note or increases its risk, (x)
suspension with or without cause of the transaction of the usual business or
employment, (xi) cancelling, removing or permitting to be concealed or removed
any property, with intent to hinder, delay or defraud creditors: (xii) making or
suffering a transfer of any property, which is fraudulent under the law of any
applicable jurisdiction.
Each of the undersigned and any endorser hereof agree that if an attorney
is used to enforce to collect this note a reasonable attorney's fee and legal
expenses shall be added hereto.
Each of the undersigned and any endorser hereof in any litigation (whether
or not arising out of or relating to this note or any other obligation or
liability of the undersigned to the Bank) in which the Bank and any of them
shall be adverse parties, waives trial by jury and the right to interpose any
defense, set off counterclaim of any nature or description.
Each of the undersigned and each member of any undersigned partnership,
shall be jointly and severally liable hereunder.
The Bank shall not by any act, delay or omission or otherwise be deemed to
have waived any rights or remedies hereunder. No waiver shall be valid unless
signed by the Bank. Any waiver by the Bank on any occasion shall not bar any
right or remedy which the Bank would otherwise have had on any future occasion.
No executory agreement unless signed by the Bank, and no course of dealing
between the undersigned and the Bank shall be effective to modify or discharge,
in whole or part, this note. All rights and remedies of the Bank shall be
cumulative and may be exercised singly or concurrently.
This note and the provisions hereof are to be binding upon the heirs,
executors, administrators, assigns or successors of the undersigned; they shall
continue in force notwithstanding any change in any partnership party hereto,
whether such change occurs through death, retirement or otherwise; and they are
to be construed according to and governed by the laws of the State of New York.
EDWARDS CAPITAL COMPANY
BY:
------------------------
NO:____________DUE: __________
<PAGE>
FORM OF SECURED NOTE
New York
------------- --
days after date for value received, undersigned, jointly and severally,
promises to pay to the order of STERLING NATIONAL BANK AND TRUST COMPANY OF NEW
YORK ("Bank") at any of its banking offices in New York ____________________
00/100 DOLLARS with interest from date on the unpaid principal hereof until
maturity (whether as stated or by acceleration) or demand, according to the
tenor hereof, at a rate of _______% per annum payable monthly or on maturity
whichever is sooner, and after maturity or demand at a rate per annum equal to
2% above the aforesaid contractual rate until such principal is paid in full.
When undersigned is a corporation or when the loan evidenced by this note
complies with Section 108(3) of the New York Banking Law, interest shall be
calculated on the basis of a 360-day year for actual days elapsed.
As collateral security for payment of any and all obligations of
undersigned to Bank (including this note and any renewals, extensions or
modifications thereof), whether now existing or hereafter incurred, originally
contracted with Bank or with others, absolute or contingent, secured or not
secure, matured or not matured, (all of the foregoing, including those
obligations of undersigned in which Bank may acquire a participation,
hereinafter collectively called "Obligations"), undersigned hereby grants Bank a
security interest in, assigns and deposits with Bank or its agents, the
following property and all renewals, extensions, proceeds and products thereof
and substitution therefor:
See Schedule A attached hereto.
In order further to secure the payment of Obligations, Bank is hereby given
a security interest, continuing lien and right of set-off upon all property of
undersigned, and all renewals, extensions, proceeds and products thereof and
substitutions therefor, now or hereafter actually or constructively held or
received by or for the Bank for any purpose, including safekeeping, custody,
pledge, transmission and collection, and Bank shall have a security interest,
continuing lien and right of set-off for the amount of Obligations upon all of
undersigned's deposits (general and special) and credits with Bank. (All of the
foregoing, together with any property in which Bank now or hereafter shall be
granted a security interest, are hereinafter individually and collectively
called "Collateral Security".) Bank is hereby authorized at any time or times
without notice to apply all or part of such deposits or credits to Obligations
and in such amounts as Bank may elect, although Obligations may be contingent or
unmatured and whether or not the Collateral Security therefor is deemed
adequate.
If undersigned, as registered holder of Collateral Security becomes
entitled to or receives, (i) any interest, dividend or other distribution in
cash or other property from the issuer, or in connection with the dissolution or
liquidation of the issuer of such Collateral Security or (ii) any stock
certificate, option or right, whether as an addition to, in substitution of, or
in exchange for, such Collateral Security, or otherwise, undersigned agrees to
accept same in trust as Bank's agent, and forthwith to deliver same to Bank in
the exact form received, with undersigned's endorsement or assignment when
necessary, to be held by Bank as Collateral Security.
Undersigned waives protest, demand for payment, notice of default or non-
payment to any party liable upon or any guarantor, surety or indemnitor for
Obligations or Collateral
<PAGE>
Security. Undersigned consents that the obligation of any party for or upon
Obligations or Collateral Security may from time to time, in whole or in part,
be renewed, extended, modified, accelerated, compromised, settled or released by
Bank, and that any Collateral Security may from time to time be exchanged, sold,
released or surrendered by Bank, without any notice to, or assent by, or
reservation of rights against undersigned, and without affecting the liability
of undersigned upon obligations. Bank shall not be liable for failure to
collect or realize upon Obligations or collateral security, or for any delay in
so doing, nor shall bank be under any obligation to take any action with regard
thereto. Bank shall use reasonable care in the custody and preservation of
Collateral Security in its possession but need not keep Collateral Security
identifiable, nor, in the case of instruments or chattel paper, take any steps
to preserve rights against prior parties. Bank shall have no obligation to
comply with any legal requirement necessary to establish or maintain the
validity, priority or enforceability of Bank's rights in Collateral Security.
Bank may exercise ant right of undersigned with respect to Collateral Security.
In any statutory or non-statutory proceeding affecting the undersigned or
Collateral Security, whether or not a default exists in and regardless of the
amount Obligations, Bank or its nominee may file a proof of claim for the full
amount of Collateral Security and vote such claim for any and all purposes for
the full amount thereof on any matter arising in connection with such
proceeding; and Bank or its nominee may receive payments or distributions,
giving acquittance therefor, and may exchange or release Collateral Security.
Without notice and whether or not a default exists with respect to Obligations,
Bank may register in its name or that of its nominee any securities held
hereunder without disclosing that Bank is a pledgee, and Bank may exercise all
rights, privileges and options pertaining to such securities as if absolute
owner thereof, including, without limitation, rights of conversion, exchange,
subscription and to receive and retain as additional Collateral Security any
interest, dividend or other distribution in cash or property with respect
thereto. In connection therewith, Bank may make deposits and deliveries of such
securities without liability except to account for property actually received by
it. Bank shall not be responsible for failure or delay in exercising any of the
aforesaid rights, privileges or options. Undersigned shall remain responsible
for ascertaining any maturities, calls, conversions, exchanges, tenders or
similar matters relating to Collateral Security, and Bank shall have no duty to
so ascertain or to inform undersigned with respect thereto (whether or not Bank
has, or is deemed to have, knowledge). Should undersigned ascertain any such
event and request that Bank take action with respect thereto, Bank shall not be
required to do so unless such request be in writing and Bank determined that
such action will not adversely affect the value as collateral of such Collateral
Security.
Undersigned authorizes Bank to sign and file financing statements at any
time with respect to Collateral Security without the signature of undersigned.
At Bank's request, undersigned will sign all documents necessary to effect
transfer of, or perfect Bank's security interest in, Collateral Security;
however, in any event, Bank is hereby irrevocably appointed undersigned's true
and lawful attorney at all times. Obligations are outstanding to execute,
deliver and file such documents in undersigned's name, with or without
designation of Bank's signing capacity. Undersigned agrees to pay filing fees
and to reimburse Bank for all costs and expenses incurred in connection with
Collateral Security.
Bank may sell all or part of Collateral Security, although Obligations may
be contingent or unmatured, whenever in its discretion Bank considers such sale
necessary for its protection. Any such sale may be made in the manner
hereinafter provided, without first
<PAGE>
exercising any rights of offset and without making demand for margin or for
payment on account or any other demand. The making of such demand, oral or
written in any one ore more instances shall not establish a course of conduct
nor constitute a waiver of Bank's rights, as herein provided, to sell Collateral
Security without any demand or to accelerate the maturity of the Obligations.
If undersigned fails to perform any agreement contained herein or in any
other agreement delivered to Bank, or default occurs in the punctual payment of
any sum payable upon any Obligations or Collateral Security, or if any of the
following events of default occurs with respect to any maker, endorser, or
guarantor of, or any other party to Obligations or Collateral Security (each of
whom, including undersigned, is included in the term "them" as used in this
paragraph): default with respect to any liabilities or obligation to, or
agreements with, Bank; death; dissolution; death of any member of a partnership
included in the term "them"; Insolvency; any case, proceeding or other action
shall commence relating to bankruptcy, insolvency, reorganization, or relief of
debtors; calling of a meeting of any creditors; making or sending a notice of an
intended bulk transfer; granting a security interest in any property including
Collateral Security; suspension or liquidation of usual business; failing, after
demand to furnish Bank with any financial information or to permit Bank to
inspect books or records; making any misrepresentation in obtaining credit;
failing to pay or remit any tax when assessed or due; failing to pay when due
any obligation to others; filing of a voluntary petition under and provision of
the Bankruptcy Code or amendments thereto; application for appointment of a
receiver or liquidating agent or similar person; entry of a judgment against any
of them; issuance of an order of attachment against any of their property;
commencement of any proceeding for enforcement of a money judgement; failure of
any of them on Obligations or Collateral Security at any time to comply with
Regulation U of the Federal Reserve Board; or if, at any time, in the opinion of
Bank, the financial responsibility of any of them shall become impaired; then,
in any of these events, Obligations, although not yet due, shall be due and
payable immediately without notice or demand.
Upon and after the happening of any event of default Bank shall have, in
addition to all other rights and remedies, the remedies of a secured party under
the New York Uniform Commercial Code. Bank will give undersigned notice of time
and place of any public sale or of the time after which any private sale or any
other intended disposition of Collateral Security is to be made, by sending
notice ar least five days before the time of sale or disposition, which
provisions for notice undersigned and Bank agree are reasonable. Bank need not
give such notice with respect to Collateral Security which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market
In the event Bank is unable to effect a public sale of any Collateral
Security by reason of applicable securities laws, Bank is authorized at any
private sale to restrict prospective purchasers to persons who will represent
and agree to purchase such Collateral Security for their account for investment
and not with a view to the distribution or resale thereof. Undersigned agrees
that at any such private sale Collateral Security may be sold at a price that is
less than the price which might have been obtained at a public sale or that is
less than the aggregate amount of Obligations, even if Bank accepts the first
offer received and does not offer such Collateral Security to more than one
person.
Bank may apply net proceeds of any disposition of Collateral Security,
after first deducting all costs and expenses incidental thereto, including legal
expenses and attorney's
<PAGE>
fees as provided below, to the payment, in whole or in part, of Obligations,
whether due or not, absolute or contingent, in such order as Bank may elect.
Undersigned shall remain liable to Bank for payment of any deficiency.
Bank shall not by any act, delay, omission or otherwise be deemed to have
waived any rights or remedies hereunder. No waiver shall be valid unless signed
by Bank. Any waiver by Bank on any occasion shall not bar any right or remedy
which Bank would otherwise have had on any future occasion. No executory
agreement unless signed by Bank, and no course of dealing between undersigned
and Bank, shall be effective to modify or discharge, in whole or in part, this
note. All rights and remedies of the Bank shall be cumulative and may be
exercised singly or concurrently.
Each undersigned agrees that, if any attorney is used to enforce Obligation
or to enforce or declare any rights under Obligations or Collateral Security,
whether by suit or other means, and attorney's fee of 15% of principal and
interest due on such Obligations shall be payable by each undersigned against
whom Obligations or rights hereunder are enforced, declared or adjudicated.
Any notice to Bank shall be deemed effective when received at its branch,
division or department conducting the transaction hereunder. Each undersigned
agrees that any notice to any undersigned whose name appears below shall be
effective when sent to the last known address of such undersigned appearing on
records of Bank and shall be deemed notice to all the undersigned.
Bank and undersigned, in any litigation, (whether relating to Obligations,
Collateral Security or any other matter) in which they shall be adverse parties,
waive trial by jury and undersigned, in addition, waives the right to interpose
and set-off or counterclaim of any nature of description.
Bank is hereby authorized to fill in any blank spaces in this note and to
date this note when the loan is made and to correct patent errors herein.
Time for payment extended by law shall be included in computation of
interest.
This note shall be governed and construed in accordance with the laws of
New York State.
EDWARDS CAPITAL COMPANY
By:
---------------------------------------------
By:
---------------------------------------------
<PAGE>
July 29, 1993
COMMITTED LINE OF CREDIT AGREEMENT
Edwards Capital Company
2 Park Avenue
New York, NY 10016
Dear Sirs:
We are pleased to confirm that Bank Hapoalim B.M. (the "Bank") has agreed
to renew a line of credit facility to Edwards Capital Company (the "Borrower")
upon the following terms and conditions:
AMOUNT: Extensions of credit hereunder shall not exceed in aggregate principal
- - - ------
amount U.S. $3,000,000. The Borrower may repay and reborrow loans, from time to
time, except that the principal balance outstanding shall not exceed
$3,000,000,000.
USE OF PROCEEDS: The proceeds of any credit extension made hereunder shall be
- - - ---------------
used for working capital-purposes.
COMMITMENT PERIOD: Subject to the terms and conditions hereof, the line shall
- - - -----------------
be available from the date hereof until May 31, 1994 (the "Expiry Date").
COMMITMENT FEE: The Borrower shall pay the Bank a fee calculated (on the basis
- - - --------------
of the actual number of days elapsed over a year of 360 days) at the rate per
annum of 1/4% on the average daily unutilized portion of the line, payable in
arrears on the last day of each quarter commencing September 30, 1993 and on the
Expiry Date.
AVAILABILITY: The line of credit may be utilized upon written, telex or
- - - ------------
telephonic (immediately confirmed in writing) notice to the Bank received not
later than 10:00 a.m. (New York time) two business days prior to the proposed
borrowing, for periods of one, three or six months (provided no loan shall have
a maturity later than the Expiry Date) bearing interest at the per annum rate
(the "Loan Rate") of 1-3/4% in excess of the Libor Rate.
"Libor Rate" for each loan to which it applies shall mean the rate or rates
established by the New York Branch of the Bank two Business Days prior to the
date of the loan by applying either of the following: (i) the British Bankers
Association ("BBA") Interest Settlement Rates for U.S. Dollars, as defined in
the BBA official definitions and reflected on the Telerate BBA pages, for the
applicable amounts and interest periods, which rates reflect the offered rates
at which deposits are being quoted to prime banks in the London Interbank Market
at 11:00 A.M. London time calculated as set forth in said BBA official
definition; or (ii) such other recognized source of London Eurodollar deposit
rates as the Bank may determine from
<PAGE>
Edwards Capital Company
July 29, 1993
Page 2
time to time. If the Bank determines in its sole discretion that such quotation
Cannot be determined or does not represent its effective cost of making or
maintaining such loan, then such loan shall bear interest at the Prime Rate.
As used herein, "Prime Rate" shall mean the Bank's New York Branch's stated
prime rate as reflected in its books and records as such prime rate may change
from time to time. The Bank's determination of its Prime Rate shall be
conclusive and final. The Prime Rate is a reference rate and not necessarily the
lowest interest rate charged by the Bank.
INTEREST: Interest on each loan shall be payable by the Borrower on the maturity
- - - --------
of such loan and, if earlier, on the last day of each calendar quarter after the
date such loan is made and on any prepayment of such loan (on the amount
prepaid).
The Borrower shall pay interest on overdue principal of and (to the extent
permitted by applicable law) on overdue interest on demand at the rate of
2% excess of the greater of (x) the Loan Rate or (y) the Prime Rate.
Interest shall be computed on the basis of the actual number of days
elapsed over a year of 360 days. Any interest payable hereunder shall in
no event exceed the maximum rate permitted by applicable law.
PAYMENTS: All payments hereunder shall be made at the office of the Bank set
- - - --------
forth above or such other office as the Bank may notify the Borrower, in lawful
money of the United States of America and in immediately available funds. Any
payment due hereunder on a day which is not a business day shall be payable on
the next succeeding business day. A business day" hereunder shall be any day
other than a day on which banks are required by law or authorized to close in
New York City or in London, England.
PREPAYMENTS OF LOANS; INDEMNITY, ETC.: In the event any loan is not borrowed on
- - - -------------------------------------
the date specified therefor in a notice of borrowing, or is repaid other than at
its maturity, the Borrower shall pay to the Bank an amount (as reasonably
determined by the Bank in its sole discretion which determination shall be
conclusive and binding absent manifest error) as shall compensate the Bank for
any costs, expenses or loss (including loss of profit) incurred by it in
connection with its costs of funding such loan.
If at any time the Bank shall determine that the making or continuation of loans
at the Libor Rate has become unlawful, its obligation to make such loans shall
be terminated and the borrower shall forthwith prepay any such loans then
outstanding.
If, after the date hereof, any change in law, regulation or directive or in the
interpretation thereof subjects the Bank to any increase in the cost to it of
making or maintaining loans to the borrower hereunder, the Borrower shall pay to
the Bank, on demand from time to time,
<PAGE>
Edwards Capital Company
July 29, 1993
Page 3
such additional amounts (determined by the Bank in its sole discretion which
determination shall be conclusive and binding absent manifest error) as shall
compensate the Bank for such increased cost.
In the event that after the date hereof, the implementation of or any change in
any law or regulation, or any guideline or directive (whether or not having the
force of law) or the interpretation or administration thereof by the Bank of
Israel, any Federal Reserve bank or other authority charged with the
administration thereof, imposes, modifies or deems applicable any capital
adequacy or similar requirement (including, without limitation, a request or
requirement which affects the manner in which the Bank allocates capital
resources to its commitment hereunder) and as a result thereof, in the sole
opinion or the Bank, the rate of return on the Bank's capital as a Consequence
of its obligations hereunder is reduced to a level below that which the Bank
could have achieved but for such circumstances, then, and in each such case upon
demand from time to time, the Borrower shall pay to the Bank such additional
amount or amounts as shall compensate the Bank for such reduction in rate of
return. A certificate of the Bank as to any such additional amount or amounts,
in the absence of manifest error, shall be final and conclusive. In determining
such amount, the Bank may use any reasonable averaging and attribution methods.
CONDITIONS PRECEDENT: The Bank shall not be obligated to honor any request for
- - - --------------------
utilization of credit hereunder unless it is satisfied that the following
conditions have been met:
(1) Prior to the first advance, the Bank shall have received a duly
executed promissory note in form and substance satisfactory to the Bank
(the "Notes');
(2) The Security Agreement (General Collateral) executed by the borrower
in favor of the Bank dated May 1, 1989 (the "Security Agreement") shall
remain in full force and effect and the Borrower shall have executed the
appropriate UCC-1 statements to record the Bank's interest in the Security
referred to in the Security Agreement;
(3) The Inter-Creditor Agreement among the Bank, Chemical Bank, Israel
Discount Bank, Marine Midland Bank, N.A., National Westminster Bank USA and
Sterling National Bank & Trust Company of New York shall remain in full
force and effect;
(4) Prior to the first extension of credit, the Bank shall have received
satisfactory evidence as to the due authorization of the execution,
delivery and performance of this Agreement, the Note, and any other
documents executed by the Borrower or any other person in connection
herewith (collectively, the "Loan Documents");
<PAGE>
Edwards Capital Company
July 29, 1993
Page 4
(5) All representations and warranties made by the Borrower to the Bank
herein or in any other document executed in connection herewith shall be
true and correct as if made on the date of such advance; and
(6) There shall exist no Event of Default (as defined below or event which
with the giving of notice or passage of time or both would become an Event
of Default.
REPRESENTATIONS AND WARRANTIES: To induce the Bank to make loans pursuant
- - - ------------------------------
hereto, the Borrower hereby represents and Warrants to the Bank that (a) it has
the requisite power and authority to execute and deliver the Loan Documents; (b)
its execution, delivery and performance of the Loan Documents will not violate
any law, rule, regulation, judgment or agreement applicable to or binding upon
it; (c) each of the Loan Documents constitutes its legal, valid and binding
obligation enforceable in accordance with its terms; (d) it is not in material
default under any material agreement binding upon it; (e) there are no material
suits or proceedings pending or threatened against it before any court,
governmental body or arbitrator; and (f) the financial statements of the
Borrower dated December 31, 1992 and furnished to the Bank prior to the date
hereof fairly present its financial condition as of the date thereof and there
has been no subsequent material adverse change in its business, operations or
financial condition.
The Borrower acknowledges that neither the Bank nor any of its representatives
have made any representation (including, without limitation, any representation
that the Bank will not enforce any provision of this Agreement or the Note, in
the event of litigation or otherwise), covenant, commitment or agreement to
Borrower, except pursuant to a written document executed by the Bank.
AFFIRMATIVE COVENANTS: The Borrower covenants and agrees that for so long as
- - - ---------------------
this Agreement is in effect and until the Note, together with interest and all
other obligations incurred hereunder are paid in full, the Borrower will, unless
having first procured the written consent of the Bank:
(a) Financial Data: Furnish to Bank:
--------------
(i) within 120 days after Borrower's fiscal year end, Borrower's
unqualified audited financial statements (including balance sheet and
operating statement), prepared in accordance with generally accepted
accounting principles, by independent accountants acceptable to Bank;
(ii) within 60 days after Borrower's six month period Borrower's semi-
annual financial statements (including balance sheet and operating
statement), prepared in accordance with generally accepted accounting
principles.
<PAGE>
Edwards Capital Company
July 29, 1993
Page 5
(b) Minimum Tangible Net Worth: Maintain at all times a minimum tangible net
--------------------------
worth, calculated as total assets (not including intangibles) minus total
liabilities (hereinafter "Partners' capital") of at least $3.65 million.
(c) Compliance with Laws, etc.: Comply in all material respects with all
--------------------------
applicable laws, rules, regulations and orders.
(d) Tax Compliance: Pay to the appropriate governmental authorities when due,
--------------
all Federal, state, local and other taxes, assessments or contributions
required to be paid or deposited by Borrower ("Taxes"), except that
Borrower may defer any such payment while Borrower is diligently contesting
the respective Taxes in good faith by appropriate proceedings, but any such
deferment shall not extend beyond the time when such unpaid Taxes would
become a lien upon any of Borrower's assets. Borrower will furnish the Bank
promptly at the Bank's request with evidence satisfactory to the Bank
establishing payment of such Taxes, assessments and Contributions. In the
Bank's discretion, the Bank shall have the right (but shall not be
obligated) to pay any such Tax, assessment or contribution (including any
interest or penalties thereon) for the Borrower's benefit in the event the
borrower shall fail timely to do so; any such payment shall be deemed an
advance hereunder bearing interest at the rate and in the manner specified
herein. The borrower shall, promptly on demand, reimburse the Bank for any
such payment and any costs and expenses (including reasonable attorneys'
fees) which the Bank may incur in connection therewith.
(e) Adverse Changes: Promptly notify Bank: (i) of any material adverse change
---------------
in Borrower's financial condition, operations or business or (ii) of any
Event of Default or event, which with the giving of notice or passage of
time or both, would become an Event of Default and furnish the Bank with a
statement setting forth details or such Event of Default in the action
which the Borrower proposes to take with respect thereto.
(f) Officer's Certificate: At the time of the submission of each financial
---------------------
statement referred to above under the paragraph headed "Financial Data",
furnish the Bank with a certificate from its chief financial officer (i)
certifying that, to the best of his knowledge, no Event of Default or event
which with the giving of notice or lapse of time, or both, would constitute
an Event of Default has occurred and is continuing or, if an Event of
Default or such event has occurred and is continuing a statement as to the
nature thereof and the action which is proposed to be taken with respect
thereto and (ii) with the computations demonstrating compliance with the
covenants contained herein.
<PAGE>
Edwards Capital Company
July 29, 1993
Page 6
NEGATIVE COVENANTS: Borrower further covenants and agrees that for so long as
- - - ------------------
this Agreement is in effect and until the Note, together with interest and all
other obligations incurred hereunder and under any Letter of Credit are paid in
full, the Borrower will not, without the Bank's prior written consent after
providing the Bank with all such information and documentation as the Bank may
request:
(a) Loans to Collateral Value: Make any loan or advance in which the value
-------------------------
of the loans exceeds 70% of the market value of the medallion cabs
securing the loans.
(b) Ratio of Unsubordinated Liabilities to Capital Plus Subordinated Debt:
---------------------------------------------------------------------
Permit the ratio of (x) Borrower's unsubordinated liabilities to (y)
the aggregate of (i) the Partners' Capital plus (ii) the Borrower's
debt which is subordinated, on terms satisfactory to the Bank, to the
Borrower's liabilities to the Bank hereunder, to exceed 1:1.
(c) Ratio of SBA Subordinated Debt to Partners' Capital: Permit the ratio
---------------------------------------------------
of (x) the total of Borrower's subordinated debt issued through the
Small Business Administration or any successor agency thereto ("SBA")
to (y) Partners' Capital to exceed at any time 3:1.
EVENTS OF DEFAULT AND REMEDIES: (1) Events of Default. Each of the following
- - - ------------------------------
shall constitute an "Event of Default" hereunder: (a) default by the Borrower in
the payment of any obligation hereunder or any material default in the
performance of any other obligation, term or covenant hereunder or under any
other material agreement binding upon it and, in the case of a default under any
such other agreement, such default shall remain unremedied for thirty days; (b)
the merger or consolidation of the Borrower (unless the Borrower shall be the
surviving entity of such merger or reorganization or the Borrower shall have
received the prior consent of the Bank), or the termination of existence,
insolvency or business failure, or sale or transfer of substantially all the
assets, of the Borrower; (c) appointment of a receiver or trustee or the
issuance of any legal process against, or legal process seizing all or any
material part of the Borrower's property (unless such appointment or legal
process is terminated or dismissed within 30 days); (d) general assignment for
benefit of creditors or commencement of any proceedings under any bankruptcy or
insolvency law by or (unless dismissed or terminated within 30 days) against the
Borrower; (e) the rendering of a material judgment against the Borrower (unless
bond satisfied or stayed within 30 days); (f) any statement, representation or
warranty made by or on behalf of the Borrower in connection with this Agreement
or in any supporting financial statement of the Borrower being found to have
been false in any material respect; (g) any document executed in connection
herewith ceasing to be in full force and effect; (h) the occurrence of a
material adverse change in the Borrowers business, operations or financial
condition. (2) Remedies. Upon the occurrence of any of the foregoing Events of
---------
Default, the Note and accrued interest
<PAGE>
Edwards Capital Company
July 29, 1993
Page 7
thereon shall, at the option of the Bank, forthwith become due and payable upon
written notice, provided that, upon the occurrence of an Event of Default
referred to in (l)(d) hereof, all amounts of principal and accrued interest
thereon due hereunder and under the Note shall automatically become due and
payable without notice or demand, which Borrower waives. In addition, the Bank
shall have all rights and remedies available to it under any applicable
agreement or law.
Notwithstanding the foregoing a default under the Guaranty of Edward H.
Teitelbaum ("Teitelbaum") dated May 1, 1989 (the "Teitelbaum Guaranty'') shall
not constitute a default or Event of Default in connection with any loan made
pursuant hereto. Nothing contained herein nor any provision omitted from this
Agreement shall in any way constitute an agreement an the part of the Bank to
release Teitelbaum from his obligations to the Bank under the Teitelbaum
Guarantee.
COSTS AND EXPENSES: The Borrower agrees to pay on demand all costs and expenses,
- - - ------------------
including reasonable attorneys costs and fees, incurred by the Bank in
connection with the preparation, execution and enforcement of the Loan
Documents, or in connection
SET OFF: Any deposits or other sums at any time credited by or with compliance
- - - -------
with, or in response to, any legal process relating to the Borrower, this
Agreement or the Note due from any office of the Bank worldwide to the Borrower
(regardless of the currency thereof and whether or not matures), and any
securities or other property of the Borrower at any time in the possession of
any such office of the Bank, may at all times be held and treated as collateral
for the payment of all amounts due hereunder and under the Note and any all
other liabilities of the Borrower to the Bank. Upon the occurrence and during
the continuance of an Event of Default, the Bank may, at its option and without
notice, except as may be required by law, set off, charge and/or appropriate and
apply all or part of any such sums or property toward the payment of any such
liabilities. Without in any way derogating from the power granted to the Bank in
the previous sentence, the Bank shall endeavor to give the borrower one day's
notice prior to setting off any sums or property in the possession of the Bank.
All of the provisions o this paragraph are subject to the rights of other
lenders to the borrower pursuant to an Intercreditor Agreement to which the Bank
is a party.
PARTIES; NO TRANSFER BY BORROWER: Without the Bank's written consent, Borrower
- - - --------------------------------
shall have no right to make any transfer of this Agreement; any such purported
transfer shall be void. Subject to the foregoing, the provisions of this
Agreement shall be binding on Borrower's successors and assigns.
NO ORAL CHANGES; NO WAIVER BY THE BANK; PARTIAL UNENFORCEABILITY: This
- - - ----------------------------------------------------------------
Agreement may not be changed orally. Neither a waiver by the Bank of any of its
options, powers or rights in one or more instances, nor any delay on the part of
the Bank in exercising any of them, nor any partial or single exercise thereof,
<PAGE>
Edwards Capital Company
July 29, 1993
Page 8
shall constitute a waiver thereof in any other instance. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction, shall as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability of that provision, without invalidating the remaining
provisions of this Agreement in that or in any other jurisdiction and without
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
DISPUTES AND LITIGATION: (1) Governing Law. This Note and the rights and
- - - ----------------------- -------------
obligations of the Bank and Borrower hereunder shall be governed by the internal
laws of the State of New York Without giving effect to conflict of laws
principles. (2) Jurisdiction, Venue, and Service of Process. Borrower submits
-------------------------------------------
to the nonexclusive jurisdiction of the federal and state courts in the State of
New York in New York County with respect to any dispute arising hereunder.
Service of process may be made on Borrower by personal delivery at, or by mail
addressed to the Borrower at its address set forth herein or to such other
address as the Borrower may have last specified by notice to the Bank, with a
copy to Herrick, Feinstein as provided below. (3) Waiver of Jury Trial.
--------------------
Borrower waives, and understands that the Bank waives, the right to a jury trial
with respect to any dispute arising hereunder or relating to this Agreement or
the Note; any judicial proceeding with respect to any such dispute shall take
place without a jury. (4) Certain Damages. The Bank shall not have any
---------------
liability for negligence except solely to the extent required by law and not
disclaimable, and except for its own gross negligence or willful misconduct. In
any event, the Bank shall not have any liability for any special, consequential
or punitive damages.
NOTICE: Any notice in connection herewith shall be in writing and may be
- - - ------
delivered personally or by cable, telex, telecopy or other electronic means of
communication, or by certified mail, return receipt requested, addressed (a) to
Borrower as set forth herein and, in the case of a default, with a copy to
Herrick, Feinstein, 2 Park Avenue, New York, New York 10016, Attn: Carl F.
Schwartz, Esq. and (b) to the Bank at Bank Hapoalim B.M., 117 Avenue of the
Americas, New York, New York 10036, Attention: Legal Department or, in the case
of notices to either party, to such other address as the intended recipient may
have last specified by notice to the other party. Any such notice shall re
addressed to such other address(es) as may be designated in writing hereafter.
All such notices shall be deemed given when delivered personally or
electronically or when mailed, except notice of change of address, which shall
be deemed to have been given when received.
BANK HAPOALIM B.M.
By: /s/ Barry Shivak
-------------------
Title: /s/ Vice President
--------------------
<PAGE>
Edwards Capital Company
July 29, 1993
Page 9
By: /s/ Sandra Weine
-------------------
Title: Assistant Vice President
--------------------------
Accepted and Agreed
as of ________________________
EDWARDS CAPITAL COMPANY
By: Harvard Servicing Corp.,
General Partner
By: /s/ Edward M. Abramson
---------------------------
Title: President
-------------------------
By:______________________________
Title:___________________________
<PAGE>
PROMISSORY NOTE
U.S. $3,000,000 September 30, 1995
FOR VALUE RECEIVED, the undersigned Edwards Capital Company (the
"Borrower") promises to pay to the order of Bank Hapoalim B.M. (the "Bank") the
principal sum of Three Million United States Dollars or, if less, the aggregate
unpaid amount of all loans made by the Bank to the Borrower pursuant to the
Committed Line of Credit Agreement between the Bank and the Borrower dated July
29, 1993, as amended May 31, 1994 and October 31, 1994 and as further amended as
of the date hereof (the "Agreement"). Each such loan shall mature on September
30, 1996 or, if earlier, a date specified by the Bank to the Borrower prior to
the date such loan is made, in accordance with the agreement.
The Borrower further promises to pay interest on the unpaid principal
amount hereof from the date hereof until this Note is paid in full, at the rates
and the times provided for in the agreement.
As provided in the Agreement, this Note may be required to be prepaid and
may be accelerated under certain circumstances.
All payments hereunder shall be made at the office of the Bank set forth in
the Agreement (and for the account of such office as provided for in the
Agreement), in lawful money of the United States of America and in immediately
available funds.
All loans made pursuant to the Agreement, the maturity thereof and the
interest rate applicable thereto shall be recorded by the Bank on a schedule,
which in the Bank's discretion may be computer-generated, and which is
incorporated in, and is a part of, this Note. The Schedule shall be conclusive,
final and binding upon Borrower, absent manifest error; provided, however, that
the failure of the Bank to record any of the foregoing shall not limit or
otherwise affect the obligation of the Borrower to pay all amount owed to the
Bank under this Note.
The Borrower hereby waives presentment, demand, notice, protest and all
other demands or notices in connection with the delivery, acceptance,
performance , default or enforcement of this Note. No course of action or delay
or omission of the holder in exercising any right or remedy hereunder shall
constitute or be deemed to be a waiver of any right or remedy hereunder, and a
waiver on one occasion shall not operate as a bar to or a waiver of any such
right or remedy on any further occasion.
<PAGE>
-2-
The Borrower agrees to pay on demand all costs and expenses, including
attorneys' costs and fees, incurred or paid by the holder in connection with the
enforcement of this Note.
This Note shall be governed by the law of the State of New York. The
Borrower hereby waives any right it may have to trial by jury in any proceeding
brought in connection with this Note.
EDWARDS CAPITAL COMPANY
2 Park Avenue
New York, New York 10016
By: HARVARD SERVICING CORP.,
GENERAL PARTNER
By: /s/ Edward M. Abramson
---------------------------
Title: President
--------------------
<PAGE>
THIRD AMENDMENT
Dated as of September 30, 1995
This Amendment between Edwards Capital Company (the "Borrower") and Bank
Hapoalim B.M. (the "Bank").
PRELIMINARY STATEMENT. The Borrower and the Bank have entered into a
Committed Line of Credit Agreement dated as of July 29, 1993, as amended as of
May 31, 1994 and October 31, 1994 (hereinafter the "Credit Agreement"; the terms
defined therein being used herein as therein defined unless otherwise defined
herein).
The Borrower and the Bank have agreed to amend the Credit Agreement as
hereinafter set forth.
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
-----------------------------
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The paragraph of the Credit Agreement headed "Commitment Period" is
hereby amended by deleting the date "September 30, 1995" and substituting
therefor the date "September 30, 1996".
SECTION 2. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective when, and only when the Bank shall have received this Amendment
executed by the Borrower and the Bank shall have also received, in the form
attached hereto as Exhibit A, a new promissory note of the Borrower dated
September 30, 1995 in substitution for the note of the Borrower dated October
31, 1994.
<PAGE>
-2-
SECTION 3. Representations and Warranties of the Borrower. By executing
-----------------------------------------------
and delivering this Amendment, the Borrower hereby confirms, reaffirms and
restates the representations and warranties set forth in the Section of the
Agreement headed "Representations and Warranties", provided that all references
--------
in said Section to the "Loan Documents" shall be deemed to include this
Amendment and the Agreement as amended hereby.
SECTION 4. Reference to and Effect on the Credit Agreement and the Note.
-------------------------------------------------------------
(A) Upon the effectiveness of Section 2 hereof, on and after the date hereof,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, shall mean and be a reference to
the Credit Agreement, as amended hereby, each reference in the Credit Agreement
to the term "Expiry Date" shall mean and be a reference to the date "September
30, 1996" and each reference in the Credit Agreement to the term "Note" shall
mean and be a reference to the note of the Borrower dated September 30, 1995.
(B) Except as specifically amended above, all terms of the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
(C) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Bank under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
EDWARDS CAPITAL COMPANY
By: HARVARD SERVICING CORP.,
GENERAL PARTNER
By: /s/ Edward M. Abramson
-----------------------------
Title: President
--------------------------
BANK HAPOALIM B.M.
By: /s/ Conrad Wagner
-----------------------------
Title: Vice President
--------------------------
By: /s/ Leonard Rudolph
-----------------------------
Title: VP
--------------------------
<PAGE>
SECOND AMENDMENT
Dated as of October 31, 1994
This Amendment between Edwards Capital Company (the "Borrower") and Bank
Hapoalim B.M. (the "Bank").
PRELIMINARY STATEMENT. The Borrower and the Bank have entered into a
Committed Line of Credit Agreement dated as of July 29, 1993, as amended as of
May 31, 1994 (hereinafter the "Credit Agreement"; the terms defined therein
being used herein as therein defined unless otherwise defined herein).
The Borrower and the Bank have agreed to amend the Credit Agreement as
hereinafter set forth.
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
-----------------------------
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The paragraph of the Credit Agreement headed "Commitment
Period" is hereby amended by deleting the date "November 30, 1994" and
substituting therefor the date "September 30, 1995".
(b) The paragraph of the Credit Agreement headed "Availabilty" is
amended in whole to read as follows:
Availability: The line of credit may be utilized at the Borrower's option,
------------
as follows:
(1) Upon written telex or telephonic (immediately confirmed in
writing) notice to the Bank received not later than 10:00 a.m. (New York time)
two business days
<PAGE>
-2-
prior to the proposed borrowing, for periods of one, two or three months
(provided no loan shall have a maturity later than the Expiry Date) bearing
interest at the per annum rate (the "Loan Rate") of 1 1/2% in excess of the
Libor Rate.
(2) Upon written, telex or telephonic (immediately confirmed in
writing) notice to the Bank received not later than 12:00 noon (New York time)
on the day of the proposed borrowing (provided no loan shall have a maturity
later than the Expiry Date) bearing interest at the Bank's Base Rate.
"Libor Rate" for each loan to which it applies shall mean the rate or rates
established by the New York Branch of the Bank two Business Days prior to the
date of the loan by applying either of the following: (i) the British Bankers
Association ("BBA") Interest Settlement Rates for U.S. Dollars, as defined in
the BBA official definitions and reflected on the Telerate BBA pages, for the
applicable amounts and interest periods, which rates reflect the offered rates
at which deposits are being quoted to prime banks in the London Interbank Market
at ll:O0 A.M. London time calculated as set forth in said BBA official
definition; or (ii) such other recognized source of London Eurodollar deposit
rates as the Bank may determine from time to time. If the Bank determines in its
sole discretion that such quotation cannot be determined or does not represent
its effective cost of making or maintaining such loan, then such loan shall bear
interest at the base Rate.
"Base Rate", for each loan to which it applies, shall mean the greater of
(i) the Federal Funds Rate plus 1/2% or (ii) the Bank's New York Branch's stated
Prime Rate as reflected in its books and records as such Prime Rate may change
from time to time. The
<PAGE>
-3-
Bank's determination of its Prime Rate shall be conclusive and final. The Prime
Rate is a reference rate and not necessarily the lowest interest rate charged by
the Bank.
(c) The paragraph of the Credit Agreement headed "Prepayment of
Loans; Indemnity, Etc." is hereby amended by inserting the words "accruing
interest at the Libor Rate" in the first line of such paragraph following the
words "In the event any loan".
SECTION 2. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective when, and only when the Bank shall have received this Amendment
executed by the Borrower and the Bank shall have also received, in the form
attached hereto as Exhibit A, a new promissory note of the Borrower dated
October 31, 1994 in substitution for the note of the Borrower dated May 31,
1994.
SECTION 3. Representations and Warranties of the Borrower. By executing
----------------------------------------------
and delivering this Amendment the Borrower hereby confirms, reaffirms and
restates the representations and warranties set forth in the Section of the
Agreement headed "Representations and Warranties", provided that all references
in said Section to the "Loan Documents" shall be deemed to include this
Amendment and the Agreement, as amended hereby.
SECTION 4. Reference to and Effect on the Credit Agreement and the Note.
------------------------------------------------------------
(A) Upon the effectiveness of Section 2 hereof, on and after the date hereof,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, shall mean and be a reference to
the Credit Agreement, as amended hereby, each reference in the Credit Agreement
to the term "Expiry Date" shall mean and be a reference
<PAGE>
-4-
to the date "September 30, 1995" and each reference in the Credit Agreement to
the term "Note" shall mean and be a reference to the note of the Borrower dated
October 31, 1994.
(B) Except as specifically amended above, all the terms of the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
(C) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Bank under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers Whereunto duly authorized, as of the date
first above written. EDWARDS CAPITAL COMPANY
EDWARDS CAPITAL COMPANY
By: Harvard Servicing Corp.
Title: General Partner
By: /s/ Edward M. Abramson
--------------------------
Title: President
-----------------------
BANK HAPOALIM B.M.
By: /s/ Sandra Weine
--------------------------
Title: AVP
--------------------
By: /s/ Leonard Rudolph
---------------------
Title: VP
------------------
<PAGE>
PROMISSORY NOTE
Exhibit A
---------
U.S. $3,000,000 October 31, 1994
FOR VALUE RECEIVED, the undersigned Edwards Capital Company (the
"Borrower") promises to pay to the order of Bank Hapoalim B.M. (the "Bank") the
principal sum of Three Million United States Dollars or, if less, the aggregate
unpaid amount of all loans made by the Bank to the Borrower pursuant to the
Committed Line of Credit Agreement between the Bank and the Borrower dated July
29, 1993, as amended May 31, 1994 and as further amended as of the date hereof
(the "Agreement"). Each such loan shall mature on September 30, 1995 or, if
earlier, a date specified by the Bank to the Borrower prior to the date such
loan is made, in accordance with the Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount hereof from the date hereof until this Note is paid in full, at the rates
and the times provided for in the Agreement.
As provided in the Agreement, this Note may be required to be prepaid and
may be accelerated under certain circumstances.
All payments hereunder shall be made at the office of the Bank set forth in
the Agreement (and for the account of such office as provided for in the
Agreement), in lawful money of the United States of America and in immediately
available funds.
All loans made pursuant to the Agreement, the maturity thereof and the
interest rate applicable thereto shall be recorded by the Bank on a schedule,
which in the Bank's discretion may be computer-generated, and which is
incorporated in, and is a part of, this Note. The Schedule shall be conclusive,
final and binding upon borrower, absent manifest error; provided, however, that
the failure of the Bank to record any of the foregoing shall not limit or
otherwise affect the obligation of the borrower to pay all amount owed to the
Bank under this Note.
The Borrower hereby waives presentment, demand, notice, protest and all
other demands or notices in connection with the delivery, acceptance,
performance , default or enforcement of this Note. No course of action or delay
or omission of the holder in exercising any right or remedy hereunder shall
constitute or be deemed to be a waiver of any right or remedy hereunder, and a
waiver on one occasion shall not operate as a bar to or a waiver of any such
right or remedy on any further occasion.
<PAGE>
-6-
The Borrower agrees to pay on demand all costs and expenses, including
attorneys' costs and fees, incurred or paid by the holder in connection with the
enforcement of this Note.
This Note supersedes and replaces the Note in the amount of $3,000,000
executed by the Borrower in favor of the Bank dated May 31, 1994.
This Note shall be governed by the law of the State of New York. The
Borrower hereby waives any right it may have to trial by jury in any proceeding
brought in connection with this Note.
EDWARDS CAPITAL COMPANY
2 Park Avenue
New York, New York 10016
By: HARVARD SERVICING CORP.,
GENERAL PARTNER
By:_________________________
Title:______________________
<PAGE>
AMENDMENT
Dated as of May 31, 1994
This Amendment between Edwards Capital Company (the "Borrower") and Bank
Hapoalim B.M. (the "Bank").
PRELIMINARY STATEMENT. The Borrower and the Bank have entered into a
Committed Line of Credit Agreement dated as of July 29, 1993 (hereinafter the
"Credit Agreement"; the terms defined therein being used herein as therein
defined unless otherwise defined herein).
The Borrower and the Bank have agreed to amend the Credit Agreement as
hereinafter set forth.
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
-----------------------------
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended by deleting
in the paragraph of the Credit Agreement headed "Commitment Period" the date
"May 31, 1994" and substituting therefor the date "November 30, 1994".
SECTION 2. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective when, and only when the Bank shall have received this Amendment
executed by the Borrower and the Bank shall have also received, in the form
attached hereto as Exhibit A, a new promissory note of the Borrower dated May
31, 1994 in substitution for the note of the Borrower dated July 29, 1993.
<PAGE>
-2-
SECTION 3. Representations and Warranties of the Borrower. By executing
----------------------------------------------
and delivering this Amendment, the Borrower hereby confirms, reaffirms and
restates the representations and warranties set forth in the Section of the
Agreement headed "Representations and Warranties", provided that all references
in said Section to the "Loan Documents" shall be deemed to include this
Amendment and the Agreement, as amended hereby.
SECTION 4. Reference to and Effect on the Credit Agreement and the Note.
------------------------------------------------------------
(A) Upon the effectiveness of Section 2 hereof on and after the date hereof,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, shall mean and be a reference to
the Credit Agreement, as amended hereby, each reference in the Credit Agreement
to the term "Expiry Date" shall mean and be a reference to the date "November
30, 1994" and each reference in the Credit Agreement to the term "Note" shall
mean and be a reference to the note of the Borrower dated May 31, 1994.
(B) Except as specifically amended above, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed.
(C) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Bank under the Credit Agreement, nor constitute a waiver
of any provision of the Credit Agreement.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
EDWARDS CAPITAL COMPANY
By: Harvard Servicing Corp., General Partner
By: /s/ Edward M. Abramson
-------------------------------
Title: President
-------------------
BANK HAPOALIM B.M.
------------------
By: /s/ Conrad Wagner
-----------------------
Title: VP
------------------
<PAGE>
INTER-CREDITOR AGREEMENT
Re: Edwards Capital Company
The subject company (herein called the "Debtor") from time to time incurs
obligations, direct and/or contingent, to each of the undersigned (herein called
a "Creditor"), some or all of which obligations are secured, either wholly or
partially, by Collateral. Each Creditor has filed or may file a financing
statement under the Uniform Commercial Code and the Creditors desire to agree
among themselves as to the relative priority of their respective security
interests in Collateral. It is hereby agreed:
1. "Collateral" means all personal property and fixtures of the Debtor,
whether now or hereafter existing or now owned or hereafter acquired and
wherever located, of every kind and description, tangible or intangible,
including but not limited to, all goods, documents, instruments, chattel paper,
accounts, contract rights and general intangibles and including the products and
proceeds thereof and accessions thereto, constituting security for obligations
of the Debtor, direct or contingent.
2. "Specific Security Interest" means a perfected and enforceable
security interest of a Creditor in any of the following Collateral, including
the products and proceeds thereof and accessions thereto:
(a) Collateral in the possession of the Creditor (or an agent or
bailee on its behalf); or
(b) Collateral made available to the Debtor by the Creditor (or its
agent or bailee) pursuant to a trust receipt or other security
agreement the effect of which is to continue the Creditor's
security interests therein; or
(c) Collateral covered by a non-negotiable document issued in the
name of the Creditor or as to which the Creditor (or an agent or
bailee on its behalf) controls possession through a negotiable
document; or
(d) Collateral which is an obligation owed by the Creditor to the
Debtor; or
(e) Collateral which is specifically identified in a security
agreement, or in another writing, delivered to the Creditor at or
about the time the security interest attaches.
3. "General Security Interest" is any perfected and enforceable security
interest of a Creditor in Collateral, however arising, other than a Specific
Security Interest.
<PAGE>
4. A Specific Security Interest of a Creditor in Collateral has priority
to the extent of all obligations, direct or contingent, of the Debtor to such
Creditor secured thereby over any General Security Interest of another Creditor
in the same Collateral.
5. If Specific Security Interests of two or more Creditors attach to the
same Collateral, the Specific Security Interest which is a purchase money
security interest has priority over any other Specific Security Interest, except
that a Specific Security Interest of the type referred to in paragraph 2(c)
hereof has, in the absence of notice of another security interest stamped on or
affixed to the document (notwithstanding anything in paragraph 7 relating to
notice), priority over any Specific Security Interest of the type referred to in
paragraph 2(b), and Specific Security Interests of two or more Creditors of the
type referred to in paragraph 2(b) rank equally in priority.
6. The General Security Interest of each Creditor in Collateral ranks
equally in priority with the General Security Interest of each other Creditor in
the same Collateral.
7. The priorities specified herein are applicable irrespective of the
time or order of attachment or perfection of security interests or the time or
order of filing of financing statements or the giving or failure to give notice
of the acquisition or expected acquisition or purchase money or other security
interests.
8. Except as herein otherwise specifically provided, priority shall be
determined in accordance with law.
9. This Agreement shall terminate ten (10) days from the date on which
one or more Creditors give written notice to each of the other Creditors of its
intention to terminate. Termination shall not impair any specific or General
Security Interest theretofore acquired by any Creditor or affect the priorities
thereof hereunder.
10. This Agreement shall be governed by the laws of the State of New York.
Unless the context otherwise requires, all terms used herein which are defined
in the Uniform Commercial Code shall have the meanings therein stated.
11. Any person who is not a party to this Agreement initially may become a
party hereto by affixing his signature to the executed counterparts of this
Agreement held by each Creditor. This Agreement is solely for the benefit of
Creditors and their successors or assigns and no other person or persons shall
have any right, benefit, priority or interest under, or because of the existence
of, this Agreement.
12. Each of the executed several counterparts of this Agreement shall be
an original. All such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, each Creditor has caused this Agreement to be duly
executed as of the 14th day of May, 1991. *Except that notes payable to debtor
and held by any creditor shall be deemed to be subject to a general security
interest for the equal benefit of all of the creditors and, for the purposes of
perfecting such general security interest, the possession of such notes by any
such creditor shall be deemed to be on behalf of itself and of
-2-
<PAGE>
the other creditors. For purposes of this Paragraph all creditors shall be
defined as all banks which are party to this agreement.
BANK HAPOALIM CHEMICAL BANK
75 Rockefeller Plaza 640 Fifth Avenue
New York, NY 10019 New York, NY 10019
By: /s/ Barry Shivak By: /s/ William F. Thayer
------------------ ------------------------
ISRAEL DISCOUNT BANK NATIONAL WESTMINSTER
OF NEW YORK BANK USA
511 Fifth Avenue 175 Water Street
New York, NY 10017 New York, NY 10038
By: /s/ Robert E. Stark By: /s/ Barbara Wenner
---------------------- ----------------------
MARINE MIDLAND BANK, N.A. STERLING NATIONAL BANK &
250 Park Avenue TRUST COMPANY OF NEW YORK
New York, NY 10177 540 Madison Avenue
New York, NY 10022
By: /s/ Robert Lundy By: /s/ John C. Millman
--------------------- ----------------------
By: /s/ Salvatore V. Colonna
---------------------------
-3-
<PAGE>
SECURITY AGREEMENT
------------------
(GENERAL COLLATERAL)
In consideration of one or more loans, letters of credit, or other
financial accommodation made, issued or extended by Bank Hapoalim B.M. - New
York (hereinafter referred to as the "Bank") to the undersigned or to a third
party at the request of the undersigned and in order to secure the payment of
all the Liabilities (as hereinafter defined), the undersigned (hereinafter
referred to as the "Debtor") hereby acknowledge(s) the existence of and grant(s)
to the Bank a security interest in and a general lien upon and/or right of
setoff with respect to the Security (as hereinafter defined), and the Debtor
hereby agrees that the Bank shall have the rights, remedies and benefits
hereinafter set forth. The undersigned agrees that should the aggregate market
value of the Security at any time suffer any decline in value or should any
property be deemed by the Bank to be unsatisfactory or inadequate, or should
such property fail to comply with legal requirements, the undersigned will upon
request deliver to the Bank additional Security or will make one or more
payments on account of the Liabilities to the satisfaction of the Bank.
1. The term "Liabilities" shall include any and all indebtedness,
obligations and liabilities of any kind of the Debtor to the Bank now or
hereafter existing, arising directly between the Debtor and the Bank or acquired
outright, conditionally or a collateral security from another by the Bank,
absolute or contingent, joint and/or several, secured or unsecured, due or not
due, contractual or tortious, liquidated or unliquidated, arising by operation
of law or otherwise direct or indirect including without limited the generality
of the foregoing, indebtedness, obligations and liabilities to the Bank of the
Debtors as a member of any partnership, syndicate, association or other group
and whether incurred by the Debtor as principal, surety,indorser, guarantor,
accommodation party or otherwise. The term "Security" shall mean the balance of
every deposit account of the Debtor with the Bank and all other property of
Debtor which may be held by the Bank including any property listed on Schedule I
attached hereto.
2. The Debtor warrants, covenants, agrees and represents as follows,
subject to an inter-creditor agreement among Chemical Bank, Marine Midland Bank
N.A., National Westminster Bank USA and Bank Hapoalim B.M. dated January 11,
1989.
(a) Debtor shall pay and perform all of the Liabilities according to their
terms;
(b) Debtor has full right, title and interest in and to the Security
existing on the date hereof, and will have full right, title and interest in and
to all future Security. If accounts receivable are included in the Security,
such accounts constitute and will constitute, legal, valid and binding
obligations of the persons obligated thereby (the "Obligors" ) and will not be
subject to any setoffs, defenses or claims against the Debtor.
(c) Debtor shall defend title to the Security against all persons and
against all claims and demands whatsoever, which Security is lawfully held by
the Debtor and, except
<PAGE>
for the security interest granted hereby, such Security is now free and clear of
any and all liens, security interests, claims, charges, encumbrances, taxes and
assessments except as set forth on Schedule I attached hereto.
(d) Debtor shall keep the Security free and clear of all liens, charges,
encumbrances, taxes and assessments; and except for such Security as may be
delivered to the Bank, and except for inventory which may be sold in the
ordinary course of business to solvent customers for cash or terms customary or
usual in Debtor's business, Debtor shall not remove, sell, exchange, assign,
loan, lease, mortgage or otherwise encumber or dispose of or permit the removal,
sale, exchange, assignment, loan, lease, mortgage, encumbrance or disposal of
any Security without the Bank's written consent first obtained.
(e) Debtor shall promptly notify the Bank of any material adverse change
from the present in Debtor's financial status (or of the status of its customers
or any of the guarantors of the Liabilities), or in the condition of the
Security.
(f) To the extent tangible assets are included in the Security, Debtor
shall keep all such Security, at its own cost and expense in good repair and
condition, and will not misuse, abuse, waste or allow the Security to
deteriorate except for normal wear and tear and will make the same available for
inspection by the Bank at all reasonable times.
(g) To the extent tangible assets are included in the Security, Debtor, at
its own expense, shall keep such Security adequately insured against loss by
fire (including extended coverage), theft and other hazards as the Bank at its
option may require for the full, fair insurable value thereof. Policies shall be
obtained from responsible insurers as may be acceptable to the Bank.
Certificates of insurance of all policies payable to Debtor and the Bank as
their interest may appear and in such form as the Bank shall deem appropriate,
shall be deposited with the Bank, and the Bank is authorized, but is under no
duty, to obtain such insurance upon failure by the Debtor to do so, and to
charge Debtor therefor. Debtor shall give immediate written notice to the Bank
and to the insurers of loss or damage to any of the Security and shall promptly
file proofs of loss with insurers. The Debtor hereby appoints the Bank attorney-
in-fact for the Debtor for the purpose of obtaining, adjusting, and cancelling
any such insurance and endorsing settlement drafts, and Debtor hereby assigns to
the Bank all sums which may become payable under such insurance, including
return premiums and dividends, as additional security for the Liabilitie s.
(h) Debtor shall pay, when due, all taxes, assessments and license fees
relating to the Security.
(i) Debtor shall, on demand of the Bank, do the following: (i) furnish
further assurance of title; (ii) execute any written agreement or do any other
acts necessary to effectuate the purposes and provisions of this agreement;
(iii) give, execute, deliver, file and/or record any notice, statement,
instrument, document, agreement or other papers that may be necessary or
desirable, or that the Bank may request, in order to create, preserve,
2
<PAGE>
perfect, validate or continue any security interest granted pursuant hereto and
pay all costs of filing in connection therewith.
3. The Bank's endorsement or delivery to Debtor from time to time of
documents of title evidencing or relating to any Security shall not be deemed a
reassignment thereof to Debtor or a waiver or release of the Bank's liens and
security interest as herein set forth, and Debtor shall at all times hold said
documents and the Security evidenced thereby and the proceeds of products
thereof in trust for the Bank's benefit and subject to the Bank's rights
hereunder.
4. A list of all offices of the Debtor describing Debtor's activities
thereof is set forth in Schedule II attached hereto. The office where the Debtor
maintains its records concerning the accounts receivable is at 215 Lexington
Avenue, New York, New York 10016. The Debtor will not change the location of the
place where such records are maintained without the Bank's prior written
consent; nor shall Debtor change its name from or do business under any name
other than its name as set forth herein without the Bank's prior written
consent.
5. The Bank shall have the right at all reasonable times to inspect,
verify and check all of Debtor's books, accounts, records, orders and original
correspondence and such other papers as the Bank may desire, as well as the
quantity, quality, value, specifications, conditions, location and disposition
of all the security Statements concerning the Security will be forthwith
furnished to the Bank by Debtor at the Bank's request.
6. To the extent accounts receivable are included in the Security, the
Bank shall have the right at any time (i) to give notice to all of the Obligors
under all of Debtor's accounts receivable that all payments thereunder should be
made to the Bank, and (ii) to collect such accounts receivable in any manner
which the Bank may, in its sole discretion, deem proper. The Debtor shall not
instruct the Obligors to make payments with respect to the Security to any
person, firm or corporation other than to the Debtor without the prior written
consent of the Bank.
7. Debtor agrees that upon the Bank's request it shall forthwith execute
mortgages and such other documents as to grant a lien in favor of the Bank on
any and all interests in real estate Debtor may have in order to further secure
the payment and/or performance of the Liabilities.
8. The Bank shall at all times have the right to take possession of and
to hold all Security until payment in full and/or complete performance of all of
the Liabilities, and the Bank shall have the right but not the obligation, at
its discretion, whether or not any of the Liabilities are due, in its name or in
the name of the Debtor, or otherwise, to demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in exchange
for, or to make any compromise or settlement deemed desirable with respect to,
any of the Security, or to extend the time of payment, arrange for payment in
3
<PAGE>
installments, or otherwise modify the terms of, or release, any of the Security,
without thereby incurring responsibility to, or discharging or otherwise
affecting any of the Liabilities of the Debtor. The Bank shall have no
responsibility for ascertaining nor informing the Debtor, with respect to, nor
be required to take any action concerning, any maturities, calls, conversions,
exchanges, offers, tenders or similar matters relating to any of the Security
(whether or not the Bank has or is deemed to have knowledge of the aforesaid).
9. With respect to the Security, or any part thereof, which at any time
shall come into the possession or custody or under the control of the Bank or
any of its agents, associates or correspondents, for any purpose, the right is
expressly granted to the Bank, at its discretion, (i) to transfer to or register
in the name of itself or its nominee any of the Security, and whether or not so
transferred or registered, to receive the income and dividends thereon,
including stock dividends and subsequent rights thereto, and to hold the same as
a part of the Security and/or apply the same as hereinafter provided; (ii) to
exchange any of the Security for other property upon a reorganization,
recapitalization or other readjustment and in connection therewith to deposit
any of the Security with any committee or depository upon such terms as it may
determine; (iii) to vote the Security so transferred or registered and so
exercise or cause its nominee to exercise all or any powers with respect thereto
with the same force and effect as an absolute owner thereof; all without notice
and without liability except to account for property actually received by the
Bank. The Bank shall be deemed to have possession of any of the Security in
transit to or set apart for it or any of its agents, associates or
correspondents. To the extent that the Security may consist of capital stock, it
is further agreed that, in the event that any new or additional certificate(s)
of stock being issued (as stock dividends otherwise) relative to any such
capital stock, held at the time as /Security hereunder, such certificate(s)
shall be deemed an increment to the stock so held and under pledge to the Bank
and that, therefore, such certificate(s) will -- to the extent received by or
placed under the control of the undersigned -- be held or controlled in trust
for the Bank and will be promptly delivered to the Bank (in form for transfer)
to be held hereunder.
10. The Bank may assign, transfer and/or deliver to any transferee of any
of the Liabilities any or all of the Security, and the Bank shall have the
right, for and in the name, place and stead of the Debtor, to execute
endorsements, assignments or other instruments of conveyance or transfer with
respect thereto. Thereafter, the Bank shall be fully discharged from all
responsibility with respect to the Security so assigned, transferred and/or
delivered, except for claims, if any, arising prior to such transfer. Such
transferee shall be vested with all the powers and rights of the Bank hereunder
with respect to such Security, but the Bank shall retain all rights and powers
hereby granted by Debtor with respect to any of the Security not so assigned,
transferred or delivered.
11. All of the Liabilities of the Debtor shall become immediately due and
payable at the option of the Bank without notice, presentment or demand for
payment, all of which are hereby expressly waived, and the Bank shall thereupon
have all of the rights of a secreted party under the Uniform Commercial Code and
shall have the right to take immediate
4
<PAGE>
possession of all or any part of the Security, and for such purpose may, with or
without legal process, enter upon or into nay premises where the Security or any
part thereof may then be located and take possession thereof, and remove the
same to such other place as the Bank may deem safe and convenient, in its sole
discretion, and at such time as may be deemed advisable by the Bank, sell, lease
or otherwise dispose of any or all of the Security, without demand of
performance or advice of intention to sell or of time or place of sale (except
as is otherwise required by statute and may not be waived) and the Bank may
purchase the Security at any such sale.
12. The proceeds of any such disposition shall be applied (i) first to all
expenses (including expenses for legal services of every kind) of, or incidental
to, the enforcement of any of the provisions hereof or of any of the
Liabilities, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement of any of the Security or receipts of the
proceeds thereof, and for the case of the Security, and for defending or
asserting the rights and claims of the Bank in respect thereof, by litigation or
otherwise, including insurance expenses; and all such expenses shall be
liabilities within the terms of this agreement; and (ii) next to the payment of
the full principal balance and/or interest with respect to any of the
Liabilities, whether or not then due, if the proceeds of such disposition shall
be insufficient to pay the costs, charges, expenses and attorneys' fees and
other expenses hereinabove set forth, and the full principal balance and
interest in respect of the Liabilities secured hereby Debtor shall be liable
for, and hereby agrees to pay forthwith, any such deficiency. At the request of
the Bank, Debtor shall assemble the Security and make the same available to the
Bank at a place to be designated by the Bank. The bank shall not be obligated to
take any steps necessary to preserve any rights in any of the Security against
prior parties who may be liable in connection therewith, and the Debtor hereby
agrees to rake all such steps.
13. The Debtor hereby designates and appoints the Bank (and any person
designated by the Bank) as attorney-in-fact of the Debtor, irrevocably and with
full power of substitution, to open and dispose of mail addressed to the Debtor,
to notify postal authorities to change the address for delivery of mail
addressed to the Debtor to such address as the Bank may designate, to endorse
the Debtor's name on any checks, drafts, notes or similar instruments that may
come into the Bank's possession, and to do all other acts and things necessary
or advisable in the Bank's discretion to carry out and enforce this agreement.
Such designation and appointment being coupled with an interest is irrevocable
until the liabilities shall have been fully paid or discharged.
14. No delay on the part of the Bank in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. No waiver by the Bank of any provision or condition of this
agreement shall constitute a waiver of any other provision or condition
contained herein. The rights, remedies and benefits herein expressly specified
are cumulative and not exclusive of any rights or benefits which the Bank may
otherwise have.
5
<PAGE>
15. The Debtor, if more than one, shall be jointly and severally liable
hereunder, and all provisions hereof regarding the Liabilities or Security of
the Debtor shall apply to any Liabilities or any Security of any or all of them.
16. This agreement shall be binding upon the heirs, executors,
administrators, assigns or successors of the Debtor; shall constitute a
continuing agreement and shall apply to all future as well as existing
transactions; and if all transactions between the Bank and the Debtor shall be
at any time closed, this agreement shall be equally applicable to any new
transactions thereafter, and shall so continue in force notwithstanding any
change in any partnership party hereto, whether such change occurs death,
retirement or otherwise. The rights granted to the Bank herein shall be
supplementary and in addition to those granted in any other agreements with
respect to the Liabilities.
17. This agreement and all documents delivered in connection herewith
shall be construed in accordance with and governed by the Internal laws of the
State of New York without giving effect to principles of conflicts of law.
18. No modification, amendment or waiver of any provision of this
agreement, nor the consent to any departure herefrom shall in any way be
effective unless the same shall be in writing and signed by the party to be
charged and then such waiver of consent shall be effective only in the specific
instance and for the purpose for which given.
19. In case one ore more of the provisions contained in the agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality or enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
20. All notices hereunder shall be in writing and shall be deemed to have
been given when mailed postage prepaid, registered or certified mail and
addressed to the respective parties as set forth below or at such other address
as any party may specify to the other in writing (such change of address to
become effective only upon receipt of such notification in writing):
The Bank is authorized, at its option, to file Financing Statement(s) or
amendments thereto without the signature of the undersigned with respect to any
of the Security; the undersigned agrees to reimburse the Bank for the expense of
any such filing.
To Debtor: Edwards Capital Company
215 Lexington Ave.
New York, New York 10016
To Bank: Bank Hapoalim B.M.
New York
10 Rockefeller Plaza
New York, New York
6
<PAGE>
Debtor: EDWARDS CAPITAL COMPANY May 1, 1989
By: /s/ Edward Teitelbaum, G.P.
------------------------------
By: /s/ Leon Ausfresser, G.P.
----------------------------
Schedule I referred to in paragraph 1 of Security Agreement of Edwards Capital
- - - ------------------------------------------------------------------------------
Company to Bank Hapoalim B.M. (the "Agreement")
- - - -----------------------------------------------
(a) All of the Borrowers assets, personal property, goods, documents,
instruments, notes, chattel paper, accounts, accounts receivable, finance
receivables, intangibles, general intangibles, choses in action, and contract
rights, (b) all security interests granted to the Borrower (including but not
limited to security interests in taxi medallions and/or in taxis), and (c) all
proceeds and products of all of the foregoing. All of the foregoing apply
wherever located and whether in existence now or hereafter and whether the
Debtor has acquired or hereafter acquires an interest therein or a right
thereto.
Schedule II referred to in paragraph 4 of the Agreement
- - - -------------------------------------------------------
Address(es) Activities
- - - ----------- ----------
215 Lexington Ave All
New York, New York 10016
Riders to the Agreement
- - - -----------------------
Rider A
- - - -------
, subject to an inter-creditor agreement among Chemical Bank, Marine
Midland Bank N.A., National Westminster Bank USA and Bank Hapoalim B.M. dated
January 11, 1989.
Rider B
- - - -------
Upon the occurrence of any Event of Default under Debtor's promissory note to
the Bank,
Rider C
- - - -------
Except for claims, if any, arising prior to such transfer.
DEBTOR: EDWARDS CAPITAL COMPANY
By: /s/ Edwards Teitelbaum, G.P.
-----------------------------
By: /s/ Leon Ausfresser, G.P.
----------------------------
7
<PAGE>
Continuing General Security Agreement
In consideration of financial accommodations (arising from loan, advance, letter
of credit, acceptance and/or other credit transactions) given or to be given or
to be continued to the undersigned (the "Debtor") or to any other party(ies) at
the request, or for the benefit, or upon the undertaking, of the Debtor by
National Westminster Bank of USA (the "Bank"), the Debtor hereby agrees with the
Bank that, whenever the Debtor shall be at any time or times directly or
contingently indebted, liable or obligated to the Bank in any manner whatsoever,
the Bank shall have the following rights:
1. As security for the due and punctual payment of any and all of the
present and future Obligations of the Debtor (as defined in Section 2 below),
the Debtor hereby grants to the Bank a continuing security interest in (a) all
of the Collateral (as defined in Section 3 below), whether now or thereafter
existing or acquired, and (b) all present and future products and proceeds of
the Collateral.
2. As used herein, the term "Obligations" means all liabilities, absolute
or contingent, joint, several or independent, of the Debtor now or hereafter
existing, due or to become due to, or held or to be held by, the Bank for its
own account or as agent for another or others, whether created directly or
acquired by assignment or otherwise and howsoever evidenced.
3. As used herein, the term "Collateral" means the property described
opposite the box(es) checked below together with the property describe din
Section 4 below:
[X] A. ALL PERSONAL PROPERTY. All of the personal property and fixtures
of the Debtor wherever located and whether now owned or in existence or
hereafter acquired or created, of every kind and description, tangible or
intangible, including without limitation all inventory, goods, equipment, farm
products, instruments, documents, chattel paper, accounts, contract rights and
general intangibles, such terms having the meaning ascribed by the Uniform
Commercial Code, and including but not limited to (an) any of such property
evidencing (i) loans from the Debtor to New York City minifleet taxi
corporations, (ii) loans from the Debtor to individual New York City taxicab
owners and drivers and (iii) any other loans made by the Debtor, and (b) any and
all security interests in favor of the Debtor (including, without limitation,
any and all security interests in favor of the Debtor in tax medallions and
taxis).
[_] B. EQUIPMENT. Equipment (of any nature and description), now owned
or hereafter acquired and wherever located, employed in the operation of the
Debtor's business, and all proceeds thereof and products of such equipment in
any form whatsoever. As used herein, the term "equipment" shall also mean and
include all spare parts therefor, all present and future additions, attachments
and accessions thereto, all substitutions therefor and replacements thereof.
Nothing herein shall be construed as giving a right to the Debtor to sell any
equipment which is the subject of this Agreement.
<PAGE>
[ ] C. INVENTORY. All of the inventory of the Debtor, of every type or
description, now owned or hereafter acquired and wherever located, whether raw,
in process or finished, all goods usable in processing the same and all
documents of title covering any inventory, and all proceeds thereof and products
of such inventory in any form whatsoever, including but not limited to accounts
and chattel paper .
[ ] D. ACCOUNTS AND CHATTEL PAPER. All of the Debtor's present and
future accounts, contract rights, general intangibles and chattel paper and all
other rights to the payment of money arising out of the sale (or lease) of goods
or services (hereinafter referred to in the plural as "Accounts" and in the
singular as "Account"), all proceeds thereof and all liens, securities,
guarantees, remedies, and privileges pertaining thereto, together with all
rights and liens of the Debtor in and to such goods, including returned or
repossessed goods, and all rights and property of any kind forming the subject
matter of any of the Accounts, including the right of stoppage in transit.
[ ] E. OTHER.
If no box is checked, Clause A (All Personal Property) shall be deemed
applicable for all purposes of this Agreement. If the Clause A box is checked,
checking also the Clause B and/or Clause C and/or Clause D and/or Clause E
box(es) is not intended, and shall not be construed, to limit the generality or
legal effect of the description contained in Clause A.
4. Any and all deposits or other sums at anytime credited by or due from
the Bank to the Debtor; and any and all monies, securities and other property of
the Debtor, and the proceeds thereof now or hereafter held or received by or in
transit to the Bank from or for the Debtor, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, shall at all times constitute
security for any an all Obligations.
5. The Debtor represents and warrants that: (a) no Financing Statement
(other than any which may have been filed on behalf of the Bank) relating to any
of the Collateral is on file in any public office; and (b) the Chief Executive
Office (or Major Executive Office) of Debtor (if any), and the Collateral are
respectively located at the address(es) set froth at the end of this Agreement
and Debtor will not change such location without prior written notice to and
consent of the Bank; and (c) Debtor has not created and is not aware of any
security interest, lien or encumbrance on or affecting the Collateral other than
created hereby .
6. The Debtor assumes all liability and responsibility in connection with
all Collateral acquired by Debtor, and the obligation of the Debtor to pay all
Obligations shall in
<PAGE>
no way be affected or diminished by reason of the fact that any such Collateral
may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable
to the Debtor.
7. As long as this Agreement shall remain in effect, the Debtor agrees:
(a) that, if the Bank so demands in writing at any time (i) all proceeds
of the Collateral shall be delivered to the Bank promptly upon their receipt in
a form satisfactory to the Bank, and (ii) all chattel paper, instruments, and
documents pertaining to the Collateral shall be delivered to the Bank at the
time and place in the manner in which specified in the Bank's demand;
(b) in order to enable the Bank to comply with the law of any
jurisdiction, including state, federal and foreign, applicable to any security
interest granted hereby or to the Collateral, to execute and deliver upon
request, in form acceptable to the Bank, any Financing Statement, notice,
statement, instrument, document, agreement or other paper and/or to perform any
act requested by the Bank which may be necessary to create, perfect, preserve,
validate or otherwise protect such security interest or to enable the Bank to
exercise and enforce the Bank's rights hereunder or with respect to such
security interest;
(c) promptly to pay any filing fees or other costs in connection with (i)
the filing or recordation of such Financing Statements or any other papers
described above and (ii) such searches of the public records as the Bank in its
sole discretion shall require;
(d) that the Bank is authorized to file or record any such Financing
Statements or other papers without the signature of the Debtor if permitted by
applicable law;
(e) the Bank may file a photographic or other reproduction of this
Agreement in lieu of a Financing Statement in any filing office where it is
permissible to do s;
(f) except for the security interest granted hereby, the Debtor shall keep
the Collateral and proceeds and products thereof free and clear of any security
interest, liens or encumbrances of any kind, the Debtor shall promptly pay, when
due, all taxes and transportation, storage and warehousing charges and fees
affecting or arising out of the Collateral and shall defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein adverse to the Bank;
(g) at all times to keep all insurable Collateral insured at the expense
of the Debtor to the Bank's satisfaction against loss by fire, theft and any
other risk to which the Collateral may be subject; all policies shall be
endorsed in favor of the Bank and, if the Bank so requests shall be deposited
with the Bank and in any event, such policies will provide that each insurer
will give the Bank no less than 30 days' notice in writing prior to the exercise
of any right of cancellation; in the event Debtor fails to maintain any
insurance the Bank may (but shall not be obligated to) place such insurance and
pay the premium therefor, in which event Debtor will pay the Bank such premium
with interest; the Bank may apply any proceeds of such insurance which may be
received by it toward payment of the Obligations, whether or not due, in such
order of application as the Bank may determine;
<PAGE>
(h) that the Bank's duty with respect to the Collateral shall be solely to
sue reasonable care in the custody and preservation of collateral in its
possession; the Bank shall not be obligated to take any steps necessary to
preserve any rights in any of the Collateral against prior parties, and the
Debtor hereby agrees to take such steps; the Debtor shall pay to the Bank all
costs and expenses, including filing and reasonable attorney's fees, incurred by
the Bank in connection with the custody, care, preservation or collection of the
Collateral; the Bank may, but is not obligated to, exercise any and all rights
of conversion or exchange or similar rights, privileges and options relating to
the Collateral; the Bank shall have no obligation to sell or otherwise realize
upon any of the Collateral as herein authorized and shall not be responsible for
any failure to do so or for any delay in so doing; in the event of any
litigation, with respect to any matter connected with this Agreement, the
Obligations, the Collateral, or any other instrument, document or agreement
applicable hereto or to any one or more of them in any respect, Debtor hereby
waives the right to a trial by jury and all defenses, rights of setoff and
rights to interpose counterclaims of any nature;
(i) to provide the Bank with such information as the Bank may from time to
time request with respect to the location of the Collateral and any of its
places of business ;
(j) that the Bank will be notified promptly in writing of any change in
any office as set forth below;
(k) that the Debtor will permit the Bank, by its officers and agents, to
have access to and examine at all reasonable times the properties, minute books
and other corporate records, and books of account and financial records of the
Debtor; and
(l) that the Debtor will promptly notify the Bank upon the occurrence of
any default, as provided in this Agreement, of which the Debtor has knowledge.
8. If the Clause A and/or D box(es) in Section 3 (All Personal Property
and/or Accounts and Chattel Paper) is (are) checked, the following provisions
shall also be applicable.
A. Upon non-payment when due of any of the Obligations, or upon failure
of the Debtor or perform any agreement on its part to be performed hereunder, or
by the terms of any other or related agreement covering the Obligations, the
Debtor agrees as follows: (i) the Debtor will not, without first obtaining the
written consent of the Bank, renew or extend the time of payment of any Account;
(ii) the Debtor will promptly notify the Bank in writing of any compromise,
settlement or adjustment with respect to an Account and will forthwith account
therefor to the Bank in cash for the amount thereof without demand or notice;
(iii) the Debtor will stamp, in form and manner satisfactory to the Bank, its
accounts receivable ledger and other books and records pertaining to the
Accounts, with an appropriate reference to the security interest of the Bank in
the Accounts; (iv) upon request, the Debtor will furnish the Bank original or
other paper relating to the sale of merchandise or the performance of labor or
services which created any Account; (v) the Debtor may collect the Accounts,
subject to the discretion and control of the Bank, but the Bank may, without
cause or notice, curtail or terminate such authority at any time; (vi) the
proceeds of the Accounts,
<PAGE>
when collected by the Debtor, whether consisting of cash, checks, notes, drafts,
money orders, commercial paper of any kind whatsoever, or other documents,
received in payment of the Accounts shall be promptly remitted by the Debtor to
the Bank, in precisely the form received, except for endorsement by the Debtor
when required; (vii) such proceeds until remitted to the Bank, as aforesaid,
shall be held in trust by the Debtor for, and as the property of, the Bank and
shall not be commingled with other funds, money or property; (viii) proceeds of
the Accounts will be received by the Bank subject to final collection and
receipt of proceeds in cash or by unconditional credit to and accepted by the
Bank; (ix) the Bank shall apply in its absolute discretion, all collections
received by it on the Accounts, toward the payment of any of the Obligations
whether due or not due; (x) the Debtor will promptly notify the Bank in writing
of the return or rejection of any merchandise represented by the Accounts and
the Debtor shall forthwith account therefor to the Bank in cash without demand
or notice and until such payment has been received by the Bank, the Debtor will
receive and hold all such merchandise separate and apart, in trust for and
subject to the security interest in favor of the Bank; (xi) the Bank is
authorized to sell, for the Debtor's account and sole risk, all or any part of
such merchandise in the manner and under the terms and conditions hereinafter
set forth.
B. The Debtor represents and warrants to the Bank that the Debtor is the
sole owner of the Accounts and no one has or claims to have an interest of any
kind therein or thereto; each of the debtors named in every such Account is
indebted to the Debtor in the amount and on the terms indicated in the invoice
and schedule of Accounts; each Account is bona fide and arise out of the
performance of labor or services or the sale and delivery or lease of
merchandise or both; and none of the Accounts is now, nor will at any time in
the future become, Contingent upon the fulfillment of any contract or conditions
whatsoever, nor subject to any defense, offset or counterclaim.
C. The Debtor will maintain accurate and complete records of the Accounts
and will make the same available to the Bank at any time upon demand.
9. Upon non-payment when due of any of the Obligations, or upon the
failure of the Debtor to perform any agreement on its part to be performed
hereunder, or by the terms of any other related agreement covering the
Obligations, or in case the Bank deems itself insecure, or it appears at any
time that any representation in any financial or other statement of the Debtor
(delivered to the Bank by or on behalf of the Debtor) is untrue or omits any
material fact, or if a material adverse change shall occur in the financial
condition of the Debtor, or if the Debtor (or any endorser, guarantor or surety
of or upon any of the Obligations) shall die or (being a partnership or
corporation) shall be dissolved or shall become insolvent (however evidenced),
or upon the suspension of the Debtor, or upon the issuance of any warrant,
process, or order of attachment, garnishment or lien and/or the filing of a lien
as a result thereof against any of the property of the Debtor (or any endorser,
guarantor or surety of or upon any of the Obligations), or upon the making by
the Debtor (or any endorser, guarantor or surety) of an assignment for the
benefit of creditors under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt, composition, receivership, liquidation or
dissolution law or statute of any jurisdiction, - then in any such event (each
an "Event of Default"), (a) all Obligations shall become at once due
<PAGE>
and payable, without notice, presentment, demand for payment or protest, which
are hereby expressly waived; (b) the Bank is authorized to take possession of
the Collateral and, may enter, with the aid and assistance of any person or
persons, any premises where the Collateral, or any part thereto is, or may be,
placed and remove same; (c) the Bank may proceed to apply to the Obligations,
any and all deposits or other sums described in Section 4 hereof; (d) the Bank
may require the Debtor to assemble the Collateral and to make it available to
the Bank at a place designated by the Bank which is reasonably convenient to the
Bank and the Debtor; (e) the Bank shall have the right from time to time to
sell, resell, assign, transfer and deliver all or any part of the Collateral, at
any broker's board or exchange, or at public or private sale or otherwise, at
the option of the Bank, for cash or on credit for future delivery, in such
parcel or parcels and at such time or times and at such place or places, and
upon such terms, and conditions as the Bank, may deem proper, and in connection
therewith may grant options and may impose reasonable conditions such as
requiring any purchaser to represent that any stock constituting part of the
Collateral is being purchased for investment purposes only, all without (except
as shall be required by applicable statute and cannot be waived) advertisement
or demand upon the Debtor or right of redemption to the Debtor, which are hereby
expressly waived; unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Bank will give the Debtor reasonable notice of the time and place of any such
public sale or of the time after which any private sale or any other intended
disposition thereof is to be made and Debtor agrees that five (5) days prior
notice shall be deemed reasonable notice; (f) upon each such sale, the Bank may,
unless prohibited by applicable statute which cannot be waived, purchase all or
any part of the Collateral being sold, free from and discharged of all trusts,
claims, rights of redemption and equities of the Debtor, which are hereby waived
and released; (g) the Bank shall, upon mailing notice to the Debtor that is so
elects, have from the date of such mailing the right from time to time to vote
any shares of stock securing any of the Obligations; provided, however, the Bank
at any time, before or after the occurrence of any Event of Default, may, but
shall not be obligated to, transfer into or out of its own name or that of its
nominee all or any of the Collateral which is instruments, stocks, bonds, and
other securities, and the Bank or its nominee may demand, sue for, collect,
receive and hold as like Collateral any or all interest, dividends and income
thereon and if any securities are held in the name of the Bank or its nominee,
the Bank may, after the occurrence of any such events, exercise all voting and
other rights pertaining thereto as if the Bank were the absolute owner thereof;
but the Bank shall not be obligated to demand payment of, protest, or take any
steps necessary to preserve any rights in any such Collateral against prior
parties, or take any action whatsoever in regard to any such Collateral, all of
which the Debtor assumes and agrees to do. Without limiting the generality of
the foregoing, the Bank shall not be obligated to take any action in connection
with any conversion, call, redemption, retirement or any other event relating to
any of such Collateral, unless the Debtor gives written notice to the Bank that
such action shall be taken not more than thirty (30) days prior to the time such
action may first be taken and not less than ten (10) days prior to the
expiration of the time during which such action may be taken; (h) the Bank's
obligations, if any, to give additional (or to continue) financial
accommodations of any kind to the Debtor shall immediately terminate; and (i) in
addition to the rights and remedies given to the Bank hereunder or otherwise,
the Bank shall have all of the rights and remedies of a secured party under the
New York Uniform Commercial Code.
<PAGE>
10. In the case of each such sale or of any proceedings to collect any of
the Obligations, the Debtor shall pay all costs and expenses of every kind for
collection, sale or delivery, including reasonable attorneys' fees, and after
deducting such costs and expenses from the proceeds of sale or collection, the
Bank may apply any residue to pay any of the Obligations and the Debtor will
continue liable to the Bank for any deficiency with interest.
11. The Bank may, but is not obligated to, (a) demand, sue for, collect or
receive any money or property at any time due, payable or receivable on account
of or in exchange for any obligations securing any of the Obligations, (b)
compromise and settle with any person liable on such obligation, and/or (c)
extend the time of payment of or otherwise change the terms thereof, as to any
party liable thereon all without incurring responsibility to the undersigned or
affecting any of the Obligations.
12. In order to effectuate the terms and provisions hereof, Debtor hereby
designates and appoints Bank and its designees or agents as attorney-in-fact of
Debtor, irrevocably and with power of substitution, with authority to receive,
open and dispose of all mail addresses to Debtor, to notify the Post Office
authorities to change the address for delivery of mail addressed to Debtor to
such address as Bank may designate; to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders, instruments or other evidence of
payment or proceeds of the Collateral that may come into Bank's possession; to
sign the name of Debtor on any notes, acceptance,s checks, drafts, money orders,
instruments or other evidence of payment or proceeds of the Collateral that may
come into Bank's possession; to sign the name of Debtor on any invoices,
document drafts against and notices (which also may direct, among other things,
that payment be made directly to the Bank) to Account debtors obligors of
Debtor, assignments and requests for verification of Accounts; to execute proofs
of claim and loss; to execute any endorsement,s assignments, or other
instruments of conveyance or transfer, to adjust and compromise any claims under
insurance policies; to execute releases; and to do all other acts and things
necessary and advisable in the sole discretion of Bank to carry out and enforce
this Agreement. All acts of said attorney or designee are hereby ratified and
approved and said attorney or designee shall not liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact or law.
This power of attorney being coupled with an interest is irrevocable while any
of the Obligations shall remain unpaid.
13. All options, powers and rights granted to the Bank hereunder or under
any promissory note, instrument, document or other writing delivered to the Bank
shall be cumulative and shall be in addition to any other options, powers or
rights which the Bank may now or hereafter have as a secured party under the New
York Uniform Commercial Code or under any other applicable law or otherwise.
14. No delay on the part of the Bank in exercising any of its options,
powers, or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. Neither this Agreement nor any provision hereof may be modified,
changed, waived, discharged or terminated orally, but only by an instrument in
writing, signed by the party against whom enforcement of the modification,
change, waiver, discharge or termination is sought. The Bank shall have the
right, for and in the name, place and stead of the Debtor, to execute
<PAGE>
endorsements, assignments or other instruments of conveyance or transfer with
respect to any of the Collateral.
15. Notice of acceptance of this Agreement by the Bank is hereby waived.
This Agreement shall be immediately binding upon the Debtor and its successors
and assigns, whether or not the Bank signs this Agreement.
16. It is the intention of the parties (a) that, this Agreement shall
constitute a continuing agreement applying to any and all future, as well as
existing transactions between he Debtor and the Bank; and (b) that the security
interest provided for herein shall attach to after-acquired as well as existing
Collateral, and the Obligations covered by this Agreement shall include future
advances and other value, as well as existing advances and other value, whether
or not similar to prior or existing advances or other value, and whether or not
the advances or value are or shall be given pursuant to commitment, all to the
maximum extent permitted by the Uniform Commercial Code.
17. Unless the context otherwise requires, all terms used herein which are
defined in the New York Uniform Commercial Code shall have the meanings therein
stated.
18. If this Agreement is signed by two or more parties as debtors, they
shall be jointly and severally liable hereunder, and the term "Debtor" wherever
used in this Agreement shall mean the parties who have signed this Agreement and
each of them.
19. Mailing Address of Debtor. For the purpose of Section 9.402(1) of the
Uniform Commercial Code, the address of the Debtor specified below under the
caption "Chief Executive Office" (or "Major Executive Office" address whenever
the Chief Executive Office is located outside of the United States) shall be the
Debtor's mailing address.
20. This Agreement shall be construed in accordance with and be governed
by the law of the State of New York.
IN WITNESS WHEREOF, the Debtor has executed this Agreement or has caused
these presents to be executed and delivered by its proper corporate officer or
officers and caused its proper corporate seal to be hereto affixed, this 17th
day of June 1987 .
(Check one) EDWARDS CAPITAL COMPANY
---------------------------
[ ] Chief Executive Office Debtor
[ ] Major Executive Office
By: /s/ Edward Teitelbaum,
------------------------
General Partner
---------------
Title
<PAGE>
Address:
215 Lexington Ave
______________________________________
New York, New York 10016
______________________________________
______________________________________
Other Business Addresses and/or Location of Collateral
(if none, state "None")
None
______________________________________
______________________________________
<PAGE>
GENERAL LOAN AND SECURITY AGREEMENT
The undersigned (jointly and severally, if more than one) expect from time
to time, directly or indirectly, to procure credit for themselves or others from
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK (hereinafter called Bank) and
to deliver to Bank property as collateral security for the payment of the
undersigned's liabilities to Bank. To induce Bank to become or continue, so
long as Bank may see fit, as the owner or holder of any liabilities, in any
amount, in any form, and of any nature, whether absolute or contingent, direct
or indirect, due or not due, now existing or hereafter arising, upon or with
respect to which any of the undersigned may in any way be or become liable to
Bank, and which at any time have been or may hereafter be acquired by Bank (all
of which, whether one or more than one, and including the undersigned's
obligations hereunder, are hereinafter called the Liabilities), the undersigned
hereby agree that all property of any nature whatsoever of the undersigned at
any time heretofore or hereafter pledged, assigned and transferred to or
deposited with Bank or its agents by the undersigned or otherwise coming into
the possession of the Bank or its agents in any way shall be held subject to all
the terms of this agreement as collateral security for the prompt and
unconditional payment of the Liabilities.
The undersigned further agree to deposit with Bank, forthwith upon demand,
such additional collateral security for payment of the Liabilities as Bank may
from time to time demand. The undersigned further agree that, in order to
further secure the payment of the Liabilities, Bank is hereby given a continuing
lien and right of offset upon and against all debts, credits and credit balances
owing from Bank to the undersigned and against all moneys, securities,
uncollected deposits, collection items, choses in action, the avails of any
thereof and any other property of any nature whatsoever of the undersigned which
may for any purpose be actually or constructively held by or in transit to Bank
or any of its affiliates, correspondents or agents, or the subagents of any of
them, or placed in any sale deposit box leased by Sterling Safe Deposit Company
of New York to the undersigned, and agree that Bank may apply the same on
account of the Liabilities. The undersigned further agree that, if there should
be any default hereunder or with respect to the Liabilities, or if at any time
the market value of any collateral security hereunder should decline to such an
extent as, in the sole and unrestricted opinion of Bank, may make the equity
therein insufficient collateral security for the payment of the Liabilities,
then Bank is hereby authorized, at any time or times, to sell, at one or more
sales, assign and deliver the whole or any part of such collateral security,
whether or not the same consists in whole or in part of commercial paper, choses
in action or any other property of any other nature whatsoever, and any
substitutions therefor and additions thereto, and any other unliquidated
security provided for herein, and any and all right, title and interest of the
undersigned in any collateral security or for other performance and without
regard to any such demand, if made, and that Bank may be the purchaser of any
and all such collateral security or other property so sold and hold the same
thereafter in its own right absolutely free from any claim or right of
redemption on the part of the undersigned, which is hereby waived and released,
without any responsibility in that or any other event on Bank's part for any
inadequacy of price.
<PAGE>
The undersigned hereby authorize Bank to sign and file financing statements
at any time with respect to any collateral security without the signature of the
undersigned. The undersigned will, however, at any time on request of Bank,
sign financing statements, trust receipts, security agreements or other
agreements with respect to any collateral security. Upon the undersigned's
failure to do so Bank is authorized as the agent of the undersigned to sign any
such instrument. The undersigned agree to pay all filing fees and to reimburse
Bank for all costs and expenses of any kind incurred in any way in connection
with the collateral security.
Bank is authorized, whether or not any of the Liabilities be due, in its
own name or in the name of the undersigned or otherwise, to demand, sue for,
collect and receive any money or property at any time due, payable or receivable
upon or on account of or in exchange for, or make any compromise or settlement
it deems desirable with reference to, or otherwise realize upon, with or without
suit, any collateral or other security for payment of the Liabilities. Any of
the Liabilities and any security therefor, and the obligations of any party with
respect to any of them, may at any time or times and in whole or in part be
increased, decreased, renewed, extended, accelerated, modified, compromised,
transformed or released by Bank as it may deem advisable, without notice to or
further assent by the undersigned and without affecting the obligations of the
undersigned hereunder and without any liability on the part of Bank for any such
action taken by it. Bank may pursue any of its remedies hereunder or otherwise
against any party obligated upon any of the Liabilities and against any security
therefor hereunder or otherwise at any time or times as it may deem advisable,
without being obligated to resort to any other party or security unless and
until it shall deem it advisable to do so. The undersigned hereby waive all
presentment for payment, protest and notice of protest of all negotiable or
other instruments to which the undersigned may be a party.
If the undersigned, as registered holder of collateral security, shall
become entitled to receive or do receive any stock certificate, option or right,
whether as an addition to, in substitution of, or in exchange for, such
collateral security, or otherwise, the undersigned agree to accept same as
Bank's agent and to hold same in trust for Bank, and to forthwith deliver the
same to Bank in the exact form received, with the undersigned's indorsement when
necessary, to be held by Bank as collateral security.
Bank may apply the net proceeds of any sale, lease or other disposition of
collateral security, after deducting all costs and expenses of every kind
incurred therein or incidental to the retaking, holding, preparing for sale,
selling, leasing, or the like of said collateral security or in any way relating
to the rights of Bank thereunder, including attorney's fees hereinafter provided
for and legal expense, to the payment, in whole or in part, in such order as
Bank may elect, or one or more of the Liabilities, whether due or not due,
absolute or contingent, making proper rebate for interest or discount on items
not then due, and only after so applying such net proceeds and after the payment
by Bank of any other amounts required by any existing or future provision of law
(including section 9-504(1)(c) of the Uniform Commercial Code of any
jurisdiction in which any of the collateral security may at the time be located)
need Bank account for the surplus, if any. The undersigned shall remain liable
to Bank for the payment of any deficiency, with legal interest. Notwithstanding
the holding by Bank of any collateral or other security for payment of the
Liabilities, or any
- 2 -
<PAGE>
sale, exchange, enforcement, collection of, realization upon, compromise or
settlement, attempted or effected, with reference to any such security, the
undersigned shall be and remain liable for the payment in full of the
Liabilities, including the aforesaid expense, except only to the extent that the
same or any part thereof shall have been reduced by payment or actual
application thereon by Bank of any security hereunder or the avails thereof.
If at any time said collateral or any other security held by Bank hereunder
shall, in the sole and unrestricted judgment of Bank, be unsatisfactory to Bank,
and the undersigned shall not on demand forthwith furnish such further
collateral or make such payment on account as shall be satisfactory to Bank, or
if any sum payable upon the Liabilities be not paid when due, or if there should
be any other default hereunder or with respect to the Liabilities, or if any of
the undersigned, or any other party liable upon or with respect to the
Liabilities (hereinafter, whether one or more than one, call Obligor) should
die, fail, dissolve or be dissolved, become insolvent, make any assignment for
the benefit of creditors, r commit any act of bankruptcy, or if a judgment
should be rendered or order of attachment, injunction or execution be issued, or
in the event of failure to pay, withhold, collect or remit any tax or tax
deficiency when assessed or due, or if any tax assessment is made by the United
States or any state, or in the event any procedure for the enforcement of a
money judgment under Article 52 of the New York Civil Practice Law and Rules or
amendments thereto be commenced, or any receiver, trustee, conservator or
custodian be appointed of, for or against, any of the undersigned or Obligor or
any property of any of them, of if a petition under any of the provisions of the
Bankruptcy Act, or any amendments thereto, or any other insolvency statute for
adjudication as a bankrupt, or for reorganization, composition, arrangement,
extension or any other relief should be filed by or against any of the
undersigned or Obligor, or if any of the undersigned or Obligor should upon
request fail to furnish any financial information to Bank or permit it to
inspect their respective books of account, records and papers, or if any
statement or representation made to Bank by the undersigned in any financial
statement or otherwise should in the opinion of Bank be untrue or misleading, or
if there should be any such change in the condition or affairs, financial or
otherwise, of any of the undersigned or Obligor, as in the opinion of Bank may
increase its credit risk respecting any of the Liabilities, then and upon the
occurrence of any such event, the Liabilities shall become forthwith due and
payable and shall forthwith be paid by the undersigned.
Upon the happening of any of the events hereinabove set forth, and at any
time thereafter, Bank shall have, in addition to all other rights and remedies,
the remedies of a secured party under the Uniform Commercial Code. The
undersigned shall, upon request of Bank, assemble the collateral security and
make it available to Bank at a place to be designated by Bank which is
reasonably convenient to Bank and the undersigned. Bank will give the
undersigned notice of the time and place of any public sale of the collateral
security or of the time after which any private sale or any other intended
disposition thereof is to be made by sending notice, as herein provided, at
least five days before the time of the sale or disposition, which provisions for
notice the undersigned and Bank agree are reasonable. No such notice need be
given by Bank with respect to collateral security which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market. Any notice to Bank shall be deemed effective only if sent to
and received at the branch,
- 3 -
<PAGE>
division or department of Bank conducting the transaction or transactions
hereunder. Any notice to the undersigned shall be deemed sufficient if sent to
the undersigned whose name appears first below to the last known address of such
undersigned appearing on the records of Bank. Each of the undersigned hereby
designates the one whose name appears first below among the undersigned as agent
to receive notice hereunder on his or its behalf. The word "property" as used
herein includes but is not limited to instruments, documents, goods, inventory,
equipment, chattel paper, contract rights, consumer goods, accounts, general
intangibles ad fixtures together with the proceeds, products ad accessions of
and to any of the foregoing, all as defined by the Uniform Commercial Code and
any and all other forms of property, whether real, personal or mixed, and any
right, title or interest of the undersigned therein or thereto. Bank may pledge
any of the collateral security hereunder (either alone or with others) to the
United States or to the Federal Reserve Bank of New York, in its own right or as
agent of the United States, to secure deposits or other obligations of the Bank
of any amounts whatever. No delay on the part of Bank or any other holder
hereof in exercising any power or right hereunder shall operate as a waiver of
any such power or right; not shall any single or partial exercise of any power
or right hereunder preclude other or further exercise thereof or the exercise of
any other power or right. No executory agreement unless in writing and signed
by Bank, and no course of dealing between the undersigned and Bank shall be
effective to change or modify or to discharge in whole or in part this
agreement. The undersigned agree that, whenever an attorney is used to collect
or enforce this agreement or to enforce, declare or adjudicate any rights or
obligations under this agreement or with respect to collateral security, whether
by suit or by any other means whatsoever, the reasonable actual attorneys' fees
shall be payable by the undersigned against whom this agreement or any
obligation or right hereunder is sought to be enforced,declared or adjudicated.
The undersigned, in any litigation (whether or not arising out of or relating to
the Liabilities or said collateral security) in which Bank and any of them shall
be adverse parties, waive trial by jury and, the right to interpose any defense
based upon any Statute of Limitations or any claim of laches and set-off or
counterclaim of any nature or description.
Bank is hereby authorized to correct patent errors herein. Bank shall have
no duty to collect income or principal, or to send notices, perform services or
take any action of any kind respecting the management of any property deposited
as collateral security hereunder. None of the provisions hereof shall be
waived, modified, or changed orally or otherwise than in writing signed by the
duly authorized officer of Bank and the undersigned. Waiver by Bank of any
provision hereof on any one or more occasions shall not constitute a waiver
thereof on any other occasion.
If the avails of any security therefor be applied on account of any of the
Liabilities, neither the undersigned nor any other party shall have any right of
subrogation to Bank's rights in any other security for any of the Liabilities,
and the undersigned hereby waive all rights, if any, of subrogation with respect
to such other security and all rights, if any, of contribution from Bank by
reason of any such application or otherwise. The undersigned hereby waive any
notice of the acceptance of this agreement by Bank. The rights and powers
herein granted to Bank are not intended to limit any rights or powers granted in
any note or other instrument taken in connection with any of the Liabilities,
and shall in all respects be cumulative thereto. The undersigned hereby
expressly consent to and ratify all the terms, provisions and conditions of any
such note or other instrument now or hereafter
- 4 -
<PAGE>
taken in connection with any of the Liabilities, and waive any further notice of
the creation, maturity and nonpayment of any such note or other instrument or of
any of the Liabilities evidenced thereby. Bank is hereby authorized, at its
option, but without any obligation to do so, to transfer or register any of the
aforesaid collateral in the name of any of its nominees without further notice
to the undersigned. Bank may assign and transfer any of the Liabilities and any
or all the collateral security therefor and shall be thereafter fully discharged
from all liability and responsibility with respect to the Liabilities and
collateral security so transferred and the transferee shall be vested with all
the powers and rights of Bank hereunder with respect to the collateral security
so transferred,but with respect to the Liabilities and security therefor not so
transferred. Bank shall retain all rights and powers given it herein.
The undersigned agree that this agreement shall continue in full force and
effect until notice of termination thereof shall have been given in writing,
actually delivered to Bank, and receipt thereof acknowledged in writing, signed
by Bank, provided, however, that such notice shall not become effective as to
the Liabilities unpaid on the date of receipt of such notice, together with any
subsequent extensions or renewals of the Liabilities and all other obligations
arising therefrom, until the same shall have been paid in full to Bank. The
terms of this agreement shall be construed under and in accordance with the laws
of the State of New York. All the terms, provisions and conditions hereof shall
be binding upon the undersigned, their respective executors, administrators,
successors and assigns. Any provision hereof which may prove unenforceable
under any law shall not affect the validity of any other provision hereof.
In witness whereof, the undersigned have signed, sealed and delivered this
instrument of the 1st day of May 1991.
EDWARDS CAPITAL COMPANY
By: Harvard Servicing Corp.,
General Partner
By: /s/ Edward Abramson, President
---------------------------------
- 5 -
<PAGE>
GENERAL SECURITY AGREEMENT
In order to obtain loans, advances, acceptances, letters of credit and/or
other financial accommodations from or otherwise deal with, Israel Discount Bank
of New York (hereinafter referred to as "the Bank") and in consideration
therefor, the undersigned hereby agree(s) with the Bank as follows in respect of
any and all liabilities of the undersigned to the Bank due or to become due, now
or hereafter existing, direct or indirect, absolute or contingent, liquidated or
unliquidated, at law or in equity or otherwise, and whether, or acquired by
pledge or purchase from the undersigned or others, or incurred by overdraft,
direct or implied contract, or arising by operation of law or in any other
manner whatsoever (all of which liabilities are hereinafter referred to as "the
obligations") to wit:
1. All loans, advances or credits heretofore obtained from the Bank by
the undersigned, as well as all present and future indebtedness to the Bank,
shall, unless otherwise agreed upon, be repayable by the undersigned to the Bank
upon demand with interest. Interest on obligations with stated maturities shall
continue during any extension in time of payment resulting from a stated payment
date falling on Saturday, Sunday or a public holiday.
2. As security for the repayment of the obligations, the undersigned
hereby grant(s) to the Bank a security interest in, a general lien upon and/or
right of set-off of, all personal property and fixtures of the undersigned,
whether no or hereafter existing or now owned or hereafter acquired and wherever
located, of every kind and description, tangible or intangible, including, but
not limited to, the balance of every deposit account, now or hereafter existing,
of the undersigned with the Bank and any other claim of the undersigned against
the Bank, now or hereafter existing, and all moneys, goods, instruments,
securities, documents, chattel paper, accounts, contract rights, general
intangibles, credits, claims, demands and any other property, rights and
interests of the undersigned, and the proceeds, products and accessions of and
to any thereof (all of which property is hereinafter referred to as the
"Security").
3. At any time and from time to time, upon the demand of the Bank, the
undersigned will: (1) delivery and pledge to the Bank, indorsed and/or
accompanied by such instruments of assignment and transfer in such form and
substance as the Bank may reasonably request, any and all instruments, documents
and/or chattel paper as the Bank may specify in its demand; (2) give, execute,
deliver, file and/or record any notice, statement, instrument, document,
agreement or other papers that may be necessary or desirable or that the Bank
may request, in order to create, preserve, perfect, or validate any security
interest granted pursuant thereto or to enable the Bank to exercise and enforce
its rights hereunder or with respect to such security interest: (3) keep and
stamp or otherwise mark any and all documents and chattel paper and its
individual books and records relating to inventory, accounts and contract rights
in such manner as the Bank may require; and (4) permit representatives of the
Bank at any time to inspect its inventory and to inspect and make abstracts from
the undersigned's books and records pertaining to inventory, accounts, contract
rights, chattel paper, instruments and documents. The right is expressly
granted to the Bank, at its discretion, to file at any time one or more
financing statements under the
<PAGE>
Uniform Commercial Code naming the undersigned as debtor and the Bank as secured
party without the signature of the undersigned and indicating therein the types
or describing the items of Security herein specified; all without notice and
without liability except to account for property actually received by it.
Without the prior written consent of the Bank the undersigned will not file or
authorize or permit to be filed in any jurisdiction any such financing or like
statement in which the Bank is not named as the sole secured party.
4. The undersigned further agree(s), upon the demand of the Bank, to
deliver to the Bank additional collateral to its satisfaction, and/or to make
such payment on account of the obligations as will be satisfactory to the Bank,
should the market value of any Security at any time subject hereto decline, or
should any change occur in the marketability thereof, or should any of the
Security for any reason be deemed unsatisfactory to the Bank.
5. The undersigned hereby agree(s) to reimburse the Bank for any and all
reasonable and actual costs and expenses of every kind which may be paid or
incurred by the Bank in the collection of, and/or realization upon, and/or the
attempted collection of, and/or attempted realization upon, any and/or all of
the obligations and/or any and/or all of the Security, and/or for the insurance
and/or in the sale or delivery, as in this agreement provided, of any and/or all
of the Security, and for the care of the Security and defending or asserting the
rights and claims of the Bank in respect thereof, by litigation or otherwise,
and the repayment of all such costs and expenses (including legal costs and
charges for legal services) is hereby secured in the same manner and to the same
extent as any of the obligations.
6. If the undersigned shall default in the performance of any of its
agreements herein or in any instrument or document delivered pursuant hereto, or
upon the non-payment of any of the obligations at maturity, or in case of
failure of the undersigned to meet at maturity any liabilities/*/ of the
undersigned to any other party, or upon the failure of the undersigned to
furnish additional security to the satisfaction of the Bank as above provided,
or upon the death, dissolution, merger, consolidation, termination of existence,
declared insolvency or failure in business of, or appointment of a receiver for,
or commission of any act of bankruptcy by the undersigned, or the entry of any
judgment/*/ against the undersigned, or levy under a warrant of attachment upon
the credit or property of the undersigned, or in case any petition in bankruptcy
should be filed by or against the undersigned, or any proceedings in bankruptcy
or under any act of Congress or other governmental authority relating to the
relief of debtors should be commenced for the relief or readjustment of any
indebtedness of the undersigned, either through reorganization, composition,
extension or otherwise, or if the undersigned or any copartnership of which the
undersigned is (are) a member (or members) shall suspend the transaction of his,
its or their usual business, or be expelled from or suspended by any stock or
securities exchange or other exchange, or in case any of the foregoing defaults
or contingencies be committed by, or occur with reference to, any one or more of
the undersigned (if there by more than one) or any maker, drawer, acceptor,
endorser, guarantor, surety or accommodation party or other person liable upon
or
_________________________________
/*/in excess of $75,000.00.
<PAGE>
for any of the obligations or Security, all of the obligations of the
undersigned and of each of them, to the Bank, shall at the option of the Bank
immediately mature and become forthwith due and payable, without demand or
notice.
Upon default hereunder or in connection with any of the obligations
(whether such default be that of the undersigned or of any other party obligated
thereon). The undersigned shall, at the request of the Bank, assemble the
Security at such place or places as the Bank designates in its request. The
Bank shall have the rights and remedies with respect to the Security of a
secured party under the Uniform Commercial Code (whether or not the Code is in
effect in the jurisdiction where the rights and remedies are asserted). In
addition, with respect to the Security, or any part thereof, which shall then be
or shall thereafter come into the possession or custody of the Bank or any of
its agents, associates or correspondents, the Bank may assign, transfer, sell or
cause to be sold in the Borough of Manhattan, New York City, or elsewhere in one
or more sales or parcels, at such price as the Bank may deem best, and for cash
or on credit or for future delivery, without assumption of any performance or
notice of intention to sell or of time or place of sale (except such notice as
is required by applicable statute and cannot be waived), and the Bank or anyone
else may be the purchaser of any or all of the Security so sold and thereafter
hold the same absolutely, free from any claimer right of whatsoever kind,
including any equity of redemption, of the undersigned, any such demand, notice
or right and equity being hereby expressly waived and released. In the case of
any failure of the purchaser to take up and pay for the Security so sold, the
Security may be again sold. No entry of judgment shall impair any rights or
powers granted hereunder.
Upon any such sale or other realization upon any or all of the Security, or
the application of moneys held by the Bank on deposit or otherwise for the
undersigned, or any one or more of them, the Bank may apply the proceeds
thereof, both principal and income, after the payment therefrom of all expenses
incident to sale, delivery and/or collection, to or toward the payment of either
the principal or the interest (or partly to the other) of any or all of the
obligations at its option, in such proportions and in such sequence or order as
the Bank in its sole discretion may determine, and the undersigned shall
continue liable for any deficiency remaining after such application.
7. The Bank at its discretion without notice to the undersigned, and
whether or not any of the obligations be due, may transfer to its own name, or
to the name of a nominee or nominees, any of the Security, and in its name or in
the name of any nominee or nominees, or in the name or names of the undersigned,
or of any one or more of them, or otherwise, may endorse, demand, sue for,
collect and/or receive any money or property at any time due, payable or receive
upon, or on account of,or in exchange for, or may take any action it may deem
necessary for its own protection with respect to any of the Security, and may
vote the Security. The Bank, whether or not any of the obligations be due, in
its name, or in the name or names of any one or more of the undersigned, or
otherwise, may make any compromise or settlement it deems desirable with
reference to and/or otherwise realize upon, with or without suit, any of the
Security, or any claim by or against the Bank with respect thereto or to the
proceeds thereof, and the Bank may renew or extend the time of payment or
performance, or arrange for payment in installments, or otherwise modify the
terms as to any
<PAGE>
other parties liable thereon, or release, any of the Security, or of any claims
with respect thereto or to the proceeds thereof. By the exercising of any of
the foregoing powers the Bank shall not incur any responsibility to, or
discharge or otherwise affect any liability of the undersigned with respect to
any of the obligations, or upon, or in connection with, any of the Security.
The Bank shall be deemed to have possession of any of the Security in transit to
or set apart for it or any of its agents, associates or correspondents. The
Bank shall not be required to take any steps necessary to preserve any rights
against prior parties to any of the Security. The Bank shall be deemed to have
possession of any of the Security in transit to or set apart for it or any of
its agents, associates or correspondents. The Bank shall not be required to
take any steps necessary to preserve any rights against prior parties to any of
the Security.
8. As respects any instrument to which the undersigned, or any one or
more of them, is a party or which at any time may be included in or which may
evidence the obligations or the Security, the undersigned hereby waive(s)
presentment, protest and notice of protest and dishonor and further waives any
and all other notices and demands whatsoever, whether or not relating to such
instruments.
9. If any tangible property shall at any time be included in the
Security, the undersigned agree(s) at the undersigned's own expense at all time
to keep the same fully insured with responsible companies acceptable to the Bank
against loss by fire and any other risks to which said property may be subject.
The insurance policies or certificates on said property shall be deposited with
the Bank on demand, and the loss thereunder shall be payable to the Bank or as
the Bank may elect. In case of failure on the part of the undersigned to effect
such insurance, the Bank may itself insure such property at the expense of the
undersigned and the repayment of such expenses is hereby secured in the same
manner and to the same extent as any of the obligations.
10. The Bank may assign or transfer the whole or any part of the
obligations, and may transfer therewith the whole or any part of the Security.
The transferee shall have the same rights and powers with reference to the
obligations so transferred and the Security transferred therewith as are hereby
given to the Bank, and upon such transfer, the Bank shall be fully discharged
from all claims with respect to any Security so transferred, but shall itself
retain all rights and powers hereby given with respect to any Security not so
transferred.
11. No delay on the part of the Bank or any transferee in exercising any
power or right hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any power or right hereunder preclude other or further
exercise thereof, or the exercise of any other power or right. The rights,
remedies and powers hereby conferred are irrevocable, cumulative, and not
exclusive of but in addition to, any rights, remedies and powers which the Bank,
or its transferee, may or would otherwise have.
12. All rights, questions, disputes and controversies arising under this
agreement shall be determined according to the laws of the State of New York.
Unless the context otherwise requires, all terms used herein which are defined
in the Uniform Commercial Code shall have the meanings therein stated.
<PAGE>
13. Calls for collateral or any notices to the undersigned may be
personally made or given, or may be made or given by leaving the same at the
address given below, or at the last known address of the undersigned, or any of
them, or by mailing, telephoning, telegraphing or cabling the same to any such
address with the same effect as if delivered to the undersigned in person.
14. If the undersigned are more than one, this agreement shall be joint
and several. In such case, each of the undersigned, to secure the repayment of
any and all obligations as above defined, now or hereafter owning to the Bank by
him or it, individually and/or jointly with any other or others, hereby confers
upon the Bank with respect to any and all property or property rights now or
hereafter owned by him or its separately, or jointly with such other or others,
the same security, rights, powers, and remedies as have hereinbefore been
conferred upon the Bank with respect to the joint property and property rights
of all of the undersigned for the repayment of their joint obligations.
15. This agreement shall be a continuing agreement applying to all future
as well as to all existing transactions. It shall bind all administrators,
executors, heirs, partners, successors and assigns of the undersigned, and each
of them, and shall not be affected by any change in personnel, or by the death
or retirement of any member, of a partnership. No provisions hereof shall be
modified or limited except by a written instrument expressly hereto and to the
provision so modified or limited.
SEE RIDER ANNEXED HERETO
New York May 2 , 1991 ___________________________________
---------
Address____________________________
EDWARDS CAPITAL COMPANY
By: Harvard Servicing Corp.
By: /s/ Edward M. Abramson
-------------------------
Edward M. Abramson, President
Address:___________________________
<PAGE>
RIDER TO GENERAL SECURITY AGREEMENT
MADE BY EDWARDS CAPITAL COMPANY
TO
ISRAEL DISCOUNT BANK OF NEW YORK
16. Notwithstanding anything to the contrary set forth herein, the only
liabilities which shall constitute "the obligations," and shall be secured
hereby, shall be liabilities undertaken directly by Edwards Capital ("ECC") to
the Bank, and not any liabilities acquired by the Bank from another person.
17. Notwithstanding the provisions of the last sentence of paragraph 3, or
anything else set forth herein, consent of the Bank shall not be required in
connection with the filing of any financial statement in favor of, or the
granting of any security interest to any lender with whom the Bank has entered
into an Inter-Creditor Agreement with respect to ECC, such consent being granted
hereby. The Bank has been advised by ECC that it has granted security interests
in the Security to Chemical Bank, Marine Midland Bank, N.A., National
Westminster Bank, USA, Bank Hapoalim and Sterling National Bank and Trust
Company or New York, and ECC shall not be deemed to be in default hereunder by
virtue of the granting to such banks of such security interests or any rights in
connection therewith.
18. Notwithstanding the provisions of paragraph 6, any sale of the
Security shall be conducted in a commercial reasonable manner.
<PAGE>
PROMISSORY NOTE
(SINGLE PAYMENT - DEMAND OR TIME)
(VARIABLE RATE OF INTEREST)
March 5, 1996
$275,000.00
90 days after date, for value received, the undersigned promise(s) to pay
ISRAEL DISCOUNT BANK OF NEW YORK (hereinafter called the "Bank") or order, at
its 511 Fifth Avenue Branch Office in the City of New York, TWO HUNDRED SEVENTY
FIVE THOUSAND AND 00/100 Dollars ($275,000.00) in lawful money of the United
States, together with interest from the date of this note until maturity or
demand at a rate per annum equal to 2 per cent above the prime loan rate of this
Bank from time to time in effect calculated on the basis of a 360-day year and
actual number of days elapsed (but in no event in excess of the maximum rate
permitted by applicable law), such interest to be payable monthly commencing
April 1996 and continuing in the same day of each calendar month thereafter
and at maturity. If the space in the preceding sentence is incomplete or
completed by the insertion of a "0" or a mark other than a number, then the
interest rate hereunder shall be equal to the prime loan rate of the Bank in
effect from time to time. Any change in such rate of interest shall be
effective on the date a change in the prime loan rate of the Bank occurs,
without notice to the undersigned. Interest from and after maturity (whether as
stated or by acceleration or demand) shall be at the rate per annum equal to 2%
above the rate charged hereunder on the date of such maturity or demand or if
such rate shall not be lawful with respect to the undersigned, at the highest
lawful rate then in effect. The prime loan rate of the Bank in effect on the
date of this Note is 8.25% per annum.
As security for this note and all other liabilities of the undersigned to
the bank, the undersigned and any endorser of this note hereby give(s) the Bank
a continuing lien and/or right of set-off upon any and all deposit balances now
or hereafter maintained, any and all securities and other property of the
undersigned and any endorser and the proceeds thereof now or hereafter coming
into possession or control of the Bank, hereby authorizing the Bank at any time,
without prior notice, to appropriate and apply such deposits or the proceeds of
the sale of such securities or other property to any of such liabilities,
although contingent and although unmatured, it being understood that the Bank
shall be under no obligation to effect any such appropriation and application.
The unpaid balance of this note shall, at the option of the Bank, become
immediately due and payable with or without notice or demand, upon the happening
of any one of the following specified events, with respect to any one of the
undersigned, or with respect to any endorser or guarantor of this note: (i)
failure to pay any amount when due as herein agreed, (ii) the making of any
misrepresentation for the purpose of obtaining the loan evidenced by this note,
(iii) default in the payment or performance of any other obligation to the Bank,
(iv) death, (v) insolvency (however evidenced) or the commission of any act of
insolvency, (vi) the making of a general assignment for the benefit of
creditors, (vii) the filing of any petition
<PAGE>
or the commencement of any proceeding by or against any of the undersigned or
any such endorser or guarantor for any relief under any bankruptcy or insolvency
laws or any laws relating to the relief of debtors, readjustment of
indebtedness, reorganizations, compositions or extensions, (viii) any
proceeding, procedure or remedy supplementary to, or in enforcement of
judgements, or any writ or order of attachment or garnishment is issued, made,
resorted to or commenced against, or with respect to, any property of the
undersigned or any endorser or guarantor hereof, (ix) such a change in the
financial condition or affairs (personal or otherwise) which, in the opinion of
the Bank, impairs the collectibility of this note or increases its risk, (x)
suspension with or without cause of the transaction of the usual business or
employment, (xi) cancelling, removing or permitting to be concealed or removed
any property, with intent to hinder, delay or defraud creditors: (xii) making or
suffering a transfer of any property, which is fraudulent under the law of any
applicable jurisdiction.
Each of the undersigned and any endorser hereof agree that if an attorney
is used to enforce to collect this note a reasonable attorney's fee and legal
expenses shall be added hereto.
Each of the undersigned and any endorser hereof in any litigation (whether
or not arising out of or relating to this note or any other obligation or
liability of the undersigned to the Bank) in which the Bank and any of them
shall be adverse parties, waives trial by jury and the right to interpose any
defense, set off counterclaim of any nature or description.
Each of the undersigned and each member of any undersigned partnership,
shall be jointly and severally liable hereunder.
The Bank shall not by any act, delay or omission or otherwise be deemed to
have waived any rights or remedies hereunder. No waiver shall be valid unless
signed by the Bank. Any waiver by the Bank on any occasion shall not bar any
right or remedy which the Bank would otherwise have had on any future occasion.
No executory agreement unless signed by the Bank, and no course of dealing
between the undersigned and the Bank shall be effective to modify or discharge,
in whole or part, this note. All rights and remedies of the Bank shall be
cumulative and may be exercised singly or concurrently.
This note and the provisions hereof are to be binding upon the heirs,
executors, administrators, assigns or successors of the undersigned; they shall
continue in force notwithstanding any change in any partnership party hereto,
whether such change occurs through death, retirement or otherwise; and they are
to be construed according to and governed by the laws of the State of New York.
MEDALLION TAXI MEDIA, INC
BY: /s/ Daniel Baker V.P.
----------------------------
/s/ Marie Russo V.P.
-----------------------------
<PAGE>
NATWEST BANK N.A.
PROMISSORY NOTE
$2,000,000 As of September 1, 1995
Office Address: 175 Water Street
New York, NY 10038
FOR VALUE RECEIVED, TRI-MAGNA CORPORATION (the "Borrower") promises to pay
to the order of NATWEST BANK N.A. (formerly National Westminster Bank USA - the
"Bank") at the office of the Bank located at the place first above stated or at
such other place as the holder hereof may from time to time appoint in writing,
in lawful money of the United States of America in immediately available funds,
the principal sum of Two Million Dollars ($2,000,000) or such lesser amount as
may then by the aggregate unpaid principal balance of all loans made by the Bank
to the Borrower hereunder (each a "Loan" and collectively the "Loans") as shown
on the schedule attached to and made a part of this Note. All Prime Rate Loans
(as hereinafter defined) shall be payable on demand and all Eurodollar Loans (as
hereinafter defined) shall be payable on the last day of the Interest Period (as
hereinafter defined) applicable thereto. The Borrower also promises to pay
interest (computed on the basis of a 360-day year for actual days elapsed) at
said office in like money on the unpaid principal amount of each Loan from time
to time outstanding at a rate per annum, to be elected by the Borrower at the
time each Loan is made, equal to either (i) a fluctuating rate equal to the
Prime Rate (the rate of interest established from time to time by the Bank as
its "prime rate"; a Loan bearing interest at this rate is sometimes hereinafter
called a "Prime Rate Loan") or (ii) a fixed rate of 1.75% plus the Eurodollar
Rate for an Interest Period of one month (a Loan bearing interest at this rate
is sometimes hereinafter called a "Eurodollar Loan"). Interest on each Prime
Rate Loan shall be payable monthly on the last day of each month commencing the
first such day to occur after a Loan is made hereunder and, together with
principal, on the date demand for payment thereof is made. Interest on
Eurodollar Loans shall be payable on the last day of each Interest Period
applicable thereto. If any payment of principal or interest becomes due on a
day on which the banks in New York, New York are required or permitted by law to
remain closed, such payment may be made on the next succeeding day on which such
banks are open, and such extensions shall be included in computing interest in
connection with such payment; provided, however, that if the result of any such
extension would be to extend the maturity date of any Eurodollar Loan into
another calendar month the payment shall be made on the immediately preceding
Business Day. The Borrower further agrees that after any stated or any
accelerated maturity of Eurodollar Loans hereunder, or after demand for payment
of Prime Rate Loans hereunder, all Loans shall bear interest (computed daily) at
a rate of 2% per annum in excess of the Prime Rate, payable and demand. In no
event shall interest payable hereunder be in excess of the maximum rate of
interest permitted under applicable law.
The Borrower hereby expressly authorizes the Bank to record on the attached
schedule the amount and date of each Loan, the rate of interest thereon,
Interest Period thereof and the
<PAGE>
date and amount of each payment of principal. All such notations shall be
presumptive as to the correctness thereof; provided, however, the failure of the
Bank to make such notation shall not limit or otherwise affect the obligations
of the Borrower under this Note.
In consideration of the granting of the Loans evidenced by this Note, the
Borrower hereby agrees as follows:
1. Loan Requests. Requests for Eurodollar Loans shall be made not less
-------------
than three Business Days prior to the date the Loan is to be made. Requests for
Prime Rate Loans may be made up until 1:00 p.m. on the date the Loan is to be
made. Any request for a Loan may be written or oral, but if oral, written
confirmation thereof must be received by the Bank within three Business Days
thereafter. The Bank shall have no obligation to make any Loan hereunder.
2. Prepayment. Subject to the indemnification agreement set forth in
----------
Section 3 with respect to Eurodollar Loans, the Borrower may prepay any Loan at
any time in whole or in part without premium or penalty. Each such prepayment
shall be made together with interest accrued thereon to and including the date
of prepayment.
3. Indemnity; Yield Protection. The Borrower hereby agrees to indemnify
---------------------------
the Bank against any loss or expenses which the Bank may sustain or incur as a
consequence of any of the following:
(a) the failure of the Borrower to borrow a Eurodollar Loan after a
request therefor shall have been made; or
(b) the receipt or recovery by the Bank, whether by acceleration or
otherwise, of all or any part of a Eurodollar Loan prior to the last day of the
Interest Period applicable thereto.
Without limiting the effect of the foregoing, the amount to be paid by the
Borrower to the Bank in order to so indemnify the Bank for any loss occasioned
by any of the events described in the preceding paragraph, and as liquidated
damages therefor, shall be equal to the excess, discounted to its present value
as of the date paid to the Bank, of (i) the amount of interest which otherwise
would have accrued on the principal amount so received, recovered or not
borrowed during the period (the "Indemnity Period") commencing with the date of
such receipt, recovery, or failure to borrow to the last day of the applicable
Interest Period for such Eurodollar Loan at the rate of interest applicable to
such Loan (or the rate of interest requested in the case of a failure to borrow)
provided for herein (prior to default) over (ii) the amount of interest which
would be earned by the Bank during the Indemnity Period if it invested the
principal amount so received, recovered or not borrowed at the rate per annum
determined by the Bank as the rate it would bid in the London interbank market
for a deposit of eurodollars in an amount approximately equal to such principal
amount for a period of time comparable to the Indemnity Period.
2
<PAGE>
A certificate as to any additional amounts payable pursuant to this Section
3 setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by the Bank set forth
therein if made reasonable and in good faith. The Borrower shall pay any
amounts so certified to it by the Bank within 10 days of receipt of any such
certificate.
The indemnities set forth herein shall survive payment in full of all
Eurodollar Loans and all other Loans made pursuant to this Note.
4. Increased Costs. If the Bank determines that the effect of any
---------------
applicable law or government regulation, guideline or order or the
interpretation thereof by any governmental authority charged with the
administration thereof (such as, for example, a change in official reserve
requirements which the Bank is required to maintain in respect of loans or
deposits or other funds procured for funding such loans) is to increase the cost
to the Bank of making or continuing Eurodollar Loans hereunder or to reduce the
amount of any payment of principal or interest receivable by the Bank thereon,
then the Borrower will pay to the Bank on demand such additional amounts as the
Bank may determine to be required to compensate the Bank for such additional
costs or reduction. Any additional amounts as the Bank may determine to be
required to compensate the Bank for such additional costs or reduction. Any
additional payment under this section will be computed from the effective date
at which such additional costs have to be borne by the Bank. A certificate as to
any additional amounts payable pursuant to this Section 4 setting forth the
basis and method of determining such amounts shall be conclusive, absent
manifest error, as to the determination by the Bank set forth therein if made
reasonable and in good faith. The Borrower shall pay an amounts so certified to
it by the Bank within ten days of receipt of any such certificate.
5. Change in Circumstances. In the event, and on each occasion, that on
-----------------------
the day two Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan, the Bank shall have determined (a) that dollar deposits in the
amount of the requested principal amount of such Eurodollar Loan are not
generally available in the London interbank market, (b) that the rate at which
such dollar deposits are being offered will not adequately and fairly reflect
the cost to the Bank of making or maintaining such Eurodollar Loan during such
Interest Period, or (c) that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Bank shall, as soon as practicable thereafter, give written
or telex notice of such determination to the Borrower. In the event of any such
determination, until the circumstances giving rise to such notice no longer
exist, no Eurodollar Loan then outstanding will be converted into a Prime Rate
Loan the expiration of the then current Interest Period. Each determination by
the Bank hereunder shall be conclusive absent manifest error.
6. Change in Legality.
------------------
(a) Notwithstanding anything to the contrary herein contained, if any
change in any law or regulation or in the interpretation thereof by any
governmental authority charged with the administration or interpretation thereof
shall make it unlawful for the Bank to make or
3
<PAGE>
maintain any Eurodollar Loan, then, by written notice to the Borrower, the Bank
may declare that Eurodollar Loans will not thereafter be made by the Bank
hereunder, whereupon the Borrower shall be prohibited from requesting Eurodollar
Loans from the Bank hereunder unless such declaration is subsequently withdrawn.
(b) For purposes of this Section 6, a notice to the Borrower by the
Bank pursuant to paragraph (a) above shall be effective, if lawful, on the last
day of the then current Interest Period; in all other cases, such notices shall
be effective on the day of receipt by the Borrower.
7. Warranties and Representations. The Borrower represents and warrants
------------------------------
that: (a) the financial statements of the Borrower heretofore furnished to the
Bank are complete and correct and fairly represent the financial condition of
the Borrower as at the dates thereof and for the periods covered thereby, which
financial condition has not materially adversely changed since the date of the
most recently dated balance sheet heretofore furnished to the Bank; (b) no Event
of Default (as hereinafter defined) has occurred and no event has occurred which
with the giving of notice or the lapse of time or both would constitute an Event
of Default; (c) the Borrower shall not use any party of the proceeds of any
Loan to purchase or carry any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to the
others for the purpose of purchasing or carrying any margin stock; (d) there is
no pending or, to the knowledge of the Borrower, threatened action or proceeding
affecting the Borrower before any court, governmental agency or arbitrator
which, if determined adversely to the Borrower would have a material adverse
effect on the financial condition of the Borrower except as described n the
financial statements of the Borrower heretofore furnished to the Bank; and (e)
on the occasion of the granting of each Loan all representations and warranties
contained herein shall be true and correct and with the same force and effect as
though such representations and warranties had been made on and as of the date
of the making of each such Loan.
8. Events of Default. Upon the occurrence of any of the following
-----------------
specified events of default (each an "Event of Default"): (a) default in making
any payment of principal, interest or any other sum payable under this Note,
when due; or (b) default by Borrower in the due payment of any other
indebtedness for borrowed money or default in the observance or performance of
any covenant or condition contained in any agreement or instrument evidencing,
securing or relating to any such indebtedness, which causes or permits the
acceleration of the maturity thereof; or (c) any representations or warranty
made by the Borrower herein or in any certificate furnished by the Borrower in
connection with the Loans evidenced hereby or pursuant to the provisions hereof,
proves untrue in any material respect; or (d) the Borrower becomes insolvent or
bankruptcy, is generally not paying its debts as they become due, or makes an
assignment for the benefit of creditors, or a trustee or receiver is appointed
for the Borrower or for the greater part of the properties of the Borrower with
the consent of the Borrower, such trustee or receiver is not discharged within
30 days, or bankruptcy, reorganization, liquidation or similar proceedings are
instituted by or against the Borrower under the laws of any jurisdiction, and if
instituted against the Borrower are consented to be it or remain undismissed
4
<PAGE>
for 30 days, or a writ or warrant of attachment or similar process shall be
issued against a substantial part of the property of the Borrower and shall not
be released or bonded within 30 days after levy; or (e) the Bank shall have
determined, in its sole discretion, that one or more conditions exist or events
have occurred which have resulted, or may result, in a material adverse change
in the business, properties or financial condition of the Borrower; then, in
such event, and at any time thereafter, if any Event of Default shall then be
continuing, the Bank may declare the principal and the accrued interest in
respect of all loans under this Note to be, whereupon the Note shall become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived by the Borrower.
9. Collateral Security.
-------------------
(a) As collateral security for the payment of any and all sums owing
under this Note and all other obligations, direct or contingent, joint, several
or independent, of the Borrower and of any Subsidiary and each endorser and
guarantor hereof now or hereafter existing, due or to become due to, or held, or
to be held by the Bank, whether created directly or acquired by assignment or
otherwise, (all of such obligations, including this Note, are hereinafter called
the "Obligations"), the Borrower hereby grants to the Bank a lien on and
security interest in any and all deposits or other sums at any time credited by
or due from the Bank to the Borrower, whether in regular or special depository
accounts or otherwise, and any and all monies, securities and other property of
the Borrower, and the proceeds thereof, now or hereafter held or received by or
in transit to the Bank from or for the Borrower, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and any such deposits,
sums, monies, securities and other property, may at any time after the
occurrence of any Event of Default be set-off, appropriated and applied by the
Bank against any of the Obligations whether or not such Obligations are then due
or are secured by any collateral, or, if they are so secured, whether or not
such collateral held by the Bank is considered to be adequate. As used herein,
the term "Subsidiary" or "Subsidiaries" means any corporation or corporations of
the Borrower, alone, or the Borrower and/or any one or more of its Subsidiaries,
owns, directly or indirectly, at least a majority of securities having ordinary
voting power for the election of directors; and
(b) In addition to the collateral described in Section 9(a) hereof,
payment of the Obligations is also secured by a first priority security interest
in all promissory notes and other instruments and documents evidencing the
obligations of borrowers to repay loans made by the Company.
10. Definitions. As used herein:
-----------
(a) "Business Day" means any day other than a day on which the Banks
in New York, New York are required or permitted by law to remain closed; and,
with respect to Eurodollar Loans, a day on which transactions in eurodollars are
carried on in the London Interbank Market.
5
<PAGE>
(b) "Eurodollar Rate" means with respect to any Eurodollar Loan
Interest Period, the rate per annum determined by the Bank to be the rate at
which deposits in U.S. dollars are offered by a Reference Bank (selected by the
Bank) in the London Interbank Market at approximately 11:00 a.m. (London time)
two Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Eurodollar Loan to which such
Interest Period is to apply and for a period of time comparable to such Interest
Period divided by one minus the Eurodollar Reserve Percentage.
-----
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding one billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of the Bank to United
States residents). The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve Percentage.
"Reference Banks" means banks appearing in the display designated as
page "LIBO" on the Reuters' Monitor Money Rates Service (or such other page as
may replace the LIBOR page on that service for the purpose of displaying London
Interbank Offered Rates of major banks); provided that if no such offered rate
shall appear on such display, "Reference Banks" shall mean one or more major
banks in the London interbank market as selected by the Bank.
(c) "Interest Period" means each one month period requested by the
Borrower during which a Eurodollar Loan may bear interest at the Eurodollar Rate
plus a margin of 1.75%.
12. Miscellaneous.
-------------
(a) The Borrower agrees to pay on demand all of the Bank's costs and
expenses, including reasonable counsel fees, in connection with the collection
of any sums due to the Bank and enforcement of its rights under this Note.
(b) No modifications or waiver of any provision of this Note shall be
effective unless such modification or waiver shall be in writing and signed by a
duly authorized officer of the Bank, and the same shall then be effective only
for the period and on the conditions and for the specific instances specified in
such writing. No failure or delay by the Bank in exercising any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any rights, power or privilege.
6
<PAGE>
(c) The Borrower hereby waives presentment, damage for payment,
notice of protest, notice of dishonor, and any and all other notices or demands
except as otherwise expressly provided for herein.
(d) This Note shall be construed in accordance with and governed by
the laws of the State of New York and the Borrower consents to the jurisdiction
of the courts of New York in any action brought to enforce any rights of the
Bank under this Note.
(e) Borrower waives trial by jury and the right to interpose any set-
off or counterclaim in any litigation in any court with respect to, in
connection with, or arising out of, this Note or any instrument or document
delivered pursuant hereto or the validity, protection, interpretation,
collection or enforcement hereof or thereof.
(f) This Note replaces the $1,000,000 Promissory Note dated December
1, 1994. All loans outstanding thereunder will be entered on the schedule
annexed hereto as the initial Loans made hereunder.
TRI-MAGNA CORPORATION
By: /s/ Daniel Baker
-----------------------------
Vice President Finance (Title)
7
<PAGE>
LOAN AND REPAYMENT SCHEDULE
PROMISSORY NOTE DATED AS OF ________________
TRI-MAGNA CORPORATION
TO NATWEST BANK N.A.
<TABLE>
<CAPTION>
2 Last
Day of Amount of Unpaid
Amount Rate of Interest Principal Principal Notation
Date of Loan Interest Period Repayment Balance Made By
<S> <C> <C> <C> <C> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
<PAGE>
LOAN AGREEMENT
FOR
MEDALLION FUNDING CORP.
___________________________
dated as of March 27, 1992
___________________________
<PAGE>
LOAN AGREEMENT, dated as of March 27, 1992, among MEDALLION FUNDING CORP.,
a New York corporation ("Borrower"), the banks (including National Westminster
Bank USA as lender hereunder) that from time to time are signatories hereto
(including Assignees (as hereinafter defined), collectively, the "Banks" and
individually, a "Bank"), and NATIONAL WESTMINSTER BANK USA, as a Bank
("NatWest") and as Agent for the Banks(including any successor, the "Agent").
WHEREAS, Borrower has applied to NatWest for, and NatWest and the other
Banks are willing to, among other things, provide for, a revolving credit
facility, upon 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, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. As used in this Agreement, the terms defined
-------------
in the recitals hereto shall have the respective meanings ascribed thereto in
said recitals and the following terms shall have the following respective
meanings:
"Accumulated Funding Deficiency" shall have the meaning set forth in
------------------------------
Section 302 of ERISA.
"Additional Commitment Amount" shall have the meaning set forth in Section
----------------------------
12.2 hereof.
"Adjusted LIBO Rate" shall mean, with respect to any Interest Period
------------------
applicable to any LIBO Rate Loan of any Bank, the rate of interest per annum, as
determined by such Bank, equal to the quotient (rounded to the nearest 1/100 of
1.00% or, if there is no nearest 1/100 of 1.00%, then to the next higher 1/100
of 1.00%) obtained by dividing such Bank's LIBO Base Rate by an amount equal to
the result obtained by subtracting the Eurodollar Reserve Percentage (expressed
as a decimal) from 1.00. The Adjusted LIBO Rate of each Bank shall be adjusted
automatically on and as of the opening of business on the effective date of any
change in the Eurodollar Reserve Percentage.
"Affiliate" shall mean any Person which, directly or indirectly, controls
---------
or is controlled by or is under common control with any other Person and,
without limiting the generality of the foregoing, shall include any Person who
(a) beneficially owns or holds 20% or more of the Voting Interests of such other
Person (determined either by number of shares or number of votes) or (b) is an
associate (as such term is defined in Rule 405 of the Securities Act of 1933, as
in effect on the Effective Date) of such other Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
2
<PAGE>
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or, indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Aggregate Revolving Credit Commitment" shall mean $35,000,000, as the same
-------------------------------------
may be reduced, terminated or increased from time to time pursuant to Sections
2.4, 2.10, 9.1 or 12.2 hereof.
"Agreement" shall mean this Loan Agreement, as the same may be amended and
---------
supplemented from time to time.
"Amount" shall mean, with respect to any Loan, the principal amount of,
------
plus all accrued and unpaid interest on, and all other amounts due in respect
of, such Loan.
"Assignee" or "Assignees" shall have the meaning set forth in Section 12.2
-------- ---------
hereof.
"Assignment" or "Assignments" shall have the meaning set forth in Section
---------- -----------
12.2 hereof.
"Assignor" or "Assignors" shall have the meaning set forth in Section 12.2
-------- ---------
hereof.
"Authorized Representative" shall mean, with respect to Borrower, its
-------------------------
president, vice president or chief financial officer, or any other officer of
Borrower designated as such from time to time by Borrower in a written notice to
the Banks, accompanied by an incumbency certificate with specimen signature
included.
"Banking Day" shall mean any Business Day on which dealings in deposits in
-----------
Dollars are transacted in the London interbank market.
"Board" shall mean the Board of Governors of the Federal Reserve System.
-----
"Borrower Financing Statements" shall mean financing statements approved
-----------------------------
for filing in accordance with the Uniform Commercial Code, and all other titles,
certificates, assignments and other documents, including, but not limited to,
the Mortgage Assignments, that the Agent or any Bank may require to perfect the
security interests to be granted under the Security Agreement.
"Borrower Security Agreement" shall mean the Security Agreement, dated the
---------------------------
Effective Date, between Borrower and the Agent for the benefit of the Banks,
substantially in the form of Exhibit E hereto, as the same may be amended or
supplemented from time to time.
"Business Day" shall mean any day other than a Saturday, Sunday or other
------------
day on which the Agent is not open for business at its offices set forth in this
Agreement.
3
<PAGE>
"Capital Stock" with respect to any corporation, shall mean common stock,
-------------
preferred stock, and any and all shares or other equivalents (however
designated) of any other corporate stock, of such corporation.
"Change of Control" shall mean any event, circumstance or condition,
-----------------
including without limitation, by reason of death, disability, incapacity,
removal, resignation, or failure to be elected, that results in any two of the
Key Executives ceasing to be on the Board of Directors of, and/or executive
officers (which shall mean the President, any Vice President, Chief Executive
Officer or Chief Financial Officer) of, the Borrower.
"Code" shall mean the Internal Revenue Code of 1986, and all rules and
----
regulations promulgated pursuant thereto, as the same may be amended or
supplemented from time to time.
"Code Section 4975" shall mean, at any date, Section 4975 of the Code.
-----------------
"Collateral" shall mean and include the assets, property or interests in
----------
property of whatever nature whatsoever, real, personal or mixed, tangible or
intangible, of Borrower securing the Revolving Credit Loans or Term Loans and
all other property and interests in personal property that shall, from time to
time, secure the Revolving Credit Loans or Term Loans.
"Collateral Account" shall have the meaning set forth in the Borrower
------------------
Security Agreement.
"Commercial Loans" shall mean Loans that are secured in whole or in part by
----------------
real property and that are not Medallion Loans.
"Default" shall mean any of the events specified in Section 9.1 hereof,
-------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Default Rate" shall have the meaning set forth in Section 2.6 hereof.
------------
"Distressed Person" shall mean any Person
-----------------
(a) that files a petition or seeks relief under or takes advantage of
any insolvency law; makes an assignment for the benefit of its creditors;
commences a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of itself or of the whole or
substantially all of its property; files a petition or an answer to a
petition under any chapter of the United States Bankruptcy Code, as amended
(11 U.S.C. (S) 101 et eq.), or files a petition or seeks relief under or
takes advantage of any other similar law or statute of the United States of
America, any state thereof or any foreign country; or
4
<PAGE>
(b) as to which a court of competent jurisdiction shall enter an
order, judgment or decree appointing or authorizing a receiver, trustee,
liquidator, custodian or conservator of such Person or of the whole or
substantially all of its property, or enters an order for relief against
such Person in any case commenced under any chapter of the United States
Bankruptcy Code, as amended, or grants relief under any other similar law
or statute of the United States of America, any state thereof or any
foreign country; or as to which, under the provisions of any law for the
relief or aid of debtors, a court of competent jurisdiction or a receiver,
trustee, liquidator, custodian or conservator shall assume custody or
control or take possession of such Person or of the whole or substantially
all of its property; or as to which there is commenced against such Person
any proceeding for any of the foregoing relief or as to which a petition is
filed against such Person under any chapter of the United States Bankruptcy
Code, as amended, or under any other similar law or statute of the United
States of America or any state thereof or any foreign country and such
proceeding or petition remains undismissed for a period of 60 days; or as
to which such Person by any act indicates its consent to, approval of or
acquiescence in any such proceeding or petition.
"Dollars" and "$" shall mean dollars in lawful currency of the United
-------
States of America.
"Domestic Investment" shall mean an Investment in respect of a Person which
-------------------
is a resident of the United States or a Person (other than a Governmental
Authority) organized or qualified under the laws of any State.
"Domestic Loan" shall mean a Loan that is denominated and payable only in
-------------
Dollars, the Person in respect of which is a resident of the United States or a
Person (other than a Governmental Authority) organized or qualified under the
laws of any State.
"Effective Date" of this Agreement shall mean the date on which (i)
--------------
counterparts of this Agreement executed and delivered by the parties hereto
shall have been received by the Agent and (ii) the conditions precedent set
forth in Article V hereto shall have been satisfied or waived in writing by all
of the Banks.
"Eligible Commercial Loan" shall mean any Commercial Loan that satisfies
------------------------
the Eligibility Requirements and (a) that is secured by Eligible Real Estate and
(b) that is made to a Person that is an ongoing business concern.
"Eligible Medallion Loan" shall mean any Medallion Loan that satisfies the
-----------------------
Eligibility Requirements and that is secured by Medallion Rights.
"Eligible Loans" shall mean any Loan that constitutes or comprises either
--------------
an Eligible Medallion Loan or Eligible Commercial Loan or both.
5
<PAGE>
"Eligible Real Estate" shall mean Real Property in which a mortgage
--------------------
interest has been obtained (and continuously maintained) by Borrower to secure
the obligations of such Person under a Loan by Borrower to such Person, or in
the case of such beneficial owner, to secure a guaranty which shall have been
made by such beneficial owner guaranteeing the Loan.
"Eligibility Requirements" with respect to any Loan, shall mean the
------------------------
following requirements:
(a) such Loan is made to, and is a recourse obligation of, the Person
to whom such Loan is made,
(b) such Loan is a Domestic Loan,
(c) such Loan is in compliance with the SBI Act and all SBA
Regulations promulgated thereunder and, after giving effect to such Loan,
Borrower and its business and operations taken as a whole, is in compliance
with the SBI Act and all SBA Regulations promulgated thereunder,
(d) such Loan is pledged in accordance with Section 2.1 of the
Borrower Security Agreement,
(e) the representations, warranties and covenants contained in Section
4.1 of the Borrower Security Agreement are true and correct, and have been
complied with, with respect to such Loan, and
(f) the Agent, on behalf of the Banks, has a perfected, first priority
security interest in such Loan.
"Equipment" shall mean all machinery, equipment, fixtures, vehicles, office
---------
equipment, furniture, furnishings, inventories, supplies, computer equipment,
and all other equipment whatsoever, wherever located, together with all
attachments, components, parts, equipment and accessories installed therein or
affixed thereto, including, but not limited to, all equipment as defined in
Section 9-109(2) of the UCC and all products, profits, rents and proceeds of any
of the foregoing; all whether now owned or hereafter created or acquired.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" shall mean an entity, whether or not incorporated, which
---------------
controls, is controlled by, or is under common control with, Borrower within the
meaning of Section 4001 of ERISA.
"ERISA Termination Event" shall mean (i) a Reportable Event, (ii) the
-----------------------
withdrawal of Borrower or any of its ERISA Affiliates from a Plan during a plan
year in which it was a
6
<PAGE>
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC, or (v) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan.
"Eurodollar Reserve Percentage" shall mean, with respect to the calculation
-----------------------------
of the Adjusted LIBO Rate of any Bank for any Interest Period, the percentage
(expressed as a decimal) that is in effect on the date such calculation is made,
as prescribed by the Board for determining the maximum reserve requirement
(including without limitation any basic, marginal, special, supplemental or
emergency reserves and determined without benefit of any credits for proration,
exceptions, or offsets that may be available from time to time) for a member
bank of the Federal Reserve System applicable to Eurocurrency funding by such
member bank, currently referred to as "Eurocurrency liabilities" in Regulation D
of the Board (or in respect of any other category of liabilities, which includes
deposits by reference to which the interest rate on LIBO Rate Loans is
determined, or any category of extensions of credit or other assets, including
loans by a non-United States office of any Bank to United States residents).
"Event of Default" shall mean any of the events specified in Section 9.1
----------------
hereof.
"Exposure Percentage" shall mean, with respect to any Bank at any
-------------------
particular time, the result of dividing the total principal amount of such
Bank's Notes and NatWest Existing Term Notes then outstanding by the total
principal amount of all Notes and NatWest Existing Term Notes then outstanding.
"Fair Market Value" with respect to Eligible Real Estate, shall mean the
-----------------
fair market value thereof as reasonably determined by Borrower and not objected
to in writing by, and in the sole and absolute discretion of, the Agent or the
Required Banks, and after deducting there from the principal of, interest on and
all other amounts due in respect of, any Indebtedness secured by any mortgage in
favor of any Person other than the Agent for the benefit of the Banks on such
Eligible Real Estate or any portion thereof.
"GAAP" shall mean generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity or officer exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to any government, and any corporation or other entity owned or
controlled (through ownership of Capital Stock or otherwise) by any of the
foregoing.
"Hazardous Materials" shall mean and include, without limitation, gasoline,
-------------------
petroleum products, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous
7
<PAGE>
or toxic substances, polychlorinated biphenyls or related or similar materials,
asbestos or any material containing asbestos, or any other substance or material
as may be defined as a hazardous or toxic substance by any Federal, state or
local environmental law, ordinance, rule or regulation.
"Indebtedness" of a Person shall mean and include, without duplication, (i)
------------
all items which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of a balance sheet as at the date
Indebtedness of such Person is to be determined, other than dividends on Capital
Stock declared but not paid to the extent such dividends are not Restricted
Payments, (ii) any liability secured by any Lien on property owned or acquired
by such Person, whether or not such liability shall have been assumed by such
Person, and (iii) guaranties, endorsements (other than for collection in the
ordinary course of business), reimbursement obligations in respect of undrawn
letters of credit and other contingent obligations of such Person in respect of
the obligations of others.
"Independent Public Accountants" shall mean Arthur Andersen & Co. or such
------------------------------
other firm of independent certified public accountants selected by Borrower and
satisfactory to the Required Banks.
"Initial Revolving Credit Loan" shall mean the Revolving Credit Loan or
-----------------------------
Loans made by the Banks to Borrower on the Effective Date.
"Initial Term" shall mean the period from and including the Effective Date
------------
to and including March 31, 1993.
"Instrument of Adherence" shall have the meaning set forth in Section 12.2
-----------------------
hereof.
"Interest Expense" shall mean, for any period, all interest paid or
----------------
scheduled to be paid (including amortization of original issue discount and non-
cash interest payments or accruals and the interest component of leases that, in
accordance with GAAP, are capitalized leases) by Borrower or any of its
Subsidiaries during such value of the Collateral. Unless the context otherwise
requires, any reference to Material Adverse Effect shall mean and refer to a
Material Adverse Effect with respect to Borrower.
"Maturity" shall have the meaning set forth in Section 2.2(b) hereof.
--------
"Medallion" shall mean the metal plate which displays the license number of
---------
a licensed Taxicab on the outside of the vehicle and which is issued by the New
York City Taxi and Limousine Commission, or by any other similar Governmental
Authority for a jurisdiction other than New York City charged with the authority
to issue licenses for the operation of Taxicabs "Medallion Loans" shall mean
Loans secured in whole or in part by Medallion Rights.
8
<PAGE>
"Medallion Riqhts" shall mean all license, operating and/or subscription
----------------
rights to Taxicab Medallion(s), and all license, operating and/or subscription
rights evidenced by such Medallions, and all renewals thereof, in which a
perfected security interest has been obtained by Borrower to secure the Loan
made by Borrower to such Person, and assigned to the Agent, for the benefit of
the banks, pursuant to the Borrower Security Agreement.
"Multiemployer Plan" shall mean a Plan that is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"NatWest Existinq Term Note Amendments" shall mean the amendments to the
-------------------------------------
NatWest Existing Term Notes, dated the Effective Date, between Borrower and
NatWest, substantially in the form of Exhibit G hereto, as the same may be
amended from time to time.
"NatWest Existing Term Notes" shall mean the term notes from Borrower to
---------------------------
NatWest, in the principal amounts of $3,000,000 and $2,000,000, dated January
11, 1990 and July 16, 1990, respectively, as the same may be amended from time
to time.
"Net Finance Assets" shall mean as of any date of calculation, an amount
------------------
equal to the sum of:
(i) Cash and Short Term Investments shown on Borrower's balance
sheet as of such date, plus
----
(ii) the aggregate outstanding principal balances of, plus
accrued interest on, all Eligible Medallion Loans and Eligible
Commercial Loans shown on Borrower's balance sheet as of the most
recent fiscal quarter, minus
(iii) all loan loss and other similar reserves shown on Borrower's
balance sheet as of the most recent fiscal quarter, minus
(iv) the portion, if any, of the Loans and accrued interest
described in (ii) above that Borrower, in its reasonable business
judgment, deems to be uncollectible or subject add to
classification as non-accruing and for which it has not made
appropriate credits to the reserves described in (iii) above,
minus
(v) the portion, if any, of the Eligible Loans and accrued
interest described in (ii) above which are more than 60 days
past due.
9
<PAGE>
"Net Income" shall mean, for any period, the gross revenues of Borrower,
----------
less (i) all realized unrealized gains and losses on investments, (ii) changes
in loan loss reserve and (iii) all operating and nonoperating expenses
(including, without limitation, Interest Expense and all fees and commissions,
however designated, payable for management, administrative, or other services)
of Borrower for such period, derived in the ordinary course of its business,
including all charges of a proper character (including current and deferred
taxes on income, provision for taxes on income, and current additions to loan
loss and other reserves), all determined on a basis consistent with prior years.
"New Bank" shall have the meaning set forth in Section 12.2 hereof.
--------
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
--------
"Note(s)" or "Revolving Credit Note(s)" or "Term Notes" shall mean the
-------- ------------------------ ----------
promissory note(s) of Borrower referred to in Sections 2.2 and 12.2 hereof and
shall include any replacement(s) therefor issued pursuant to Sections 10.18 or
12.1 hereof.
"Payments" shall have the meaning set forth in Section 3.2 hereof.
--------
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Percentage" of each Bank shall mean, at any particular time, the
----------
percentage designated as such for such Bank on Exhibit A hereto, as adjusted
from time to time pursuant to Section 12.1(d) hereof.
"Permitted Debt" shall mean all SBA Indebtedness and all unsecured
--------------
Indebtedness of Borrower owed to Permitted Lenders.
"Permitted Lenders" shall mean financial institutions approved from time to
-----------------
time by the Required Banks, which approval shall not be unreasonably withheld.
"Person" or "person" shall mean any individual, partnership, firm,
------ ------
corporation, association, joint venture, trust or other entity, or any
Governmental Authority.
"Plan" shall mean, at any particular time, any employee benefit plan which
----
is covered by ERISA and in respect of which Borrower or an ERISA Affiliate is
(or, if such plan were terminated at such time, under Section 4069 of ERISA
would be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate" shall mean, as to any Bank, the annual rate of interest
----------
announced by such Bank from time to time as its "prime rate" or "base rate", as
the case may be, in effect at its principal office. The Prime Rate is
determined as a means of pricing for United States based customers and is not
directly fixed to any external rate of interest or index, nor is it
10
<PAGE>
necessarily the lowest rate of interest charged by such bank at any given time
for any particular class of customers or credit extensions.
"Prime Rate Loan" shall mean, as of any date of determination, a Revolving
---------------
Credit Loan or Term Loan bearing interest, as of such date of determination, at
a variable rate of interest determined by reference to the Prime Rate.
"Principal payments" shall have the meaning set forth in Section 2.5(b)
------------------
hereof.
"Prohibited Transaction" shall have the meaning set forth in Section 406 of
----------------------
ERISA or Code Section 4975.
"Property" shall mean all Equipment, Real Property or other real or
--------
personal property, tangible or intangible, owned or operated by Borrower. "Real
Property" shall mean real property of a Person or an ultimate beneficial owner
of such Person or machinery or Equipment of such Person or beneficial owner
forming a part of, or affixed to, such real property.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA, other than those events as to which the 30-day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
(S) 2615.
"Renewal Term" shall have the meaning set forth in Section 2.10(b) hereof.
------------
"Required Banks" shall mean, as of any date of determination, such Bank or Banks
as have Revolving Credit Commitments or Term Loans outstanding in excess of 63%
of the sum of the Aggregate Revolving Credit Commitment plus all Term Loans then
outstanding; provided, however, that, for purposes of determining the Required
Banks, both (a) the Aggregate Revolving Credit Commitment plus all Term Loans
then outstanding and (b) NatWest's Revolving Credit Commitment plus the amount
of NatWest's Term Loan then outstanding shall be increased by all amounts then
outstanding under the NatWest Existing Term Notes.
"Restricted Investment" shall mean any Investment, to the extent it does
---------------------
not constitute a Short Term Investment. "Restricted Payment" shall mean, with
respect to Borrower, any of the following when paid (or when the proceeds of
which are paid) to any Person during the continuance of any Default or Event of
Default: (i) the payment of any dividend on or any distribution in respect of
any Capital Interests of Borrower (other than, for so long as Borrower is a
registered investment company under the 1940 Act, the payment of such dividends
and the making of such distributions as may be required by such Act), (ii) any
defeasance, redemption, repurchase or other acquisition or retirement for value
prior to scheduled maturity of any Indebtedness ranked pari passu or subordinate
in right of payment to the Revolving Credit Notes, the Term Notes or the NatWest
Existing Term Notes or of any Indebtedness having a maturity date subsequent to
the maturity of the Revolving
11
<PAGE>
Credit Notes, the Term Notes or the NatWest Existing Term Notes (other than
Permitted Debt), (iii) the redemption, repurchase, retirement or other
acquisition of any Capital Stock of Borrower or of any warrants, rights or
options to purchase or acquire any Capital Stock of Borrower, (iv) any
expenditure or the incurrence of any liability to make any expenditure for
any Restricted Investment, (v) the payment of any principal of, interest on,
or any amounts due in respect of, any Indebtedness not permitted by Section 8.2
hereof, and (vi) the payment of any principal of, or interest on, or any other
amounts due in respect of, any Subordinated Debt.
"Revolving Credit Commitment" of a Bank shall mean, as of any date of
---------------------------
calculation, an amount equal to the product of such Bank's Percentage times the
Aggregate Revolving Credit Commitment.
"Revolving Credit Commitment Period" at any date shall mean with respect to
----------------------------------
any Bank, the period from and including the Effective Date to, but excluding,
the Term Out Date with respect to such Bank's Revolving Credit Commitment.
"Revolving Credit Loan" shall mean a loan or advance made pursuant to
---------------------
Section 2.1 (a) hereof. "Revolving Credit Loans" shall mean, collectively, the
Revolving Credit Loans from time to time outstanding and unpaid.
"Revolving Credit Obligations" shall have the meaning set forth in Section
----------------------------
2.10(b) hereof.
"Senior Debt" shall mean all Indebtedness of Borrower other than
-----------
Subordinated Debt.
"Short Term Investment" shall mean an Investment in (i) direct obligations
---------------------
of the United States of America; (ii) negotiable certificates of deposit issued
by, or negotiable bankers' acceptances (eligible for discount at Federal Reserve
Banks) of, or repurchase agreements in respect of obligations described in
clause (i) with, any bank or trust company organized under the laws of the
United States of America or any State thereof having capital and surplus of not
less than $250,000,000; and (iii) readily marketable commercial paper which, at
the time of acquisition, is rated at least A-1 by Standard & Poor's Corporation
or P-1 by Moody's Investor Services, Inc.; provided, that all of such
Investments described in clauses (i), (ii) and (iii) shall be payable in Dollars
and shall mature within twelve months after the date of acquisition thereof.
"Single Employer Plan" shall mean any Plan which is covered by Title IV of
--------------------
ERISA, but is not a Multiemployer Plan.
"SBA" shall mean the Small Business Administration.
---
"SBA Indebtedness" shall mean all Indebtedness of Borrower to the SBA
----------------
incurred in accordance with the SBI Act and the SBA Regulations promulgated
thereunder, whether now
12
<PAGE>
or at any time hereafter outstanding, including, without limitation, the
following long term subordinated debentures and demand note issued by Borrower
to the SBA: (i) $1,500,000 in principal amount of 13-3/8% debentures due
September 27, 1992, (ii) $4,000,000 in principal amount of 11-3/4% debentures
due September 19, 1993, (iii) $2,000,000 in principal amount of 9-3/8%
debentures due January 9, 1996, (iv) $2,000,000 in principal amount of 7-3/8%
debentures due May 15, 1996, (v) $2,000,000 in principal amount of 9-1/8%
debentures due October 17, 1998 and (vi) a $1,000,000 demand note dated October
1, 1991.
"SBA Regulations" shall mean the regulations set forth at 13 CFR 107
---------------
implementing the SBI Act, as the same may be amended from time to time, and all
related guidelines, directives, treaties and interpretations thereof by any
Governmental Authority charged with the administration or interpretation
thereof.
"SBI Act" shall mean Title III of the Small Business Investment Act of
-------
1958, as amended, 15 U.S.C. 681 et seq. "SBIC" shall mean a small business
investment company established under and operating in compliance with the SBI
Act and the SBA Regulations promulgated thereunder.
"Solvent" shall mean, as to any Person, that such Person has capital
-------
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as
they mature and owns property having a value both at fair valuation and at
present fair saleable value, greater than the amount required to pay its debts
(including contingencies).
"Subsidiary" or "Subsidiaries" of Borrower shall mean any corporation more
---------- ------------
than 50% of the outstanding Voting Interests of which is at the time owned,
directly or indirectly, by Borrower and/or by one or more of its Subsidiaries;
provided, however, that the term "Subsidiary" shall be deemed to exclude all
Subsidiaries the Tangible Net Assets of which constitute less than 5E of the
Tangible Net Assets of Borrower.
"Subordinated Debt" shall mean the SBA Indebtedness and all other
-----------------
Indebtedness of Borrower for borrowed money that is subordinated to the
Revolving Credit Loans, the Term Loans and the NatWest Existing Term Notes on
terms that are acceptable in form and substance to the Required Banks.
"Tangible Net Assets" shall mean, with respect to any Person as of any date
-------------------
of calculation, the consolidated equity of the holders of Capital Stock of such
Person and its subsidiaries, determined on a consolidated basis in accordance
with GAAP consistently applied, adjusted by deducting therefrom (a) recorded
write-ups in the value of any assets of such Person and its Subsidiaries on a
consolidated basis, each such write-up to be determined in accordance with GAAP
consistently applied, and (b) goodwill, patents, trade names, trademarks,
copyrights, franchises, deferred assets other than prepaid insurance and prepaid
13
<PAGE>
taxes, the excess of cost of businesses acquired over book value of related
assets and such other assets as are properly classified as "intangible assets"
in accordance with GAAP.
"Taxicab" shall mean a motor vehicle carrying passengers for hire, duly
-------
licensed as a taxicab by the Taxi and Limousine Commission, or any other
Governmental Authority for a jurisdiction other than New York City, and
permitted to accept hails from passengers in the street.
"Term Loan" shall mean a loan or advance pursuant to Section 2.1 (b)
---------
hereof.
"Term Loans" shall mean, collectively, the Term Loans from time to time
----------
outstanding and unpaid.
"Term Loan Commitment" shall mean, in respect of any Bank, its commitment,
--------------------
pursuant to Section 2(b) hereof, to make a Term Loan to Borrower on such Bank's
Term Out Date equal to the principal amount of its Revolving Credit Loans then
outstanding.
"Termination Date" shall mean the earlier of (i) the date on which this
----------------
Agreement shall terminate in accordance with the provisions of Section 2.10
hereof or (ii) the Business Day, if any, on which all of the Revolving Credit
Commitments are terminated in accordance with Section 2.4 or 9.1 hereof.
"Term Loan Period" shall mean, with respect to each Term Loan, the period
----------------
from the Term Out Date with respect to the Revolving Credit Loan or Loans
replaced by such Term Loan through the date of such Term Loan's Maturity.
"Term Out Date" shall mean, with respect to each Revolving Credit Loan,
-------------
March 31, 1993, subject, however, in each case, to the renewal provisions set
forth in Section 2.10 hereof.
"Total Liabilities" shall mean, as of any date of calculation, the
-----------------
aggregate outstanding Indebtedness of Borrower as of such date, determined on an
unconsolidated basis.
"Tri-Magna" shall mean Tri-Magna Corporation, a Delaware corporation.
---------
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
---
Code as then in effect in that jurisdiction.
"Underlyinq Collateral" shall mean all of Borrower's rights with respect
---------------------
to, or interest in, any and all present. It and future Medallion Rights,
Equipment, Real Property, machinery, future accounts, accounts receivable,
receivables, contracts, contract rights, general intangibles, books, desks,
notes, bills, drafts, acceptances, choses in action, chattel paper,
instruments, documents and other forms of obligations and property, real,
14
<PAGE>
personal or mixed, tangible or intangible, at any time owing to or owned by any
Person to whom Borrower has made a Loan, or any guarantor of such Person.
"Voting Interests" shall mean securities, as defined in Section 2(1) of the
----------------
Securities Act of 1933, as amended, of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of the corporate directors (or Persons performing similar functions).
References in this Agreement to percentages of Voting Interests, unless
otherwise noted, refer to percentages of votes to which such Voting Interests is
entitled in the election of corporate directors (or Persons performing similar
functions) rather than to the number of shares.
SECTION 1.2. Other Definitional Provisions. (a) A11 terms defined in this
-----------------------------
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa.
---- -----
(b) The words "hereof," "hereby "herein," and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement, the term
"hereafter" shall mean after, and the term "heretofore" shall mean before, the
date of this Agreement, and "Article," "Section," "Schedule," "Exhibit," "Annex"
and like references are to this Agreement unless otherwise specified.
(c) Any defined term which relates to a document shall include within
its definition any amendments, modifications, renewals, restatements,
extensions, supplements, or substitutions which may have been heretofore or may
be hereafter executed in accordance with the terms thereof and hereof.
(d) References in this Agreement to particular sections of the Code,
ERISA or any other legislation shall be deemed to refer also to any successor
sections thereto or other redesignations for codification purposes.
(e) All terms defined in the UCC and not otherwise defined or modified
herein shall have the same respective meanings as are given to such terms in the
UCC.
ARTICLE II
AMOUNT AND TERMS OF REVOLVING CREDIT LOANS
SECTION 2.1. Commitments and Loans. (a) Revolving Credit Loans.
---------------------
Subject to the terms and conditions and relying upon the representations,
warranties and covenants herein set forth, each Bank severally agrees to make
one or more Revolving Credit Loans to Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate amount at any one time
outstanding not to exceed such Bank's Revolving Credit Commitment. During the
Revolving Credit Commitment Period, Borrower may borrow,
15
<PAGE>
prepay and re-borrow the Revolving Credit Loans, all in accordance with the
terms and conditions hereof; provided, however, that in no event will any Bank
be obligated to lend more than its Revolving Credit Commitment; and provided,
--------
further, that the aggregate principal amount of Revolving Credit Loans which all
- - - -------
Banks shall be committed to have outstanding hereunder shall not exceed the
Aggregate Revolving Credit Commitment.
(b) Term Loan Commitments. Subject to the terms and conditions and
---------------------
relying upon the representations, warranties and covenants herein set forth,
each Bank agrees to make a Term Loan to Borrower on the Term Out Date of its
Revolving Credit Loan or Loans in a principal amount equal to the principal
amount of its Revolving Credit Loan or Loans outstanding on such Term Out Date.
The proceeds of each Term Loan shall be made available to Borrower by such Bank
on the applicable Term Out Date by applying such proceeds directly to the
payment of the amounts owing to such Bank with respect to such Bank's Revolving
Credit Loans. Prior to each Term Loan's Maturity, the Borrower may prepay such
Term Loan, only in accordance with the provisions hereof, but thereafter may not
reborrow amounts so prepaid.
SECTION 2.2. Revolving Credit and Term Loan Notes. (a) (i) Revolving
------------------------------------ ---------
Credit Notes. The Revolving Credit Loans of each Bank shall be evidenced by a
- - - ------ -----
separate Revolving Credit Note of Borrower, in substantially the form of Exhibit
-------
B hereto, payable to the order of such Bank and representing the obligation of
- - - -
Borrower to pay the aggregate principal amount of the Revolving Credit Loans
from time to time outstanding from such Bank, together with interest thereon.
Each Bank is hereby authorized to endorse the date, amount and loan type of each
Revolving Credit Loan, the Interest Periods during which such Revolving Credit
Loan is a Prime Rate Loan or a LIBO Rate Loan, and each payment or prepayment
of principal thereof on the schedule (including additional pages thereto added
by such Bank as required) annexed to and constituting a part of its Revolving
Credit Note, which endorsement shall constitute prima facie evidence of the
----- -----
accuracy of the information so endorsed; provided, however, that the failure of
-------- -------
any Bank to insert any such date or amount or other information on such
schedule shall not in any manner affect the obligation of Borrower to repay any
Revolving Credit Loans in accordance with the terms of this Agreement.
(ii) Term Loan Notes. The Term Loan of each Bank shall be evidenced
---------------
by a separate Term Note of Borrower, in substantially the form of Exhibit C
---------
hereto, payable to the order of such Bank and representing the obligation of
Borrower to pay the aggregate principal amount of the Term Loan from time to
time outstanding from such Bank, together with interest thereon. Each Bank is
hereby authorized to endorse the date, amount and loan type of its Term Loan,
the Interest Periods during which such Term Loan is a Prime Rate Loan or LIBO
Rate Loan, and each payment or prepayment of principal thereof on the schedule
(including additional pages thereto added by such Bank as required) annexed to
and constituting a part of its Revolving Credit Note, which endorsement shall
constitute prima facie evidence of the accuracy of the information so endorsed;
----- -----
provided, however, that the
- - - -------- -------
16
<PAGE>
failure of any Bank to insert any such date or amount or other information on
such schedule shall not in any manner affect the obligation of Borrower to
repay any Term Loan in accordance with the terms of this Agreement.
(b) Date and Maturity of Each Note. Each Note shall, except as
---- ---------------------
otherwise provided in Sections 12.1 or 12.2 hereof, be dated (A) the Effective
Date, in the case of each Revolving Credit Note and (B) the applicable Term Out
Date, in the case of each Term Note issued in replacement of a Revolving Credit
Loan, and shall be payable at its Maturity. For purposes of this Agreement, the
term "Maturity" shall mean, with respect to (i) any Revolving Credit Loan, the
----------
earlier of (A) the Term Out Date for such Revolving Credit Loan, (B) the
Termination Date and (C) any other date on which such Revolving Credit Loan
shall be or become due and payable, in whole or in part, in accordance with the
terms of this Agreement, whether by required or optional prepayment,
declaration, acceleration, or otherwise and (ii) with respect to any Term Loan
made by a Bank to replace its existing Revolving Credit Loans pursuant to
Section 2.1(b) A hereof, the earlier of (A) the second anniversary of the Term
Out Date applicable to such replaced Revolving Credit Loans and (B) any other
date on which such Term Loan shall be or become due and payable, in whole or in
part, in accordance with the terms of this Agreement, whether by required or
optional prepayment, declaration, acceleration, or otherwise.
(c)(i) Interest Rate on the Revolving Credit Notes. Each Revolving
-------------------------------------------
Credit Note shall bear interest, subject to the provisions of Section 10.14
hereof, until its Maturity on the principal amount thereof from time to time
outstanding at an annual rate elected by Borrower in accordance with the notice
provisions set forth in Section 2.7 hereof equal to either (a) the Prime Rate or
(b) the Adjusted LIBO Rate of the Bank in favor of which such Note is issued
plus, in the case of the Adjusted LIBO Rate, 1.75%. The rate of interest of
each Revolving Credit Note shall be computed on the basis of a 360-day year for
the actual number of days elapsed.
(c)(ii) Interest Rate on the Term Notes. Each Term Note shall bear
-------------------------------
interest, subject to the provisions of Section 10.14 hereof, until its Maturity
on the principal amount thereof from time to time outstanding at an annual rate
elected by Borrower in accordance with the notice provisions set forth in
Section 2.3 hereof equal to either (a) the Prime Rate or (b) the Adjusted LIBO
Rate of the Bank in favor of which such Note is issued plus, in the case of the
Adjusted LIBO Rate, 2%. The rate of interest of each Term Note shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
(c)(iii) Interest Rate after Maturity. The unpaid principal balance
----------------------------
of each Note shall bear interest from and including its Maturity until paid at
the rate specified in Section 2.6 hereof.
(d) The Interest Period. The interest period (the "Interest Period")
-------------------
with respect to (i) any Prime Rate Loan, shall be a period continued from day to
day until terminated by Borrower, such termination to be effective two business
days after the selection of a LIBO
17
<PAGE>
Rate Loan to replace such Prime Rate Loan, and (ii) any LIBO Rate Loan, shall be
a period of borrowing commencing on and including the date of advance or
conversion and ending on the numerically corresponding date that is one, two,
three, four, five or six months thereafter, as set forth in the Loan Request.
Notwithstanding the foregoing:
(A) in the case of a LIBO Rate Loan, (I) if the numerically corresponding
date in the appropriate month is not a Banking Day, such Interest Period
shall be extended to the next succeeding day that is a Banking Day unless
such day falls in the succeeding calendar - month, in which event such
Interest Period shall end on the first preceding day that is a Banking Day
and (II) if there is no numerically corresponding date in the appropriate
month, such Interest Period shall end on the last Banking Day in such
month,
(B) in the case of any LIBO Rate Loan made on or after the Term Out Date,
the Interest Period shall be limited to a period of one month, and
(C) in no case shall the Interest Period of either a Revolving Credit Loan
or a Term Loan end on a date subsequent to such loan's Maturity.
(e) Payment of Interest. Interest accrued on each Revolving Credit Loan or
Term Loan shall be payable, without duplication, on:
(i) the Maturity of such loan;
(ii) with respect to any portion of any Revolving Credit Loan or Term
Loan repaid or prepaid pursuant to this Agreement, the date of such
repayment or prepayment, as the case may be;
(iii) with respect to the portion of the outstanding principal amount
of all Revolving Credit Loans and Term Loans maintained as Prime Rate
Loans, the first Business Day of each calendar month, payable monthly and
in arrears, commencing with the first such date following the date of the
making of such Revolving Credit Loans or Term Loans as, or their conversion
into, Prime Rate Loans;
(iv) with respect to the portion of the Outstanding principal amount
of all Revolving Credit Loans or Term Loans maintained as LIBO Rate Loans,
the last day of each applicable Interest Period and, ill connection with
any such Revolving Credit Loan having a four-, five-, or six-month Interest
Period, the day that would be the last day of a three-month Interest Period
commencing on the same day as such four-, five-, or six-month Interest
Period commences;
(v) with respect to that portion of the outstanding principal amount
of all Revolving Credit Loans or Term Loans that is converted to Prime Rate
Loans or
18
<PAGE>
LIBO Rate Loans on a day when interest otherwise would not have been
payable pursuant to Section 2.2(c)(iii) or (iv), the date of such
conversion.
SECTION 2.3. Procedures Applicable to Borrowings and Conversions. (a)(i)
---------------------------------------------------
Revolving Credit Loans. Subject to the limitations applicable to Interest
- - - --------- ------ -----
Periods for LIBO Rate Loans, Borrower may borrow Revolving Credit Loans on any
Business Day (in the case of LIBO Rate Loans, on any Banking Day) during the
Revolving Credit Commitment Period; provided, however, that Borrower shall give
the Bank(s) from which it seeks to borrow a Revolving Credit Loan or Loans
irrevocable written notice in the form of a Loan Request (which may be sent via
teletransmission) substantially in the form of Exhibit D hereto, specifying the
amount of the loan it is seeking from such Bank, as follows:
(A) in the case of a borrowing of a Revolving Credit Loan as a Prime
Rate Loan, on or before 1:00 p.m., prevailing New York City time, on the
requested borrowing date, which shall be a Business Day (or irrevocable
oral notice on or before 1:00 p.m., prevailing New York City time, on such
date, confirmed in a Loan Request (which may be sent via teletransmission)
no later than 5:00 p.m., prevailing New York City time, on such borrowing
date; and
(B) in the case of a borrowing of a Revolving Credit Loan as a LIBO
Rate Loan, on or before 11:00 a.m., prevailing New York City time, on the
second Banking Day preceding the first day of the requested Interest Period
(or irrevocable oral notice on or before 11:00 a.m., prevailing New York
City time, on such date, confirmed in a Loan Request (which may be sent via
teletransmission) no later than 5:00 p.m., prevailing New York City time,
on such second Banking Day preceding the first day of the requested
Interest Period).
If Borrower furnishes a Loan Request to a Bank, but no election is made as to
either the loan type or Interest Period to be applicable thereto, the Revolving
Credit Loan will be made as a Prime Rate Loan. Each borrowing of a given loan
type from any given Bank shall be in an aggregate principal amount, together
with Revolving Credit Loans of the same loan type to be continued as such and
Revolving Credit Loans of other loan types to be converted to such loan type
from such Bank on the same Business Day, of at least $500,000 or any integral
multiple of $100,000 in excess thereof. Notwithstanding the right of Borrower
hereunder to select the Banks from which to obtain Revolving Credit Loans, at no
time shall the difference between the amount of Borrower's Revolving Credit
Loans then outstanding from any two Banks be more than $500,000 more than such
difference would have been were all Revolving Credit Loans hereunder to have
been made pro rata in proportion to each Bank's Revolving Credit Commitment then
outstanding.
(ii) Term Loans. The date on which each Term Loan shall be made shall be
---- -----
the Term Out Date applicable to the Revolving Credit Loan or Loans which such
Term Loan shall replace. Each Term Loan shall, for its first Interest Period,
be a Prime Rate Loan unless Borrower gives irrevocable written notice to the
Bank making such Term Loan that it
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wants such loan, for its first Interest Period, to be a LIBO Rate Loan. Such
notice specifying a LIBO Rate Loan must be received by the Bank making the Term
Loan on or before 11:00 a.m., prevailing New York City time, on the second
Banking Day preceding the date on which such Term Loan is to be made (or
irrevocable oral notice must be given on or before 11:00 a.m., prevailing New
York City time, on such date, confirmed in writing (which may be sent via
teletransmission) no later than 5:00 p.m., prevailing New York City time, on
such second Banking Day preceding the date on which such Term Loan is to be
made. Such first Interest Period shall continue until Borrower has notified the
Bank, in accordance with Section 2.3(c) hereof, of its selection of the next
succeeding loan type and Interest Period. Within five Business Days after any
Term Loan has been made, the Banks shall revise Exhibit A hereto to reflect the
corresponding reduction in the Aggregate Revolving Credit Commitment.
(b) Each Bank specified in a Loan Request shall, on the date requested in
such notice, make available to Borrower at its account designated in such Loan
Request, in immediately available funds, the proceeds of the Revolving Credit
Loan or Term Loan being made. No Bank's obligation to fund any Revolving Credit
Loan or Term Loan shall be affected by any other Bank's failure to fund any
Revolving Credit Loan or Term Loan, nor shall any Bank's Revolving Credit
Commitment or Term Loan Commitment be increased as a result of any such failure
of any other Bank.
(c) Subject to the limitations applicable to Interest Periods for LIBO
Ratw Loans, Borrower may continue any LIBO Rate Loan as such for an additional
Interest Period or convert any Revolving Credit Loan or Term Loan of a given
loan type into a Revolving Credit Loan or a Term Loan of a different loan type
on any Business Day (in the case of LIBO Rate Loans to be continued or
converted, on any Banking Day) during the Revolving Credit Commitment Period or
Term Loan Period applicable to such Loan; provided, however, that:
-------- -------
(i) Borrower shall give the applicable Bank irrevocable written
notice in the form of a Loan Request in the manner and by the applicable
time specified in Section 2.3(a) hereof for the borrowing of a Revolving
Credit Loan of the loan type to be converted to or continued and, if
applicable, the Interst Period therefor;
(ii) in the case of the continuation of lessthan all of the
outstanding Revolving Credit Loans or of only a portion of a Term Loan of a
given loan type from a given Bank on the same Business Day, the aggregate
principal amount of the Revolvong Credit Loans or the Term Loan of such
type to be continued as such, together with any Revolving Credit Loans or a
portion of a Term Loan from a given Bnak to be made as or converted to the
same loan type on such Business Day, shall not be less than $500,000 or any
integral multiple of $100,000 in excess thereof;
(iii) in the case of the conversion of less than all of the
outstanding Revolving Credit Loans or of only a portion of a Term Loan of a
given loan type from a given
20
<PAGE>
Bank to another loan type on the same Business Day, the aggregate principal
amount of Revolving Credit Loans or the portion of the Term Loan of such
loan type to be converted to another loan type, together with any Revolving
Credit Loans or any portion of the Term Loan from such Bank of such other
loan type to be made or continued as such on such Business Day, shall not
be less than $500,000;
(iv) LIBO Rate Loans may be converted only at the end of the then
applicable interest period;
(v) no LIBO Rate Loan may be continued as such, nor may any Revolving
Credit Loan or Term Note be converted to a LIBO Rate Loan, for less than
the minimum applicable Interest Period therefor; and
(vi) no LIBO Rate Loan may be continued as such, nor may any
Revolving Credit Loan or Term Loan be converted to a LIBO Rate Loan, if any
Default or Event shall have occurred and be continuing as of any date
during the period commencing on the date the Loan Request is required to be
submitted to the applicable Bank and the Agent and ending on the first day
of the requested Interest Period.
If Borrower fails, in connection with the expiration of an Interest Period
applicable to a Revolving Credit Loan or Term Loan that is a LIBO Rate Loan, to
furnish a Loan Request to the applicable Bank for the continuation or conversion
thereof or fails to elect a loan type or permitted Interest Period therefor, or
if the continuation or conversion of any Revolving Credit Loan or Term Loan as a
LIBO Rate Loan is prohibited due to the occurrence and continuance of a Default
or Event of Default, such Revolving Credit Loan or Term Loan (unless prepaid in
accordance with the provisions of Section 2.5 hereof or accelerated in
accordance with Section 9.1 hereof) shall be converted automatically to a Prime
Rate Lean as of the expiration of the then applicable Interest Period.
SECTION 2.4 Termination and Reduction of Aggregate Revolving Credit
-------------------------------------------------------
Commitment. Subject to the provisions of Section 2.5 hereof, Borrower shall
- - - ----------
have the option to terminate, and from time to time to reduce permanently, the
Aggregate Revolving Credit Commitment, upon irrevocable written notice to the
Banks at least three Business Days prior to the proposed Termination Date or
reduction date, as the case may be, specifying such date, whether a termination
or reduction is being requested and, if a reduction is being requested, the
amount thereof. On the date specified in such notice, such termination or
reduction shall be effected; provided, however, that (i) in the case of a
termination, such termination is accompanied by repayment of all outstanding
Revolving Credit Loans and outstanding Term Loans in full, together with all
other amounts owed to the Agent or any Bank pursuant to any of the Loan
Documents and (ii) in the case of any reduction, such reduction is accompanied
by (A) repayment of the Revolving Credit Loans to the extent (if any) that the
aggregate principal amount of the Revolving Credit Loans outstanding exceeds the
amount of the Aggregate Revolving Credit Commitment as then
21
<PAGE>
reduced and (B) repayment of an amount of all Term Loans then outstanding equal
to the percentage by which the Aggregate Revolving Credit Commitment is to be
reduced multiplied by the aggregate principal amount plus accrued interest of
all Term Loans then outstanding. Any such repayment shall be subject to the
provisions of Section 2.5(a) hereof. Any reduction of the Aggregate Revolving
Credit Commitment shall be in an aggregate amount of $500,000 or an integral
multiple thereof and shall be made pro rata among the Banks in proportion to
their Revolving Credit Commitments. Any repayment of outstanding Term Loans
required by a reduction in the Aggregate Revolving Credit Commitment shall be
made pro rata among the Banks in proportion to the amount of the principal plus
accrued interest of their Term Loans then outstanding. Within five Business
Days after any reduction in the Aggregate Revolving Credit Commitment pursuant
to this Section 2.4, the Banks shall revise Exhibit A hereto to reflect such
reduction. Upon termination of the Aggregate Revolving Credit Commitment
pursuant to this Section 2.4 and upon payment of all amounts due by Borrower to
the Agent the Banks under the Loan Documents, the obligations of the parties
hereto, except as otherwise provided herein, shall be deemed terminated;
provided, however, that this Agreement and the other Loan Documents shall
continue to be effective or shall be reinstated, as the case may be, if any
payment hereunder or in connection with any of the Loan Documents at any time is
rescinded or otherwise must be returned as a result of the bankruptcy,
insolvency or reorganization of Borrower or otherwise, all as if such payment
had not been made.
SECTION 2.5. Prepayments. (a) Voluntary. Borrower from time to time may
----------- ---------
prepay the Revolving Credit Loans or the Term Loans, in whole or in part,
without premium or penalty, upon irrevocable written notice to the Banks given
at least as early before the proposed date of such prepayment as the
corresponding time specified in Section 2.3(a) hereof for notice of the
borrowing of a Revolving Credit Loan of the loan type to be prepaid, specifying
the date of prepayment and the amount of the prepayment; provided, however, that
(i) all the Revolving Credit Commitments may not be terminated (although all
Revolving Credit Loans may be paid off in full) while any Term Loan remains
outstanding, (ii) except for prepayments necessitated by Section 8.6(a) hereof,
each partial prepayment of the Revolving Credit Loans shall be in an aggregate
amount not less than $500,000 or any integral multiple of $100,000 in excess
thereof, (iii) except for prepayments necessitated by Borrower's election to
reduce the Aggregate Revolving Credit Commitment pursuant to Section 2.4 hereof,
without the prior written approval of the Required Banks, Borrower may not
prepay any Term Loan unless all Revolving Credit Loans have been paid off in
full and all Revolving Credit Commitments terminated, (iv) Borrower may not
prepay any LIBO Rate Loan prior to the last day of the Interest Period therefor.
Voluntary prepayments of the Revolving Credit Loans need not be pro rata;
provided, however, that, at no time shall the difference between the amount of
Borrower's Revolving Credit Loans then outstanding from any two Banks be more
than $500,000 more than such difference would have been were all Revolving
Credit Loans hereunder to have been made pro rata in proportion to each Bank's
Revolving Credit Commitment then outstanding. Except as otherwise agreed to by
the Required Banks, any voluntary prepayment of the Term Loans shall be pro rata
in proportion to each Bank's Term Loan then outstanding. To the extent
possible, Borrower shall, in
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connection with any voluntary prepayment, prepay Prime Rate Loans first and LIBO
Rate Loans second. If any notice of prepayment is given, the amount specified
in such notice shall be due and payable in the manner and by the time provided
in Section 3.2 hereof on the date specified in such notice, together with
accrued interest thereon to such date as provided in Section 2.2(c) hereof. Any
such prepayment of a Revolving Credit Loan may be reborrowed, subject to the
terms and conditions of this Agreement, from time to time. Any prepayment of a
Term Loan may not be reborrowed.
(b) Mandatory Prepayment of Term Loans. Principal on each Term Loan shall
----------------------------------
be repaid in equal monthly installments in an amount sufficient to amortize such
Term Loan over a twenty-four month period. Such payments (the "Principal
Payments") shall be paid by Borrower on the last day of each month during which
such Term Loan is outstanding. Any prepayments of principal on any Term Loan
pursuant to Sections 2.5(a) and (c) hereof shall not reduce the amount of each
monthly Principal Payment. Any prepayments of principal on the Term Loans
pursuant to Sections 2.5(a) and (c) hereof shall be applied against the monthly
Principal Payments in inverse order of the dates on which such Principal
Payments are to be made.
(c) Other Mandatory Prepayments. If, at any time, the aggregate
--------------------------
outstanding principal balance of the Revolving Credit Loans exceeds the
Aggregate Revolving Credit Commitment, Borrower shall make a prepayment of such
Revolving Credit Loans in the amount of such excess (rounded upwards to the next
higher integral multiple of $100,000), together with accrued interest thereon to
the date of prepayment as provided in Section 2.2(c) hereof. Such mandatory
prepayments shall be pro rata in proportion to each Bank's Revolving Credit
Commitment then outstanding and, to the extent possible, Borrower shall, in
connection with such mandatory prepayment, prepay Prime Rate Loans first, and
LIBO Rate Loans second.
SECTION 2.6. Interest on Delinquent Payments. All unpaid amounts due
-------------------------------
under the Notes or any other Loan Document that are not paid when due
(including, to the extent permitted by law, unpaid interest on the Notes) shall
bear interest, subject to the provisions of Section 10.14 hereof, from and
including its due date until paid in full (whether before or after the
occurrence of any Event of Default described in Sections 9.1(g) and 9.1(h)
hereof) at an annual rate equal to the sum of (i) in the case of any Prime Rate
Loan, 2% plus the Prime Rate applicable to such Prime rate Laon then in effect,
(ii) in the case of any Adjusted LIBO Rate Loan that is a Revolving Credit Loan,
3.75% plus the Adjusted LIBO Rate applicable to such Adjusted LIBO Rate Loan
then in effect, and (iii) in the case of any Adjusted LIBO Rate Loan that is a
Term Loan, 4% plus the Adjusted LIBO rate applicable to such Adjusted LIBO Rate
Loan then in effect. Such rate of interest (the "Default Rate") shall be
-------------
computed on the basis of a 360 day year for the actual number of days elapsed.
If the Default Rate is to be based on the Prime Rate, the Prime Rate to be
charged shall change when and as the Prime Rate is changed, and any such change
in the Prime Rate shall become effective at the opening of business on the day
on which such change is adopted. At the end of thr applicable Interest Period
for a LIBO Rate Loan on which the Default rate is being
23
<PAGE>
charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate
Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
SECTION 2.7 Increased Costs. (a) In the event any applicable existing or
---------------
future law, regulation, guideline, treaty or directive or condition or
interpretation thereof (including, without limitation, any request, guideline or
policy, whether or not having the force of law), by any Governmental Authority
charged with the administration or interpretation thereof, or any change in any
of the foregoing which:
(i) subjects any Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to its Revolving Credit
and/or Term Loan Commitment to make LIBO Rate Loans or any Revolving Credit
Loan or Term Loan that is a LIBO Rate Loan; or
(ii) changes the basis of taxation of payments to such Bank of
principal of and/or interest on its LIBO Rate Loans or its Revolving Credit
and/or Term Loan Commitment to make LIBO Rate Loans and/or fees and other
amounts payable hereunder in respect of its LIBO Rate loans or its
Revolving Credit or Term Loan Commitment to make LIBO Rate Loans; or
(iii) imposes, modifies or deems applicable or results in the
application of or increases any reserve, special deposit, assessment,
liquidity or similar requirement (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans or
commitments to lend LIBO Rate Loans by any office of any Bank (based upon
such Bank's or such Participant's reasonable allocation of the aggregate of
such requirements); or
(iv) imposes upon such Bank any other condition or requirement with
respect to its Revolving Credit and/or Term Loan Commitment to make LIBO
Rate Loans or any Revolving Credit Loan or Term Loan of which any LIBO Rate
Loan forms a part;
and the result of any of the foregoing is to increase the actual cost to such
Bank of making or maintaining its Revolving Credit and/or Term Loan Commitment
to make LIBO Rate Loans or its Revolving Credit Loans or Term Loans hereunder
that are LIBO Rate Loans or to reduce the amount of any payment (whether of
principal, interest, or otherwise) received or receivable by such Bank in
respect of any LIBO Rate Loan or its Revolving Credit or Term Loan Commitment to
make LIBO Rate Loans or to require such Bank to make any payment, then and in
any such case set forth in paragraphs (i) through (iv) above:
(1) such Bank shall promptly notify Borrower in writing of the
happening of such event;
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<PAGE>
(2) such Bank shall promptly deliver to Borrower a certificate of
such Bank stating the event that has occurred or the reserve or
requirements or other conditions that have been imposed on such Bank
or the request, directive, guideline or requirement with which it has
complied, together with the date thereof and the amount (based upon
such Bank's reasonable policies as to the allocation of capital and
costs, as applicable) of such increased cost, reduction or payment for
one or more periods ending not later than the date of such
certificate; and
(3) Borrower shall pay within 10 days after demand therefor such
amount or amounts as will compensate such Bank for such additional
cost, reduction or payment.
(b) If, after the Effective Date, any Bank shall have determined that
any change in any present (or any adoption, application, or change in any
future) applicable law, governmental rule, regulation, policy, guideline, or
directive or request (whether or not having the force of law), or any change in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, of general
application regarding capital adequacy, capital maintenance, capital ratios or
other similar requirements (whether or not having the force of law), or
otherwise affects the amount of capital required or expected to be maintained by
any of the Banks or any corporation controlling any of the Banks, or such Bank
determines that the amount of capital required is increased by or based upon the
existence of the revolving credit and term loan facilities or commitments
established hereunder or any loans made pursuant hereto or upon agreements or
loans of the type contemplated hereby then such Bank may give written notice to
Borrower of such fact (the "Increased Costs Notice"). To the extent that the
coats of such increased capital requirements are not then reflected in the Prime
Rate or the LIBO Base Rate, Borrower shall thereafter attempt to negotiate in
good faith an adjustment of the compensation payable hereunder which will
adequately compensate such Bank in light of such changed circumstances. Each
Bank hereby agrees that any Increased Cost Notice from it to Borrower shall be
delivered to Borrower no later than 90 days following the end of any financial
period with respect to which such compensation is sought. If Borrower and such
Bank are unable to agree to an adjustment within 30 days of the day on which the
Borrower receives such notice, then, commencing on such thirtieth day and
retroactive to the date of such notice (but not earlier than the effective date
of any such change), the fees payable to such Bank hereunder shall increase by
an amount which will, in such Bank's reasonable determinations provide adequate
compensation. Such Bank shall allocated such cost increases among its customers
in good faith and on an equitable basis.
(c) The certificate of such Bank as to the additional amounts payable
pursuant to this Section 2.7 delivered to Borrower, in the absence of manifest
error, shall be conclusive as to tho amount thereof. A claim by any Bank for
all or any part of any additional amount required to be paid by Borrower under
this Section 2.7 may be made at any time and from time to time as the occasion
therefor may arise. The protection of this
25
<PAGE>
Section 2.7 shall be available to such Bank regardless of any possible
contention of invalidity or inapplicability of the law, regulation or condition
that has been imposed. In the event that any such law, regulation or condition
is subsequently held to be invalid or inapplicable and the result thereof to
eradicate any such additional cost, reduction or payment, such Bank shall
promptly pay to Borrower an amount equal to the amount of compensation paid by
Borrower to such Bank for its account as a result of such invalid or
inapplicable law, regulation or condition.
SECTION 2.8. Use of Proceeds. The proceeds of the Revolving Credit Loans
---------------
and the Term Loans made to Borrower hereunder shall be used only (i) to fund
Medallion Loans and Commercial Loans made in the ordinary course of Borrower's
business and which are in compliance with the SBI Act and the SBA Regulations
promulgated thereunder, (ii) to make Investments which are in compliance with
the SBI Act and the SBA Regulations promulgated thereunder, and (iii) for other
working capital purposes.
SECTION 2.9. Payment on Non-Business Days. Whenever any payment to be
----------------------------
made under the Notes (other than principal of or any interest on LIBO Rate
Loans), this Agreement, or any other Loan Document, shall be stated to be due on
a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of payment of interest or fees, as the case may be.
SECTION 2.10. Term of Revolving Credit Commitments. (a) Subject to the
------------------------------------
other provisions of this Section 2.10, (i) during the Initial Term, the
Revolving Credit Commitment and other obligations of each Bank under this
Agreement with respect to Revolving Credit Loans shall terminate on the last day
of the Initial Term, and (ii) during any Renewal Term (as defined in Section
2.10(b) below), the Revolving Credit Commitment and other obligations of each
Bank under this Agreement with respect to Revolving Credit Loans shall terminate
on March 31 of the year immediately following the year in which such Renewal
Term commenced.
(b) Each Bank's Revolving Credit Commitment and other obligations under
this Agreement with respect to Revolving Credit Loans (collectively, "Revolving
Credit Obligations") shall be terminated on the last day of the Initial Term
unless such Bank gives written notice of renewal, for a one year period, of its
Revolving Credit Obligations to Borrower by January 31 of the year during which
such obligations are to be terminated (January 31, 1993, in the case of the
Initial Term) (the "Renewal Deadline"). Borrower shall then have until the
----------------
fifth Business Day following the Renewal Deadline to rely (by written notice,
which must be received by no later than 5:00 p.m., prevailing New York City
time, on such fifth Business Day) any Bank's offer of renewal (the "Rejection of
Renewal Deadline"). If any Bank has elected not to renew its Revolving Credit
Obligations, then all Banks who originally elected to renew their Revolving
Credit Obligations shall have until the tenth Business Day following the
Rejection of Renewal Deadline to reverse their decision and elect instead (by
written notice to Borrower, which must be received by no later than 5:00
26
<PAGE>
p.m., prevailing New York City time, on such tenth Business Day) not to renew
such obligations (the "Renewal Reconsideration Deadline"). The foregoing
procedure with respect to the renewal of the Revolving Credit Obligations of
each Bank under this Agreement shall be repeated each year following the Initial
Term (each such year, a "Renewal Term") with the Renewal Deadline, the Rejection
of Renewal Deadline and the Renewal Reconsideration Deadline to be applicable in
each such year, until there are no longer any Revolving Credit Commitments
outstanding. In the event that any Bank elects to extend its Revolving Credit
Obligations for a Renewal Term or Terms, (i) the expiration, termination,
Maturity and Term Out Date of such Obligations outstanding at the commencement
of, or made during, the Renewal Term shall be the March 31 of the year to which
such financing arrangement shall be extended by such renewal, and (ii) each
Revolving Credit Note shall be deemed amended to reflect the extended Maturity.
If any Bank elects not to renew its Revolving Credit Obligations, or if Borrower
rejects any Bank's offer to renew its Revolving Credit Obligations, then, on the
Term Out Date of such Bank's Revolving Credit Loan(s), such Bank shall make a
Term Loan to Borrower in accordance with the provisions of Section 2.1(b)
hereof.
(c) Within five Business Days after the commencement of any Renewal Term,
the Banks shall revise Exhibit A hereto if required in connection with any
change in the Aggregate Revolving Credit Commitment.
(d) Notwithstanding the foregoing provisions of this Section 2.10, upon the
occurrence of an Event of Default, the provisions of Article IX hereof shall
apply and the Agent may take any action permitted or required thereunder.
(e) The occurrence of the Termination Date shall not release, terminate or
limit the rights or remedies of the Agent, or any Bank, or the obligations under
this Agreement or any other Loan Document of Borrower, and such rights and
remedies and such obligations shall survive until Borrower shall have fully paid
and performed all its obligations hereunder and thereunder in full.
SECTION 2.11. Funding Losses. (a) Borrower shall pay, within 10 days
--------------
after demand therefor, such amount as will compensate the Banks for any loss or
reasonable expense they may sustain as a consequence of (i) the receipt or
recovery or conversion for any reason (including, without limitation, as a
consequence of acceleration pursuant to Article IX hereof, a voluntary or
mandatory prepayment pursuant to Section 2.5 hereof, or a mandatory conversion
pursuant to Section 2.13 hereof) of all or any part of a LIBO Rate Loan prior to
the last day of the applicable Interest Period therefor, or (ii) any failure to
borrow, convert to, or continue any LIBO Rate Loan as such after submitting a
Loan Request (whether oral or written) relating thereto to the applicable payee
Bank, including, but not limited to, (A) any loss or expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain a LIBO Rate Loan or any part thereof or (B) any loss of
margin on reemployment of the funds so received or recovered.
27
<PAGE>
(b) Each Bank shall be entitled to fund its Revolving Credit Loans and Term
Loans in such manner as it may determine in its sole discretion, including
without limitation the London interbank market and the New York secondary
market; provided, however, that, for the purposes of calculations under this
-------- -------
Section 2.11, each LIBO Rate Loan shall be deemed to have been funded by the
purchase in the London interbank market of a Dollar deposit in an amount
comparable to the principal amount of such LIBO Rate Loan and having a maturity
comparable to the applicable Interest Period therefor.
(c) A certificate of any Bank as to any additional amounts payable pursuant
to this Section 2.11 setting forth in reasonable detail the basis and method of
determining such amounts shall be conclusive, absent manifest error, as to the
determination by such Bank set forth therein. A claim by any Bank for all or
any part of any additional amount required to be paid by Borrower under this
Section 2.11 may be made at any time and from time to time as often as the
occasion therefor may arise.
SECTION 2.12. Alternate Rate of Interest. (a) In the event, and on each
--------------------------
occasion on which any Bank shall determine, on the day two Banking Days prior to
the commencement of any Interest Period for any of its LIBO Rate Loans, that (i)
Dollar deposits in an amount comparable to the principal amount of such LIBO
Rate Loan and having a scheduled maturity comparable to the Interest Period set
forth in the related Loan Request are not generally available in the London
interbank market or (ii) reasonable means do not exist for ascertaining the LIBO
Base Rate, such Bank, as soon as practicable thereafter, shall give oral notice
of such determination to Borrower, promptly confirmed in writing (which may be
by teletransmission), and to the Agent. In the event of any such determination
and until such Bank notifies Borrower and the Agent that the circumstances
giving rise to such notice no longer exist, no Revolving Credit Loans or Term
Loans will be made as LIBO Rate Loans and no Revolving Credit Loans or Term
Loans will be converted to or continued as LIBO Rate Loans, but shall convert to
Prime Rate Loans at the end of the applicable Interest Period, if any, therefor.
Each determination by such Bank hereunder shall be conclusive absent manifest
error.
SECTION 2.13. Changes in Legality. (a) If, anything to the contrary
-------------------
herein contained notwithstanding, any applicable existing or future law,
regulation, guideline, treaty or directive or condition or interpretation
thereof (including, without limitation, any request, guideline or policy,
whether or not having the force of law), by any Governmental Authority charged
with the administration or interpretation thereof, or any change in any of the
foregoing shall make it unlawful or improper for any Bank to make or maintain
any Revolving Credit Loans or any Term Loan as LIBO Rate Loans, then, by oral
notice to Borrower and the Agent, promptly confirmed in writing (which may be by
teletransmission), such Bank may:
(i) declare that its Revolving Credit Loans or Term Loans thereafter
will not be made by it as LIBO Rate Loans, whereupon Borrower shall be
prohibited from
28
<PAGE>
it requesting Revolving Credit Loans or Term Loans as LIBO Rate Loans
unless and until such declaration is withdrawn; and
(ii) require that all its outstanding Revolving Credit Loans or its
Term Loan that are LIBO Rate Loans be converted to Prime Rate Loans, in
which event all such Revolving Credit Loans or Term Loan shall be converted
automatically to Prime Rate Loan(s) as of the end of their applicable
Interest Periods or as of such earlier date as may be required of such Bank
for the lawful or proper conduct of its lending activities.
SECTION 2.14. Participations. Borrower may grant participations to other
--------------
Persons of Borrower's choosing in a portion of its rights and/or obligations
under any Loan; provided, however, that any such participation shall be granted
pursuant to a form of participation agreement which shall provide, among other
things, that (a) Borrower shall service such Loan, (b) any participant
thereunder shall be entitled to no more than its pro rata share of the
Underlying Collateral securing such Loan and to no more than principal and
interest under such Loan, (c) Borrower's interest shall be pari passu or
superior in right of payment to the interest of such participant in such Loan
and (d) Borrower's rights to any payment under such Loan shall be prior to, or
pro-rata with, any such participant. Upon request by the Required Banks,
Borrower shall provide the Banks in writing with a description of all Loans in
respect of which participations have been granted.
ARTICLE III
FEES AND PAYMENTS
SECTION 3.1. Facility Fees. Borrower shall pay a fee to each Bank equal
-------------
to 0.375% per annum of the Revolving-Credit Commitment of such Bank. Each fee
shall be payable to each Bank--for the period from the Effective Date to and
including the last day of its Revolving Credit Commitment Period, payable
quarterly in arrears on the first day of each calendar quarter during its
Revolving Credit Commitment Period, commencing with the first such date after
the Effective Date, and ending on the Termination Date. Fees shall be
calculated for each month on the basis of a 360-day year for the actual number
of days elapsed in such month.
SECTION 3.2. Payments. (a) Routine Payments. Except as provided in
-------- ----------------
Section 3.2(b) hereof, each payment (including each prepayment) by Borrower
pursuant to this Agreement or the Notes, whether in respect of principal,
interest, fees, or increased costs (collectively, "Payments"), shall be made by
Borrower to the respective Bank to whom such payment is owed.
(b) Payments During and Event of Default. From and after any Default or
------------------------------------
Event of Default, and during the continuance thereof, until such time as such
Default or Event of Default has been cured or waived by the Banks or the
Required Banks, as the case may be, in accordance with the provisions hereof,
all Payments shall be made by Borrower to the
29
<PAGE>
Agent for the accounts of the parties hereto. Except as provided in Section
11.5 hereof, the Agent shall promptly remit in same day or immediately available
funds to each Bank or other holder of a Revolving Credit Note or Term Note
notified to the Agent its share, if any, of such Payments received by the Agent
for the account of such Bank or holder.
(c) Timing of Payments. All Payments required to be made to any Bank or
------------------
Agent shall be made, without set-off, withholding, deduction, or counterclaim,
not later than 12:00 noon, New York City time, on the date due, in same day or
immediately available funds, to such account as such Bank or the Agent shall
specify from time to time by notice to Borrower. Funds received by any Bank or
the Agent after that time shall be deemed to have been received by the Bank or
the Agent on the next following Business Day.
SECTION 3.3. Taxes. (a) Any and all payments by Borrower pursuant to
-----
this Agreement, the Revolving Credit Notes, the Term Notes or the NatWest
Existing Term Notes shall be made, in accordance with the terms hereof and
thereof, free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding franchise taxes imposed on the Agent
or any Bank by the jurisdiction under the laws of which the Agent or such Bank
is organized or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Agent or
any Bank, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.3) the Agent or such Bank shall
receive an amount equal to the sum it would have received had no such deductions
been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law, and (iv) Borrower shall deliver to the Agent
evidence of such payment to the relevant Governmental Authority.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or any State or political subdivision thereof or any
applicable foreign jurisdiction that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes") and to deliver to the Banks evidence of such payment to the relevant
Governmental Authority.
(c) Borrower will indemnify the Agent and the Banks for the full amount of
Taxes and Other Taxes (including without limitation Taxes and Other Taxes
imposed by any jurisdiction on amounts payable under this Section 3.3) paid by
the Agent or any Bank (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 10 days after written demand
30
<PAGE>
therefor by the Agent or any Bank. Should Borrower elect to contest whether or
not the Taxes or Other Taxes giving rise to its indemnification obligation
hereunder were correctly or legally asserted, the Agent or the Bank being
indemnified agrees to cooperate in such contest, at Borrower's expense, and to
make available to Borrower such books and records as may be reasonably necessary
and useful in connection with such contest.
(d) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
3.3 shall survive the payment in full of principal, interest, fees and other
amounts hereunder and under the other Loan Documents and the NatWest Existing
Term Notes.
(e) Each Bank, if any, that is not organized under the laws of the United
States of America or any State agrees (i) prior to the first payment to such
Bank of any amounts due to such Bank under the Loan Documents, upon request by
Borrower, to execute and deliver to Borrower completed counterparts of IRS Form
W-8, 1001, or 4224 (or any successor thereto or substitute therefor), as
applicable, and (ii) thereafter, upon request by Borrower from time to time in
order to maintain the effectiveness and accuracy of such tax forms and otherwise
to comply with United States tax laws, to execute and deliver to Borrower
additional or supplemental tax forms with respect to amounts due to such Bank
under the Loan Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this Agreement and
to make the Revolving Credit Loans and Term Loans Borrower hereby makes the
following representations and warranties, which shall survive the execution and
delivery of the Loan Documents and (except to the extent that any of such
representations and warranties expressly relate to earlier dates) shall be
deemed repeated and confirmed as of each date on which any Revolving Credit
Loans or Term Loans are requested by Borrower or made by any Bank:
SECTION 4.1. Corporate Status. Borrower is a duly organized and validly
----------------
existing corporation in good standing under the laws of its state of
incorporation, is properly licensed and has the corporate power and authority
and the legal right to own its property and conduct the business in which it is
engaged or presently proposes to engage and is duly licensed and qualified as a
foreign corporation in good standing under the laws of each jurisdiction where
the failure to qualify as such would have a Material Adverse Effect.
SECTION 4.2. Subsidiaries. Except as set forth on Schedule III hereof (as
------------
the same may be amended from time to time to include entities the Tangible Net
Assets of which constitute less than 5% of the Tangible Net Assets of Borrower),
there are no corporations of which Borrower owns, directly or indirectly, shares
of capital stock having in the aggregate 50% or more of the total combined
voting power of the issued and outstanding shares of
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capital stock entitled to vote generally in the election of directors of such
corporation; nor are there any corporations, partnerships, joint ventures or
other entities in which Borrower has, or pursuant to any agreement has the right
to acquire at any time by any means, directly or indirectly, an equity interest
or investment.
SECTION 4.3. Location of Offices, Books and Records. Schedule I annexed
--------------------------------------
hereto, as amended from time to time pursuant to Section 6.9 hereof, completely
and accurately lists all places (i) at which Borrower maintains its books and
records relating to, among other things, its Loans, (ii) at which Borrower has
any places of business and (iii) at which Borrower has its chief executive
office.
SECTION 4.4. Corporate Power; Authorization. Borrower has the corporate
------------------------------
power and authority and the legal right to make, deliver and perform this
Agreement and the other Loan Documents to which it is a party. Borrower has
taken all necessary corporate action (including, but not limited to, the
obtaining of any consent of stockholders required by law or by the Certificate
of Incorporation or By-Laws of Borrower) to authorize the execution, delivery
and performance of the Loan Documents to which it is a party or by which it is
otherwise affected and to authorize the transactions contemplated hereby and
thereby.
SECTION 4.5. Enforceable Obligations. Each Loan Document, and each other
-----------------------
instrument and document executed by Borrower and delivered to the Agent pursuant
to Section 5.1 hereof, constitutes the legal, valid and binding obligation of
Borrower, enforceable in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally, and general principles of equity, and there are no
actions, suits or proceedings pending or, to the knowledge of Borrower,
threatened against, or affecting, Borrower or any of its officers or directors
calling into question the legality, validity or enforceability of any thereof.
SECTION 4.6. No Violation of Agreements; Compliance with Law. Borrower is
-----------------------------------------------
not in default under any indenture, mortgage, deed of trust, agreement or other
instrument to which it is a party or by which it or any of its properties may be
bound. Neither the execution and delivery of the Loan Documents nor any of the
instruments and documents to be delivered by Borrower pursuant to this Agreement
or the other Loan Documents, nor the consummation of the transactions herein and
therein contemplated, nor compliance with the provisions hereof or thereof will
violate any law or regulation, or any order or decree of any court or
governmental instrumentality, or will conflict with, or result in the breach of,
or constitute a default under, any indenture, mortgage, deed of trust, agreement
or other instrument to which Borrower is a party or by which it may be bound, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property of Borrower except as expressly permitted by this Agreement, or
violate any provision of the Certificate of Incorporation, By-Laws or any
preferred stock provisions of Borrower.
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SECTION 4.7. Agreements. Borrower is not a party to any agreement or
----------
instrument or subject to any corporate restriction (including any restriction
set forth in its Certificate of Incorporation, By-Laws or preferred stock
provisions) that could have a Material Adverse Effect.
SECTION 4.8. No Material Litigation. There are no actions, suits or
----------------------
proceedings pending or, to the knowledge of Borrower, threatened, against, or
affecting Borrower or any of its officers or directors before any court,
arbitrator or governmental or administrative body or agency which, if adversely
determined, might have a Material Adverse Effect. No injunction, writ,
restraining order or other order of any nature adverse to Borrower or the
conduct of its business or inconsistent with the due consummation of such
transactions has been issued by any Governmental Authority. Borrower is not in
default under any applicable statute, rule, order, decree or regulation of any
court, arbitrator or governmental body or agency having jurisdiction over
Borrower.
SECTION 4.9. Good Title to Properties. Borrower has good and marketable
------------------------
title to all its properties and assets, subject to no Liens of any kind (except
as expressly permitted under this Agreement).
SECTION 4.10. Margin Regulations. Borrower does not own any "margin
------------------
stock" as such term is defined in Regulation U, as amended (12 C.F.R. Part 221),
issued by the Board and is not obligated to register with the Board as a
"lender" as such term is defined in Regulation G, as amended (12 C.F.R. Part
207), issued by the Board. The proceeds of the borrowings made pursuant to this
Agreement will be used by Borrower only for the purposes set forth in Section
2.8 hereof. None of such proceeds and none of the proceeds of any loan or
advance made by Borrower will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin stock or for the purposes of maintaining,
reducing or retiring any Indebtedness that originally was incurred to purchase
or carry margin stock or for any other purpose that might constitute any of the
Revolving Credit Loans or Term Loans under this Agreement or any such loans or
advances a "purpose credit" within the meaning of said Regulations G and U or
Regulation X (12 C.F.R. Part 224) of the Board. Neither Borrower nor any agent
acting in its behalf has taken or will take any action that might cause this
Agreement or any of the documents or instruments delivered pursuant hereto or
other Loan Documents to violate any regulation of the Board or to violate the
Securities Exchange Act of 1934, as amended.
SECTION 4.11. SBIC. Borrower is, and has been since the date of its
----
incorporation, a qualified SBIC. Borrower is in compliance with all conditions
or requirements imposed by the SBA or any other applicable Governmental
Authority with respect to its status as a SBIC including, without limitation,
all conditions and requirements imposed under the SBI Act and the SBA
Regulations promulgated thereunder.
SECTION 4.12. Investment Company. Each of Borrower and Tri-Magna is an
------------------
"investment company," as such term is defined in the 1940 Act. The acquisition
of the
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<PAGE>
Notes by the Banks, the application of the proceeds and repayment thereof by
Borrower and the performance of the transactions contemplated by this Agreement
and the other Loan Documents will not violate any provision of said Act, or any
rule, regulation or order issued by the Securities and Exchange Commission
thereunder.
SECTION 4.13. Disclosure. No representation or warranty made by Borrower
----------
in any Loan Document or any other document furnished from time to time in
connection herewith or therewith contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to Borrower or any of
its officers or directors which has, or which in the future might have, in the
reasonable judgment of Borrower, a Material Adverse Effect, except as set forth
or referred to in this Agreement or in another document or instrument heretofore
furnished to the Banks.
SECTION 4.14. Taxes and Claims. Borrower has filed or caused to be filed,
----------------
all Federal, state and local tax returns and reports which are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or charges imposed on it or any of its property by any Governmental Authority
(other than those the amount or validity of which are currently being diligently
contested in good faith by appropriate proceedings and in respect of which
adequate reserves in conformity with GAAP have been provided on the books of
Borrower); and no tax liens have been filed and, to the knowledge of Borrower,
no claims are being asserted with respect to any such taxes, fees or other
charges. Borrower, to the best of its knowledge, has paid and discharged all
lawful claims for labor, material, supplies and anything else which might or
could, if unpaid, become a Lien on any of its properties (other than those the
amount or validity of which are currently being diligently contested in good
faith by appropriate proceedings and in respect of which adequate reserves in
conformity with GAAP have been provided on the books of Borrower).
SECTION 4.15. Licenses and Permits. Borrower possesses all the licenses,
--------------------
permits, approvals and consents of Federal, state and local governments and
regulatory authorities) and rights in any thereof, adequate for the conduct of
its business as now conducted, without conflict with the rights or claimed
rights of others. Borrower has not received any notice nor does Borrower have
any knowledge or reason to believe that any appropriate authority intends to
cancel, terminate or modify any of such licenses or permits or that valid
grounds for such cancellation, termination or modification exist.
SECTION 4.16. Consents. No consent, authorization or action of, or filing
--------
with, any Governmental Authority or any other Person is required to authorize,
or is otherwise required of Borrower in connection with, the execution,
delivery, performance, validity or enforceability of the Loan Documents or any
of the instruments or documents to be delivered pursuant to the Loan Documents.
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<PAGE>
SECTION 4.17. Employee Benefit Plans. (a) None of the Plans maintained
----------------------
at any time by Borrower, or any ERISA Affiliate thereof or the trusts created
thereunder has engaged in a Prohibited Transaction which could subject any such
Plan or trust to a material tax, liability or penalty on or resulting from
Prohibited Transactions imposed under Code Section 4975 or ERISA.
(b) None of the Plans which are employee pension benefit plans maintained
at any time by Borrower, or any ERISA Affiliate thereof, or the trusts created
thereunder has been terminated in a manner that results or could result in a
liability to Borrower in excess of $50,000, nor has Borrower, any ERISA
Affiliate thereof, or any such Plan of Borrower or any ERISA Affiliate incurred
any liability to the PBGC in excess of $50,000, other than for required
insurance premiums which have been paid when due; neither Borrower nor any ERISA
Affiliate has withdrawn from or caused a partial withdrawal to occur with
respect to any Multiemployer Plan within the meanings of Sections 4203 and 4205
of ERISA the effect of which was a liability or potential liability to Borrower
in excess of $50,000; and Borrower and each ERISA Affiliate has made or provided
for all contributions to all employee pension benefit plans which they maintain
and which were required under ERISA or the Code as of the end of the most recent
fiscal year under each such plan; no such employee pension benefit plan has
incurred any Accumulated Funding Deficiency the effect of which was a liability
or potential liability to Borrower in excess of $50,000, whether or not waived;
nor has there been any Reportable Event, or other event or condition, which
presents a risk of termination of any such Plan by the PBGC, which termination
could result in a potential liability to Borrower in excess of $50,000.
(c) The present value of all accrued benefits under the Plans, if any,
which are employee pension benefit plans did not, as of the most recent
valuation date for each such Plan, exceed by more than $50,000 the then current
value of the assets of such Plans allocable to such accrued benefits.
(d) Each employee pension benefit plan maintained by Borrower and each
ERISA Affiliate has been administered in accordance with its terms and is in
compliance in all material respects with all applicable requirements of ERISA
and other applicable laws, regulations and rulings.
(e) As used in this Section 4.17 the term "employee pension benefit plan"
and "accrued benefits" shall have the respective meanings assigned to them in
ERISA.
SECTION 4.18. Financial Condition. The consolidated balance sheets of the
-------------------
Borrower for the fiscal years ended March 31, 1989, 1990 and 1991 and the
related consolidated statements of income, retained earnings and cash flow for
the fiscal years ended on said dates, as certified by the Independent Public
Accountants present fairly the consolidated financial condition of the Borrower
as at the date of each such balance sheet, and the results of its operations for
such period. All such financial statements have been prepared in accordance
with GAAP applied on a basis consistent with that of the comparable
35
<PAGE>
preceding period, and since the dates of the financial statements mentioned
above, there has been no material adverse change in the consolidated condition,
financial or otherwise, of the Borrower.
SECTION 4.19. Environmental Laws, Etc. (a) All Property heretofore, now
------------------------
or hereafter owned or operated by Borrower complied, complies and will comply in
all material respects with all applicable Federal, state and local,
environmental, health and safety statutes, guidelines, codes, ordinances and
regulations;
(b) such Property does not contain and is not being and has not been used
to generate, manufacture, refine, produce, store, handle, transfer, process,
dispose of, or transport, any Hazardous Materials in violation of any material
applicable Federal, state or local law or regulation; and
(c) there are no underground storage tanks or surface impoundments located
on, under, or within such Property in violation of any material applicable
Federal, state or local law or regulation.
SECTION 4.20. Event of Default. No event has occurred and is continuing
----------------
that constitutes a Default or an Event of Default or would constitute such a
Default or Event of Default after notice or lapse of time or both.
SECTION 4.21. Solvency. Borrower is Solvent, and will not, as a result of
--------
the transactions contemplated hereby or by the Loan Documents become not
Solvent.
SECTION 4.22. Priority. Except as otherwise permitted hereunder, when the
--------
Revolving Credit Loans and Term Loans are made, the Borrower Security Agreement
will create valid and perfected first priority security interests in and to all
Collateral enforceable against Borrower and all third parties in all relevant
jurisdictions and securing the payment of the Revolving Credit Loans and Term
Loans.
SECTION 4.21. Advertising Origination and Servicing Activities. All
------------------------------------------------
advertising, origination and servicing activities, procedures and materials used
with regard to any Loan made or accounts acquired, collected or serviced by
Borrower comply with all applicable Federal, state and local laws, ordinances,
rules and regulations, including but not limited to those related to usury,
truth in lending, real estate settlement procedures, consumer protection, equal
credit opportunity, fair debt collection, rescission rights and disclosures,
except where failure to comply would not have a Material Adverse Effect.
SECTION 4.24. Activities. The only transactions engaged in by Borrower in
----------
the ordinary course of its business consist of: (i) the making and servicing of
Loans and Investments in compliance with the SBI Act and the SBA Regulations
promulgated thereunder; and (ii) transactions incidental to the foregoing.
36
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to Initial Revolving Credit Loan. The
-------------------------------------------
obligation of the Banks to make the Initial Revolving Credit Loan hereunder is
subject to the satisfaction on the Effective Date of the following conditions
precedent:
(a) Each Bank shall have received, on or before making the Initial
Revolving Credit Loan, the following, each in form and substance satisfactory to
each Bank in all respects:
(i) a Revolving Credit Note conforming to the requirements
hereof in the form of Exhibit B hereto, executed by an Authorized
---------
Representative of Borrower;
(ii) evidence satisfactory to the Banks that all outstanding
Indebtedness (other than Indebtedness permitted under Section 8.2
hereof) is being simultaneously repaid and that all Liens securing
such Indebtedness are being simultaneously terminated;
(iii) the Borrower Security Agreement in the form of Exhibit E,
---------
executed by an Authorized Representative of Borrower;
(iv) the NatWest Existing Term Note Amendments in the form of
Exhibit G hereto, executed by an Authorized Representative of
---------
Borrower;
(v) evidence satisfactory to the Banks that the Borrower Financing
Statements have been duly authorized and executed by Borrower and
have been properly submitted for filing, and confirmation thereof
received in a form acceptable to the Required Banks, such that the
security interests described therein will constitute valid and
perfected first priority security interests, subject only to Liens
permitted pursuant to Section 8.1 hereof;
(vi) the results of a search of all filings made against Borrower
under the UCC as in effect in any relevant state, indicating that the
Collateral is free and clear of any Lien or encumbrance, subject only
to Liens securing Indebtedness to be paid off in full with the
proceeds of the Initial Revolving Credit Loans;
(vii) opinions of counsel to Borrower substantially in the form of
Exhibit F hereto; such opinion shall also cover such other matters
incident to the transactions contemplated by this Agreement and the
other Loan Documents as the Required Banks reasonably may require;
(viii) a copy of the Certificate of Incorporation of Borrower and
all amendments thereto, certified as of the date hereof by the
Secretary of Borrower;
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<PAGE>
(ix) copies of the By-laws of Borrower in effect as of the
Effective Date, certified by the Secretary of Borrower;
(x) certified copies of the resolutions of the Board of Directors
of Borrower approving each of the Loan Documents and each of the other
instruments and documents to be executed by it and delivered to the
Banks pursuant to this Agreement or any other Loan Document,
certified by the Secretary of Borrower, and certified copies of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect thereto;
(xi) certificates of the Secretary of Borrower certifying the
names and true signatures of the officers of Borrower authorized to
sign each document to which it is a signatory and which is to be
delivered by it hereunder or pursuant to any other Loan Document to
which it is a party;
(xii) a certificate of the President and the chief financial
officer of Borrower to the effect that (A) the financial statements
referred to in Section 4.18 hereof present fairly the financial
condition of Borrower as of the date and for the period of such
financial statements and (B) material adverse change in the
condition, financial or otherwise, of Borrower has occurred since the
date of such financial statements;
(xiii) a certificate of an Authorized Representative of Borrower
to the effect that Borrower has in effect all insurance coverage
required pursuant to Section 6.3 hereof;
(xiv) originals of instruments and other documents constituting
part of the Collateral or Underlying Collateral as the Agent may
request in order to perfect its security interest, on behalf of the
Banks, in such Collateral;
(xv) copies of all other documents, instruments and agreements
requested by the Agent in connection with the transactions
contemplated by this Agreement and the other Loan Documents.
(b) Borrower is a corporation duly organized and validly existing, has all
licenses, permits and authorizations necessary to own its properties and to
carry on its business as now conducted and proposed to be conducted and is in
good standing in the jurisdiction of its organization and in each other
jurisdiction in which the nature of its business or ownership or use of its
property requires such qualification and the Agent shall receive such evidence
thereof, as it or the Required Banks may request.
(c) All requisite corporate action and proceedings, as the case may be, in
connection with the Loan Documents shall be satisfactory in form and substance
to the Banks, and the Banks shall have received all information and copies of
all documents, including, without limitation, records of requisite corporate
action and proceedings which the
38
<PAGE>
Banks and Willkie Farr S Gallagher, as counsel to the Banks, may have requested
in connection therewith, such documents, where so requested, to be certified by
appropriate corporate officers or Governmental Authorities.
(d) All necessary approvals, authorizations and consents, if any be
required, of any Governmental Authority having jurisdiction with respect to any
of the Collateral and the transactions contemplated by this Agreement and the
other Loan Documents shall have been obtained. In addition, Borrower shall be
in compliance with all laws, rules, regulations, orders and administrative
guidelines applicable to the operation of its business, including, without
limitation, those of the SBA.
(e) All representations, warranties, covenants and agreements contained in
any Loan Document shall be true and correct in all material respects, and shall
have been performed (to the extent required to be performed on or prior to the
Effective Date), as of the Effective Date.
SECTION 5.2. Conditions to All Revolving Credit and Term Loans. The
-------------------------------------------------
obligation of the Banks to make any Revolving Credit Loans (including the
Initial Revolving Credit Loan) and any Term Loans is further subject to the
satisfaction of the following conditions precedent:
(a) each of the representations and warranties made by Borrower in or
pursuant to any Loan Document or which are contained in any agreement,
instrument, certificate, document or other writing furnished at any time under
or in connection herewith or therewith shall be true and correct in all material
respects when made and on and as of the date of the making of such Revolving
Credit Loan or Term Loan (except to the extent any representation or warranty
expressly relates to an earlier date);
(b) no Default or Event of Default shall have occurred and be continuing on
such date or after giving effect to the Revolving Credit Loans or Term Loans to
be made on such date; and
(c) no event, act or condition having or causing a Material Adverse Effect
with respect to Borrower has occurred since the date of this Agreement.
Each borrowing by Borrower hereunder shall constitute a representation and
warranty by Borrower as of the date of such borrowing that the conditions in
clauses (a), (b) and (c) of this Section 5.2 have been satisfied.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until the Notes together with interest
and all other Indebtedness of Borrower to the Agent or the Banks under the Loan
Documents are
39
<PAGE>
paid in full and the Aggregate Revolving Credit Commitment and all Term Loan
Commitments are terminated, unless specifically waived in writing by the
Required Banks:
SECTION 6.1. Financial Statements and Other Information. Borrower shall
------------------------------------------
furnish to the Banks:
(a) as soon as practicable and in any event within 30 days after the close
of each calendar quarter, a detailed schedule of all outstanding Loans of
Borrower setting forth (i) the aging, on a contractual basis, of each Loan and
(ii) the aggregate dollar amount of Loans as to which any amendments or
modifications to or waivers of any terms thereof have been made during the
quarter as a result of the Person to whom such Loan was made being unable to
comply (for whatever reason) with the terms thereof.
(b) as soon as practicable and in any event within 30 days after the close
of each calendar quarter, a schedule setting forth (i) the number of Medallion
Rights pledged to Borrower as security for Loans made by it, (ii) the then
outstanding aggregate principal amount of the Loans secured by such Medallion
Rights and (iii) Borrower's good faith best estimate (along with supporting
documentation) of the current fair market value of the operating rights and
licenses evidenced by taxi medallions included in such Medallion Rights.
(c) as soon as practicable and in any event within 10 days after the close
of each calendar month, a schedule evidencing compliance by Borrower with the
pro rata (plus or minus $500,000) borrowing requirements with respect to the
Revolving Credit Commitments set forth in Section 2.3(a)(i) hereof.
(d) as soon as practicable and in any event within 60 days after the end of
each of the first three fiscal quarters of each fiscal year, a balance sheet, a
statement of income and retained earnings and a statement of cash flow of
Borrower, as at the end of and for the quarterly period then ended and for the
period commencing at the end of the previous fiscal year and ending with such
quarter, setting forth the corresponding figures for the appropriate periods of
the previous fiscal year in comparative form, all in reasonable detail (which
detail shall include data as to non-accruals (and related collateral,
repossessions, charge-offs and reconciliation for allowance for losses) and be
reviewed by the Independent Public Accountants and certified by the President or
Chief Financial Officer of Borrower to be true and correct and to have been
prepared in accordance with GAAP (except for the omission of footnotes), subject
to normal recurring year-end audit adjustments;
(e) as soon as practicable and in any event within 90 days after the end of
the fiscal year of Borrower commencing with the fiscal year ending March 31,
1992, a balance sheet, a statement of income and retained earnings and a
statement of cash flow of Borrower, as at the end of and for the fiscal year
just closed, setting forth the corresponding figures of the previous fiscal year
in comparative form, all in reasonable detail (which detail shall include data
as to non-accruals and related collateral, repossessions, charge-offs and
reconciliation for allowance for losses), presented in a manner consistent with
the financial
40
<PAGE>
statements of Borrower for the preceding fiscal year, and, with respect to such
consolidated statements, certified (without any qualification or exception
deemed material by any Bank) by the Independent Public Accountants; and
concurrently with such financial statements, a written statement, addressed to
the Banks, signed by such Independent Public Accountant to the effect that, in
making the examination necessary for their certification of such financial
statements, they have not obtained, as of the end of such fiscal year, any
knowledge of the existence of any Default or Event of Default, or, if such
accountants shall have obtained from such examination any such knowledge, they
shall disclose in such written statement the Default or Event of Default;
(f) concurrently with the delivery of the schedules or financial statements
required to be furnished under Sections 6.1(a), 6.1(c), or 6.1(d) hereof, a
certificate signed by the President or Chief Financial Officer of Borrower, and
concurrently with the delivery of the financial statements required to be
furnished under Section 6.1(e) hereof, a certificate signed by the Independent
Public Accountants, and promptly upon the occurrence of any Default or Event of
Default, a certificate signed by the President or Chief Financial Officer of
Borrower or such Independent Public Accountants, if a Default or Event of
Default shall have occurred during the period of their review, in each case
stating (i) that a review of the activities of Borrower during such period has
been made under his or their, as the case may be, immediate supervision with a
view to determining whether Borrower has observed, performed and fulfilled all
of its obligations under this Agreement, and (ii) that there existed during such
period no Default or Event of Default (provided that, as to a certificate
prepared by the Independent Public Accountants, such period, as it relates to
the compliance by Borrower with covenants contained in Articles VII and VIII
hereof shall apply to the fiscal period covered by their review) or if any such
Default or Event of Default exists, specifying the nature thereof, the period of
existence thereof and what action Borrower proposes to take, or has taken, with
respect thereto; each such certificate shall be accompanied by a schedule
setting forth the computations as of the end of such period of each of the
financial ratios, tests or covenants specified in Article VII, 6.15, 8.2, 8.3,
8.4, and 8.14 hereof;
(g) concurrently with the delivery of the financial statements required to
be furnished under Section 6.1(e) hereof, any management letters prepared by the
Independent Public Accountants described above, setting forth weakness in the
accounting and control procedures of Borrower;
(h) promptly upon receipt thereof, copies of (i) all financial reports
(including, without limitation, management letters), if any, submitted to
Borrower by its auditors in connection with each annual, interim or special
audit of its books by such auditors, (ii) all "vault count opinions" submitted
to Borrower in connection with each inspection by such auditors of the documents
evidencing Borrower's Loans and the Underlying Collateral securing such Loans,
(iii) all audits submitted to Borrower by the SBA or any other Governmental
Authority and (iv) all reports, letters or other documents submitted to Borrower
by the SBA or any other Governmental Authority relating to a material change in
Borrower's business or the rules and regulations promulgated by any Governmental
Authority
41
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applicable thereto, including, without limitation, the SBI Act, the SBA
Regulations, the 1940 Act and the Code; and
(i) with reasonable promptness, such other information respecting the
business, operations and financial condition of Borrower as the Agent or any of
the Banks from time to time reasonably may request.
SECTION 6.2. Taxes and Claims. (a) Borrower shall pay promptly when due,
----------------
(i) all material sales, use, excise, personal property, income, withholding,
corporate franchise and all other taxes, assessments and governmental charges
upon or against or relating to Borrower or its ownership or use of any of its
properties, assets, income or gross receipts unless and to the extent that such
charges are being diligently contested in good faith by appropriate proceedings
and adequate reserves in conformity with GAAP have been provided therefor on the
books of Borrower, and (ii) all lawful claims, whether for labor, materials,
supplies, services or anything else which might or could, if unpaid, become a
Lien or charge upon the properties or assets of Borrower or any of its
Subsidiaries, which Lien would not be permitted under this Agreement, unless and
to the extent such claims are being diligently contested in good faith by
appropriate proceedings and adequate reserves in conformity with GAAP have been
provided therefor on the books of Borrower.
(b) Borrower shall not permit, or suffer to remain, and will promptly
discharge, any Lien (other than a Permitted Lien) arising from any unpaid tax,
assessment, levy or governmental charge.
(c) In the event Borrower shall fail to pay any such tax, assessment, levy
or governmental charge or to discharge any such Lien (other than a Permitted
Lien), then the Agent, without waiving or releasing any obligation or default of
Borrower hereunder, may at any time or times hereafter, but shall be under no
obligation to do so, make such payment, settlement, compromise or release or
cause to be released any such Lien, and take any other action with respect
thereto which the Agent deems advisable. All sums paid by the Agent in
satisfaction of, or on account of any tax, levy or assessment or governmental
charge, or to discharge or release any Lien, and any expenses, including
reasonable attorneys' fees actually incurred, court costs and other charges
relating thereto, shall become a part of the Obligations secured by the
Collateral, payable on demand.
SECTION 6.3. Insurance. (a) Borrower shall (i) keep all of its
---------
properties adequately insured at all times with responsible insurance carriers
against loss or damage by fire and other hazards and (ii) maintain adequate
insurance at all times with responsible carriers against liability on account of
damage to persons and property and under all applicable workmen's compensation
laws. For the purposes of this Section 6.3(a), insurance shall be deemed
adequate if the same is not less extensive in coverage and amount than is
customarily maintained by other persons engaged in the same or similar business
similarly situated.
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(b) Borrower, from time to time upon request of the Agent or any Bank,
promptly shall furnish or cause to be furnished to the Agent evidence, in form
and substance satisfactory to the Agent and such Bank, of the maintenance of all
insurance required by this Section 6.3 to be maintained, including, but not
limited to, such originals or copies as the Agent or such Bank may request of
policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments.
SECTION 6.4. Books and Records. Borrower shall maintain, at all times,
-----------------
true and complete books, records and accounts in which true arid correct entries
shall be made of its transactions in accordance with GAAP consistently applied
and in compliance with the regulations of any governmental regulatory body
having jurisdiction over it.
SECTION 6.5. Properties in Good Condition. Borrower shall keep its
----------------------------
properties in good repair, working order and condition (subject to such wear and
tear as may occur in the ordinary course of business) and, from time to time,
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto, so that the business carried on may be properly and
advantageously conducted at all times in accordance with prudent business
management.
SECTION 6.6. Inspection by the Banks. Borrower shall allow any
-----------------------
representative of any of the Banks to visit and inspect any of the properties of
Borrower to examine and audit the books of account and other records and files
of Borrower, to make copies thereof and to discuss the affairs, business,
finances and accounts of Borrower with its officers and employees, all at such
reasonable times and as often as any of the Banks may request. Reasonable
expenses incurred in connection with one such audit and inspection requested by
the Required Banks each year shall be paid by Borrower, with any additional
audits to be at the expense of the Bank performing the same, except that, if an
Event of Default shall have occurred and be continuing, all such additional
audits shall be at the expense of the Borrower.
SECTION 6.7. Pay Indebtedness to Banks and Perform Other Covenants.
-----------------------------------------------------
Borrower shall (a) make full and timely payments of the principal of and
interest on the Notes and the NatWest Existing Term Notes and all other amounts
owed by Borrower to the Banks, whether now existing or hereafter arising and (b)
duly comply with all the terms and covenants contained in each of the
instruments and documents furnished in connection with or pursuant to this
Agreement or the other Loan Documents or the NatWest Existing Term Notes, all at
the times and places and in the manner set forth therein.
SECTION 6.8. Compliance With Laws. Borrower shall comply with all
--------------------
applicable laws and regulations, including but not limited to, those of the SBA
and Federal, state and local laws and regulations relating to consumer lending,
disclosure, collection and licensing, where the failure to so comply would have
a Material Adverse Effect (other than those the validity of which are being
diligently contested in good faith by appropriate proceedings and
43
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adequate reserves in conformity with GAAP have been provided therefor on the
books of Borrower).
SECTION 6.9. Notice of Certain Events. Borrower shall promptly, but in no
------------------------
event later than three Business Days after obtaining knowledge thereof, give
written notice to the Banks of: (a) any material litigation, including
arbitrations, and of any investigations or proceedings before any Governmental
Authority brought against Borrower, whether or not the claim is considered by
Borrower to be covered by insurance, which might, if determined adversely, have
a Material Adverse Effect, or where the amount involved, when added together
with all other amounts involved in any other litigation, investigation,
arbitration or proceeding affecting Borrower, would exceed $500,000, and
Borrower shall, if requested by the Required Banks, set up such reserves as the
Required Banks reasonably determine are necessary to protect the Agent or the
Banks against loss; (b) any written notice of a violation received by Borrower
from any Governmental Authority which, if such violation were established, might
have a Material Adverse Effect; (c) any material attachment, judgment, lien,
levy or order which may be placed on or assessed against or threatened against
Borrower or the Collateral; (d) any Default or Event of Default or any event
that, after notice or lapse of time or both, would become a Default or Event of
Default; (e) any other matter that has or causes or may have or cause a Material
Adverse Effect with respect to Borrower; (f) any Change of Control or proposed
Change of Control; and (g) any change in the corporate name or corporate form of
Borrower, or of any change in the information disclosed on Schedule I annexed
hereto.
SECTION 6.10. Environmental Laws, Etc. (a) Borrower shall keep all
------------------------
Property owned or operated by it free of Hazardous Materials and comply with the
requirements of all applicable Federal, state and local environmental, health,
safety and sanitation laws, ordinances, regulatory and administrative
authorities with respect thereto. Except to the extent it does so on the date
hereof and in strict compliance with all applicable laws, Borrower shall not use
any Property to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce, process or in any manner deal with, Hazardous
Materials, and shall not cause or permit, as a result of any intentional or
unintentional act or omission on the part of Borrower or any occupant, tenant or
subtenant, the installation or placement of Hazardous Materials onto any
Property or onto any other property or suffer the presence of Hazardous
Materials on any Property. Borrower shall undertake promptly and pursue
diligently to completion appropriate remedial clean-up action in the event of
any release of Hazardous Materials on, upon or into any real property owned or
operated by Borrower or any real property adjacent thereto.
(b) borrower agrees to provide the Banks with copies of any notifications
of releases of Hazardous Materials that are given by or on behalf of Borrower to
any Governmental Authority with respect to any real property owned or operated
by Borrower. Such copies shall be sent to the Banks concurrently with the
mailing or delivery of such copies to the Governmental Authority.
44
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SECTION 6.11. Further Assurances. Upon the request of the Required Banks,
------------------
Borrower at its cost and expense shall duly execute and deliver, or cause to be
duly executed and delivered, to the Banks such further instruments and do and
cause to be done such further acts as may be reasonably necessary or proper in
the opinion of the Required Banks to carry out more effectually the provisions
and purposes of this Agreement and the other Loan Documents.
SECTION 6.12. ERISA. Borrower shall deliver to the Banks, promptly after
-----
(i) the occurrence thereof, notice that an ERISA Termination Event or a
Prohibited Transaction with respect to any Plan has occurred, which notice shall
specify the nature thereof and Borrower's proposed response thereto, and (ii)
actual knowledge thereof, copies of any notice of the PBGC's intention to
terminate or to have a trustee appointed to administer any Plan.
SECTION 6.13. Corporate Existence. Borrower shall do or cause to be done
-------------------
all things necessary to preserve, renew and keep in full force and effect its
corporate existence (except as otherwise may be permitted by Section 8.6 hereof)
and all rights, licenses, permits and franchises, the termination of which would
have a Material Adverse Effect; comply with all laws, regulations, ordinances,
rules and orders applicable to it, noncompliance with which would have a
Material Adverse Effect; conduct and operate its business in substantially the
manner in which it is presently conducted and operated without material
alteration or change in the nature of such business; at all times maintain and
preserve all property used or useful in the conduct of its business and keep the
same in appropriate repair and condition, and from time to time make, or cause
to be made, all appropriate repairs, renewals and replacements thereto, so that
the business carried on in connection therewith may be properly conducted at all
times.
SECTION 6.14. Maintenance of Security Interest. Borrower shall maintain
--------------------------------
perfected, first priority security interests in the Collateral in favor of the
Agent in accordance with the terms of the Borrower Security Agreement, subject
only to the Liens permitted pursuant to Section 8.1 hereof.
SECTION 6.15. Required percentage of Medallion Loans. Borrower shall
--------------------------------------
ensure that, for so long as any amounts are owed by it to the Banks or the Agent
under the Loan Documents or the NatWest Existing Term Notes, at all times at
least 65% of the aggregate principal amount of all Loans made by it and then
outstanding shall be Eligible Medallion Loans to Persons who have obtained such
Loans for the purpose of acquiring Medallion Rights for use primarily in New
York City.
ARTICLE VII
FINANCIAL COVENANTS
Borrower covenants and agrees that, until the Notes, together with interest
and all other Indebtedness of Borrower to the Agent or the Banks under this
Agreement and the
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other Loan Documents, are paid in full and the Aggregate Revolving Credit
Commitment and all Term Loan Commitments are terminated, Borrower shall not,
without the prior written consent of the Required Banks:
SECTION 7.1. Minimum Tangible Net Assets. Suffer or permit Tangible Net
---------------------------
Assets to be less than $19,000,000 at any time.
SECTION 7.2. Minimum Tangible Net Assets Plus Subordinated Debt. Suffer
--------------------------------------------------
or permit Tangible Net Assets plus Subordinated Debt to be less than $29,000,000
at any time.
SECTION 7.3. Maximum Liability Ratio. Suffer or permit the ratio of Total
-----------------------
Liabilities to Tangible Net Assets to be more than 4:1 at any time.
SECTION 7.4. Maximum Liability Less Subordinated Debt Ratio. Suffer or
----------------------------------------------
permit the ratio of (a) Total Liabilities less Subordinated Debt to (b) Tangible
Net Assets plus Subordinated Debt to be more than 2:1 at any time.
SECTION 7.5. Minimum Net Finance Assets. Suffer or permit the ratio of
--------------------------
Net Finance Assets to Senior Debt to be less than 1.35:1 at any time.
SECTION 7.6. Minimum Net Income to Interest Expense Ratio. Suffer or
--------------------------------------------
permit the ratio, on a rolling four quarter basis, of (a) Net Income plus
Interest Expense to (b) Interest Expense to be less than 1.35:1.
SECTION 7.7. Minimum Allowance for Losses. Suffer or permit, at any time,
----------------------------
its allowance for losses (determined in accordance with GAAP) to be less than
the greater of the amount of (i) 1% of the aggregate outstanding principal
balance of, plus accrued interest on, all Loans then outstanding or (ii) 4% of
the aggregate Outstanding principal balance of, plus accrued interest on, all
Commercial Loans then outstanding.
SECTION 7.8. Maximum Revolving Credit Indebtedness. Suffer or permit, at
-------------------------------------
any time, the aggregate principal amount of its Revolving Credit Loans
outstanding to exceed the Aggregate Revolving Credit Commitment plus all
principal amounts then outstanding under the NatWest Existing Term Notes
(together, the "Total Facility Amount") less:
--------------------- ----
(a) $2,000,000, if the Total Facility Amount is less than or equal to
$40,000,000;
(b) $3,000,000, if the Total Facility Amount is less than or equal to
$50,000,000 but greater than $40,000,000; and
(c) $5,000,000, if the Total Facility Amount is greater than $50,000,000.
SECTION 7.9 Maximum Revolving Credit and Term Loan Indebtedness
---------------------------------------------------
Percentage. Suffer or permit, at any time, the Aggregate Revolving Credit
- - - ----------
Commitment plus the
46
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aggregate principal balance of all outstanding Term Loans and NatWest Existing
Term Notes to exceed 220% of Borrower's Tangible Net Assets plus outstanding
Subordinated Indebtedness.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, until the Notes together with interest
and all other Indebtedness of Borrower to the Agent or the Banks under this
Agreement are paid in full and the Aggregate Revolving Credit Commitment and all
Term Loan Commitments are terminated, Borrower shall not, without the prior
written consent of the Required Banks:
SECTION 8.1. Liens. Create, assume or suffer to exist any Lien upon any
-----
of its property or assets, whether now owned or hereafter acquired; provided,
--------
however, that the foregoing restriction and limitation shall not apply to the
- - - -------
following Liens:
(a) Liens created under the Borrower Security Agreement or other Liens in
favor of the Agent or the Banks;
(b) Liens existing on property at the time acquired by Borrower after the
date of the financial statements referred to in Section 4.18 hereof, provided
--------
that such Lien was not incurred, directly or indirectly, in anticipation or
contemplation of such acquisition;
(c) Liens constituting renewals, extensions or refundings of Liens
permitted by clause (b) above, provided that the principal amount of the
Indebtedness secured by any such new Lien does not exceed the principal amount
of the Indebtedness being renewed, extended or refunded at the time of renewal,
extension or refunding thereof and that such new Lien attaches only to the same
property theretofore subject to such earlier Lien;
(d) Liens securing taxes, assessments or governmental charges or levies, or
the claims or demands of materialmen, mechanics, carriers, workmen, repairmen,
warehousemen, landlords and other like Persons, not yet delinquent or which are
being actively contested in good faith by appropriate proceedings and in respect
of which adequate reserves in conformity with GAAP have been provided on the
books of Borrower;
(e) other Liens incidental to the conduct of its business or the ownership
of its property and assets which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and which do not in
the aggregate materially detract from the value of its property or assets, or
materially impair the use thereof in the operation of its business;
(f) attachment, judgment and other similar Liens arising in connection with
court proceedings, provided that execution or other enforcement of such Liens is
effectively stayed, the claims secured thereby are being actively contested in
good faith by appropriate
47
<PAGE>
proceedings and adequate reserves in conformity with GAAP have been provided on
the books of Borrower; and
(g) Liens arising in connection with, and securing the cost of, the
acquisition of Equipment, provided, that such Lien attaches to such Equipment
--------
concurrently with or within 90 days after the acquisition thereof (by purchase,
construction or otherwise), and provided, further, that the aggregate amount of
-------- -------
Indebtedness securing all such Liens shall not at any time exceed $1,000,000.
SECTION 8.2. Indebtedness. Create, incur, assume or suffer to exist,
------------
contingently or otherwise, any Indebtedness, except:
(a) Indebtedness of Borrower to the Agent and the Banks arising hereunder
or under any of the other Loan Documents;
(b) Permitted Debt and Subordinated Debt of Borrower;
(c) Indebtedness under the NatWest Existing Term Notes;
(d) Indebtedness secured by Liens described in Section 8.1(b), (c) or (g)
hereof; and
(e) Unsecured current liabilities incurred in the ordinary course of
business and paid within 90 days after the due date thereof (unless diligently
contested in good faith by appropriate proceedings and, if requested by the
Agent, reserved against in conformity with GAAP) other than liabilities that are
for money borrowed or are evidenced by bonds, debentures, notes or other similar
instruments.
SECTION 8.3. Limitation on Loans and Investments.
-----------------------------------
(a) Make, or obligate itself to make, any loan or advance or Investment
that is not a Domestic Loan or a Domestic Investment.
(b) Make, or obligate itself to make, any loan or advance or Investment
that is not in compliance with the rules and regulations promulgated by any
Governmental Authority to which it is subject, including, without limitation,
the SBI Act and the SBA Regulations promulgated thereunder and the 1940 Act.
(c) Make, or obligate itself to make, any Loan if, after giving effect to
such Loan, the aggregate outstanding principal amount of all Loans made to any
one Person together with its Affiliates would exceed 10% of Borrower's Tangible
Net Assets plus Subordinated Debt.
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(d) Make, or commit to make, or acquire or commit to acquire, any
Commercial Loan to or from any Person if, as a result of such Loan, Borrower's
Commercial Loan concentration in any given industry (determined in accordance
with the Standard Industrial Classification promulgated by the Office of
Management and Budget) would exceed in principal amount 25% of Borrower's total
Loans outstanding.
SECTION 8.4. Limitation on Subsidiaries. Own, beneficially or of record,
--------------------------
or obligate itself to own, beneficially or of record, directly or indirectly,
50% or more of the Voting Interests of any corporation the Tangible Net Assets
of which constitute more than 5% of the Tangible Net Assets of Borrower.
SECTION 8.5. Restricted Payments. Make, or obligate itself to make, any
-------------------
Restricted Payment.
SECTION 8.6. Merger, Consolidation, Sale or Transfers of Assets.
--------------------------------------------------
(a) Sell, discount or otherwise dispose of Loans or any Collateral if a
Default or Event of Default has occurred and is continuing or if the effect of
such sale, discount or disposal would be to put Borrower in violation of any of
the covenants and agreements contained in this Agreement.
(b) Sell or otherwise dispose of an amount of Loans which, in aggregate
principal amount, exceeds 10% of the aggregate principal amount of all Loans of
Borrower then outstanding unless, immediately upon such sale or disposition,
Borrower makes, in accordance with the provisions of Section 2.5(a) hereof, a
voluntary prepayment on all then outstanding Revolving Credit Loans and Term
Loans equal to the aggregate principal amount, plus accrued interest, of the
Loans so sold it or disposed.
(c) Enter into any transaction of merger or consolidation, or transfer,
sell, assign, lease, or otherwise dispose of all or substantially all of its
properties or assets to any Person, except that the Borrower may merge or
consolidate with any other Person, provided that (A) Borrower shall be the
--------
surviving and continuing corporation, (B) no Default or Event of Default shall
have occurred and be continuing and (C) after giving effect to such
consolidation or merger, Borrower would be Solvent and would have Tangible Net
Assets at least equal to the Tangible Net Assets Borrower had immediately before
such consolidation or merger.
SECTION 8.7. Transfer of Proceeds. Transfer, or commit itself to
--------------------
transfer, any portion of the proceeds of the Revolving Credit Loans and Term
Loans to be made to Borrower from time to time hereunder to Tri-Magna, except as
may be necessary in order for Borrower to pay and make to Tri-Magna its normal
and customary dividends and distributions; provided that such dividends or
-------- ----
distributions do not cause Borrower to be in violation of any of the covenants
and agreements contained in this Agreement.
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<PAGE>
SECTION 8.8. Compliance with ERISA. Take any of the following actions or
---------------------
permit any of the following events to 4 exist if, as a result thereof, Borrower
would, or would be likely to, incur a liability in excess of $50,000:
terminate, or permit or suffer any of its ERISA Affiliates to terminate (other
than a standard termination, as defined in Section 4041(b) of Title IV of ERISA,
of a Single Employer Plan), any Plans maintained by Borrower or any of its ERISA
Affiliates so as to incur any liability to the PBGC; permit or suffer to exist
any Prohibited Transaction involving any of such Plans or any trust created
thereunder which would subject Borrower to a tax, liability or penalty on
Prohibited Transactions imposed under Code Section 4975 or ERISA; fail to pay,
or permit or suffer any of its ERISA Affiliates to fail to pay, to any such Plan
(including any multiemployer plan) any contribution which it or such ERISA
Affiliate is obligated to pay under the terms of such Plan; permit any
Accumulated Funding Deficiency, whether or not waived, with respect to any Plan;
or permit or suffer to exist any occurrence of a Reportable Event, or any other
event or condition, which presents a material risk of termination by the PBGC of
any such Plan.
SECTION 8.9. Change in Business. Materially change or alter the nature of
------------------
its business as conducted as of the Effective Date.
SECTION 8.10. Amendments of Agreements. Consent to any amendment,
------------------------
supplement, or other modification of any of the terms (including acceleration,
covenant, default, subordination, sinking fund, repayment, interest rate or
redemption provisions) contained in, or applicable to, or any security for, any
Permitted Debt or other instrument evidencing or applicable to Permitted Debt if
such amendment, supplement, or other modification materially adversely affects
the interests of any Bank.
SECTION 8.11. Transactions with Affiliates. Enter into, or cause, suffer,
----------------------------
or permit to exist, any material transactions, including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service, with any Affiliate on terms that are less favorable to Borrower than
those that would be obtainable at the time from any Person who is not an
Affiliate.
SECTION 8.12. Negative Pledges. Enter into any agreement (excluding this
----------------
Agreement and the other Loan Documents) prohibiting the creation or assumption
of any Lien upon its properties, revenues, or assets, whether now owned or
hereafter acquired.
SECTION 8.13. Inconsistent Agreements. Enter into any agreement
-----------------------
containing any provisions which would be violated or breached by any borrowing
hereunder or by the performance by Borrower of its obligations under any of the
Loan Documents where the potential consequences of such violation or breach
would have a Material Adverse Effect.
SECTION 8.14. Capital Expenditures. Expend or commit to expend for itself
--------------------
more than an aggregate of $500,000 in any fiscal year for capital expenditures,
for the acquisition of Equipment or for leasehold improvements.
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ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.1. Events of Default. If any one or more of the following
-----------------
events (herein called "Events of Default") shall occur for any reason whatsoever
-----------------
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of or interest on any of the Revolving Credit Loans or Term Loans or
any other amounts due and owing to the Agent or the Banks, when and as the same
shall become due and payable and, with respect to defaults in payment other than
payment of principal, such default shall continue for more than five days;
(b) if default shall be made in the performance or observance of, or shall
occur under, any covenant, agreement or provision contained in Article VII or
Sections 6.9(d), 6.13, 6.14, 8.1, 8.2, 8.5, 8.6, 8.9, 8.10 or 8.12 hereof;
(c) if default shall be made by Borrower in the performance or observance
of, or shall occur under, any other covenant, agreement or provision of this
Agreement (other than Section 6.7 hereof) and such default shall not have been
remedied within 30 day after such failure shall first have become known to any
officer of Borrower;
(d) if default shall be made by Borrower in the performance or observance
of, or shall occur under, any covenant, agreement or provision of any other Loan
Document or in any other agreement, instrument or document delivered to the
Agent or the Banks and such default shall not have been remedied within such
grace or cure period, if any, as may be provided therefor;
(e) if an Event of Default (as such term is defined in each of the NatWest
Existing Term Notes) shall occur or have been declared under either of the
NatWest Existing Term Notes and such Event of Default shall not have been
remedied within the grace or cure period, if any, as may be provided therefor;
(f) if Borrower shall (i) default in the payment of any principal, interest
or premium with respect to any Indebtedness for borrowed money or any obligation
which is the substantive equivalent thereof in excess of $50,000, other than
Indebtedness under the Revolving Credit Loans, the Term Loans, or the NatWest
Existing Term Notes, and such default shall continue for more than the period of
grace, if any, therein specified or (ii) default in the performance or
observance of any other term, condition or agreement contained in any such
obligation or in any agreement relating thereto if the effect thereof is to
cause, or permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due prior
to its stated maturity;
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(g) if any representation or warranty or any other statement of fact herein
or in the other Loan Documents, or in connection with the transactions
contemplated hereby or thereby, or in any writing, certificate, report or
statement at any time furnished by Borrower to the Agent or any Bank pursuant to
or in connection with this Agreement or the other Loan Documents shall prove to
have been false or misleading in any material respect when made;
(h) if Borrower shall file a petition or seek relief under or take
advantage of any insolvency law; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of itself or of the whole or substantially
all of its property; file a petition or an answer to a petition under any
chapter of the United States Bankruptcy Code, as amended (11 U.S.C. (S) 101 et
seq.), or file a petition or seek relief under or take advantage of any other
similar law or statute of the United States of America, any state thereof or any
foreign country;
(i) if a court of competent jurisdiction shall enter an order, judgment or
decree appointing or authorizing a receiver, trustee, liquidator, custodian or
conservator of Borrower or of the whole or substantially all of its property, or
enter an order for relief against Borrower in any case commenced under any
chapter of the United States Bankruptcy Code, as amended, or grant relief under
any other similar law or statute of the United States of America, any state
thereof or any foreign country; or if, under the provisions of any law for the
relief or aid of debtors, a court of competent jurisdiction or a receiver,
trustee, liquidator, custodian or conservator shall assume custody or control or
take possession of Borrower or of the whole or substantially all of its
property; or if there is commenced against Borrower any proceeding for any of
the foregoing relief or if a petition is filed against Borrower under any
chapter of the United States Bankruptcy Code, as amended, or under any other
similar law or statute of the United States of America or any state thereof or
any foreign country and such proceeding or petition remains undismissed for a
period of 60 days; or if Borrower by any act indicates its consent to, approval
of or acquiescence in any such proceeding or petition;
(j) if any judgment or judgments against Borrower or any attachment or
execution against any of its property for any amount or amounts in excess of
$50,000 in the aggregate remains unpaid, unstayed, undismissed or unbonded for a
period of more than 30 days;
(k) (i) any Person shall engage in any Prohibited Transaction involving
any Plan, (ii) any Accumulated Funding Deficiency, whether or not waived, shall
exist with respect to any Plan, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Banks likely to result in
the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA (other than a
standard termination as defined in Section 4041(b) thereof), (v) Borrower or any
of its ERISA Affiliates shall, or is, in the reasonable opinion of the Required
Banks, likely to, incur any liability in connection
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with a withdrawal from, or the insolvency or reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect to a
Plan; and in case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could subject
Borrower to any tax, penalty or other liabilities in the aggregate material in
relation to the business, operations, property or financial or other condition
of Borrower;
(l) if there shall occur any change in the Collateral or in the business of
Borrower, or its operation, conduct or prospects thereof, that individually or
in the aggregate, could have or result in a Material Adverse Effect;
(m) if there shall occur a Change of Control; then, in the case of an Event
of Default described in clause (h) or (i) above, the Aggregate Revolving Credit
Commitment shall automatically terminate and (i) the unpaid balance of the
Revolving Credit Notes, the Term Notes and all interest accrued thereon, and
(ii) any accrued and unpaid fees and expenses due and payable hereunder or under
any other Loan Document shall automatically (without any action on the part of
the Agent or the Banks and without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived) forthwith become due and
payable, and, in the case of any other Event of Default, then and in any such
event, and at any time thereafter, if such or any other Event of Default shall
then be continuing the following action may be taken: the Agent, upon the
direction of the Required Banks, shall declare (i) the Aggregate Revolving
Credit Commitment and all Term Loan Commitments to be terminated, whereupon the
obligation of the Agent and the Banks to make further Revolving Credit Loans or
Term Loans hereunder shall terminate immediately and (ii) the Revolving Credit
Notes and Term Notes to be due and payable, whereupon the maturity of the then
unpaid balance of the Revolving Credit Notes and Term Notes shall be accelerated
and the same, and all interest accrued thereon and any accrued and -- unpaid
fees and expenses due and payable hereunder, shall f forthwith become due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived, anything contained herein or in Revolving Credit
Notes or Term Notes to the contrary notwithstanding.
SECTION 9.2. Suits for Enforcement. In case any one or more Events of
---------------------
Default shall occur and be continuing, the Agent and the Banks may proceed to
protect and enforce their rights or remedies either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
agreement or other provision contained herein, in the other Loan Documents, or
in any document or instrument delivered in connection with or pursuant to this
Agreement or the other Loan Documents or to enforce the payment of the Notes or
any other legal or equitable right or remedy.
SECTION 9.3. Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon the Banks or the Agent is intended to be exclusive of any other
right or remedy contained herein or in the other Loan Documents or in any
instrument or document delivered in connection with or pursuant to this
Agreement or the other Loan Documents,
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and every such right or remedy shall be cumulative and shall be in addition to
every other such right or remedy contained herein and therein or now or
hereafter existing at law or in equity or by statute, or otherwise.
SECTION 9.4. Rights and Remedies Not Waived. No course of dealing between
------------------------------
Borrower and any of the Banks or the Agent or any failure or delay on the part
of any Bank or the Agent in exercising any rights or remedies hereunder shall
operate as a waiver of any rights or remedies of such or any other Bank or the
Agent and no single or partial exercise of any rights or remedies hereunder
shall operate as a waiver or preclude the exercise of any other rights or
remedies hereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Collection Costs. In the event that the Banks or the Agent
----------------
or any of them shall retain or engage an attorney or attorneys to collect or
enforce or protect its interests with respect to this Agreement, any of the
other Loan Documents, or any instrument or document delivered pursuant to this
Agreement or the other Loan Documents, including, without limitation, each of
the documents referred to in Section 5.1 hereof, or to protect the rights of any
holder or holders with respect thereto, Borrower shall pay, within 10 days after
demand therefor, all of the costs and expenses of such collection, enforcement
or protection, including reasonable attorneys' fees actually incurred and
disbursements, and the Banks or the Agent or the holders of such Notes, as the
case may be, may take Judgment for all such amounts, in addition to the unpaid
principal balance of the Notes and accrued interest thereon and any accrued and
unpaid fees and expenses due and payable hereunder.
SECTION 10.2. Modification and Waiver. No modification, amendment or
-----------------------
waiver of any provision of this Agreement, the other Loan Documents or any other
documents executed in connection herewith or therewith and no consent by the
Banks or the Agent to any departure therefrom by Borrower shall be effective
unless such modification, amendment, waiver or consent shall be in writing and
signed by the Agent (in the case of a modification or amendment with respect to
the agency relationship between the Agent and the Banks) and either the Required
Banks or all Banks, as the case may be, and, in the case of a modification or
amendment other than those described in clause (iv) of this Section 10.2, by an
Authorized Representative of Borrower, and the same shall then be effective only
for the period and on the conditions and for the specific instances and purposes
specified in such writing; provided, however, that (i) no provision hereof which
-------- -------
expressly requires the consent, approval or waiver by all Banks may be amended,
modified or waived except by all Banks, (ii) none of the following may be
amended, modified or waived except with the written consent of all the Banks:
(w) the Borrower Security Agreement, (x) the definition of "Eligible Loan,"
"Required Banks," "Event of Default," "Prime Rate," "Adjusted LIBO Rate" and
all defined terms included in such definitions, or the provisions of Section 9.1
hereof or this Section 10.2, (y) any provision governing or providing for: the
rate of interest payable on the Revolving Credit Loans or the Term Loans,
mandatory prepayments of
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principal thereof or fees or other amounts payable to any of the Banks or the
date of Maturity of the Revolving Credit Loans or Term Loans, and (z) Sections
3.3 and 10.9 hereof and Exhibit A hereto, (iii) none of the following may be
------- -
amended, modified or waived except with the written consent of all the Banks:
(x) the definitions of "Aggregate Revolving Credit Commitment," "Aggregate Term
Loan Commitment," "Revolving Credit Commitment Periods," "Revolving Credit
Loans," "Term Loans," "Term Loan Commitment", or any of the provisions of
Article II (other than Sections 2.8 and 2.14 thereof) or Article III hereof, and
(iv) none of the following shall require the consent, authorization or approval
of Borrower: (x) amendment or modification of any agreement to which Borrower is
not a party, and (y) with respect to the agency relationship between the Agent
and the Banks, Article XI (other than Section 11.4) hereof. None of the
provisions of Article XI hereof may be amended, modified or waived except with
the written consent of the Agent. No notice to or demand on Borrower in any
case shall entitle Borrower to any other or further notice or demand in similar
or other circumstances.
SECTION 10.3. GOVERNING LAW. THIS AGREEMENT, THE REVOLVING CREDIT NOTES
-------------
AND THE TERM NOTES AND THE RIGHTS AND DUTIES OF THE PARTIES THEREUNDER AND WITH
RESPECT TO INTEREST, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY
APPLICABLE TO THE EXERCISE OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS
UNDER THE UCC.
SECTION 10.4. Notices. All notices, requests, consents, demands or other
-------
communications provided for herein shall be in writing and shall be deemed to
have been given (i) five Business Days days after the date mailed if sent by
registered or certified mail, postage prepaid, return receipt requested, or (ii)
on the day of delivery if personally delivered or sent by overnight courier
service, or (iii) on the day of transmission if sent by telecopier and
confirmed, on the same day as such notice is sent, by telephonic notice or by
one of the other two methods listed above, and shall be addressed, as the case
may be, as follows: to NatWest at 175 Water Street, 28th Floor, New York, New
York 10038 (Attention: Mark J. Sicinski), Telecopier No. (212) 602-2180, with a
copy to Willkie Farr & Gallagher, 153 E. 53rd Street, New York, New York 10022
(Attention: Cornelius T. Finnegan, III, Esq.), Telecopier No. (212) 752-2991,
and to any other Bank at its address specified for such Bank on Exhibit A; and
------- -
to Borrower at Medallion Funding Corp., 205 East 42nd Street, New York, New York
10017 (Attention: Daniel Baker, Vice President, Finance), Telecopier No. (212)
983-0351, with a copy to Palmer & Dodge, One Beacon Street, Boston,
Massachusetts 02108, (Attention: John L. Whitlock, Esq.), Telecopier No. (617)
227-4420, or to such other person or address as either party shall designate to
the other from time to time in writing forwarded in like manner.
SECTION 10.5. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with GAAP, consistently applied.
Where any
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accounting determination or calculation is required to be made under this
Agreement, such determination or calculation (unless otherwise provided) will be
made in accordance with GAAP, consistently applied except that if because of a
change in GAAP, Borrower would have to alter a previously utilized accounting
method or policy in order to remain in compliance with GAAP, such determination
or calculation will continue to be made in accordance with Borrower's previous
accounting methods or policy. Unless otherwise specified herein all financial
statements required to be delivered hereunder, shall be prepared and all
financial records shall be maintained in accordance with GAAP.
SECTION 10.6. Costs and Expenses; Indemnity. (a) Borrower agrees to pay
-----------------------------
on demand all reasonable out-of-pocket costs and expenses incurred by the Banks
and the Agent in connection with the filing and recording of this Agreement, the
other Loan Documents and all instruments and documents delivered pursuant to
this Agreement or the other Loan Documents (including the filing and recording
of any waivers or consents which may be requested by borrower), all out-of-
pocket costs and expenses, if any, in connection with the enforcement (whether
in the context of a civil action, adversary proceeding, workout or otherwise) Of
this Agreement, the other Loan Documents, and such other instruments and
documents, including, without limitation, reasonable attorneys' fees actually
incurred, audit charges, appraisal fees, search fees and filing fees and all
out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees) of the Agent in connection with its duties as collateral agent
under the Borrower Security Agreement. Borrower agrees to be responsible for
payment of the amounts referred to in this Section 10.6 whether or not any
Revolving Credit Loans or Term Loans are made hereunder.
(b) Borrower further agrees to indemnify and save harmless each Bank and
the Agent and each of their respective officers, directors, employees, agents
and Affiliates from and against any and all actions, causes of action, suits,
losses, liabilities and damages and expenses (including, without limitation,
reasonable attorney's fees actually incurred) in connection therewith (herein
called the "Indemnified Liabilities") incurred by any Bank or the Agent or any
-----------------------
of their respective officers, directors, employees, agents or Affiliates as a
result of, or arising out of or relating to any of the transactions contemplated
hereby or by the other Loan Documents, except for any Indemnified Liabilities
arising on account of the gross negligence or willful misconduct of the Person
seeking indemnity under this Section 10.6(b); provided, however, that, if and to
-------- -------
the extent such agreement to indemnify may be unenforceable for any reason,
Borrower shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which shall be permissible under applicable
law. The agreements in this Section 10.6 shall survive the payment of the
Revolving Credit Notes and the Term Notes and related obligations.
SECTION 10.7. WAIVER OF JURY TRIAL AND SETOFF. EACH OF BORROWER, THE
-------------------------------
AGENT AND THE BANKS HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
56
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AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR
DISPUTE, HOWSOEVER ARISING, BETWEEN BORROWER AND ANY OF THE BANKS OR THE AGENT,
BETWEEN ANY BANKS, AND BETWEEN THE AGENT AND ANY BANKS; AND BORROWER HEREBY
WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN
CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM
COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
SECTION 10.8. Captions. The captions of the various sections and
--------
paragraphs of this Agreement have been inserted only for the purpose of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 10.9. Lien; Setoff by Banks. (a) Borrower hereby grants to the
---------------------
Agent and the Banks a continuing lien for its respective Indebtedness to the
Agent and the Banks upon any and all monies, securities and other property of
Borrower and the proceeds thereof, now or hereafter held or received by or in
transit to, the Agent or any of the Banks from or for Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special) and credits of Borrower with, and
any and all claims of Borrower against the Banks, at any time existing. Upon
the occurrence of any Event of Default, the Agent and the Banks are hereby
authorized at any time and from time to time, without notice to Borrower, to
setoff, appropriate and apply any or all items hereinabove referred to against
all Indebtedness of Borrower to the Agent and the Banks, whether under this
Agreement, the Revolving Credit Notes, the Term Notes, the Existing NatWest Term
Notes or otherwise, and whether now existing or hereafter arising. The Agent
and each Bank agree promptly to notify Borrower after any such setoff and
application is made by such Bank, provided that the failure to give such notice
-------- ----
shall not affect the validity of such setoff and application.
(b) Each holder of a Note, or an Existing NatWest Term Note agrees that if
it shall, through the exercise of a right of banker's lien, setoff, counterclaim
or otherwise, obtain-payment with respect to any Note which results in its -
receiving more than its pro rata share of the aggregate payments or reductions
--- ----
of all Notes and Existing NatWest Term Notes (based on such holder's Exposure
Percentage), it shall forthwith purchase from such other holders a participation
in all of the Notes and Existing NatWest Term Notes held by such other holders
so that the amount of all unpaid Notes and Existing NatWest Term Notes and
participations therein held by all holders shall be pro rata (based on each
--- ----
holder's Exposure Percentage).
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(c) Borrower expressly consents to the foregoing arrangements in Section
10.9(b) and agrees that any holder of a participation in a Note or Existing
NatWest Term Note so acquired may exercise any and all rights of banker's lien,
setoff, counterclaim or otherwise with respect to any and all monies owing by
such holder to Borrower as fully as if such holder were a holder of a Note or
Existing NatWest Term Note in the amount of such participation. If all or any
portion of any such excess payment is thereafter recovered from the holder which
received the same, the purchase provided for in Section 10.9(b) shall be
rescinded to the extent of such recovery, without interest.
(d) Each Bank agrees that if and to the extent that any amount received by
the Agent or any Bank from Borrower or any other obligor or from the Collateral
is subsequently invalidated, declared to be fraudulent or preferential, set
aside or judicially required to be repaid to a trustee, receiver or any other
person under any applicable creditors' remedy proceeding, including without
limitation any bankruptcy proceeding, the other Banks hereto shall purchase from
the Bank from which said amount is recovered an additional participation in such
amount equal to such Bank's Exposure Percentage of that amount. The amount
invalidated, declared to be fraudulent or preferential, set aside or judicially
required to be repaid to a trustee, receiver or any other person under any
applicable creditors' remedy proceeding shall be deemed to be an amount
immediately due and owing from Borrower.
SECTION 10.10. Security. As security for the payment of any and all sums
--------
owing under the Notes and the Existing NatWest Term Notes and all other
obligations of Borrower hereunder and under the Existing NatWest Term Notes and
the other Loan Documents, Borrower shall execute and deliver to the Agent and
the Banks, on the Effective Date, the Borrower Security Agreement and grant to
the Agent, on behalf of the Banks, a security interest in all of its interests
in the Collateral and Underlying Collateral and cause to be properly filed in
all pertinent jurisdictions the Borrower Financing Statements.
SECTION 10.11. Jurisdiction; Service of Process. Borrower hereby
--------------------------------
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of New York, County of New York and of any Federal Court located in the
Southern District of New York, and agrees that venue in each of such Courts is
proper, in connection with any action or proceeding arising out of or relating
to this Agreement, the other Loan Documents, or any document or instrument
delivered pursuant to this Agreement or the other Loan Documents. In any such
action or proceeding, Borrower waives personal service of any summons, complaint
or other process and agrees that the service thereof may be made by certified or
registered mail directed to Borrower at its address set forth in Section 10.4
hereof. Nothing herein shall affect the right of any Bank to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against Borrower in any other jurisdiction.
SECTION 10.12. Benefit of Agreement. This Agreement shall be binding upon
--------------------
and inure to the benefit of Borrower, the Agent and the Banks and their
respective successors and
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assigns, and all subsequent holders of the Notes and the NatWest Existing Term
Notes, except that the obligation of the Banks to make Revolving Credit Loans or
Term Loans hereunder shall not inure to the benefit of any successors or assigns
of Borrower.
SECTION 10.13. Counterparts. This Agreement may be executed by the
------------
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
SECTION 10.14. Interest. (a) Usury Limitation. It is the intention of
-------- ----------------
the parties hereto to conform strictly to the usury laws now in force in the
appropriate controlling jurisdiction. Accordingly, if the transactions
contemplated hereby would be usurious, under any controlling law, then, in that
event, notwithstanding anything to the contrary in this Agreement, the Notes or
any other instrument or agreement entered into in connection therewith, it is
agreed as follows: (i) the aggregate of all charges which constitute interest
under the laws of the controlling jurisdiction that are contracted for,
chargeable or receivable under this Agreement or under any of the other
aforesaid instruments or agreements or otherwise in connection with the Notes
("Interest") shall under no circumstances exceed the maximum amount of interest
--------
permitted by law (the "Maximum Amount"), and any Interest in excess of the
--------------
Maximum Amount shall be cancelled automatically and shall not be payable under
this Agreement, the Notes or the aforesaid instruments or agreements and, if
theretofore paid, shall be either refunded to Borrower or credited ratably on
the principal of the Notes; and (ii) in the event that the maturity of the Notes
is accelerated by reason of an election of the Required Banks resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
voluntary or mandatory prepayment by Borrower permitted or required by this
Agreement, the Notes or any of the other aforesaid instruments or agreements,
then Interest may never include more than the Maximum Amount, and excess
Interest, if any, shall be cancelled automatically as of the date of such
acceleration or prepayment, and if theretofore paid, shall be either refunded to
Borrower or credited ratably on the principal of the Notes; provided, that,
nothing contained in this Section 10.14 shall be deemed to imply that the laws
of any State other than the State of New York shall govern this Agreement or the
Notes.
(b) Recapture. If, at any time, Interest would exceed the Maximum Amount
---------
but for the foregoing limitation, Interest shall remain at the Maximum Amount,
notwithstanding any subsequent reduction of Interest, until the total amount of
Interest equals the amount of Interest which would have accrued if Interest had
not been limited to the Maximum Amount, but nothing in this paragraph shall
affect or extend the maturity of any of the Notes.
If, at maturity or final payment of any of the Notes, the total amount of
Interest paid is less than the total amount of Interest which would have accrued
had Interest not been limited to the Maximum Amount, Borrower agrees, to the
full extent permitted by law, to pay to the Banks an amount equal to the
positive difference, if any, derived by subtracting (x) the amount of Interest
which accrued on its respective Notes pursuant to the provisions of the
foregoing two paragraphs from (y) the lesser of (i) the amount of Interest which
would
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have accrued on such Notes if the Maximum Amount had at all times been in
effect, and (ii) the amount of Interest which would have accrued if Interest on
such Notes, not limited to the Maximum Amount, had at all times been in effect.
SECTION 10.15. Attorneys' Fees. As used in this Agreement, "attorneys'
--------------- ----------
fees" shall include, without limitation, all reasonable fees of counsel
- - - ----
(including, without limitation, those incurred on appeals) actually incurred
arising from such services and all reasonably incurred expenses, costs, charges
and other fees of such counsel, and all such fees shall constitute Indebtedness
of Borrower to the Agent and the Banks under this Agreement. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include: paralegal fees, costs and expenses; accountants' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses; long
distance telephone charges; air express and courier charges; telegram charges;
secretarial overtime charges; and, expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services.
SECTION 10.16. Severability. Any provision of this Agreement prohibited
------------
by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, or modified to conform with such laws,
without invalidating the remaining provisions of this Agreement, and any such
prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.
SECTION 10.17. Confidentiality. The Agent and each Bank are hereby
---------------
authorized to deliver a copy of any financial statement or any other information
relating to the business, operations or financial condition of Borrower which
may be furnished to it hereunder or otherwise, to any regulatory body or agency
having jurisdiction over the Agent or such Bank or to any Person which shall, or
shall have any right or obligation to, succeed to all or any part of the
interest of the Agent or such Bank in, this Agreement, the other Loan Documents
and any security herein or therein provided for or otherwise securing the Notes.
Except as provided above, the Agent and the Banks agree that from the date
hereof, they will not, without the prior written consent of Borrower, submit or
disclose to or file with any Person other than a Bank or any of its or such
Bank's Affiliates or a Person that may become a Bank, or such Person's
Affiliates, any confidential or non-public information relating to Borrower,
except where disclosure may be required by law.
SECTION 10.18. Loss, Theft, Etc. of Notes. Upon receipt by Borrower of
--------------------------
(i) an affidavit of an authorized officer of any Bank setting forth the fact of
loss, theft or destruction of any Note and of its ownership of the Note at the
time of such loss, theft or destruction or (ii) a mutilated Note, such affidavit
or mutilated Note shall be accepted as satisfactory evidence thereof and no
further indemnity shall be required as a condition to the execution and delivery
of a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated
Note without expense to the holder thereof, provided that such Bank agrees in
writing to indemnify Borrower from all expenses, claims and liabilities
(including without limitation, reasonable attorneys' fees actually incurred) in
the defense of any such claims
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resulting from the loss, theft, destruction or mutilation of the old Note and
the execution and delivery of the new Note.
ARTICLE XI
AGENCY
Borrower and the Banks agree with the Agent as follows:
SECTION 11.1. Appointment and Actions. (a) Each Bank hereby irrevocably
-----------------------
designates and appoints National Westminster Bank USA as the Agent of such Bank
under the Loan Documents (including any additional documents referred to therein
as "Loan Documents"), and each such Bank hereby irrevocably authorizes the Agent
--------------
to take such action on its behalf under the provisions hereof and thereof and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms hereof and thereof together with such other powers as are
reasonably incidental thereto. The Agent shall hold the security pledged under
the Borrower Security Agreement in accordance with the terms thereof.
Notwithstanding any provision to the contrary in this Agreement or any of the
other Loan Documents, the Agent shall not have any duties or responsibilities
except those expressly set forth herein or therein, nor any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the Loan
Documents or otherwise exist against the Agent.
(b) The Agent may execute any of its duties by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with any of the Loan Documents (except for its or such person's own
gross negligence or willful misconduct), or (ii) responsible in any manner to
any Bank or Participant for any recitals, statements, representations or
warranties made by Borrower contained herein or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with any of the Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any of
the Loan Documents or for any failure of Borrower to perform its obligations
under any of the Loan Documents. The Agent shall not be under any obligation to
any Bank to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of any of the Loan Documents, or
to inspect the properties, books or records of Borrower.
(d) The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or
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conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons and upon advice and statements of
legal counsel (including, without limitation, counsel to Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent.
(e) The Agent shall be fully justified in failing or refusing to take any
action under any of the Loan Documents unless it shall first receive such advice
or concurrence of the Banks as it deems appropriate or as required by the
specific terms of this Agreement or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under any of the Loan Documents in accordance with a request of the
Required Banks (or all Banks if specifically required by the terms of this
Agreement), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Banks and all future holders of the Notes
and all Participants.
(f) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default or any default under any document,
agreement or instrument delivered in connection therewith, unless the Agent
shall have actual knowledge thereof or shall have received notice from any Bank
or Borrower, describing such event, act or condition, Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Agent has such actual knowledge or receives such a notice, the Agent shall
give notice thereof to the Banks. The Agent shall take such action with respect
to such event, act or condition or Default or Event of Default as shall be
reasonably directed by the Required Banks (or all Banks if specifically required
by the terms of this Agreement) in writing; provided that, unless and until the
Agent shall have received such directions, the Agent no may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such event, act or condition, Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
(g) Until such time as the Agent shall have been notified in writing duly
executed on behalf of any Bank by an officer thereof duly authorized to take
such action, that such Bank has sold all or a portion of the Revolving Credit
Loans or the Term Loans made by, or Revolving Credit Commitment or Term Loan
Commitment of, such Bank, the Agent may treat such Bank as the owner or holder
of such Bank's share of the Revolving Credit Loans or Aggregate Revolving Credit
Commitment, or of such Bank's Term Loan or Term Loan Commitment, as applicable,
in accordance with the percentages thereof advanced by such Bank.
(h) At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other Persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate
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agent or agents on behalf of the Banks with such power and authority as may be
necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Agent, include provisions for the protection of such co-agent or separate agent
similar to the provisions of this Article XI).
SECTION 11.2. Independent Credit Decisions. Each Bank expressly
----------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of Borrower shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon the Agent or the
other Banks, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
Borrower and made its own decision to enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the Agent or
the other Banks, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action hereunder, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of Borrower which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates, provided that the Agent shall supply the Banks with a copy of any
financial audit of Borrower actually received by the Agent.
SECTION 11.3. Indemnification of Agent. Each Bank jointly and severally
------------------------
agrees to indemnify NatWest in its capacity as Agent (to the extent not
reimbursed by Borrower), ratably according to its Percentage of the Aggregate
Revolving Credit Commitment on the date hereof from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of any of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided that no
Bank shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's bad faith, willful
misconduct or gross negligence. The agreements in this subsection shall survive
the payment of the Notes and related obligations.
SECTION 11.4. Resignation and Succession. The Agent may resign as Agent
--------------------------
upon ten days' written notice to the Banks and Borrower; provided, however, that
-------- -------
such resignation
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shall not become effective until a successor agent shall have accepted its
appointment hereunder; and provided, further, that if no successor shall have so
-------- -------
accepted within 30 days from the date of such notice, the Agent may apply to a
court of competent jurisdiction for the appointment of a successor agent. If
the Agent shall resign as Agent, then Borrower (or the Required Banks, if
Borrower fails to do so) shall appoint a successor agent, whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. Any such
successor agent selected by Borrower shall require the prior written consent of
the Required Banks, which consent shall not be unreasonably withheld. Any
successor agent must be a bank or trust company incorporated and doing business
within the United States of America having a combined capital and surplus of at
least $250,000,000 After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article XI shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. In
the event that the Agent becomes subject to the receivership of the Federal
Deposit Insurance Corporation or any successor entity, such receiver commences
the liquidation of the Agent, and Banks holding at least 10% of the sum of the
Aggregate Revolving Credit Commitment plus the amount of all Term Loans then
outstanding request the Agent to resign because of such receivership, the
Agent's agency under this Agreement shall terminate.
ARTICLE XII
SALES AND TRANSFERS
SECTION 12.1. Sales and Transfers. (a) Subject to the provisions of this
-------------------
Section 12.1, any Bank may execute an assignment and acceptance (herein
individually called an "Assignment" and collectively called the "Assignments"),
---------- -----------
whereby such Bank (herein individually called an "Assignor" and collectively
--------
called the "Assignors") shall assign, without recourse and without
---------
representation or warranty except as specifically set forth in said Assignment,
to one or more banks or other entities (herein individually called an "Assignee"
--------
and collectively called the "Assignees") all or any part of the Assignor's
---------
rights and benefits, and delegate all or any part of the Assignor's obligations,
under this Agreement, such Assignor's Revolving Credit and/or Term Loan
Commitment, the Revolving Credit Loans and Term Loans and the Notes.
(b) Any Assignment pursuant to this Section 12.1 shall be in an aggregate
principal amount of not less than $3,000,000 and shall require the prior written
consent of Borrower, which consent shall not be unreasonably withheld (it being
the understanding of the parties hereto that a refusal to consent to an
Assignment to an entity which is a significant competitor of Borrower shall not
be considered unreasonable).
(c) Upon execution, delivery and acceptance of each Assignment, from and
after the effective date specified therein, which effective date shall be at
least five Business Days
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after the execution thereof, Borrower, the Agent, and the Banks agree that, to
the extent of any such Assignment,
(i) the Assignee shall, in addition to any rights, benefits and
obligations hereunder held by it immediately prior to such effective date,
have the rights, benefits and obligations of a Bank under this Agreement,
the Assignor's Revolving Credit and/or Term Loan Commitment, the Revolving
Credit Loans, the Term Loans and the Notes as it would have if it were a
Bank hereunder to the extent that the same have been assigned and delegated
to it pursuant to such Assignment, and
(ii) the Assignor shall, to the extent that rights, benefits and
obligations hereunder have been assigned and delegated by it pursuant to
such Assignment, relinquish its rights and benefits and be released from
its obligations under this Agreement (and, in the case of an Assignment
covering all or the remaining portion of the Assignor's rights, benefits
and obligations under this Agreement, the Assignor shall cease to be a Bank
hereunder), except that in all cases the Assignor shall remain entitled to
the rights and benefits arising under Section 10.6, and shall remain liable
with respect to any of its obligations arising under Article XI, with
respect to any matters arising prior to the effective date of any such
Assignment;
provided, that the Agent, Borrower and each Bank shall be entitled to continue
- - - --------
to deal solely and directly with the assigning Bank in connection with the
interests so assigned and delegated to the Assignee until written notice of such
Assignment, together with addresses and related information with respect to the
Assignee, shall have been given to the Agent, Borrower and each Bank by the
assigning Bank and the Assignee.
(c) Upon its receipt of an Assignment executed by the Assignor and an
Assignee, together with the Note(s) subject to such Assignment, the Agent shall,
if such Assignment has been completed and conforms to the requirements of this
Section 12.1 and forward a photostatic copy thereof to Borrower. Within 5
Business Days after its receipt of a photostatic copy of such Assignment,
Borrower shall execute and deliver to the Agent, to be exchanged for the
applicable Note(s) delivered to the Agent by the Assignor, a new Note or new
Notes payable to the order of the Assignee in an amount equal to and of the same
type as the Note or Notes assumed by it pursuant to such Assignment and, if the
Assignor has retained a Revolving Credit Commitment or a portion of the Term
Loan hereunder, a new Revolving Credit Note or Term Note, as the case may be,
payable to the order of the Assignor in an amount equal to the Revolving Credit
Commitment or the amount of the Term Loan retained by it hereunder. Such new
Note or Notes shall be of the same type as, and in aggregate principal amount
equal to the aggregate principal amount of, such Note or Notes shall be dated
the effective date of such Assignment, shall be payable to the order of the
Assignee and, if applicable, the Assignor, shall otherwise be in substantially
the form of such surrendered Note(s), and shall constitute Revolving Credit
Note(s) or a Term Note under this Agreement, as the case may be. Such new
Revolving Credit Note(s) or Term Note shall be in replacement and substitution
for, and not in payment of, the Revolving
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Credit Note(s) or Term Note delivered to the Agent by the Assignor. The Agent
shall deliver such new Revolving Credit Note(s) or Term Note to the payee or
payees thereof and shall mark the Revolving Credit Note(s) or Term Note
previously held by the Assignor as "replaced" and shall deliver the same to
Borrower.
(d) Within five Business Days after each Assignment has been accepted by
the Agent in accordance with the terms hereof, Borrower and the Agent shall
revise Exhibit A hereto to set forth (i) the Percentage or amount of the Term
Loan of each Assignee and such Assignee's name and address and (ii) the
Percentage or amount of the Term Loan, if any, retained by the Assignor, and the
appropriate officer of each of Borrower and the Agent shall initial each such
revision.
SECTION 12.2 New Banks. Any financial institution approved by Borrower
---------
and the Required Banks may join this Agreement as an additional Bank (such
Person being herein referred to as the "New Bank") and be entitled to all the
--------
rights and interests and obligated to perform all of the obligations and duties
of a Bank with respect to a specified additional amount of Revolving Credit
Commitment hereunder, provided that (a) Borrower shall, in its sole discretion,
--------
have given its prior written consent to the addition of the New Bank as a party
to this Agreement, (b) the Required Banks shall have given their prior written
consent (which consent shall not be unreasonably withheld), (c) such New Bank
and Borrower shall have executed and delivered an instrument of adherence (the
"Instrument of Adherence") in form and substance satisfactory to Borrower
-----------------------
pursuant to which such New Bank shall agree to be bound as a Bank by the terms
and conditions hereof and the other Loan Documents, and to make Revolving Credit
Loans and a Term Loan to Borrower in accordance with this Agreement, and which
Instrument of Adherence shall specify the maximum amount of additional Revolving
Credit Loans that such New Bank shall agree to be bound as a Bank by the terms
and conditions hereof and the other Loan Documents, and to make Revolving Credit
Loans and a Term Loan to Borrower in accordance with this Agreement, and which
Instrument of Adherence shall specify the maximum amount of additional Revolving
Credit Loans that such New Bank agrees to provide hereunder (the "Additional
----------
Commitment Amount") and the New Bank's address for notices, (d) the Additional
- - - -----------------
Commitment Amount provided by any New Bank must be at least $3,000,000, (e) such
New Bank shall have received such opinions of counsel to Borrower, such evidence
of proper corporate organization, existence, authority and appropriate corporate
proceedings with respect to Borrower, and such other certificates, instruments,
and documents, as it shall have requested in connection with such Instrument of
Adherence, and (f) such New Bank shall have confirmed to and agreed with the
Agent, the Banks and Borrower as follows:
(i) the Agent and the Banks have made no representation or warranty
and shall have no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement or the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency, collectibility or value of this Agreement, the
other Loan Documents, and Collateral, or any other Instrument or document
furnished pursuant hereto;
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(ii) the Agent and the Banks have made no representation or warranty
and shall have no responsibility with respect to the financial condition of
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of their obligations under this Agreement or any
of the other Loan Documents, or the performance or observance by Borrower
and its Subsidiaries or any other Person primarily or secondarily liable in
respect of their obligations under this Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
(iii) such New Bank confirms that it has received a copy of this
Agreement and the other Loan Documents, together with copies of the most
recent financial statements referred to in Sections 4.18 and 6.1 hereof and
such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Instrument of
Adherence;
(iv) such New Bank will, independently and without reliance upon the
other Banks or the Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement;
(v) such New Bank appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(vi) such New Bank agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Bank; and
(vii) such New Bank represents and warrants that it is legally
authorized to enter into such Instrument of Adherence.
Upon any New Bank's execution of an Instrument of Adherence and Borrower's
and the Required Banks' consent thereto, the Percentage of each Bank and the
Aggregate Revolving Credit Commitment shall be adjusted appropriately. Promptly
thereafter, Borrower shall notify each of the Banks and the Agent of the
joinder hereunder of such New Bank, the resulting increase in the Aggregate
Revolving Credit Commitment and each Bank's new Percentage and provide each of
the Banks and the Agent with a copy of the executed Instrument of Adherence and
a copy of Exhibit A reflecting the necessary adjustments.
------- -
Upon the effective date of any Instrument of Adherence, the New Bank shall
make all (if any) such payments to the other Banks as may be necessary to result
in the Revolving Credit Loans made by such New Bank being equal to such New
Bank's Percentage (as then in effect) of the aggregate principal amount of all
Revolving Credit Loans outstanding to
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Borrower as of such date. Borrower hereby agrees that any New Bank so paying
any such amount to the other Banks pursuant to this Section 12.2 shall be
entitled to all the rights of a Bank hereunder and such payments to the other
Banks shall constitute Revolving Credit Loans held by such New Bank hereunder
and that such New Bank may, to the fullest extent permitted by law, exercise all
of its right of payment (including the right of set-off) with respect to such
amounts as fully as if such New Bank had initially advanced Borrower the amount
of such payments.
THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY. SEE SECTION 10.7
HEREOF.
IN WITNESS WHEREOF, Borrower, the Agent and the Banks have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
------------------------------
Title:
/s/ Daniel Baker
------------------------------
Title: V.P. Finance
NATIONAL WESTMINSTER BANK USA,
as Agent and as one of the Banks
By: /s/ Thomas J. Levy
-------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
------------------------------
Title: Vice President
BANK HAPOALIM B.M.
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<PAGE>
By: /s/ Leonard Katcher
------------------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time
------------------------------
Title: A.V.P.
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By: /s/ John Miller
------------------------------
Title: President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert J. Fanelli
------------------------------
Title: Vice President
By: /s/ Robert E. Stark
------------------------------
Title: F.V.P.
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EXHIBIT B
REVOLVING CREDIT NOTE
---------------------
$_________ No._____
March 27, 1992
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
___________________ (the "Bank") at the principal office of such Bank, currently
located at _______________________, in lawful money of the United States of
America and in immediately available funds, an amount equal to the lesser of (a)
_________________________ MILLION DOLLARS ($____________) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to the Loan Agreement, dated as of March 27, 1992, among the
Borrower, the banks that from time to time are signatories thereto, and National
Westminster Bank USA as Agent (as amended, modified or supplemented from time to
time in accordance with its terms, the "Loan Agreement"). The Borrower further
promises to pay interest (computed on the basis of a 360-day year for the actual
number of days elapsed) in ___________ money on the unpaid principal balance of
this Note from time to time outstanding at such rates and times as provided in
the Loan Agreement.
All Revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
----- -----
evidence of the accuracy of the information so endorsed; provided, however, that
-------- -------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable
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<PAGE>
on demand, but in no event shall such rate of interest (the "Default Rate") be
in excess of the maximum rate of interest permitted under applicable law. The
Default Rate shall be computed on the basis of a 360-day year for the actual
number of days elapsed. If the Default Rate is to be based on the Prime Rate,
the Prime Rate to be charged shall change when and as the Prime Rate is changed,
and any such change in the Prime Rate shall become effective at the opening of
business on the day on which such change is adopted. At the end of the
applicable Interest Period for a LIBO Rate Loan on which the Default Rate is
being charged, such LIBO Rate Loan shall be automatically converted to a Prime
Rate Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part, as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Note required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND
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ASSIGNS OF BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND
ASSIGNS. If any term or provision of this Revolving Credit Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions herein shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
MEDALLION FUNDING CORP.,
a New York corporation
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
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EXHIBIT D
FORM OF LOAN REQUEST
--------------------
____________, 19__
[Address of Bank]
Re: Loan Agreement, dated as of March 27, 1992 by and among Medallion
Funding Corp., the banks that from time to time are signatories
thereto and National Westminster Bank USA as Agent (the "Loan
----------------------------------------
Agreement")
-----------
Dear Sir or Madam:
Reference is made to the Loan Agreement (capitalized terms used but not
defined herein having the meaning ascribed thereto in the Loan Agreement).
I. Advances
------------
[In the case all or a portion of a Revolving Credit borrowing is made as a Prime
Rate Loan.]
Please advance $___________ as a Prime Rate Loan effective on ____________,
19__. [Note: loan request must be received by no later than 1:00 p.m., New
York City time, in order for the loan to be advanced on the same day as the
request.]
[In the case all or a portion of a Revolving Credit borrowing is made as a LIBO
Rate Loan.]
Please advance $___________ as a LIBO Rate Loan effective on _____________,
19__ (which is not less than two Banking Days from the date hereof). The
Interest Period for such LIBO Rate Loan will commence on and include the date of
advance and will end, subject to the limitations applicable to Interest Periods
contained in the definition of Interest Period in the Loan Agreement, on the
numerically corresponding date that is [one] [two] [three] [four] [five] [six]
months thereafter.
II. Conversions
----------------
[In the case of the conversion of all [or a portion] of a Prime Rate Loan into a
LIBO Rate Loan.]
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Please convert $__________, [which amount represents the entire outstanding
principal amount] of the Prime Rate Loan or Loans of the undersigned, into a
LIBO Rate Loan effective on _____________, 19___ (which is not less than two
Banking Days from the date hereof). The Interest Period for such LIBO Rate Loan
will commence on and include the date of such conversion and will end, subject
to the limitations applicable to Interest Periods contained in the definition of
Interest Period in the Loan Agreement, on the numerically corresponding date
that is [one] [two] [three] [four] [five] [six] months thereafter. [Note: Term
Loans that are LIBO Rate Loans may only have an Interest Period of one month.]
[Please continue $__________ (the balance) of such Prime Rate Loan or Loans
not so converted as a Prime Rate Loan.]
[In the case of the conversion of all [or a portion] of a LIBO Rate Loan into a
Prime Rate Loan.]
Please convert $__________, [which amount represents the entire outstanding
principal amount] of the LIBO Rate Loan or Loans of the undersigned, the
Interest Period with respect to which ends on (the "Conversion Date"), into a
Prime Rate Loan effective on the Conversion Date (which is not less than two
Banking Days from the date hereof).
III. Continuations
-------------------
[In the case of the continuation of all [or a portion] of a LIBO Rate Loan.]
Please continue $___________, [which amount represents the entire
outstanding principal amount] of the LIBO Rate Loan or Loans of the undersigned,
the Interest Period with respect to which ends on (which is not less than two
Banking Days from the date hereof), as a LIBO Rate Loan with an Interest Period
commencing on and including such date and ending, subject to the limitations
applicable to Interest Periods contained in the definition of Interest Period in
the Loan Agreement, on the numerically corresponding date that is [one] [two]
[three] [four] [five] [six] months thereafter. [Note: Term Loans that are LIBO
Rate Loans may only have an Interest Period of one month.]
MEDALLION FUNDING CORP.,
a New York corporation
By:
---------------------------------
Title:
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<PAGE>
NOTICE
------
Reference is hereby made to the Loan Agreement dated as of March 27,
1992 among Medallion Funding Corp., the banks signatory thereto (the "Banks")
and National Westminster Bank USA ("NatWest"), as agent for such Banks and as a
Bank (the "Agreement"). Terms used herein and not otherwise defined shall have
the respective meanings ascribed to them in the Agreement.
The undersigned hereby notifies each Bank of (i) the increase in the
Revolving Credit Commitment of NatWest to $11,000,000 and (ii) the increase in
the Revolving Credit Commitment of Bank of Tokyo to $7,500,000. As a result of
such increases in the Revolving Credit Commitments of NatWest and Bank of Tokyo,
the Aggregate Revolving Credit Commitment under the Agreement will be
$49,500,000 and each Bank's new Percentage will be as set forth on the revised
Exhibit A attached hereto.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
----------------------------
Title:
By: /s/ Daniel Baker
----------------------------
Title: Vice President
Dated as of March 31, 1993
75
<PAGE>
EXHIBIT A
---------
(as amended
March 31, 1993)
<TABLE>
<CAPTION>
Revolving Credit
Name and Address of Bank Facility Available Percentage
- - - ---------------------------------------------- ------------------ ----------
<S> <C> <C>
National Westminster Bank USA
175 Water Street
New York, New York 10038 $11,000,000 11/49.5
The First National
Bank of Boston
100 Federal Street
Boston, Massachusetts 02110 $10,000,000 10/49.5
Bank Hapoalim B.M.
75 Rockefeller Plaza
New York, New York 10019 $ 5,000,000 5/49.5
The Bank of Tokyo Trust Company
100 Broadway
New York, New York 10005 $ 7,500,000 7.5/49.5
Sterling National Bank &
Trust Company of New York
540 Madison Avenue
New York, New York $ 3,000,000 3/49.5
Israel Discount Bank of New York
511 Fifth Avenue
New York, New York $ 4,000,000 4/49.5
European American Bank
One Rockefeller Plaza
New York, New York 11020 $ 4,000,000 4/49.5
Fleet Bank of
Massachusetts, N.A.
75 State Street
Boston, MA 02109 $ 5,000,000 5/49.5
TOTAL FACILITIES $49,500,000
</TABLE>
76
<PAGE>
Amendment Number One to Loan Agreement and
Renewal of Revolving Credit Agreement Obligations
-------------------------------------------------
AMENDMENT, dated as of March 31, 1993, to the Loan Agreement, dated as
of March 27, 1992, among Medallion Funding Corp. ("Borrower"), the banks
signatory thereto (the "Banks"), and National Westminster Bank USA, as agent for
the Banks and as a Bank (the "Agreement"). Terms used herein and not otherwise
defined shall have the meaning ascribed to them in the Agreement.
WHEREAS, Borrower and the Banks wish to amend Section 7.8 of the
Agreement, "Maximum Revolving Credit Indebtedness"; and
WHEREAS, Borrower and the Banks wish for all Revolving Credit
Commitments and other obligations of the Banks under the Agreement with respect
to Revolving Credit Loans to be renewed for one year until March 31, 1994;
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound, the parties hereto hereby agree as follows:
1. Amendment of Section 7.8. Section 7.8 of the Agreement is hereby
-------------------------
amended to read in its entirety as follows:
"SECTION 7.8. Maximum Revolving Credit Indebtedness. Suffer or
-------------------------------------
permit, at any time, the aggregate principal amount of its Revolving Credit
Loans outstanding to exceed the Aggregate Revolving Credit Commitment plus
all principal amounts then outstanding under the NatWest Existing Term
Notes (together, the "Total Facility Amount") less:
(a) $2,000,000, if the Total Facility Amount is less than or
equal to $40,000,000; and
(b) $3,000,000, if the Total Facility Amount is greater than
$40,000,000."
2. Notice of Renewal of Revolving Credit Commitment. Each Bank hereby
------------------------------------------------
gives notice to Borrower of its election to renew its Revolving Credit
Commitment and other obligations under the Agreement with respect to Revolving
Credit Loans for a one year period, until March 31, 1994 (the "Renewal Term").
Borrower hereby waives the requirement set forth in the Agreement that such
notices were to have been given by the Banks to Borrower by no later than
January 31, 1993 and hereby accepts each Bank's offer of renewal. Pursuant to
Section 2.10(b) of the Agreement, (i) the expiration, termination, Maturity and
Term Out Date of all Obligations outstanding as of the commencement of the
Renewal Term, or made during the Renewal Term, shall be March 31, 1994, and (ii)
each
77
<PAGE>
Revolving Credit Note that does not otherwise state the extended Maturity shall
be deemed amended to reflect such extended Maturity.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Renewal of Revolving Credit Agreement Obligations to be executed by their
respective officers duly authorized as of the day and year first above written.
The Borrower:
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
---------------------------------
Title
By: /s/ Daniel Baker
---------------------------------
Title: Vice President
The Banks:
NATIONAL WESTMINSTER BANK USA
By: /s/ Richard Miller
---------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
---------------------------------
Title: Vice President
BANK HAPOALIM B.M.
By: /s/ Leonard Katcher
---------------------------------
Title: Vice President
78
<PAGE>
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time
---------------------------------
Title: A.V.P.
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By: /s/ Leonard Rudolph
---------------------------------
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert Fanelli
---------------------------------
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Brian O'Connor
--------------------------------
Title: Vice President
EUROPEAN AMERICAN BANK
By: /s/ Stephen J. Deering
---------------------------------
Title: A.V.P.
Dated as of March 31, 1993
79
<PAGE>
CONSENT
-------
Reference is hereby made to the Loan Agreement dated as of March 27, 1992
among Medallion Funding Corp. ("Medallion"), the banks signatory thereto and
National Westminster Bank USA ("NatWest"), as agent for such Banks and as a Bank
(the "Agreement"). Terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Agreement.
The undersigned hereby consent to (i) the increase in the Revolving Credit
Commitment of NatWest to $11,000,000, (ii) the increase in the Revolving Credit
Commitment of Bank of Tokyo to $7,500,000, and (iii) the corresponding increase
in the Aggregate Revolving Credit Commitment to $49,500,000. The undersigned
further (i) acknowledge and agree that, as a result of such increase in
NatWest's Revolving Credit Commitment, their respective Percentages shall be
reduced accordingly, (ii) consent to the issuance by Medallion to each of
NatWest and Bank of Tokyo of a New Revolving Credit Note that reflects the
increase in NatWest's and Bank of Tokyo's Revolving Credit Commitments,
respectively, and (iii) consent to the amendment of Exhibit A to the Agreement
to reflect the increased Revolving Credit Commitments of NatWest and Bank of
Tokyo and the resulting changes to the Percentages and the Aggregate Revolving
Credit Commitment.
The Borrower:
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
------------------------------
Title:
By: /s/ Daniel Baker
------------------------------
Title: Vice President
The Banks:
NATIONAL WESTMINSTER BANK USA
By: /s/ Richard J. Miller
------------------------------
Title: Vice President
80
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
-------------------------------
Title: Vice President
BANK HAPOALIM B.M.
By: /s/ Leonard Katcher
-------------------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time
-------------------------------
Title: A.V.P.
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By: /s/ Leonard Rudolph
-------------------------------
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert J. Fanelli
-------------------------------
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Brian O'Connor
-------------------------------
Title: Vice President
81
<PAGE>
EUROPEAN AMERICAN BANK
By: /s/ Stephen J. Deering
-------------------------------
Title: A.V.P.
Dated as of March 31, 1993
82
<PAGE>
MEDALLION FUNDING CORP.
REVOLVING CREDIT AGREEMENT
REVISION OF BANKING GROUP
SEPTEMBER 29, 1993
83
<PAGE>
NOTICE
------
Reference is hereby made to the Loan Agreement dated as of March 27, 1992 among
Medallion Funding Corp., the banks signatory thereto (the "Banks") and National
Westminster Bank USA ("NatWest"), as agent for such Banks and as a Bank (the
"Agreement"). Terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Agreement.
The undersigned hereby notifies each Bank of (i) the increase in the Revolving
Credit Commitment of NatWest to $13,000,000, (ii) the increase in the
Revolving Credit Commitment of Fleet Bank of Massachusetts to $10,000,000,
(iii) the increase in the Revolving Credit Commitment of The First National
Bank of Boston to $13,500,000, and (iv) the increase in the Revolving Credit
Commitment of Israel Discount Bank of New York to $4,500,000. As a result of
such increases in the Revolving Credit Commitments of NatWest, Fleet Bank of
Massachusetts, The First National Bank of Boston and Israel Discount Bank of
New York, the Aggregate Credit Commitment under the Agreement will be
$60,500,000 and each Bank's new Percentage will be as set forth on the revised
Exhibit A attached hereto.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
-------------------
Alvin Murstein, President
By: /s/ Daniel F. Baker
------------------------
Daniel F. Baker, Vice President Finance
Dated as of September 29, 1993
84
<PAGE>
EXHIBIT A
(as amended
September 29, 1993)
<TABLE>
<CAPTION>
Revolving Credit
Name and Address of Bank Facility Available Percentage
- - - ----------------------------------- ------------------ ----------
<S> <C> <C>
National Westminster Bank USA*
175 Water Street
New York, New York 10038 $13,000,000 130/605
The First National
Bank of Boston
100 Federal Street
Boston, Massachusetts 02110 $13,500,000 135/605
Bank Hapoalim B.M.
75 Rockefeller Plaza
New York, New York 10019 $ 5,000,000 50/605
The Bank of Tokyo Trust Company
1251 Ave. of Americas
Ne York, New York 10005 $ 7,500,000 75/605
Sterling National Bank and
Trust Company of New York
540 Madison Avenue
New York, New York 10022 $ 3,000,000 30/605
Israel Discount Bank of New York
511 Fifth Avenue
New York, New York 10022 $ 4,500,000 45/605
European American Bank
One Rockefeller Plaza
New York, New York 11022 $ 4,000,000 40/605
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109 $10,000,000 100/605
TOTAL FACILITIES $60,500,000
</TABLE>
_______
* In addition, NatWest has $2,000,000 outstanding in NatWest Existing Term
Note, which mature in 7/95.
85
<PAGE>
CONSENT
-------
Reference is hereby made to the Loan Agreement dated as of March 27,
1992 among Medallion Funding Corp., the banks signatory thereto (the "Banks")
and National Westminster Bank USA ("NatWest"), as agent for such Banks and as a
Bank (the "Agreement"). Terms used herein and not otherwise defined shall have
the respective meanings ascribed to them in the Agreement.
The undersigned hereby consent to (i) the increase in the Revolving
Credit Commitment of NatWest to $13,000,000, (ii) the increase in the Revolving
Credit Commitment of Fleet Bank of Massachusetts to $10,000,000, (iii) the
increase in the Revolving Credit Commitment of The First National Bank of Boston
to $13,500,000, and (iv) the increase in the Revolving Credit Commitment of
Israel Discount Bank of New York to $4,500,000. The undersigned further (i)
acknowledge and agree that, as a result of such increases in the Revolving
Credit Commitments of NatWest, Fleet Bank of Massachusetts, The First National
Bank of Boston and Israel Discount Bank of New York, the Aggregate Credit
Commitment under the Agreement will be $60,500,000, (ii) consent to the issuance
by Medallion to each of NatWest, Fleet Bank of Massachusetts, The First National
Bank of Boston and Israel Discount Bank of New York a New Revolving Credit Note
that reflects the increases in each banks Revolving Credit Commitment,
respectively, and (iii) consent to the amendment of Exhibit A to the Agreement
to reflect the increased Revolving Credit Commitments of each bank and the
resulting changes to the Percentages and the Aggregate Revolving Credit
Commitment.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
--------------------------------
Alvin Murstein
President
By: /s/ Daniel F. Baker
--------------------------------
Daniel F. Baker
Vice President Finance
86
<PAGE>
The Banks:
NATIONAL WESTMINSTER BANK USA
By: /s/ Richard J. Miller
---------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
---------------------------------
Title: Vice President
BANK HAPOALIM B.M.
By: /s/ Barry Shivak
---------------------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time
--------------
Title: Vice President
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By: /s/ Leonard Rudolph
---------------------------------
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert J. Fanelli
---------------------------------
Title: Vice President
By: /s/ Robert E. Stark
---------------------------------
Title: Sr. Vice President
87
<PAGE>
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Brian O'Connor
---------------------------------
Title: Vice President
EUROPEAN AMERICAN BANK
By: /s/ James J. Harding
---------------------------------
Title: Assistant Treasurer
Dated as of September 29, 1993
88
<PAGE>
MEDALLION FUNDING CORP.
REVOLVING CREDIT AGREEMENT
RENEWAL AND EXTENSION
MARCH 31, 1994
89
<PAGE>
AMENDMENT, dated as of March 31, 1994, to the Loan Agreement, dated as of
March 27, 1992 among Medallion Funding Corp. ("Borrower), the banks signatory
thereto (the "Banks") and National Westniinster Bank USA, as agent for the Banks
and as a Bank (the "Agreement"). Terms used herein and not otherwise defined
shall have the meaning ascribed to them in the Agreement.
WHEREAS, Borrower and the Banks wish for all Revolving Credit Commitments and
other obligations of the banks under the Agreement with respect to Revolving
Credit Loans to be renewed for six months until September 30, 1994;
NOW, THEREFORE, in considerations of the foregoing premises and intending to
be legally bound, the parties hereto hereby agree as follows:
Notice of Renewal of Revolving Credit Commitment.
- - - ------------------------------------------------
Each Bank hereby gives notice to Borrower of its election to renew its
Revolving Credit Commitment and other obligations under the Agreement with
respect to Revolving Credit Loans for a six month period, until September 30,
1994 (the "Renewal Term"). Borrower hereby waives the requirement set forth in
the Agreement that such notices were to have been given by the Banks to Borrower
by no later than July 31, 1994 and hereby accepts each Bank's offer of renewal.
Pursuant to Section 2.10(b) of the Agreement, (i) the expiration, termination,
Maturity and Term Out Date of all Obligations outstanding as of the commencement
of the Renewal Term, or made during the Renewal Term, shall be September 30,
1994, and (ii) each Revolving Credit Note that does not otherwise state the
extended Maturity shall be deemed amended to reflect such extended Maturity.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Renewal
of Revolving Credit Agreement Obligations to be executed by their respective
officers duly authorized as of the date and year first above written.
The Borrower:
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
---------------------------------
President
By: /s/ Daniel Baker
---------------------------------
Vice President
90
<PAGE>
The Banks:
NATIONAL WESTMINSTER BANK USA
By: /s/ Mark J. Smith
---------------------------------
Title: A.V.P.
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
---------------------------------
Title: Vice President
BANK HAPOALIM B.M.
By: /s/ Barry Shivak
---------------------------------
Title: V.P.
By: /s/ Louis Alvay
---------------------------------
Title: A.V.P.
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time
---------------------------------
Title: Vice President
STERLING NATIONAL BANK AND TRUST COMPANY OF
NEW YORK
By: /s/ Leonard Rudolph
----------------------------------
Title: S.V.P.
91
<PAGE>
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert J. Fanelli
----------------------------------
Title: Vice President
By: /s/ Robert E. Stark
----------------------------------
Title: Sr. Vice President
FLEET BANK OF MASSACHUSETTS
By: /s/ Brian O'Connor
----------------------------------
Title: Vice President
EUROPEAN AMERICAN BANK
By: /s/ James J. Harding
----------------------------------
Title: Assistant V.P.
92
<PAGE>
AMENDMENT NUMBER THREE TO LOAN AGREEMENT
AMENDMENT, dated as of September 29, 1995, to the Loan Agreement, dated as
of March 27, 1992 (as amended, modified, or supplemented from time to time),
among Medallion Funding Corp. ("Borrower"), the Banks signatory thereto (the
"Banks"), and NatWest Bank N.A. (formerly National Westminster Bank USA) as
agent for the Banks and as a Bank (the "Agreement"). Terms used herein and not
otherwise defined shall have the meaning ascribed to them in the Agreement.
WHEREAS, in connection with the annual renewal and extension of the
Agreement, all of the Banks except Bank Hapoalim B.M. ("Bank Hapoalim") have
elected to renew their respective Revolving Credit Commitments; and
WHEREAS, the Banks other than Bank Hapoalim (the "Continuing Banks") have
also agreed to increase their respective commitments and make Revolving Credit
Loans to the Borrower for the purposes, among other things, of paying in the
full the outstanding Revolving Credit Loans owed to Bank Hapoalim and the
Borrower's SBA Indebtedness; and
WHEREAS, Borrower and the Continuing Banks wish to amend certain covenants
and sections of the Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and intending to
be legally bound effective as of the date first above written, the parties
hereto hereby agree as follows:
1. AMENDMENT OF DEFINITION. The definition of "Aggregate Revolving Credit
Commitment" in Section 1 of the Agreement is hereby amended to read in its
entirety as follows:
"Aggregate Revolving Credit Commitment" shall mean $78,000,000, as
--------------------------------------
the same may be reduced, terminated or increased from time to time pursuant
to Sections 2.4, 2.10, 9.1 or 12.2 hereof."
2. AMENDMENT OF SECTION 3.1. Section 3.1 of the Agreement if hereby
amended to insert "(a) Commitment Fees" immediately after the title "Facility
---------------
Fees" at the beginning thereof and to insert at the end of Section 3.1(a) the
following Section 3.1(b) to read as follows:
"(b) Annual Fees. Borrower shall pay to each Bank and annual fee
-----------
equal to such Bank's Percentage times $62,500. Such annual fee shall be
payable to each Bank for the period from September 29, 1995 to an including
the last day of its Revolving Credit Commitment Period, payable quarterly
in arrears in the first day of each calendar quarter during its Revolving
Credit Commitment Period, commencing with January 2, 1996, and ending on
the Termination Date. Such annual fees shall be calculated for each quarter
on the basis of a 365-day year for the actual number of days elapsed in
such month."
<PAGE>
3. AMENDMENT OF SECTION 7.2. Section 7.2 of the Agreement is hereby
amended to read in its entirety as follows"
"Minimum Tangible Net Assets Plus Subordinated Debt." Suffer or
--------------------------------------------------
permit Tangible Net Assets plus Subordinated Debt to be less than
$19,000,000 at any time.
4. AMENDMENT OF SECTION 7.4. Section 7.4 of the Agreement is hereby
amended to read in its entirety as follows:
"Maximum Liability Less Subordinated Debt Ratio." Suffer or permit the
----------------------------------------------
ration of (a) Total Liabilities less Subordinated Debt to (b) Tangible Net
Assets plus Subordinated Debt to be more than 4:1 at any time.
5. AMENDMENT OF SECTION 7.5. Section 7.5 of the Agreement is hereby
amended to read in its entirety as follows:
"Minimum Net Finance Assets." Suffer or permit the ratio of Net
--------------------------
Finance Assets to Senior Debt to be less than 1.2:1 at any time.
6. RENEWAL OF REVOLVING CREDIT COMMITMENT. Each Continuing Bank hereby
gives notice to Borrower of its election to renew its Revolving Credit
Commitment and other obligations under the Agreement with respect to Revolving
Credit Loans for a one year period, until September 30, 1996 (the "Renewal
Term"). Borrower hereby waives the requirement set forth in the Agreement that
such notices were to have been given by the Renewal Deadline and hereby accepts
the offer of renewal of each Continuing Bank, and the Continuing Banks confirm
such renewal notwithstanding the decision by Bank Hapoalim not to renew its
Revolving Credit Commitment. Pursuant to Section 2.10(b) of the Agreement, (i)
the expiration, termination, Maturity and Term Out Date of all Obligations to
the Continuing Banks outstanding as of the commencement of the Renewal Term, or
made during the Renewal Term, shall be September 30, 1996, and (ii) the Renewal
Deadline each year shall hereafter be the date which is two months before
Maturity.
7. AUTHORIZATION TO BORROW. Notwithstanding the limitations in Section
2.5 on prepayment or in Section 2.8 of the Agreement on the use of proceeds, the
Borrower may use the proceeds of Revolving Credit Loans to pay in full the
outstanding Revolving Credit Loans owed to Bank Hapoalim without prepaying other
Revolving Credit Loans, and, after the Revolving Credit Loans od Bank Hapoalim
have been paid in full, to prepay all of the outstanding SBA Indebtedness.
8. AMENDMENT TO EXHIBIT A. In order to reflect the changes in each Bank's
Revolving Credit Commitment after the effective date of this Amendment, Exhibit
-------
A to the Agreement is amended and replaced with Exhibit A attached hereto.
- - - - ---------
9. DELIVERY OF NEW NOTES AND RETURN OF OLD NOTES. On or before the
effective date of this Amendment, the Borrower will deliver to each continuing
Bank a replacement Revolving Credit Note reflecting such Continuing Bank's
increased Revolving Credit Commitment in replacement of such Continuing Bank's
existing Revolving Credit Note (the "Old Note"). Promptly after the effective
date of this Amendment, each Continuing Bank will return the Borrower such
Continuing's Old Note marked "cancelled".
<PAGE>
10. EFFECTIVENESS OF AMENDMENT. This Amendment shall be effective as of
the date first above written provided that the Borrower shall have received
counterparts of this Amendment duly signed by the Borrower and each of the
Continuing Banks, and the Borrower shall have delivered a new Revolving Credit
Note to each of the Continuing Banks as provided in Section 9 hereof, and
provided further, that the amendments contained in Section 1 od this Amendment
shall become effective from and after the payment in full by Borrower of the
Revolving Credit Loans owed to Bank Hapoalim. Promptly after the effective date
of this Amendment, the Borrower shall deliver fully executed counterparts of
this Amendment to each of the Continuing Banks which shall constitute all of the
Banks under the Agreement.
11. NO OTHER AMENDMENT. Except as expressly provided in this Amendment,
all of the terms and conditions of the Agreement and the other Loan Documents
shall remain in full force and effect.
12. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts by each party on a separate counterpart, each of which
when so executed and delivered shall be an original, but all of which together
shall constitute one instrument. In proving thus Amendment, it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers duly authorized as of the day and year
first above written.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein, President
-------------------------------
By: /s/ Daniel Baker, Vice President Finance
------------------------------------------
NATWEST BANK N.A.
By: /s/ Richard J. Miller, V.P.
----------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons, Vice President
-----------------------------------
<PAGE>
FLEET BANK OF MASSACHUSETTS
By: /s/ Brian O'Connor, Vice President
------------------------------------
THE BANK OF TOKYO TRUST COMPANY
By: /s/ Paul Time, Vice President
-------------------------------
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert j. Fainelli , Vice President
------------------------------------------
EUROPEAN AMERICAN BANK
By: /s/ Robert Morse, Vice President
-----------------------------------
SHAWMUT BANK CONNECTICUT N.A.
By: /s/ Margery L. Peterson, Vice President
-------------------------------------------
<PAGE>
EXHIBIT A
(as amended Sept. 29, 1995)
<TABLE>
<CAPTION>
Revolving Credit
Name & Address of Bank Facility Available Percentage
- - - ---------------------- ------------------ ----------
<S> <C> <C>
NatWest Bank, N.A.
175 Water Street
New York, New York 10038 $18,000,000 180/780
The First National Bank of
Boston
100 Federal Street
Boston, MA 02110 $17,500,000 175/780
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109 $17,500,000 175/780
The Bank of Tokyo Trust Company
1251 Avenue of the Americas
New York, New York 10016 $10,000,000 100/780
Israel Discount Bank of New York
511 Fifth Avenue
New York, New York 10022 $ 6,000,000 60/780
European American Bank
335 Madison Avenue
New York, New York 10017 $ 6,000,000 60/780
Shawmut bank Connecticut N.A.
157 Church Street
New Haven, CT 06510 $ 3,000,000 30/780
$78,000,000
</TABLE>
*In addition NatWest has $2,000,000 outstanding in NatWest Existing Term Note,
which matures in 7/97.
<PAGE>
MEDALLION FUNDING CORP.
REVOLVING CREDIT AGREEMENT
AMENDMENT FOUR
&
ASSIGNMENT OF LOAN
MARCH 29, 1996
<PAGE>
NOTICE
Reference is made to the Loan Agreement dated as of March 27, 1992 (as
amended, modified, or supplemented from time to time) among Medallion Funding
Corp. ("Medallion"), the banks signatory thereto (the "Banks") and NatWest Bank
N.A., as agent for the Banks (the "Agreement"). Terms used herein and not
otherwise defined shall have the respective meanings ascribed to them in the
Agreement.
The undersigned hereby notifies each Bank of the assignment as of the date
hereof of the $3,000,000 Revolving Credit Commitment of Shawmut Bank
Connecticut, N.A. to Harris Trust and Savings Bank under the Agreement. As a
result of such assignment, the Aggregate Credit Commitment under the Agreement
will be $78,000,000 and each Bank's Percentage will Be set forth on the revised
Exhibit A attached hereto.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
-------------------------------------
President
By: /s/ Daniel F. Baker
--------------------------------
Vice President Finance
NATWEST BANK N.A. AS AGENT
By: /s/ Richard J. Miller
--------------------------------
Vice President
Dated: March 28, 1996
<PAGE>
SCHEDULE I
(as amended March 28, 1996)
<TABLE>
<CAPTION>
Revolving Credit
Name & Address of Bank Facility Available Percentage
- - - ---------------------- ------------------ ----------
<S> <C> <C>
NatWest Bank N.A.
175 Water Street
New York, NY 10038 $18,000,000 180/780
The First National
Bank of Boston
100 Federal Street
Boston, MA 02110 $17,500,000 175/780
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109 $17,500,000 175/780
The Bank of Tokyo Trust Company
1251 Ave. of the Americas
New York, NY 10016 $10,000,000 100/780
Israel Discount Bank of New York
511 Fifth Avenue
New York, NY 10022 $ 6,000,000 60/780
European American Bank
335 Madison Ave.
New York, NY 10017 $ 6,000,000 60/780
Harris Trust and Savings Bank
111 West Monroe
Chicago, IL 60690 $ 3,000,000 30/780
-----------
TOTAL FACILITIES $ 78,00,000
-----------
</TABLE>
*In addition, NatWest has $2,000,000 outstanding in NatWest Existing Term Note,
which matures in 7/97.
This agreement is secured by a perfected security interest in all of the
Licensee's assets. NatWest Bank N.A. acts as collateral agent on behalf of the
entire banking group. Medallion Funding Corp. does not have any other
outstanding liens.
<PAGE>
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Loan Agreement, dated as of March 27, 1992 (as
amended, modified, or supplemented from time to time, the "Loan Agreement"),
among Medallion Funding Corp. (the "Borrower"), such Banks or financial
institutions that are or may become parties to the Loan Agreement as "Banks"
(the "Banks"), and NatWest Bank N.A. as Agent (the "Agent"). Capitalized terms
used herein and not otherwise defined shall have the meanings assigned to such
terms in the Loan Agreement.
Shawmut Bank Connecticut, N.A. (the "Assignor") and Harris Trust and
Savings bank (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse
and without representations and warranties of any kind whatsoever, express or
implied, except as set forth in this Assignment and Acceptance, and the Assignee
hereby purchases and assumes from the Assignor, all of the Assignor's rights and
obligations as a Bank under the Loan Agreement, the Security Agreement, the
Assignor's Revolving Credit Commitment, its Revolving Credit Loan, and its
Revolving Credit Note, as of the Effective Date (as hereinafter defined).
2. The Assignor (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) represents that as of the
date hereof, its Percentage is 30/780, and the outstanding balance of it
Revolving Credit Loans is $3,000,000; (iii) makes no representation or warranty
of any kind whatsoever, express or implied, and assumes and shall have no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency, collectibility or value of
the Loan Agreement, the other Loan Documents, any Collateral or any other
instrument or document furnished pursuant thereto, other than that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; and (iv) makes no
representation or warranty of any kind whatsoever, express or implied, and
assumes and shall have no responsibility with respect to the financial condition
of the Borrower or the performance by the Borrower under the Loan Agreement or
the other Loan Documents or any other instrument or document executed pursuant
thereto.
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this assignment and Acceptance; (ii) confirms that it has received
a copy of the Loan Agreement, together with copies of the most recent financial
statements delivered pursuant to Sections 4.18 and 6.1 of the Loan Agreement and
such other documents and information as t has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (iii)
agrees that it will, independently and without reliance upon the Assignor or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Agreement; (iv) appoints and authorizes the
Agent to take such action as Agent on its behalf and to exercise such powers
under the loan Documents as are delegated to the Agent thereto, together with
such powers as are reasonably incidental
<PAGE>
thereto; (v) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Loan Agreement are required to be
performed by it as Bank; and (vi) agrees that it will keep confidential all the
information with respect to the Borrower furnished to it by the Borrower or the
Assignor (other than information generally available to the public or otherwise
available to the Assignor on a nonconfidential basis), provided, however, that
--------- --------
the Assignee may disclose such information to the bank regulatory authorities
for the Assignee to the extent that the Assignee is required to do so, and may
also disclose such information to permitted assignees.
4. The effective date for this Assignment and Acceptance shall be March
28, 1996 (the "Effective Date"). Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent in accordance with Section 12.1(c)
of the Loan Agreement.
5. From and after the Effective Date, (i) the Assignee shall be a party to
the Loan Agreement and have the rights and obligations of a Bank thereunder, and
(ii) the Assignor shall be deemed to have relinquished its rights and benefits,
be released from its obligations as a Bank under the Loan Agreement, and cease
to be a Bank under the Loan Agreement, except that the Assignor shall remain
entitled to the rights and benefits arising under Section 10.6 of the Loan
Agreement, and shall remain liable with respect to any of its obligations
arising under Article XI of the Loan Agreement, with respect to any matters
arising before the Effective Date.
6. In accordance with the terms of the Loan Agreement, from and after the
Effective Date, the Borrower and the Agent shall make all payments in respect to
the interest assigned hereby (including payments of principal, interest, fees
and other amounts) to the Assignee. The Assignor and the Assignee shall make
all appropriate adjustments in payments for periods prior to the Effective Date
or with respect to the making of this assignment directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
8. The Assignee's address, for purposes of Section 10.4 of the Loan
Agreement is:
Harris Trust and Savings Bank
111 West Monroe
Chicago, IL 60690
Attention: Mike Houlihan
Telephone No.: 312-461-4514
Telecopy No.: 312-765-8382
<PAGE>
This Assignment and Acceptance is executed by the parties hereto by their
respective officers thereunto duly authorized as of March 28, 1996.
SHAWMUT BANK CONNECTICUT, N.A.,
as Assignor
By: /s/ David Winthrop
-----------------------------------------
Title: Senior Vice President
HARRIS TRUST AND SAVINGS BANK,
as Assignee
By: /s/ Michael Houlihan
-----------------------------------------
Title: Vice President
Accepted and Agreed:
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
----------------------------------------
Title: President
By: /s/ Daniel F. Baker
----------------------------------------
Title: Vice President Finance
<PAGE>
Amendment Number Four to Loan Agreement
AMENDMENT, dated as of March 29, 1996, to the Loan Agreement, dated as of
March 27, 1992 (as amended, modified, or supplemented from time to time), among
Medallion Funding Corp. ("Borrower"), the banks signatory thereto (the "Banks"),
and NatWest Bank, N.A (formerly National Westminster Bank USA) as agent for the
banks and as a Bank (the "Agreement"). Terms used herein and not otherwise
defined shall have the meaning ascribed to them in the Agreement.
WHEREAS, Shawmut Bank Connecticut, N.A. ("Shawmut") has previously
assigned, and Harris Trust and Savings Bank, has assumed, all of Shawmut's
rights and obligations under the Agreement; and
WHEREAS, Borrower has previously, with the consent of the Banks, prepaid
its SBA Indebtedness and redeemed it preferred stock held by the SBA, and
expects to receive additional equity capital in connection with a public
offering (the "Public Offering") of securities by its parent company, all of
which have caused certain of the financial covenants of the Agreement to be
redundant; and
WHEREAS, Borrower and the Banks wish to amend certain definitions,
covenants and sections of the Agreement:
NOW, THEREFORE, in consideration of the foregoing premises and intending to
be legally bound effective as of the date first above written, the parties
hereto hereby agree as follows:
1. Amendment of Definition. The definition of "Aggregate Revolving Credit
Commitment" in Section 1 of the Agreement is hereby amended to read in its
entirety as follows:
"Aggregate Revolving Credit Commitment" shall mean $118,000,000, as the
-------------------------------------
same may be reduced, terminated or increased from time to time pursuant to
Section 2.4, 1.10, 9.1 or 12.2 hereof."
2. Amendment of Definition. Paragraph (i) of the definition of
"Restricted Payment" in Section 1 of the Agreement is hereby amended to read as
follows:
"(i) the payment of any dividend on or any distribution in respect of any
Capital Interests of Borrower (other than payment of dividends required to
be paid in order to avoid the imposition of income takes pursuant to the
Code, or for so long as borrower is a registered investment company under
the 1940 Act, the payment of such dividends as may be required by the
Act),"
3. Deletion of Sections 7.7 and 7.9. Sections 7.7 and 7.9 of the
Agreement are hereby deleted in their entirety.
<PAGE>
4. Amendment to Section 8.3(c). Section 8.3(c) is hereby amended to read
in its entirety as follows:
"(c) Make or oblige itself to make, any Loan if, after giving effect to
such Loan, the aggregate outstanding principal amount of all Loans made to
any one Person together with its Affiliates would exceed 20% of Borrower's
Tangible Net Assets plus Subordinated Debt."
5. Amendment of Schedule II. The Banks hereby consent to changes in the
Key Executives as reflected on Schedule II attached to this Amendment to be
-----------
effective on and after the closing of the Public Offering, Schedule II to the
-----------
Agreement shall be amended and replaced in its entirety with Schedule II
-----------
attached hereto.
6. Amendment of Schedule III. Schedule III to the Agreement shall be
------------
amended and replaced in its entirety with Schedule III attached hereto.
------------
7. Renewal of Revolving Credit Commitment. Each Bank hereby gives notice
to Borrower of its election to renew its Revolving Credit Commitment and other
obligations under the Agreement with respect to Revolving Credit Loans for the
period until June 30, 1997 (the "Renewal Term"). Borrower hereby accepts the
offer of renewal Term herein stated. Pursuant to Section 2.10(b) of the
Agreement, (i) the expiration, termination, Maturity and Term Out Date of all
Obligations to the Banks outstanding as of the commencement of the Renewal Term,
or made during the Renewal Term, shall be June 30, 1997, and (ii) the Renewal
Deadline each year shall hereafter be the date which is two months before the
Maturity.
8. Effectiveness of this Amendment. This Amendment shall be effective as
of the date first above written provided that the Borrower shall have received
--------
counterparts of this Amendment duly signed by the Borrower and each of the
Banks. Promptly after the effective date of this Amendment, the Borrower shall
deliver fully executed counterparts of this Amendment to each of the Banks, and
the Agreement shall consist of the Agreement as previously amended, modified and
supplemented and as amended by this Amendment.
9. No other Amendments. Except as expressly provided in this Amendment,
all of the terms and conditions of the Agreement and the other Loan Documents
shall remain in full force and effect.
10. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers duly authorized as of the day and year
first written above.
MEDALLION FUNDING CORP.
By:/s/ Alvin Murstein
---------------------------------------------
Title: President
By: /s/ Daniel Baker
---------------------------------------------
Title: Vice President Finance
NATWEST BANK N.A.
By: /s/ Richard J. Miller
---------------------------------------------
Title: Vice President
FIRST NATIONAL BANK OF BOSTON
By: /s/ Amy B. Lyons
---------------------------------------------
Title: Vice President
FLEET BANK OF MASSACHUSETTS
By: /s/ Brian J. Slater
---------------------------------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By: /s/ G. Stewart
---------------------------------------------
Title: S.V.P. and Manager
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Robert J. Fainelli
---------------------------------------------
Title: Vice President
By: /s/ Robert E. Stark
---------------------------------------------
Title: Senior Vice President
EUROPEAN AMERICAN BANK
By: /s/ James J. Harding
---------------------------------------------
Title: Assistant Vice President
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By: /s/ Michael Houlihan
-------------------------------------------
Title: Vice President
<PAGE>
SCHEDULE II
KEY EXECUTIVES
--------------
Alvin Murstein Chief Executive Officer, Director
Daniel F. Baker Chief Financial Officer, Treasurer
Michael Kowalsky President
Marie Russo Senior Vice President
Michael Fanger Executive Vice President
<PAGE>
Schedule III
Subsidiaries
------------
F.A.P. HOLDING CORP.
<PAGE>
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
SECURITY AGREEMENT
between
MEDALLION FUNDING CORP., as debtor
and
NATIONAL WESTMINSTER BANK USA, as Agent
and secured party,
for the benefit of
THE BANKS SIGNATORY TO THE LOAN
AGREEMENT, DATED AS OF March 27, 1992,
AMONG MEDALLION FUNDING CORD,
THE BANKS SIGNATORY THERETO
AND NATIONAL WESTMINSTER BANK USA AS AGENT
_____________________________________
dated as of March 27, 1992
_____________________________________
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of the 27th day of March, 1992, is
between MEDALLION FUNDING CORP., a New York corporation ("Borrower"), and
NATIONAL WESTMINSTER BANK USA, a national banking association, as agent (the
"Agent") for the banks that from time to time are signatories to the Loan
Agreement (hereinafter defined) (collectively, the "Banks" and individually, a
"Bank").
RECITALS
--------
WHEREAS, the Agent and the Banks have entered into a Loan Agreement, dated
as of even date herewith, (as the same may be amended or supplemented from time
to time, the "Loan Agreement"), with Borrower providing for revolving credit
loans (including the Initial Revolving Credit Loan) (the "Revolving Credit
Loans") and term loans (the "Term Loans") not to exceed the amounts provided in
the Loan Agreement.
WHEREAS, a condition precedent to the obligation of the Banks to make the
Revolving Credit Loans or Term Loans under the Loan Agreement is that Borrower
grant to the Agent perfected, first-priority security interests in all of the
Collateral to secure the payment and performance of all of the obligations of
Borrower owing to the Agent and the Banks pursuant to the Loan Agreement and
other documents.
WHEREAS, in partial satisfaction of Borrower's obligation under Sections
5.1 and 5.2 of the Loan Agreement and otherwise as an inducement necessary to
the Banks' making the Revolving Credit Loans or Term Loans to Borrower, Borrower
agrees to grant to the Agent a security interest in the Collateral pursuant to
the terms set forth herein.
NOW, THEREFORE, in consideration of the willingness of the Agent and the
Banks to enter into the Loan Agreement and to agree, subject to the terms and
conditions thereof, to make the Revolving Credit Loans or Term Loans to Borrower
pursuant thereto, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and the Agent hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. Capitalized terms defined in the foregoing
-------------
caption and recitals shall have the respective meanings ascribed thereto.
Capitalized terms if defined in the Loan Agreement and not otherwise defined in
this Agreement shall have the meanings ascribed to those terms in the Loan
Agreement. In addition, as used herein, the following terms shall have the
following meanings:
"Books and Records" shall mean books, records, computer files and other
-----------------
Information relating to any of the Collateral.
<PAGE>
"Chattel Paper" shall have the meaning assigned to it in Section
-------------
9-105(1)(b) of the UCC.
"Collateral" shall mean all the following property now owned or at any time
----------
hereafter acquired by Borrower or in which Borrower now has or at any time in
the future may acquire any right, title or interest:
(a) all Loans;
(b) all property and rights, including, but not limited to, Underlying
Collateral, which now or hereafter secure Loans;
(c) all Books and Records;
(d) all amounts deposited in any Collateral Account;
(e) all Contracts;
(f) all rights and remedies of Borrower with respect to, or in connection
with, any contract, security interest, guaranty or other document,
instrument or agreement relating to or affecting any Loans or any
Underlying Collateral;
(g) all General Intangibles;
(h) all Instruments;
(i) all Chattel Paper;
(j) all Equipment;
(k) all Inventory;
(1) all Investments;
(m) all property and rights, including, but not limited to, items
described in clauses (b) through (1) hereof, repossessed, or otherwise
acquired in connection with any Loans or the exercise by Borrower of
any rights of a secured party under or with respect to any of the
Loans or this Agreement or arising out of the sale or disposition of
any Loans, any other Collateral, or in connection with the sale of any
repossessed property;
(n) all parts, accessions, accessories, goods, appurtenant or related to
any of the foregoing, replacement parts, trade names, choses in
action, now or hereafter affixed thereto, arising therefrom, used in
connection therewith, or related to the use, possession or operation
thereof;
<PAGE>
(o) all cash and Short-Term Investments; and
(p) to the extent not otherwise included, all Proceeds, products,
substitutions and replacements of any and all of the foregoing.
"Collateral Account" shall mean that account of Borrower maintained with
------------------
the Agent and containing such reasonable terms as shall be agreed to by the
Agent.
"Contracts" shall mean all contracts and agreements, including, but not
---------
limited to, loan agreements, security agreements, guaranties, intercreditor
agreements, office leases, lease agreements for mobile goods (as defined in the
UCC) (whether or not covered by a certificate of title), indemnity agreements,
license agreements, rental agreements and all other contracts and agreements of
every kind and nature whatsoever.
"Depository Accounts" shall mean accounts of Borrower containing any
-------------------
deposits or other sums credited to Borrower, whether in regular or special
depository accounts or otherwise.
"Equipment" shall mean all machinery, equipment, fixtures, vehicles, office
---------
equipment, furniture, furnishings, inventories, supplies. computer equipment and
all other equipment whatsoever, wherever located, together with all attachments,
components, parts, equipment and accessories installed therein or affixed
thereto, including, but not limited to, all equipment as defined in Section
9-109(2) of the UCC and all products, profits, rents and proceeds of any of the
foregoing; all whether now owned or hereafter created or acquired.
"General Intangibles" shall have the meaning assigned to it in Section
-------------------
9-106 of the UCC and shall include, but not be limited to, all interests in and
to Permits and Licenses, Medallion Rights, patents, trademarks, tradenames,
copyrights, trade secrets, licenses and know-how.
"Information" shall mean books, records, delivery receipts, copies of
-----------
checks and stubs. security documents, division of interest files, bank
reconciliation statements, remittances, revenue accounting records, invoices,
leases, licenses, authorizations for expenditures, contracts and such other
documents, information and data as any Bank may request pursuant to the Loan
Agreement.
"Instruments" shall have the meaning assigned to it in Section 9-105(1)(i)
-----------
of the UCC.
"Inventory" shall mean all inventory, goods, raw materials, components and
---------
other personal property, wherever located, including, but not limited to, all
inventory as defined in Section 9-109(4) of the UCC.
"Investment" in any Person shall mean any loan, advance, or extension of
----------
credit to or for the account of; any guaranty, endorsement or other direct or
indirect contingent liability
<PAGE>
in connection with the obligations, Capital Stock or dividends of; any
ownership, purchase or acquisition of any assets, business, Capital Stock,
obligations or securities of;
or any other interest in or capital contribution to; such Person.
"Laws" shall have the meaning set forth in Section 2.2 hereof.
----
"Loan" shall mean any loan, advance or extension of credit made in the
----
ordinary course of business by Borrower to or for the account of any client or
customer of Borrower. Any loan, advance or extension of credit made at a
different point in time shall be deemed to be a separate and distinct Loan.
"Loan Documents" shall mean and collectively refer to the Loan Documents
--------------
(as defined in the Loan ( Agreement) and all other agreements, instruments and
documents, including, without limitation, notes, guaranties, mortgages, deeds to
secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust account
agreements and all other written matters whether heretofore, now or hereafter
executed by or on behalf of Borrower and/or delivered to the Agent or the Banks,
with respect to (i) this Agreement, (ii) the transactions contemplated by this
Agreement, (iii) the NatWest Existing Term Notes or (iv) the transactions
contemplated by the NatWest Existing Term Notes.
"Medallion" shall mean the metal plate which displays the license number of
---------
a licensed Taxicab on the outside of the vehicle and which is issued by the New
York City Taxi and Limousine Commission or by any other Governmental Authority
for a jurisdiction other than New York City with the authority to issue licenses
for the operation of Taxicabs.
"Medallion Riqhts" shall mean (a) all license, operating and/or
----------------
subscription rights to Taxicab Medallion(s), and all license, operating and/or
subscription rights evidenced by such Medallion(s) and (b) all renewals thereof.
"NatWest Existing Term Notes" shall mean the term notes from Borrower to
---------------------------
NatWest, in the principal amounts of $3,000,000 and $2,000,000, dated January
11, 1990 and July 16, 1990 respectively, as the same may be amended from time to
time.
"Obligations" shall mean any and all present and future indebtedness and
-----------
all performance obligations which may at any time be owing by Borrower to the
Agent or any Bank, however arising, under the Loan Agreement, this Agreement,
the NatWest Existing Term Notes or any other agreement between the Agent or any
Bank and Borrower in connection with any of the foregoing, whether now in
existence or incurred hereafter, whether incurred directly or incurred by others
and assumed by Borrower, whether secured by mortgage, pledge, or lien upon or
security interest in any property of Borrower, or any other Person, whether such
indebtedness or other obligation is absolute or contingent, joint or several,
matured or unmatured, direct or indirect, and whether the Borrower is liable for
such indebtedness or other obligation as principal. surety, endorser, guarantor,
or otherwise. Without limiting the generality of the foregoing, the Obligations
shall include the liability of Borrower to any Sank for all balances owing to
any Bank in any account maintained on such
<PAGE>
Bank's books under the Loan Agreement, the NatWest Existing Term Notes or under
any other agreement or arrangement now or hereafter entered into between
Borrower and the Agent or any Bank in connection therewith, and, in connection
with this Agreement, the Loan Agreement or the NatWest Existing Term Notes, (i)
indebtedness owing by Borrower to the Agent or any Bank, (ii) the liability of
Borrower to the Agent or any Bank as maker or endorser of any promissory note or
other instrument for the payment of money, and (iii) the liability of Borrower
to the Agent or any Bank under any instrument of guaranty or indemnity, or
arising under any guarantee, endorsement, or undertaking which the Agent
or any Bank may make or issue to others for the account of Borrower, including
without limitation, any accommodation extended to Borrower with respect to
letters of credit, acceptance of drafts. or endorsement of notes or other
instruments by the Agent or such Bank for the account and benefit of Borrower.
The Obligations shall also include interest, premium (if any), commissions.
financing and service charges, and expenses and fees, including but not limited
to the costs and expenses of collection of the Obligations
(including the fees and disbursements of accountants), the costs and expenses of
the Agent and the costs and expenses of filing, perfecting, preserving,
retaking, holding, and preparing any of the Collateral for sale, chargeable to
Borrower and due from Borrower under this Agreement, the Loan Agreement, the
NatWest Existing Term Notes or under any other agreement or arrangement which
may be now or hereafter entered into between Borrower and the Agent or the
Banks.
"Other Agreements" shall mean collectively any of the Loan Documents other
----------------
than this Agreement.
"Percentage of the Obligations" shall mean with respect to the Agent or any
-----------------------------
Bank the percentage which is equal to the product of (x) 100 times (y) a
fraction, the numerator of which is the total amount of Obligations owing to the
Agent or such Bank, as the case may be, at the time of computation and the
denominator of which is the total amount of the Obligations as of such time.
"Permits and Licenses" shall mean (a) all applicable authorizations,
--------------------
consents, certificates, licenses, rights of way permits, approvals, waivers,
exemptions, encroachment agreements, variances, franchises, permissions, and
permits of any Governmental Authority and all documents and applications filed
in connection therewith, and (b) all renewals thereof.
"Permitted Liens" shall mean the Liens permitted pursuant to Section 8.1 of
---------------
the Loan Agreement.
"Proceeds" shall have the meaning assigned to it in Section 9-306(1) of the
--------
UCC and shall include, but not be limited to, (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty existing from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color
<PAGE>
of governmental authority) and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Real property" shall mean real property of a Person or an ultimate
-------------
beneficial owner of such Person or machinery or Equipment of such Person or
beneficial owner forming a part of, or affixed to, such real property.
"Taxicab" shall mean a motor vehicle carrying passengers for hire, duly
-------
licensed as a taxicab by the Taxi and Limousine Commission, or any other
Governmental Authority for a jurisdiction other than New York City, and
permitted to accept hails from passengers in the
street.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
---
Code as then in effect in that jurisdiction.
"Underlying Collateral" shall mean all of Borrower's rights with respect
---------------------
to, or interest in, any and all present and future Medallion Rights, Equipment,
Real Property, machinery, future accounts, accounts receivable, receivables,
contracts, contract rights, general intangibles, books, desks, notes, bills,
drafts, acceptances, choses in action, chattel paper, instruments, documents and
other forms of obligations, and property, real, personal or mixed, tangible or
intangible, at any time owing to or owned by any Person to whom Borrower has
made a Loan, or any guarantor of such Person.
SECTION 1.2. Accounting Terms. Any accounting term used in this Agreement
----------------
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP.
SECTION 1.3. Rules of Construction. (a) Words of the masculine gender shall
---------------------
mean and include correlative words of the female and neuter genders, and words
importing the singular number shall mean and include the plural number and vice
versa.
(b) The terms "hereby", "hereto", "hereof", "herein", and "hereunder" and
------ ------ ------ ------ ---------
any similar words refer to this Agreement as a whole and not to any particular
provisions of this Agreement. The term "hereafter" shall mean after, and the
---------
term "heretofore" shall mean before, the date of this Agreement, and "Article",
----------
"Section", "Schedule", "Exhibit" and like references are to this Agreement
unless otherwise specified.
(c) Any defined term that relates to a document shall include within its
definition any amendments, modifications, renewals, restatements, extensions,
supplements, or substitutions which may have been heretofore or may be hereafter
executed in accordance with the terms thereof. Unless otherwise indicated,
references in this Agreement to the UCC shall mean the UCC as in effect in the
State of New York.
(d) References in this Agreement to particular sections of the UCC or to
any other legislation shall be deemed to refer also to any successor sections
thereto or other
<PAGE>
redesignations for codification purposes. Unless otherwise indicated, references
in this Agreement to the UCC shall mean the UCC as in effect in the State of New
York.
(e) All terms used in this Agreement that are not capitalized shall have
the meanings provided by the UCC as in effect in the State of New York to the
extent the same are used or defined therein.
ARTICLE II
CREATION OF SECURITY INTEREST
SECTION 2.1. Grant of security interest to Agent. To induce the Banks to
-----------------------------------
make the Revolving Credit Loans or Term Loans to Borrower and, as security for
any and all Obligations of Borrower, Borrower hereby grants to the Agent for the
ratable benefit of the Agent and the Banks a continuing first priority lien on
and security interest in the Collateral, and, in furtherance of such grant,
Borrower hereby assigns for security all the Collateral to the Agent for the
ratable benefit of the Agent and the Banks.
SECTION 2.2. Perfection. At any time or times after (i) a Default or an
----------
Event of Default has occurred or (ii) any change in any existing law,
regulation, guideline, treaty or directive or condition or interpretation
thereof, including without limitation, any request, guideline or policy, whether
or not having the force of law (collectively, "Laws"), or the proposal by any
Governmental Authority, of a new Law, which, in the Agent's opinion, adversely
affects the validity, security or perfection of the security interests and liens
granted herein, Borrower shall execute and deliver to the Agent, at the Agent's
request, all assignments, certificates of title, conveyances, assignment
statements, financing statements, renewal financing statements, security
agreements, affidavits, mortgages, mortgage assignments, trust deeds, notices
and all other agreements, instruments and documents that the Agent reasonably
may request, in form satisfactory to the Agent, and shall take any and all
other steps reasonably requested by the Agent, in order to perfect and
maintain the security interests and liens granted herein, and to consummate
fully all of the transactions contemplated under this Agreement and any other
Agreements.
SECTION 2.3. Recording, Registerinq, Filing, Etc. At any time or times
-----------------------------------
after (i) a Default or an Event of Default has occurred or (ii) any change in
any existing Law or the proposal by any Governmental Authority of a new Law
which, in the Agent's opinion, adversely affects the validity, security or
perfection of the security interests and liens granted herein, Borrower will
perform, or will cause to be performed, each of the following:
(a) Record, register and file such notices, certificates of title,
financing statements, mortgage assignments, trust deeds and other documents or
instruments as may, from time to time, be requested by the Agent to carry out
fully the intent of this Agreement, with such administrations or governmental
agencies as may be necessary or advisable in order to perfect, establish,
confirm, and maintain the security interests and liens created hereunder, as
legal, valid, and binding security interests and liens upon the Collateral;
<PAGE>
(b) Furnish to the Agent evidence of every such recording, registering and
filing; and
(c) Execute and deliver or perform, or cause to be executed and delivered
or performed, such further and other instruments or acts as the Agent reasonably
determines are necessary or desirable to fully carry out the intent and purpose
of this Agreement or to subject the Collateral to the security interest and lien
created hereunder, including, without limitation, defending the title of
Borrower to the Collateral by means of negotiation with and, if necessary,
appropriate legal proceedings against, each party claiming an interest
therein contrary or adverse to Borrower's title to same.
SECTION 2.4. Delivery of Documents. (a) As promptly as practicable after
---------------------
the date hereof (but in no event later than 10 Business Days after the date
hereof), Borrower shall deliver to the Agent all instruments evidencing all
Loans (collectively, the "Collateral Notes") of Borrower then outstanding. In
addition, each time Borrower shall make a new Loan, Borrower shall immediately
deliver to the Agent the Collateral Note evidencing such Loan. The Agent shall
keep all Collateral Notes at its principal office in New York City in a vault or
other place of similar security. Borrower and its authorized agents and
representatives, which shall include its Independent Public Accountants, shall
at all times, during normal business hours, have full access to examine, but not
to remove, without the prior consent of the Agent, the Collateral Notes provided
however, that (i) Borrower and/or its authorized agent shall have given the
Agent at least 24 hours prior notice, or such other notice as may be required by
applicable provisions of the Investment Company Act of 1940, as amended, before
Seeking access to the Collateral Notes and (ii) the Agent shall, in its sole
discretion, be entitled to have one of its employees, agents or representatives
present at all times or from time to time during any such period of access.
(b) Upon the Agent's request, Borrower shall immediately deliver to
the Agent or its designee, at Borrower's expense, copies of all documents,
chattel paper, security agreements, guarantees and other writings evidencing any
Loan or its related Underlying Collateral.
(c) At any time on or after a Default or Event of Default, upon the
Agent's request, Borrower shall immediately deliver to the Agent or its designee
all documents, instruments, chattel paper, security agreements, guarantees and
other writings so requested by the Agent evidencing any Collateral of Borrower,
such documents, instruments, chattel paper, security agreements, guarantees and
other writings to be held as Collateral under the terms of this Agreement.
(d) The Agent shall have no obligation to inspect or examine any of
the Collateral Notes or other documents delivered to it by Borrower hereunder,
and shall be entitled to assume, and shall be fully protected in assuming,
without inspection or examination, that Borrower has complied in full with its
delivery obligations hereunder.
SECTION 2.5. Further Assurances. (a) At any time or times after (i) a
------------------
Default or an Event of Default has occurred or (ii) any change in any existing
Law or the proposal by any Governmental Authority of a new Law which, in the
Agent's opinion, adversely affects the
<PAGE>
validity, security or perfection of the security interests and liens granted
herein, then, in addition to the acts specifically required to be performed by
Borrower elsewhere under this Agreement, Borrower shall do all other things and
sign and deliver all other documents and instruments reasonably requested by the
Agent to perfect, protect, maintain and enforce the security interests and liens
of the Agent in the Collateral, and the first priority of such security
interests and liens, and other rights granted hereunder or under any other
present or future agreement between Borrower and the Agent, including, without
limitation, the Loan Documents. Such acts shall include but not be limited to
the marking of Borrower's Books and Records, the chattel paper and instruments
to show the Agent's security interests and liens and the filing of financing,
renewal and/or continuation statements under the UCC or other documents
evidencing the Agent's liens under applicable law and the delivery of any
Collateral the physical possession of which is necessary or desirable in order
for the Agent to perfect its liens. Upon the occurrence of any of the events
specified in subclauses (i) and (ii) of this Section 2.5(a), Borrower authorizes
the Agent to execute alone any financing, renewal and/or continuation statement
or any other document or instrument which the Agent may require to perfect,
protect, continue or enforce in accordance herewith any security interest, lien
or other right hereunder or under any of the other Loan Documents and authorizes
the Agent to sign Borrower's name on the same. Upon payment in full by Borrower
of all the Obligations in accordance with the terms thereof, the security
interests and liens granted by Borrower hereunder shall terminate, except that
if, at any time, all or part of the payment of the monetary Obligations
theretofore made by Borrower or any other Person is rescinded or otherwise must
be returned by the Agent or any Bank for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of Borrower or
such other Person), the security interests and liens granted hereunder or under
any other present or future agreement between Borrower and the Agent, and all
rights of the Agent and all Obligations shall be reinstated as to monetary
Obligations which were satisfied by the payment to be rescinded or returned, all
as though such payment had not been made, and Borrower shall sign and deliver to
the Agent all documents and things necessary to reperfect all terminated liens
subject to the intervening liens, if any, granted by Borrower to any Person.
(b) A carbon, photographic, or other reproduction of this Agreement
shall be sufficient as a UCC filing and may be filed in any appropriate office
in lieu thereof.
(c) Upon the occurrence of any of the events specified in subclauses
(i) and (ii) of Section 2.5(a), to the extent requested by the Agent, Borrower
will use its best efforts to cause each mortgagee of any and all real estate
under any lease included in any Underlying Collateral and each landlord under
any lease included in any Underlying Collateral to execute and deliver to the
Agent assignments, in form and substance satisfactory to the Agent, by which
such mortgagee or landlord waives its rights, if any, to the Collateral.
SECTION 2.6. Appointment of Agent as Attorney-in-Fact. Upon the occurrence
----------------------------------------
of any of the events specified in subclause (i) of Section 2.5(a), Borrower does
hereby irrevocably make, constitute and appoint the Agent and; any of its
officers, employees or agents as the true and lawful attorneys of Borrower with
power to:
<PAGE>
(a) sign the name of Borrower on any financing statement, renewal
financing statement, notice or other similar document that in the Agent's
opinion must be filed in order to perfect or continue perfected the security
interests granted in this Agreement or any Other Agreements;
(b) receive, endorse, assign and deliver, in Borrower's name or in the
name of the Agent, all checks, notes, drafts and other instruments relating to
any Collateral, including receiving, opening and properly disposing of all mail
addressed to Borrower concerning the Collateral and, during the existence of an
Event of Default (as hereinafter defined), to notify postal authorities to
change the address for delivery of mail to such address as the Agent may
designate;
(c) sign Borrower's name on any notices to any of Borrowers clients or
customers; and
(d) upon the occurrence and during the continuance of an Event of
Default, take or bring at Borrower's cost, in Borrower's name or in the name of
the Agent, all steps, actions and suits deemed by the Agent necessary or
desirable to effect collections in connection with any Loans, to enforce payment
in connection with any Loans, to settle, compromise or release in whole or in
part any amounts owing in Connection with any Loans, to prosecute any action or
proceeding with respect to any Loans, to extend the time of payment in
connection with any Loans, to make allowances and adjustments with respect
thereto, to secure credit in the name of the Agent, and to do all other things
necessary or desirable to realize upon the Collateral, including but not limited
to the Underlying Collateral, and to carry out this Agreement and all Other
Agreements.
Neither the Agent nor its agents or attorneys will be liable for any
act or omission nor for any error of judgment or mistake of fact unless such
act, omission, error or mistake shall occur as a result of their gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable so long as the Obligations remain unpaid.
SECTION 2.7 Indemnity. In addition to all of the Agent's and Banks' other
---------
rights and remedies under the Loan Documents, Borrower will hold the Banks and
the Agent from and indemnify the Banks and the Agent or other designee of the
Agent against all losses, damages, costs and expenses (including, without
limitation, attorneys' fees, costs and expenses) incurred by any of them,
whether prior to or from and after the date hereof, whether direct, indirect or
consequential. as a result of or arising from or relating to any suit.
investigation, action or proceeding by any Person, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including without limitation, any
Federal or state antitrust laws, or under any common law or equitable cause or
otherwise, all to the extent arising from or in connection with this Agreement
or the other Loan Documents or the enforcement of the rights of the Agent
hereunder, other than losses, damages, costs and expenses resulting from, but
only to the extent resulting from, the willful misconduct or gross negligence of
the Person seeking indemnification.
<PAGE>
SECTION 2.8. Borrower Remains Liable. Anything herein to the contrary
-----------------------
notwithstanding, (i) Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Agent or the Banks of
any rights under this Agreement or any of the other Loan Documents shall not
release Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (iii) neither the Agent nor the Banks
shall have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement or any of the other Loan
Documents nor shall the Agent or any Bank be obligated to perform any of the
obligations or duties of Borrower thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 2.9. Agent May Perform. If Borrower fails to perform any agreement
-----------------
contained herein, the Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Agent incurred in connection therewith shall
be payable by Borrower, together with interest thereon at the rate specified in
Section 2.6 of the Loan Agreement, and until so paid shall be deemed part of the
Obligations.
SECTION 2.10. Agent's Duties. The powers conferred on the Agent hereunder
--------------
are solely to protect its interest and the interests of the Banks in the
Collateral and shall not impose any duty upon it to exercise any such powers
except as provided herein. Except for the safe custody of any Collateral in its
possession and the accounting for monies actually received by it hereunder and
performing its other express duties hereunder, the Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
ARTICLE III
PRIORITY OF SECURITY INTERESTS
SECTION 3 1. Priority of Security Interests. Borrower warrants and
-------------------------------
represents to the Agent and the Banks that, as to those assets for which
perfection may be accomplished by filing or by possession under the UCC, the
security interests granted to the Agent hereunder constitute and will constitute
at all times a valid and perfected security interest vested in the Agent in and
upon the Collateral. Borrower further warrants and represents that the Agent's
security interests in the Collateral are not and hereinafter shall not become
subordinate or junior to the security interests, liens or claims of any other
Person, firm or corporation, including the United States or any department,
agency or instrumentality thereof, or any state, county or local governmental
agency, except for the Permitted Liens Borrower shall not grant (without the
prior written approval of the Agent) a security interest in or permit a lien or
encumbrance upon any of the Collateral to anyone except the Agent as long as any
of the Obligations remain unpaid, except for the Permitted Liens.
ARTICLE IV
COLLATERAL
<PAGE>
SECTION 4.1. Representations, Covenants and Warranties. Borrower hereby
-----------------------------------------
makes the following representations, warranties and covenants to the Agent and
the Banks, which shall survive the execution and delivery of the Loan Documents
and (except to the extent that any of such representations, and warranties and
covenants expressly relate to earlier dates) shall be deemed repeated and
confirmed as of each date on which any Revolving Credit Loans or Term Loans are
requested by Borrower or made by any Bank:
(a) Borrower is now and at all times hereafter shall be the absolute
owner, free and clear of all Liens (other than Permitted Liens) except security
interests and rights of the Agent and the Banks granted herein, of indefeasible
title to all of the Collateral, except for that portion of Borrower's rights
and/or obligations under any Loan in which Borrower has granted a participation
to any Person in accordance with Section 2.14 of the Loan Agreement;
(b) To the best of Borrower's knowledge, each outstanding Loan does,
and each future Loan will, represent a bona fide, valid and legally enforceable
indebtedness according to its terms, and each Loan, at the time of creation
thereof, except with the consent of the Agent and the Banks, will be subject to
no offsets, discounts, counterclaims, contra-accounts or any other defense of
any kind or character that materially adversely affects the value of the Loan;
(c) with respect to each outstanding and future Loan, the Agent and
the Banks may rely on all statements or representations made by Borrower on or
with respect to such Loans delivered hereunder or under the Loan Agreement, and,
unless otherwise indicated in writing by Borrower, each outstanding Loan is, and
each future Loan will be, genuine and in all respects what it purports to be,
and, to Borrower's knowledge, there are no, and, at the time of creation of each
Loan there will not be any, to Borrower's knowledge, facts, events or
occurrences that would in any way materially impair the validity or enforcement
thereof;
(d) all of the outstanding Loans have been, and all future Loans will
be, created, and are (or in the case of future Loans, will be), and the form and
content of each document related to all outstanding and future Loans, the
security related thereto, and the transactions from which it arose comply
(or, in the case of future Loans, will comply) in all material respects with
any and all applicable laws, ordinances, rules and regulations, Federal, state
and/or local, with respect to the extension of credit and charging of interest,
including, without limitation, as applicable, the Federal Consumer Credit
Protection Act, the Federal Fair Credit Reporting Act, the Federal Trade
Commission Act, the Federal Equal Credit Opportunity Act and all Federal, state
and local laws related to licensing, usury, truth in lending, real estate
settlement procedures, consumer protection, equal credit opportunity, fair
debt collection, unfair and deceptive trade practices, rescission rights and
disclosures, and with all rules and regulations thereunder, all as amended, and
any disclosures required with respect to any Loan the failure of which to make
would have a Material Adverse Effect on Borrower were and will continue to be
made properly and in a timely manner;
<PAGE>
(e) the original amount and unpaid balance of each Loan shown on
Borrower's books and records and on any statement or schedule delivered to the
Agent (i) is and will be the true and correct amount actually owing to Borrower;
(f) if requested by the Required Banks at any time or from time to
time, Borrower shall cause a Lien search against each Person to whom a Loan has
been made satisfactory to the Agent, to be performed and delivered directly to
the Agent, which Lien search shall indicate the absence of any Liens against
such Person or the property of the Person on which Borrower has a Lien, other
than Liens in favor of Borrower which have been assigned to the Agent or the
Banks or Liens in favor of the Agent or the Banks and other than Permitted
Liens;
(g) Borrower has not extended and will not extend any credit of any
kind or in any manner to any Person in connection with the transactions from
which the Loans arose or will arise other than as Borrower has indicated on and
has had evidenced by, or will indicate or have evidenced by, in the case of
future Loans, Borrower's files related to the Loans;
(h) each security agreement, UCC filing, title retention instrument,
and other document and instrument, if any, which is security for the Loans
contains, or will contain, in the case of future Loans, a correct and sufficient
description of the Underlying Collateral covered thereby and each lien or
security interest which secures any outstanding Loan is, or any future Loan
will be, valid;
(i) to the best knowledge of Borrower, except as disclosed to the
Agent, any and all policies of insurance related to the property securing any
obligation of a Person to whom Borrower has made a Loan, or any guarantor of
such Loan, in connection with any Loan and any credit life insurance, credit
disability insurance, or credit unemployment insurance are in full force and
effect in accordance with the terms of all agreements between Borrower and such
Person or guarantor;
(j) Borrower has no knowledge of any fact which would impair in any
material respect the value or validity of any Loan except as disclosed to the
Agent; and
(k) the transactions contemplated herein, including the granting of
security interests herein and the enforcement by the Agent of its rights
hereunder if a Default or Event of Default occurs, do not and will not affect
the validity of the pledges of the Underlying Collateral and the Loans secured
by the Underlying Collateral are and will still be valid against the Obligers of
such Loans.
SECTION 4.2. Collections. (a) Subject to the provisions of this Agreement
-----------
and the other Loan Documents, Borrower shall service, manage, enforce, and make
Collections in connection with the Loans. "Collections", as used herein, means
payment of principal and interest on the Loans, other payments made with
respect to Loans, the cash proceeds realized from the enforcement of Loans and
any security therefor, or the collateral, proceeds of credit or group life
insurance, and all proceeds of insurance of any real or personal property which
secure any of the Loans.
<PAGE>
(b) With respect to each of the Collections: Borrower shall collect
all Collections, receive all payments thereon and immediately deposit the
proceeds thereof into a Depository Account. Borrower may withdraw funds from
such account to use in the ordinary course of its business.
SECTION 4.3. Rights of Agent Regarding Collateral. Upon the occurrence and
------------------------------------
during the continuance of an Event of Default, the Agent shall have the right,
and upon the direction of the Required Banks shall, at any time and from time to
time thereafter, without notice to Borrower, (a) to notify, and upon the
direction of the Agent to Borrower, the Borrower will notify, (i) all Persons to
whom Borrower has made Loans that the Agent has a security interest in such
Collateral and direct all such Persons to make payments to the Agent or its
designee, and to such banks and accounts (which may be the Collateral Account)
as designated by the Agent or such designee, of all sums owing by them to
Borrower, and (ii) all banks in which Borrower has any Depository Accounts of
the occurrence of an Event of Default and direct all such Banks to transfer into
the Collateral Account, or to such other account at such bank as shall be
designated by the Agent or its designee, all amounts on deposit from time to
time in the related Depository Accounts; (b) to settle, compromise, sell,
assign, extend or renew any debt owing by any Persons to whom Borrower has made
a Loan; (c) to sell or assign such Collateral upon such terms as the Agent may
deem advisable; and (d) to discharge and release in the name of Borrower and the
Agent any such debt. Any and all disbursements for costs and expenses incurred
or paid by the Agent with respect to the enforcement, collection or protection
of its interest in the Collateral, or against Borrower, whether by suit or
otherwise, notification of Persons to whom Borrower has made Loans, including
reasonable attorneys' fees actually incurred, court costs and similar expenses,
if any, shall become a part of the Obligations secured by the Collateral,
payable on demand.
ARTICLE V
DEFAULT
SECTION 5.1. Events of Default. Any one of the following events will
-----------------
constitute an "Event of Default":
(a) failure of Borrower to observe, perform or comply with any of the
terms, provisions, conditions or covenants, or, in any material respect, any
warranties or representations, contained in this Agreement other than in Section
4.1 hereof;
(b) failure of Borrower to observe, perform or comply with any of the
terms, provisions, conditions, covenants, warranties or representations
contained in Section 4.1 of this Agreement, which failure shall not have been
remedied within 30 days after such failure shall first have become known to any
officer of Borrower;
(c) the occurrence of an Event of Default under the Loan Agreement; or
(d) any of the Loan Documents shall cease to be in full force and
effect.
<PAGE>
SECTION 5.2. Remedies. (a) Upon the occurrence of any Event of
--------
Default, the Agent shall have, in addition to any other rights and remedies
contained in this Agreement or in any of the Other Agreements, all the rights
and remedies of a secured party under the UCC, and all other rights and remedies
provided by law, all of which shall be cumulative to the extent permitted by
law. Upon the occurrence of any Event of Default and at any time thereafter if
such or any other default shall then be Continuing, the Agent shall have the
right without further notice to Borrower to, and upon the direction of the
Required Banks shall, appropriate, take possession and control of, set off and
apply to the payment of any or all of the Obligations, any or all Collateral, in
the manner set forth in Section 5.3, to enforce payment in connection with the
Loans or any other Collateral, to settle, compromise or release, in whole or in
part, any amounts owing on the Collateral, to prosecute any action, suit or
proceeding with respect to the Collateral, to extend the time of payment of any
and all Collateral, to make allowances and adjustment with respect thereto, to
issue credits in the name of Borrower or the Agent, to sell, assign and deliver
the Collateral (or any part thereof), at public or private sale, at broker's
board, for cash, upon credit or otherwise, at the Agent's sole option and
discretion and the Agent and any Bank or other Person interested in the
Obligations may bid or become purchaser at any such sale, if public, free from
any right of redemption,which is hereby expressly waived. Borrower agrees that
the giving of ten days notice by the Agent, sent by certified mail, return
receipt requested postage prepaid, to the address set forth below, designating
the place and time of any public sale or of the time after which any private
sale or other intended disposition of the Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice with
respect thereto. The net cash proceeds resulting from the exercise of any of the
foregoing rights or remedies shall be applied by the Agent to the payment of the
Obligations pro rata on the basis of the respective Percentages of the
Obligations, and Borrower shall remain liable to the Agent and the Banks for any
deficiency, together with interest thereon at the rate provided in the Loan
Agreement, and the cost and expenses of collection of such deficiency, including
(to the extent permitted by law), without limitation, reasonable attorneys' fees
actually incurred, expenses and disbursements.
(b) If at any time or times hereafter the Agent employs counsel for
advice with respect to this Agreement or any Other Agreements, or to intervene,
file a petition, answer, motion or other pleading in any suit or proceeding
relating to this Agreement or any Other Agreements, or relating to any
Collateral, or to protect, take possession of, or liquidate any Collateral, or
to attempt to enforce any security interest or lien in any Collateral, or to
represent the Agent in any pending or threatened litigation with respect to the
affairs of Borrower in any way relating to any of the Collateral or to the
Obligations or to enforce any rights of the Agent or any Bank or liabilities of
Borrower, any Person to whom Borrower has made a Loan, or any Person which may
be obligated to the Agent or such Bank by virtue of this Agreement or any Other
Agreement, instrument or document now or hereafter delivered to the Agent or any
Bank by or for the benefit of Borrower, then in any of such events, all of the
reasonable attorneys' fees actually incurred arising from such services, and any
expenses, costs and charges relating thereto, shall be Obligations secured by
the Collateral.
<PAGE>
(c) Upon the occurrence of an Event of Default, the Agent shall have
the right to require Borrower to assemble all Collateral not already in the
Agent's possession and make it reasonably available to the Agent at one or more
places to be designated by the Agent which are reasonably convenient to both
parties, and to take possession of such Collateral and to enter and remain upon
the various premises of Borrower without cost or charge to the Agent, and to use
the same, together with materials, supplies, books and records of Borrower for
the purpose of collecting such Collateral or liquidating such Collateral (plus
any Collateral already in the Agent's % possession), whether by foreclosure,
auction or otherwise. In addition, the Agent may remove from such premises such
Collateral, and any records with respect thereto, to the premises of the Agent
or any Custodian for such time as the Agent may desire, in order to effectively
collect or liquidate such Collateral.
(d) Upon the occurrence of an Event of Default, the Agent shall have
the right to, and upon the direction of the Required Banks shall, require
Borrower to establish and maintain a lockbox service (which may be the
Collateral Account) with such bank or banks as may be acceptable to the Agent.
In the event Borrower (or any of its Affiliates, subsidiaries, stockholders,
directors, officers, employees or agents) shall receive any monies, checks,
notes, drafts or any other items of payment relating to, or proceeds of, the
Loans, Borrower agrees with the Agent as follows:
(i) Borrower shall hold all such items of payment in trust for the
Agent and the Banks and as the property of Agent and the Banks,
separate from the funds of Borrower, and Borrower shall
immediately forward, or cause to be forwarded, the same to
the lockbox service for application to the Revolving Credit Loans
or Term Loans;
(ii) Borrower shall forward to the Agent, on a daily basis, deposit
slips related to all such items of payment received by Borrower
and, if requested by the Agent, copies of such checks and other
items, together with a statement showing the application of that
portion of such items of payment relating to payment in connection
with the Loans and a collection report with regard thereto in
form and substance satisfactory to the Agent;
(iii) All such items of payment shall be the sole and exclusive
property of the Agent for the benefit of the Banks immediately
upon the earlier of receipt of such items by the Agent or the
receipt of such items by Borrower;
<PAGE>
(iv) The lockbox service shall be subject to the sole control of the
Agent and the Agent shall have the right at all times in its sole
discretion to apply all or part of such items of payment to the
payment of the Obligations. The Agent may, and upon the direction
of the Required Banks shall, release to Borrower all or any part
of such items of payment; and
(v) the Agent assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by
any bank thereunder.
SECTION 5.3. Application of Proceeds. (a) The proceeds of any lockbox
-----------------------
collection or sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Agent in the following order of priority:
first, to payment of the expenses of such lockbox or sale or other realization,
including reasonable compensation to the Agent and its agents and counsel and
all expenses, liabilities, advances incurred or made by the Agent in connection
therewith, and any other unreimbursed expenses for which the Agent is to be
reimbursed under this Agreement; second, to the payment of the Obligations; and
third, after indefeasible payment in full of all Obligations, to payment to
Borrower or its successors and assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds. The Agent may make
distributions hereunder in cash or in kind, but such distributions shall in all
events be made pro rata on the basis of the respective Percentages of the
Obligations. Distributions made under clause "second" above may also be made in
a combination of cash or property but shall be made pro rata on the basis of the
respective Percentages of the Obligations. Distributions made under clauses
"first" and "third" may also be made in a combination of cash or property. Any
deficiency remaining, after application of such cash or cash proceeds to the
Obligations, shall continue to be Obligations for which Borrower remains liable.
(b) In making the determinations and allocations required by this
Section 5.3, the Agent may rely upon information supplied by the Banks as to the
amounts of the Obligations held by them, and the Agent shall have no liability
to any of the Banks for actions taken in reliance upon such information. All
distributions made by the Agent pursuant to this Section 5.3 shall be final and
the Agent shall have no duty to inquire as to the application by the Banks of
any amount distributed to them. However, if at any time the Agent determines
that an allocation was based upon a mistake of fact (including without
limitation, mistakes based on an assumption that principal or interest or any
other amount has been paid by payments that are subsequently recovered from the
recipient thereof through the operation of any bankruptcy, reorganization,
insolvency or other laws or otherwise), the Agent may in its discretion, but
shall not, subject to Section 5.3(c), be obligated to, adjust subsequent
allocations and distributions hereunder so that, on a cumulative basis, the
Banks
<PAGE>
receive the distributions to which they would have been entitled if such mistake
of fact had not been made.
(c) If, through the operation of any bankruptcy, reorganization,
insolvency or other laws or otherwise, the security interests created hereby are
enforced with respect to some, but not all, of the Obligations, the Agent shall
nonetheless apply the proceeds for the benefit of the Banks, in the proportion
and subject to the priorities of Section 5.3(a). To the extent that the Agent
distributes proceeds collected with respect to one Obligation to or on behalf of
the holder of another Obligation or a Bank obtains the equivalent of proceeds
through the exercise of any right of setoff, the holder of the former Obligation
shall be deemed to have such a participation in the latter Obligation or shall
be subrogated to the rights of the holder thereof to receive any subsequent
payments and distributions made with respect to the portion thereof paid or to
be paid by the application of such proceeds.
SECTION 5.4. Waiver by Agent or Banks. The Agent's or any Bank's failure at
------------------------
any time or times hereafter to require strict performance by Borrower of any of
the provisions, warranties, terms and conditions contained in this Agreement or
any of the Other Agreements shall not waive, affect or diminish any right of the
Agent or any Bank at any time or times hereafter to demand strict performance
therewith and with respect to any other provisions, warranties, terms and
conditions contained in this Agreement or any of the Other Agreements, and any
waiver of any Event of Default shall not waive or affect any other Event of
Default, whether prior or subsequent thereto, and whether of the same or a
different type. None of the warranties, conditions, provisions and terms
contained in this Agreement or any Other Agreement shall be deemed to have been
waived by any act or knowledge of the Agent or any Bank, or their respective
agents, officers or employees except by an instrument in writing signed by an
officer of the Agent or such Bank and directed to Borrower specifying such
waiver.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Continuing Lien. This Agreement secures all present and future
---------------
Obligations of Borrower. There is included within the term "Collateral," as used
herein, all other property and all interests therein of any kind hereafter
acquired by Borrower, meeting or falling within the general description of the
Collateral set forth herein and also the proceeds and products thereof.
SECTION 6.2. Waivers by Borrower. (a) Borrower irrevocably waives the right
-------------------
to direct the application of any and all payments which may be received by the
Agent during the continuance of an Event of Default and Borrower does hereby
irrevocably agree that, during the continuance of an Event of Default, the Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments received in such manner as the Agent may deem advisable,
notwithstanding any entry upon any of its books and records.
(b) Borrower also waives any and all notices of demand, notice or
protest that Borrower might be entitled to receive with respect to this
Agreement by virtue of any
<PAGE>
applicable statute or law, and waives demand, protest, notice of protest, notice
of default, release, compromise, settlement, extension or renewal of all
commercial paper, accounts, contract rights, instruments, guaranties, and
otherwise, at any time held by the Agent or the Banks on which Borrower may in
any way be liable, notice of nonpayment at maturity of any and all Loans, and
notice of any action taken by the Agent or the Banks unless expressly required
by this Agreement.
SECTION 6.3. Parties. This Agreement and any of the other Agreements,
-------
instruments and documents executed and delivered pursuant hereto or to
consummate the transactions contemplated hereunder shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto.
SECTION 6.4. GOVERNING LAW. THIS AGREEMENT AND ANY OTHER AGREEMENTS SHALL
-------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE TO THE EXERCISE
OF REMEDIES OR THE PERFECTION OF SECURITY INTERESTS UNDER THE UCC.
SECTION 6.5. WAIVER OF JURY TRIAL AND SETOFF. EACH OF BORROWER AND THE
-------------------------------
AGENT HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT
TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER AGREEMENTS
OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER
AGREEMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN
BORROWER AND ANY OF THE BANKS OR THE AGENT, BETWEEN ANY BANKS, AND BETWEEN THE
AGENT AND ANY BANKS; AND BORROWER HEREBY WAIVES THE RIGHT TO INTERPOSE ANY
SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION,
IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS
SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE
FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER
ACTION).
SECTION 6.6. Jurisdiction; Service of Process. Borrower hereby irrevocably
--------------------------------
consents to the jurisdiction of the Courts of the State of New York, County of
New York and of any Federal Court located in the Southern District of New York,
and agrees that venue in each of such Courts is proper in connection with any
action or proceeding arising out of or relating to this Agreement, the Other
Agreements, or any document or instrument delivered pursuant to this Agreement
or the Other Agreements. Nothing herein shall affect the right of any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Borrower in any other jurisdiction.
<PAGE>
SECTION 6.7. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties of Borrower and all terms, provisions, conditions
and agreements to be performed by Borrower contained in this Agreement and in
the other Loan Documents shall be true and correct, and satisfied, where
applicable, at the time of the execution of this Agreement, and shall survive
the execution and delivery of this Agreement and all Other Agreements.
SECTION 6.8. Obligations Secured by Property Other Than Collateral. To the
-----------------------------------------------------
extent that the Obligations are now or hereafter secured by property other than
the Collateral, or by a guarantee, endorsement or property of any other Person,
then the Agent shall have the right to, and upon the direction of the Required
Banks shall, proceed against such other property, guarantee or endorsement upon
the occurrence and during the continuance of an Event of Default, and the Agent
shall have the right, with the consent of the Required Banks, to determine which
rights, security, liens, security interests or remedies the Agent shall at any
time pursue, relinquish, subordinate, modify or take any other action with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's rights or any of the Bank's rights under the Obligations, this
Agreement or any Other Agreements.
SECTION 6.9. Successor Agent. In the event a successor agent is appointed
---------------
pursuant to the provisions of Section 11.4 of the Loan Agreement, such successor
agent shall succeed to the rights, powers and duties of the Agent hereunder, and
the term "Agent" shall mean such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to the Loan Agreement or any holders of the Revolving Credit
Notes or Term Notes. Such former Agent agrees to take such actions as are
reasonably necessary to effectuate the transfer of its rights, powers and duties
to such successor agent.
SECTION 6.l0. Termination. This Agreement and the security interest in the
-----------
Collateral created hereby will terminate when the Obligations have been
irrevocably paid and finally discharged in full in accordance with the terms of
the Loan Agreement or the NatWest Existing Term Notes, as the case may be, and
the Banks are no longer obligated to make Revolving Credit Loans or Term Loans
under the Loan Agreement. No waiver by the Agent or any Bank or any other holder
of the Revolving Credit Notes, the Term Notes or the NatWest Existing Term Notes
of any default will be effective unless in writing nor operate as a waiver of
any other default or of the same default on a future occasion. In the event of a
sale or assignment by the Agent or any Bank of a Revolving Credit Note(s), a
Term Note(s) or a NatWest Existing Term Note, or any portion thereof, the Agent
or such Bank may assign or transfer its rights and interest under this Agreement
in whole or in part to the purchaser or purchasers of the Revolving Credit
Note(s), Term Note(s) or NatWest Existing Term Note(s), whereupon such purchaser
or purchasers will become vested with all of the powers, rights and
responsibilities of the Agent or such Bank hereunder, and the Agent or such Bank
will thereafter be forever released and fully discharged from any liability or
responsibility hereunder with respect to the rights, interest and
responsibilities so assigned, other than liabilities arising out of actions
taken prior to the date of assignment. Borrower may not assign this Agreement
without the express written consent of the Agent and the Banks.
<PAGE>
SECTION 6.11. Notices. All notices, requests, consents, demands or other
-------
communications provided for herein shall be given in accordance with the terms
of Section 10.4 of the Loan Agreement.
SECTION 6.12. Severability. To the extent any provision of this Agreement
------------
is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 6.13. Counterparts. This Agreement may be executed by the parties
------------
hereto in counterparts, each of which shall be an original and both of which
shall together constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written by the duly authorized officers of the parties hereto.
MEDALLION FUNDING CORP.
By: /s/ Alvin Murstein
---------------------------------
Name:
Title: President
By: /s/ Daniel Baker
---------------------------------
Name:
Title: V.P. Finance
NATIONAL WESTMINSTER BANK USA,
as Agent
By: /s/ Thomas J. Levy
---------------------------------
Name:
Title: Vice President
STATE OF New York )
: ss.:
COUNTY OF New York )
BEFORE ME, the undersigned Notary Public of the State and County of aforesaid,
personally appeared , with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence) and who, upon oath, acknowledged himself to
be the President of Medallion Funding Corp., the corporation described in, and
which executed the foregoing Security Agreement, and duly acknowledged to me
that he executed the foregoing Agreement for the purposes therein contained by
signing the name of the corporation, by himself as such officer.
WITNESS MY HAND AND OFFICIAL SEAL AT OFFICE, this 26th day of March, 1992.
/s/ Marie Russo
-----------------------------------
Notary Public
My Commission Expires: 1-31-94
<PAGE>
REVOLVING CREDIT NOTE
$18,000,000 No. 17
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
NatWest Bank N.A. (the "Bank") at the office of such Bank, currently located at
175 Water Street New York, New York, 10038, in lawful money of the United States
of America and in immediately available funds, an amount equal to the lesser of
(a) EIGHTEEN MILLION DOLLARS ($18,000,000) and (b) the aggregate unpaid
principal balance amount of all Revolving Credit Loans made by the Bank to
Borrower pursuant to the Loan Agreement, dated as of March 27, 1992, as amended,
among the Borrower, the banks that from time to time are signatories thereto,
and National Westminster Bank USA as Agent (as amended, modified or supplemented
from time to time in accordance with its terms. the "Loan Agreement"). The
Borrower further promises to pay interest (computed on the basis of a 360-day
year for the actual number of days elapsed) in like money on the unpaid
principal balance of this Note from time to time outstanding at such rates and
times as provided in the Loan Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate to
be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end of the applicable Interest
Period for a LIBO Rate Loan on which the Default Rate is being
<PAGE>
charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate
Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
-------------------------
President
By: /s/ Daniel F. Baker
-------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$17,500,000 No. 18
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
The First National Bank of Boston (the "Bank") at the office of such Bank,
currently located at 100 Federal Street Boston, Massachusetts, 02110, in lawful
money of the United States of America and in immediately available funds, an
amount equal to the lesser of (a) SEVENTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($17,500,000) and (b) the aggregate unpaid principal balance amount of
all Revolving Credit Loans made by the Bank to Borrower pursuant to the Loan
Agreement, dated as of March 27, 1992, as amended, among the Borrower, the banks
that from time to time are signatories thereto, and National Westminster Bank
USA as Agent (as amended, modified or supplemented from time to time in
accordance with its terms. the "Loan Agreement"). The Borrower further promises
to pay interest (computed on the basis of a 360-day year for the actual number
of days elapsed) in like money on the unpaid principal balance of this Note from
time to time outstanding at such rates and times as provided in the Loan
Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end
<PAGE>
of the applicable Interest Period for a LIBO Rate Loan on which the Default Rate
is being charged, such LIBO Rate Loan shall be automatically converted to a
Prime Rate Loan, and the Default Rate to be charged in respect of such Loan
shall be computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
--------------------------
President
By: /s/ Daniel F. Baker
--------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$17,500,000 No. 19
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
Fleet Bank of Massachusetts, N.A. (the "Bank") at the office of such Bank,
currently located at 75 State Street, Boston, Massachusetts, 02109, in lawful
money of the United States of America and in immediately available funds, an
amount equal to the lesser of (a) SEVENTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($17,500,000) and (b) the aggregate unpaid principal balance amount of
all Revolving Credit Loans made by the Bank to Borrower pursuant to the Loan
Agreement, dated as of March 27, 1992, as amended, among the Borrower, the banks
that from time to time are signatories thereto, and National Westminster Bank
USA as Agent (as amended, modified or supplemented from time to time in
accordance with its terms. the "Loan Agreement"). The Borrower further promises
to pay interest (computed on the basis of a 360-day year for the actual number
of days elapsed) in like money on the unpaid principal balance of this Note from
time to time outstanding at such rates and times as provided in the Loan
Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end
<PAGE>
of the applicable Interest Period for a LIBO Rate Loan on which the Default Rate
is being charged, such LIBO Rate Loan shall be automatically converted to a
Prime Rate Loan, and the Default Rate to be charged in respect of such Loan
shall be computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
--------------------------
President
By: /s/ Daniel F. Baker
--------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000 No. 20
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
The Bank of Tokyo Trust Company (the "Bank") at the office of such Bank,
currently located at 1251 Ave. of the Americas, New York, New York, 10016, in
lawful money of the United States of America and in immediately available funds,
an amount equal to the lesser of (a) TEN MILLION DOLLARS ($10,000,000) and (b)
the aggregate unpaid principal balance amount of all Revolving Credit Loans made
by the Bank to Borrower pursuant to the Loan Agreement, dated as of March 27,
1992, as amended, among the Borrower, the banks that from time to time are
signatories thereto, and National Westminster Bank USA as Agent (as amended,
modified or supplemented from time to time in accordance with its terms. the
"Loan Agreement"). The Borrower further promises to pay interest (computed on
the basis of a 360-day year for the actual number of days elapsed) in like money
on the unpaid principal balance of this Note from time to time outstanding at
such rates and times as provided in the Loan Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end
<PAGE>
of the applicable Interest Period for a LIBO Rate Loan on which the Default Rate
is being charged, such LIBO Rate Loan shall be automatically converted to a
Prime Rate Loan, and the Default Rate to be charged in respect of such Loan
shall be computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
--------------------------
President
By: /s/ Daniel F. Baker
--------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$6,000,000 No. 21
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
Israel Discount Bank of New York (the "Bank") at the office of such Bank,
currently located at 511 Fifth Ave., New York, New York, 10022, in lawful money
of the United States of America and in immediately available funds, an amount
equal to the lesser of (a) SIX MILLION DOLLARS ($6,000,000) and (b) the
aggregate unpaid principal balance amount of all Revolving Credit Loans made by
the Bank to Borrower pursuant to the Loan Agreement, dated as of March 27, 1992,
as amended, among the Borrower, the banks that from time to time are signatories
thereto, and National Westminster Bank USA as Agent (as amended, modified or
supplemented from time to time in accordance with its terms. the "Loan
Agreement"). The Borrower further promises to pay interest (computed on the
basis of a 360-day year for the actual number of days elapsed) in like money on
the unpaid principal balance of this Note from time to time outstanding at such
rates and times as provided in the Loan Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end of the applicable Interest
Period for a LIBO Rate Loan on which the Default Rate is being
<PAGE>
charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate
Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
---------------------------
President
By: /s/ Daniel F. Baker
---------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$6,000,000 No. 22
September 29, 1995
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
European American Bank (the "Bank") at the office of such Bank, currently
located at 335 Madison Avenue, New York, New York, 10017, in lawful money of the
United States of America and in immediately available funds, an amount equal to
the lesser of (a) SIX MILLION DOLLARS ($6,000,000) and (b) the aggregate unpaid
principal balance amount of all Revolving Credit Loans made by the Bank to
Borrower pursuant to the Loan Agreement, dated as of March 27, 1992, as amended,
among the Borrower, the banks that from time to time are signatories thereto,
and National Westminster Bank USA as Agent (as amended, modified or supplemented
from time to time in accordance with its terms. the "Loan Agreement"). The
Borrower further promises to pay interest (computed on the basis of a 360-day
year for the actual number of days elapsed) in like money on the unpaid
principal balance of this Note from time to time outstanding at such rates and
times as provided in the Loan Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end of the applicable Interest
Period for a LIBO Rate Loan on which the Default Rate is being
<PAGE>
charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate
Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
---------------------
President
By: /s/ Daniel F. Baker
------------------------
Vice President Finance
<PAGE>
REVOLVING CREDIT NOTE
$3,000,000 No. 23
March 28, 1996
FOR VALUE RECEIVED, the undersigned, Medallion Funding Corp., a New York
Corporation (the "Borrower"), hereby unconditionally promises to pay on the date
of Maturity, as defined in the Loan Agreement (hereinafter referred to) or on
such earlier date as may be required under the Loan Agreement, to the order of
Harris Trust and Savings Bank (the "Bank") at the office of such Bank, currently
located at 111 West Monroe, Chicago, IL, 60690, in lawful money of the United
States of America and in immediately available funds, an amount equal to the
lesser of (a) THREE MILLION DOLLARS ($3,000,000) and (b) the aggregate unpaid
principal balance amount of all Revolving Credit Loans made by the Bank to
Borrower pursuant to the Loan Agreement, dated as of March 27, 1992, as amended,
among the Borrower, the banks that from time to time are signatories thereto,
and National Westminster Bank USA as Agent (as amended, modified or supplemented
from time to time in accordance with its terms. the "Loan Agreement"). The
Borrower further promises to pay interest (computed on the basis of a 360-day
year for the actual number of days elapsed) in like money on the unpaid
principal balance of this Note from time to time outstanding at such rates and
times as provided in the Loan Agreement.
All revolving Credit Loans made by the Bank pursuant to the Loan Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Note on the schedule annexed hereto (including any additional pages such
holder may add to such schedule), which endorsement shall constitute prima facie
-----------
evidence of the accuracy of the information so endorsed, provided, however, that
------------------
the failure of the holder of this Note to insert any date or amount or other
information on such schedule shall not in any manner affect the obligation of
the Borrower to repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof, and until paid
in full (whether before or after the occurrence of any Event of Default
described in Sections 9.1(g) and 9.1(h) of the Loan Agreement), (a) the
outstanding principal amount of this Note which at such time is a Prime Rate
Loan (including, to the extent permitted by law, unpaid interest thereon) shall
bear interest at an annual rate equal to the sum of 2% plus the Prime Rate
applicable to such Prime Rate Loan then in effect and (b) the outstanding
principal amount of this Note which is a LIBO Rate Loan (including, to the
extent permitted by law, unpaid interest thereon) shall bear interest at an
annual rate equal to the sum of 3.75% plus the Adjusted LIBO Rate applicable to
such LIBO Rate Loan then in effect, in each case payable on demand, but in no
event shall such rate of interest (the "Default Rate") be in excess of the
maximum rate of interest permitted under applicable law. The Default Rate shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. If the Default Rate is to be based on the Prime Rate, the Prime Rate
to be charged shall change when and as the Prime Rate is changed, and any such
change in the Prime Rate shall become effective at the opening of business of
the day on which such change is adopted. At the end of the applicable Interest
Period for a LIBO Rate Loan on which the Default Rate is being
<PAGE>
charged, such LIBO Rate Loan shall be automatically converted to a Prime Rate
Loan, and the Default Rate to be charged in respect of such Loan shall be
computed based on the Prime Rate.
This Note is one of the Revolving Credit Notes referred to in the Loan
Agreement, is secured as provided therein, is entitled to the benefits thereof
and is subject to optional and mandatory prepayment, in whole or in part as
provided therein. The Borrower shall make when due any and all payments and
prepayments on this Revolving Credit Not required under the Loan Agreement.
Reference is herein made to the Loan Agreement for the rights of the holder to
accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and notice
of any kind, release, surrender or substitution of security, or forbearance or
other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only by
an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT NOTE,
THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY
JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the
date first above written.
<PAGE>
MEDALLION FUNDING CORP.,
a New York Corporation
By: /s/ Alvin Murstein
---------------------------
President
By: /s/ Daniel F. Baker
---------------------------
Vice President Finance
<PAGE>
[ALL CASH-EQUITY RAISE]
SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY
3% PREFERRED STOCK REPURCHASE AGREEMENT
---------------------------------------
This Repurchase Agreement ("Agreement"), dated August 12, 1994, by and
between Medallion Funding Corp. (the "SSBIC"), a small business investment
company licensed under Section 301(d) of the Small Business Investment Act of
1958, as amended (15 U.S.C. Sections 661 et. seq.) (the "Act"), having an office
at 205 East 42nd Street, Suite 2020, New York, New York 10017 and the U.S. Small
Business Administration ("SBA"), an agency of the United States and its
successors and assigns, located at 409 Third Street, S.W., Washington, D.C.
20416.
WITNESSETH:
WHEREAS, pursuant to Public Law 101-162 (November 21, 1989), SBA is
authorized to allow the issuer of any 3% preferred stock sold to SBA to redeem
or repurchase such stock upon the payment to SBA of an amount less than the par
value of the stock;
WHEREAS, SBA is the owner of 9,234 shares (the "Shares") of $1,000 par
value per share three percent (3%) preferred stock (the "Preferred Stock"), of
which the SSBIC is the issuer;
WHEREAS, the SSBIC has completed an "Application for Repurchase of 3%
Preferred Stock held by the Small Business Administration pursuant to Public Law
1O1-162, November 21, 1989," dated August 12, 1994 (the "Application"), which is
hereby incorporated herein by reference, pursuant to which the SSBIC has applied
to SBA for the repurchase of all of the Shares;
WHEREAS, SBA has determined that the SSBIC is not Distressed (as defined in
Article 1); and
WHEREAS, the SSBIC desires to repurchase from SBA, and SBA desires to sell
to the SSBIC, the Shares upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the value received and the covenants
contained herein, the parties hereto hereby represent and agree as follows:
ARTICLE 1. DEFINITIONS
-----------
For the purposes of the Repurchase Documents (as defined below), the
following terms shall have the meanings assigned to them in this Article 1; all
other capitalized terms shall have the meanings assigned to them in Part 107 of
Title 13 of the Code of Federal Regulations:
<PAGE>
"Application" shall mean the Application dated August 12, 1994 for the
Repurchase of 3% Preferred Stock Held By the U.S Small Business Administration
Pursuant to Public Law 101-162, November 21, 1989.
"Assets" shall mean all of the SSBIC's real or personal property (tangible
or intangible) of whatever nature and wherever located, whether now owned or
hereafter acquired, including but not limited to, all fixed assets, fixtures,
cash, inventory, notes receivable, accounts receivable, contract rights, choses
in action, causes of action, instruments, documents, electronic business
records, licenses, warranties, rights to indemnification, leasehold and
subleasehold interests in real or personal property, security interests held by
or granted to the SSBIC, tax refunds, tax refund claims, partnership and joint
venture interests, goodwill, general intangibles, all securities including
common stock, preferred stock, stock options, warrants, rights to purchase
securities, and debentures, and all rights to payment of money, together with
all additions and accessions thereto, all replacements and substitutions
thereof, all proceeds thereof, and all assets created therefrom.
"Corporate Official" shall mean those officer(s) of the corporation
authorized in the name and on the behalf of the SSBIC to prepare, file, and
execute all documentation and instruments required by SBA in connection with the
Application.
"Discount" shall mean the amount by which the aggregate par value of the 3%
preferred stock being repurchased exceeds the Purchase Price.
"Distressed" shall mean a financial condition of a small business
investment company, evidenced by its having, as of the fiscal year end
immediately preceding April 1, 1994, undistributed realized losses and a capital
impairment percentage (as defined in 13 CFR Part 107) of at least 10%.
"Indebtedness" shall mean (a) all indebtedness for borrowed money, and (b)
all obligations evidenced by bonds, debentures, notes or other similar
instruments.
"Liquidating Interest" shall mean a preferential limited ownership interest
in the Restricted Contributed Capital Surplus account granted to SBA by the
SSBIC as of the date of this Agreement. The initial value of the Liquidating
Interest shall equal the amount of the Discount.
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Repurchase Documents" shall mean this Agreement, the Application, and any
other documents furnished by the SSBIC in connection with this transaction and
any and all ancillary documents and statements executed, delivered or filed in
connection therewith, as they may be amended from time to time.
"Restricted Contributed Capital Surplus" shall have the meaning set forth
in Section 3.1 hereof.
-2-
<PAGE>
"SBA Regulations" shall mean Part 107 of Title 13 of the Code of Federal
Regulations, as amended.
"Shares" shall mean the aggregate number of shares of 3% preferred stock
being repurchased, as set forth in the recitals hereto.
ARTICLE 2. REPURCHASE AND SALE OF SHARES
-----------------------------
2.1. Repurchase and Sale. On the terms and subject to the conditions
-------------------
hereinafter set forth, the SSBIC hereby agrees to repurchase from SBA, and SBA
agrees to sell, convey, transfer and assign to the SSBIC the Shares.
2.2. Price To Be Paid. The purchase price to be paid by the SSBIC to SBA
----------------
for the Shares if $350 per share, or $3,231,900 (the "Purchase Price"), to be
paid by the certified check or wire transfer.
2.3. Accrued 3% Preferred Dividends. Because the SSBIC is not Distressed,
------------------------------
the payment of the Purchase Price by the SSBIC shall not extinguish the unpaid
dividends accrued on the Shares to the date of this Agreement in the amount of
$0.00. Such accrued dividends will be reduced on a straight line basis over a
period of five years as set forth in Section 3.4 hereof.
ARTICLE 3. PREFERENTIAL LIQUIDATING INTEREST AND SECURITY INTEREST;
--------------------------------------------------------
TREATMENT OF ACCRUED DIVIDENDS
------------------------------
3.1. Grant of Liquidating Interest. In consideration for the approval and
-----------------------------
sale of the Shares at the Purchase Price,
(a) the SSBIC has established a new capital account designated Restricted
contributed Capital Surplus which, pursuant to Section 5.16 hereof,
the SSBIC agrees to credit in an amount equal to the Discount, and
(b) the SSBIC hereby grants to SBA the Liquidating Interest in the
Restricted Contributed Capital Surplus account.
The initial value of the Liquidating Interest shall be equal to the amount of
the Discount and shall decline on a straight-line basis at the end of each month
by an amount equal to 1/60th (1.6667%) of its original amount. Upon the
occurrence of any Event of Default (as hereinafter defined) the value of the
Liquidating Interest shall become fixed at the level immediately preceding the
Event of Default And shall not decline further until such time as the default is
cured or waived.
3.2. Expiration of the Liquidating Interest. The Liquidating Interest
--------------------------------------
shall expire on (i) the date sixty (60) months from the date of this Agreement,
or (ii) if an Event of Default has occurred and such default has been cured or
waived, such later date on which the Liquidating Interest is fully amortized.
-3-
<PAGE>
3.3. Effect of Liquidation on Liquidating Interest. The SSBIC agrees that
---------------------------------------------
if, prior to the expiration of the Liquidating Interest as set forth above, its
Board of Directors or its shareholders authorizes the liquidation of the SSBIC,
or a judicial order is issued directing the voluntary or involuntary liquidation
of the SSBIC, or SBA initiates receivership or liquidation proceedings, any
assets which are available after the payment or the provision for the payment of
all debts of the SSBIC shall be distributed first to SBA, until the fair market
value of such assets is equal to the amount of the Liquidating Interest or all
remaining assets have been distributed to SBA. [For non-Distressed licensees,
see also Section 3.4 hereof.]
3.4. Treatment of Accrued 3% Preferred Dividends. Unpaid dividends on the
-------------------------------------------
Shares which are accrued to the date of this Agreement will be extinguished over
the five year period which begins at the date of this Agreement. The amount of
such dividends shall be reduced on a straight-line basis at the end of each
month by an amount equal to 1/60th (1.6667%) of the amount of such dividends on
the date hereof. The "unamortized" balance of accrued dividends shall be paid
to SBA before any distribution may be made to any shareholders of the SSBIC
other than SBA. Upon the occurrence of any event set forth in Section 3.3
hereof, the "unamortized" balance of accrued dividends shall be immediately
payable to SBA. [See also Section 5.5 hereof.]
ARTICLE 4. CONDITIONS PRECEDENT
--------------------
The agreement of SBA to sell the Shares to the SSBIC on the terms set forth
herein is subject to the satisfaction of the following conditions precedent:
4.1. Execution of this Agreement. SBA shall have received one or more
---------------------------
originals of this Agreement, executed and delivered by the Corporate Official of
the SSBIC.
4.2. Corporate Proceedings. SBA shall have received a copy of the
---------------------
resolutions, in the form attached hereto as Exhibit A, of the Board of Directors
of the SSBIC authorizing
(i) the execution, delivery and performance of the Repurchase Documents,
(ii) the grant of the Liquidating Interest to SBA,in each case certified
by the Secretary of the SSBIC as of the date hereof, with such
certificate stating that the resolutions have not been amended,
modified, revoked or rescinded as of the date of such certificate.
4.3. Charter Amendment and New Capital Account. SBA shall have received
-----------------------------------------
evidence satisfactory to it that the SSBIC has amended its charter or Articles
of Incorporation to provide for the Liquidating Interest and has established the
Restricted Contributed Capital Surplus Account in its system of accounts.
4.4. Opinion of Counsel. SBA shall have received an opinion of counsels
------------------
in the form attached hereto as Exhibit B, from independent counsel satisfactory
to SBA.
-4-
<PAGE>
4.5. Additional Matters. All proceedings and all documents, instruments
------------------
and other legal matters in connection with the repurchase and sale contemplated
herein shall be satisfactory in form and substance to SBA.
ARTICLE 5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SSBIC
------------------------------------------------------
In order to induce SBA to enter into this Agreement and to allow the SSBIC to
repurchase its 3% preferred stock at the Purchase Price, the SSBIC hereby
represents and warrants to and agrees with SBA that:
5.1. Organization and Good Standing. The SSBIC is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The SSBIC is duly licensed as a small business
investment company under Section 301(d) of the Act.
5.2. Authority. The SSBIC has the power, authority and legal right to
---------
execute, deliver and perform the Repurchase Documents, and the SSBIC has taken
all necessary action to authorize the execution, delivery and performance of the
Repurchase Documents. No consent of any other person or entity is required in
connection with the execution, delivery, performance, validity or enforceability
of the Repurchase Documents by or against the SSBIC. The Repurchase Documents
have been executed and delivered by the Corporate Official of the SSBIC and the
Repurchase Documents constitute the legal, valid and binding obligations of the
SSBIC enforceable against the SSBIC in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity.
5.3. Agreement to Remain in the SSBIC Program. The SSBIC agrees to remain
----------------------------------------
as an active licensee (within the meaning of 13 CFR (S) 107.902) in the SSBIC
Program for a period of at least five years from the date of this Agreement.
5.4. No Violations. The SSBIC is not in violation of its charter or by-
-------------
laws, or its small business investment company license, or any of the provisions
of the Act or the SBA Regulations except as disclosed to SBA. The execution,
delivery and performance of the Repurchase Documents will not violate any
provision of any existing law and will not result in any violation of the
charter or by-laws of the SSBIC and will not constitute a default under or a
violation of any agreement to which the SSBIC is a party, and will not result in
the imposition of any lien on any of the SSBIC's assets.
5.5. Management and Ownership. There has been no change in the officers,
------------------------
directors, beneficial owners of 10 percent or more of the securities of the
SSBIC, or the control (as defined in SBA Regulations) of the SSBIC, since the
issuance of its small business investment company license, except as indicated
by post-licensing amendment(s) heretofore filed with and approved by SBA. The
SSBIC will not change any of its officers, directors, managers or investment
advisers, and will not allow any change in the beneficial owners of 10 percent
or more of its securities, without the prior written approval of SBA granted
subsequent to the date hereof. [For non-Distressed Licensees: if a change of
ownership of the SSBIC occurs after
-5-
<PAGE>
April 1, 1994, the "unamortized" balance of accrued dividends at the time of the
ownership change must be paid to SBA before any distributions are made to the
shareholders (other than SBA) of the SSBIC. The monetary amount of this
obligation to pay SBA will not decline further with the passage of time. For
purposes of this subsection, a change of ownership of the SSBIC shall be deemed
to have occurred only if any current stockholder in the SSBIC receives anything
of value for conveyance or exchange of all or part of its interest, other than
as permitted under 13 CFR (S) 107.802.]
5.6. Investment Policy Operations and Capital. There has been no change
----------------------------------------
in the investment policy or operations, and no decrease in the capital, of the
SSBIC since the issuance of its small business investment company license,
except as indicated by post-licensing amendment(s) and financial reports
heretofore filed with and approved by SBA. The SSBIC will not change its
investment policy or operations and will not decrease capital without the prior
written approval of SBA granted subsequent to the date hereof.
5.7. Material Adverse Change. There has been no material adverse change
-----------------------
in the financial condition of the SSBIC since the filing of its last fiscal
year-end audited Financial Report (SBA Form 468), dated March 31, 1994 (the
"Audited Financial Report").
5.8. Financial Condition. The Audited Financial Report presents fairly
-------------------
the financial condition of the SSBIC as of the date of such report, and was
prepared in accordance with SBA Regulations. The SSBIC has no contingent assets
in the form of claims or contingent liabilities not provided for or disclosed in
the Audited Financial Report.
5.9. No Litigation. There is no claim, action, suit or proceeding pending
-------------
or, to the knowledge of the SSBIC, threatened against or relating to the SSBIC
or any of its affiliates before any court or governmental authority (including
without limitation any proceeding or action for the assessment or collection of
additional taxes) which might have a material adverse effect on the business,
assets or financial condition of the SSBIC.
5.10. No Liens, etc. The SSBIC has good and marketable title to all its
--------------
Assets, subject to no liens except as set forth in Schedule I hereto. The SSBIC
has not contracted with any person or entity the result of which is the
attachment or perfection of any security interest in any of the SSBIC's Assets
or contingent claims, nor has the SSBIC pledged, hypothecated, or assigned any
of its Assets or contingent claims except as reported in the Application or
disclosed on Schedule I hereto.
5.11. Insider Financing. The SSBIC has no outstanding loans, investments
-----------------
in, or advances to or from any officer, director, stockholder, or other
Associate (as defined in 13 CFR Section 107.3) of the SSBIC not heretofore
disclosed to SBA and, if required, approved in writing by SBA; nor has the SSBIC
made or received any loan, investment, or advance to or from any of its
Associates or, knowingly, to or from any Associate of another licensed
specialized or regular small business investment company, without disclosure to
SBA or, if required, SBA's prior written approval.
5.12. No Redemption. Notwithstanding the provisions of Section 107.802 of
-------------
SBA Regulations, as long as this Agreement is in effect, the SSBIC will not
purchase, redeem, retire
-6-
<PAGE>
or otherwise acquire directly or indirectly any shareholder's interest in the
SSBIC now or hereafter outstanding, or set aside any sum for such purpose,
without the prior written consent of SBA granted subsequent to the date hereof.
5.13. Indebtedness. As long as this Agreement is in effect, the SSBIC will
------------
not, without the prior written consent of SBA granted subsequent to the date
hereof, create, incur, assume or suffer to exist any secured Indebtedness.
Notwithstanding the provisions of the preceding sentence, the SSBIC may retain
any Indebtedness existing on the date hereof set forth on Schedule II hereof,
and any Indebtedness resulting from the refinancing of any such Indebtedness,
provided that the principal amount of any such refinancing Indebtedness (as
- - - --------
determined as of the date of the incurrence of such refinancing Indebtedness)
does not exceed the principal amount of the Indebtedness refinanced thereby.
5.14. No SBA Funds. No portion of the Purchase Price shall be derived,
------------
either directly or indirectly, from the issuance of preferred stock to SBA or
from funds acquired from or guaranteed by SBA after November 21, 1989. Payments
made within 90 days of such issuance of preferred stock or receipt of SBA funds
shall be presumed to have been derived therefrom.
5.15. Cancellation of Stock. The SSBIC will take any and all action
---------------------
necessary to cancel the Shares immediately upon the repurchase and receipt
thereof from SBA.
5.16. Restricted Contributed Capital Surplus Account. The SSBIC hereby
----------------------------------------------
agrees that the Restricted Contributed Capital Surplus Account will be used
solely for the purpose of recording the Discount on the accounts of the SSBIC.
The SSBIC further agrees that, within 30 days of the consummation of the
purchase of the Shares, the appropriate series of accounting entries will be
made, in accordance with generally accepted accounting principles, to reflect
the purchase transaction and to credit the Restricted Contributed Capital
Surplus Account in a dollar amount equal to the Discount.
5.17. Regulatory Treatment. Notwithstanding anything contained in SBA
--------------------
Regulations to the contrary, the balance in the Restricted Contributed Capital
Surplus Account shall:
(a) be included in the definition of Regulatory Capital set forth in 13
CFR (S) 107.3:
(i) for the purpose of calculating the overline limitation pursuant
to 13 CFR (S) 107.303; and
(ii) for the purpose of calculating Capital Impairment pursuant to
SBA Regulations;
(b) not be included in the definition of Private Capital or Regulatory
Capital set forth in 13 CFR (S) 107.3:
(i) for the purpose of reaching the Minimum capital requirement
pursuant to 13 CFR (S) 107.101(e); or
-7-
<PAGE>
(ii) for any other purpose not set forth above;
(c) not be included in the definition of Leverageable Capital set forth
in 13 CFR (S) 107.3;
(d) not be considered assets, income or gain for any purpose whatsoever,
including the determination of compensation for any officer or
employee of the SSBIC; and
(e) not be used for any other purpose not set forth above.
5.18. Leverage. The balance in the Restricted Contributed Capital Surplus
--------
Account shall not be considered outstanding Leverage for purposes of SBA
Regulations; provided, however, that the balance in the Restricted Contributed
Capital Surplus Account shall be considered outstanding Leverage for purposes of
13 CFR (S) 107.802, but only to the extent of the value of the Liquidating
interest at that time.
5.19. Misrepresentation. None of the Repurchase Documents, or any
-----------------
statement, financial statement, or certification furnished to SBA by or on
behalf of the SSBIC in connection therewith, contains an untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein not misleading or, insofar as the SSBIC can now
foresee, may in the future materially adversely affect the Assets or the
financial condition of the SSBIC. All statements, representations and
warranties made in this Agreement and the other Repurchase Documents are true
and complete and are made for the purpose of inducing SBA to enter into this
Agreement and consummate the transactions contemplated hereunder, and are made
with the full knowledge of the provisions of 15 U.S.C. 645, 18 U.S.C. 1001, and
18 U.S.C. 1006, which provide certain criminal penalties for making false
statements or representations.
ARTICLE 6. EXPENSES
--------
The SSBIC agrees to pay all reasonable expenses incurred by the SSBIC and
SBA which are directly related to the negotiation and preparation of this
Agreement and the other Repurchase Documents or to the consummation of the
transactions provided for herein and therein. Such expenses include but are not
limited to legal fees, accounting fees, consultant fees, filing and documentary
fees, administrative fees, and any user fee SBA may deem appropriate to recover
the costs and provide for the administration of the transactions contemplated
herein.
SBA represents that the $2,000.00 paid upon the submission of the
Repurchase Application will cover the SBA expenses incurred with respect to this
transaction.
ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES
------------------------------
7.1. Events of Default. The occurrence of one or more of the events
-----------------
listed below ("Events of Default") shall constitute an Event of Default:
-8-
<PAGE>
(a) Covenants and Agreements: The SSBIC shall default in the observance
------------------------
or performance of any covenant or agreement contained in this
Agreement or the other Repurchase Documents, and such default shall
be material and shall continue unremedied for a period of 30 days
after the SSBIC knew or should have known of its existence, or such
longer period as may be agreed to by SBA; or
(b) Representations and Warranties. The SSBIC shall have knowingly made
------------------------------
a false or materially incorrect representation or warranty in any of
the Repurchase Documents on or as of the date when made or deemed to
have been made, or any of the Repurchase Documents shall prove to
have been incomplete, incorrect, false or misleading in any material
respect on or as of the date thereof; or
(c) Sale of Assets. If without the prior written consent of SBA granted
--------------
subsequent to the date hereof, the SSBIC shall, other than in the
ordinary course of business, sell, contract to sell, lease, assign,
mortgage, dispose of or otherwise transfer any of its Assets, or any
part thereof or interest therein, whether now owned or hereafter
acquired, either permanently, temporarily, finally or contingently;
or
(d) Bankruptcy or Reorganization.
----------------------------
(i) The SSBIC shall commence any case, proceeding or other action:
a) under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to
it or its debts, or
b) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any
substantial part of its assets, or the SSBIC shall make a
general assignment for the benefit of creditors,
(ii) there shall be commenced against the SSBIC any case, proceeding
or other action of a nature referred to in clause (i) above
which results in the entry of an order for relief or any such
adjudication or appointment or remains undismissed,
undischarged or unbonded for a period of 60 days,
(iii) there shall be commenced against the SSBIC any case, proceeding
or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any
substantial part of its
-9-
<PAGE>
Assets which results in the entry of an order for such relief
which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof,
(iv) the SSBIC shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the acts set forth in this Section 7.1(d), or
(v) the SSBIC shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become
due; or
(e) Failure to Remain an Active SSBIC. The SSBIC shall become inactive (as
---------------------------------
defined in 13 CFR (S) 107.902).
(f) Preservation of SBA Liquidation Interest. The SSBIC or any of its
----------------------------------------
Associates, without SBA's prior written approval granted subsequent to the date
hereof, enters into any transaction, or permits any transaction the financial,
legal, or economic effect of which creates a significant deterioration in the
value of SBA's Liquidating Interest prior to the expiration date thereof as set
forth in this Agreement; or
(g) Dividends, Distributions, Benefits, Payments. The SSBIC, without the
--------------------------------------------
prior written consent of SBA granted subsequent to the date hereof, declares,
grants, contracts for, or pays any benefit, dividend or distribution in cash or
in kind (excluding any distribution of additional shares of the SSBIC's stock to
existing shareholders) to or for the benefit of any of its shareholders (other
than SBA), directly or indirectly [, except for divdidends or distributions out
of Retained Earnings Available for Distribution as computed on SBA Form 468]
[insert bracketed clause only if SSBIC has no accrued 3% dividends or is
Distressed]; or makes any payment, whether due or in advance of any due date, on
any obligation or debt due to any Associate, or to any other regular or
specialized small business investment company or any Associate thereof; provided
however, that the SSBIC may pay the management fee to an affiliate if previously
approved by SBA, and provided further that after the SSBIC has fully "amortized"
the accrued 3% preferred stock dividends or has paid the "unamortized" balance
of such dividends, the SSBIC may pay dividends or distributions out of Retained
Earnings Available for Distribution as computed on SBA Form 468; or
(h) Remuneration, Fees, Salaries, Benefits, Emoluments. The SSBIC, without
--------------------------------------------------
SBA's prior written approval granted subsequent to the date hereof, increases
the remuneration, fees, salaries, benefits or emoluments of any Associate; or
(i) Judgments and Decrees. One or more judgments or decrees shall be
---------------------
entered against the SSBIC involving in the aggregate a liability (not paid or
not fully covered by insurance as to which the insurer has not disclaimed
liability) of $500,000 or more and all such judgments or decrees shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or
(j) Violation of Government Regulations; Cross-Default. The SSBIC
--------------------------------------------------
violates, knowingly or intentionally, any of the material provisions of the Act
or SBA Regulations; or
-10-
<PAGE>
violates any material provision of any agreement with SBA; or is in default on
any obligation to SBA including the provisions of any Debenture or Preferred
Security or Participating Security issued to, or guaranteed by, SBA in
connection with Leverage.
7.2. Remedies. Upon the occurrence of any Event of Default, SBA, directly
--------
or through its duly appointed representative, shall be entitled to any and all
remedies available to SBA under the Act, SBA Regulations, any other agreements,
and other applicable law and regulation.
ARTICLE 8. TERMINATION
-----------
This Agreement shall be in all respects a continuing agreement and shall
remain in full force and effect until such time as all obligations under this
Agreement and the other Repurchase Documents shall be satisfied in full and the
Liquidating Interest shall have expired.
ARTICLE 9. MISCELLANEOUS
-------------
9.1. Notices. All notices, consents, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing, and shall be
deemed to have been duly given or made when delivered by hand or when deposited
in the mail, certified mail, return receipt requested, postage or delivery
prepaid, to the address appearing on the first page hereof or to such other
address as may be hereafter designated by any of the parties hereto.
9.2. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith, including without
limitation, the other Repurchase Documents and the Application, shall survive
the execution and delivery of this Agreement.
9.3. No Waiver. SBA shall not by Any act, delay, omission or otherwise be
---------
deemed to have waived any right or remedy hereunder or to have acquiesced in any
default or in any breach of any of the terms and conditions hereof The rights
and remedies herein provided are not exclusive of any rights or remedies
provided by law.
9.4. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.5. Paragraph Headings. The paragraph headings used in this Agreement
------------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
9.6. Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts and each such
counterpart shall be deemed to be an original, and all such counterparts taken
together shall be deemed to constitute one and the same instrument.
-11-
<PAGE>
9.7. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the SSBIC and SBA and their respective successors and
assigns except that the SSBIC may not assign or transfer any of its respective
rights or obligations under this Agreement without the prior written consent of
SBA.
9.8. Governing Law. This Agreement and the other Repurchase Documents and
-------------
the rights and obligations of the parties under this Agreement and the other
Repurchase Documents, shall be governed by, and construed and interpreted in
accordance with, applicable Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
MEDALLION FUNDING CORP.
By /s/ Alvin Murstein
-------------------------------------------
President
U.S. SMALL BUSINESS ADMINISTRATION
By /s/ Don A. Christensen
-------------------------------------------
Don A. Christensen
Associate Administrator for Investment
-12-
<PAGE>
SCHEDULE I
Liens
-----
NAMES AND ADDRESS OF BANK
- - - -------------------------
National Westminster Bank USA*
175 Water Street
New York, New York 10038
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Bank Hapoalim B.M.
75 Rockefeller Plaza
New York, New York 10019
The Bank of Tokyo Trust Company
1251 Avenue of Americas
New York, New York 10005
Sterling National Bank and
Trust Company of New York
540 Madison Avenue
New York, New York 10022
Israel Discount Bank of New York
511 Fifth Avenue
New York, New York 10022
European American Bank
One Rockefeller Plaza
New York, New York 11020
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, Massachusetts 02109
* Collateral agent for all Banks.
-13-
<PAGE>
SCHEDULE II
Indebtedness
------------
Medallion Funding Corp.'s Revolving Credit Facility provided by the secured lien
holders listed on Schedule I in the maximum amount of $65,000,000 plus accrued
interest and commitment fees.
-14-
<PAGE>
EXHIBIT 5
Page 1 of 3 Pages
========================================================
Disclosure of Violations of Charter, By-Laws, the
Small Business Investment Act of 1958, as amended
(the "Act"), and/or 13 CFR Part 107
========================================================
Violation of: [_] Charter
[_] By-Laws
[_] Act
[X] 13 CFR Part 107
Specific Provision Violated: Prohibited use of funds -- passive businesses.
--------------------------------------------------
______________________________________________________________________________
______________________________________________________________________________
Reason For Violation: financings to Shusterman Group, Cafe Service Corp., and
---------------------------------------------------------
Chosica Hacking Co.
- - - ------------------------------------------------------------------------------
______________________________________________________________________________
______________________________________________________________________________
Planned Action to Cure Violation: OI permits MFC to retain investments in
---------------------------------------------
portfolio pursuant to Tom Neal letter of 6/6/94 Shusterman group investments
- - - ------------------------------------------------------------------------------
have been divested.
- - - ------------------------------------------------------------------------------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Was this violation disclosed to SBA prior to the date hereof?
[X] Yes [_] No
If not, explain why disclosure not made.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_______________________________________________________ ___________________
Authorized Corporate Official Date
(A separate page must be prepared for each violation.)
-15-
<PAGE>
EXHIBIT 5
Page 2 of 3 Pages
=========================================================
Disclosure of Violations of Charter, By-Laws, the
Small Business Investment Act of 1958, as amended
(the "Act"), and/or 13 CFR Part 107
=========================================================
Violation of: [_] Charter
[_] By-Laws
[_] Act
[X] 13 CFR Part 107
Specific Provision Violated: Activity not contemplated by the Act.
----------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
Reason For Violation: Weingarten/Popovic group financings
-----------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
Planned Action to Cure Violation: OI permits MFC to retain investments in
-----------------------------------------------
portfolio until contractual maturity pursuant to letter from Tom Neal of 6/6/94.
- - - --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Was this violation disclosed to SBA prior to the date hereof?
[X] Yes [_] No
If not, explain why disclosure not made.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________ _________________
Authorized Corporate Official Date
(A separate page must be prepared for each violation.)
-16-
<PAGE>
EXHIBIT 5
Page 3 of 3 Pages
========================================================
Disclosure of Violations of Charter, By-Laws, the
Small Business Investment Act of 1958, as amended
(the "Act"), and/or 13 CFR Part 107
========================================================
Violation of: [_] Charter
[_] By-Laws
[_] Act
[X] 13 CFR Part 107
Specific Provision Violated: Activity not contemplated by the Act. Loan #'s
----------------------------------------------------
494-4&5 Bursa Cab Corp., #610-3 Edna Cab Corp., #1904-1 Rita & Ruben Cab Corp.,
- - - --------------------------------------------------------------------------------
#1909-1 Kibbe Cab Corp., N.Y. Berts Cab Corp.
- - - --------------------------------------------------------------------------------
________________________________________________________________________________
Reason For Violation: Eligibility for SSBIC financing as determined by
-----------------------------------------------------------
compliance committee of MFC.
- - - --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
Planned Action to Cure Violation: Divestiture. Bursa Cab and Edna Cab were
-----------------------------------------------
divested. Others are pending.
- - - --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Was this violation disclosed to SBA prior to the date hereof?
[X] Yes [_] No
If not, explain why disclosure not made.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________ ________________
Authorized Corporate Official Date
(A separate page must be prepared for each violation.)
-17-
<PAGE>
EXHIBIT A
BOARD OF DIRECTORS RESOLUTION
TO ACCOMPANY
REPURCHASE AGREEMENT
I, Myron Cohen, Secretary of Medallion Funding Corp., a corporation of the
State of New York (the "Corporation"), hereby certify that the following is a
true and complete copy of a resolution adopted by the Board of Directors of the
Corporation at a meeting duly called and held on August 11, 1994, at which a
quorum was present throughout, and that the said resolution has not been amended
modified or repealed.
Resolved, that
(1) The Board of Directors of this Corporation deems at advisable and in
the best interests of this Corporation to enter into the Specialized
Small Business Investment Company 3% Preferred Stock Repurchase
Agreement (the "Repurchase Agreement") with the Small Business
Administration ("SBA"), dated August 12, 1994, pursuant to which this
Corporation will purchase from SBA 9,234 shares of this Corporation's
3% Preferred Stock, the par value of which is equal to $1,000 (the
"Shares"), at a price of $350.00 per share or $3,231,900 in the
aggregate, paid in cash; and that such Repurchase Agreement is hereby
authorized and approved in all respects; and
(2) Alvin Murstein, President, Myron Cohen, Secretary ("Corporate
Officials") are hereby authorized in the name and on behalf of this
Corporation to prepare, file, and execute the Repurchase Agreement
and all documentation and instruments required by SBA in connection
with such Repurchase Agreement; and
(3) This Corporation is hereby authorized to consummate all transactions
contemplated by the Repurchase Agreement; and
(4) This Corporation is hereby authorized to grant to SBA a Liquidating
Interest (as defined in the Repurchase Agreement) in the Restricted
Contributed Capital Surplus Account on terms and conditions set forth
in the Repurchase Agreement and presented for approval to the
stockholders of this Corporation for their vote thereon and to be
evidenced by the filing of an amendment to the Corporation's charter
documents of Articles of Incorporation; and
(5) The Corporate Official(s) are hereby authorized and empowered to
execute and deliver, in the name and on behalf of this Corporation,
all such other and further instruments and documents, and to do and
perform all such acts and things, as may be necessary or desirable in
connection with the purchase of the Shares by this Corporation from
SBA, or any transaction contemplated by the Application or the
Repurchase Agreement, or otherwise in connection with the business of
this Corporation and to carry out the intent and accomplish the
purpose of ad of the foregoing paragraphs.
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<PAGE>
IN WITNESS HEREOF, I have executed this certificate and caused the seal of
the Corporation to be affixed hereto this 11th day of August, 1994.
/s/ Daniel Baker
--------------------------------------------
Acting Assistant Secretary
CORPORATE SEAL
______________________________
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<PAGE>
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20146
June 1, 1995
Mr. Mark Hornstein
Chairman/President
Transportation Capital Corp.
315 Park Avenue South
New York, NY 10010
This is to confirm our understanding as to the conditions under which the Small
Business Administration ("SBA") will agree to consider the application of
Transportation Capital Corp. ("Transportation") to repurchase at a discount it
3% preferred stock (the "Preferred Stock") held by SBA. All capitalized terms
used but not defined herein shall have the meanings ascribed thereto in Part 107
of Title 13 of the Code of Federal Regulations.
Transportation hereby agrees that if SBA sells the Preferred Stock to
Transportation at a discount, Transportation will immediately adopt and observe
the following investment policy in addition to satisfying the conditions and
covenants set forth in the Specialized Small Business Investment Company 3%
Preferred Stock Repurchase Agreement dated March 22, 1995, by and between
Transportation and SBA ("Agreement").
(1) Applications for Leverage submitted by Transportation after the date
hereof will be considered by SBA only if Transportation has, at such
time, non-medallion financings or Commitments to make non-medallion
financings in an aggregate amount at least equal to the requested
amount of Leverage. Until such Leverage is repaid in full,
Transportation shall maintain, at all times, non-medallion financings
in an amount at least equal to such Leverage. For purposes of this
paragraph, "non-medallion financings" shall mean financings other than
financings of the purchase or sale of taxi medallion and other
medallion related activities.
(2) Each Debenture issued by Transportation which is currently outstanding
shall be paid in full at maturity.
This letter agreement, if countersigned by Transportation, will constitute a
written agreement within the meaning of 13 C.F.R. 107.906(a) and any failure to
comply with any of the terms hereof will constitute nonperformance of this
letter. This letter will also constitute a Repurchase Document (as defined in
the Agreement) and any failure to comply with any of the terms hereof will also
constitute an Event of Default under Section 7.1 of the Repurchase Agreement.
This letter agreement, if countersigned by Transportation, shall be in full
force and effect until such time as both Transportation and SBA agree in writing
to its termination or modification.
Prior to the sale of the Preferred Stock by SBA to Transportation, SBA shall be
satisfied that any regulatory violations have been cured.
Prior to any sale of the Preferred Stock by SBA to Transportation,
Transportation will provide
<PAGE>
an opinion of independent counsel that Mark Hornstein has the power and
authority to enter into this letter agreement on behalf of Transportation and
that this letter agreement is a valid and binding agreement of Transportation,
enforceable in accordance with its terms.
Very truly yours,
/s/ Robert D. Stillman
Associate Administrator for Investment
AGREED AND ACCEPTED:
Transportation Capital Corp.
By: /s/ Mark Hornstein
--------------------
Chairman/President
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<PAGE>
[ALL CASH-EQUITY RAISE]
SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY
3% PREFERRED STOCK REPURCHASE AGREEMENT
---------------------------------------
This Repurchase Agreement ("Agreement"), dated March 22, 1995, by and
between Transportation Capital Corp. (the "SSBIC"), a small business investment
company licensed under Section 301(d) of the Small Business Investment Act of
1958, as amended (15 U.S.C. Sections 661 et. seq.) (the "Act"), having an office
at 315 Park Avenue South, New York, New York 10010 and the U.S. Small Business
Administration ("SBA"), an agency of the United States and its successors and
assigns, located at 409 Third Street, S.W., Washington, D.C. 20416.
WITNESSETH:
WHEREAS, pursuant to Public Law 101-162 (November 21, 1989), SBA is
authorized to allow the issuer of any 3% preferred stock sold to SBA to redeem
or repurchase such stock upon the payment to SBA of an amount less than the par
value of the stock;
WHEREAS, SBA is the owner of 3,3831/3 shares (the "Shares") of $1,000 par
value per share three percent (3%) preferred stock (the "Preferred Stock"), of
which the SSBIC is the issuer;
WHEREAS, the SSBIC has completed an "Application for Repurchase of 3%
Preferred Stock held by the Small Business Administration pursuant to Public Law
1O1-162, November 21, 1989," dated March 22, 1995 (the "Application"), which is
hereby incorporated herein by reference, pursuant to which the SSBIC has applied
to SBA for the repurchase of all of the Shares;
WHEREAS, SBA has determined that the SSBIC is not Distressed (as defined in
Article 1); and
WHEREAS, the SSBIC desires to repurchase from SBA, and SBA desires to sell
to the SSBIC, the Shares upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the value received and the covenants
contained herein, the parties hereto hereby represent and agree as follows:
ARTICLE 1. DEFINITIONS
-----------
-3-
<PAGE>
For the purposes of the Repurchase Documents (as defined below), the
following terms shall have the meanings assigned to them in this Article 1; all
other capitalized terms shall have the meanings assigned to them in Part 107 of
Title 13 of the Code of Federal Regulations:
"Application" shall mean the Application dated March 22, 1995 for the
Repurchase of 3% Preferred Stock Held By the U.S Small Business Administration
Pursuant to Public Law 101-162, November 21, 1989.
"Assets" shall mean all of the SSBIC's real or personal property (tangible
or intangible) of whatever nature and wherever located, whether now owned or
hereafter acquired, including but not limited to, all fixed assets, fixtures,
cash, inventory, notes receivable, accounts receivable, contract rights, choses
in action, causes of action, instruments, documents, electronic business
records, licenses, warranties, rights to indemnification, leasehold and
subleasehold interests in real or personal property, security interests held by
or granted to the SSBIC, tax refunds, tax refund claims, partnership and joint
venture interests, goodwill, general intangibles, all securities including
common stock, preferred stock, stock options, warrants, rights to purchase
securities, and debentures, and all rights to payment of money, together with
all additions and accessions thereto, all replacements and substitutions
thereof, all proceeds thereof, and all assets created therefrom.
"Corporate Official" shall mean those officer(s) of the corporation
authorized in the name and on the behalf of the SSBIC to prepare, file, and
execute all documentation and instruments required by SBA in connection with the
Application.
"Discount" shall mean the amount by which the aggregate par value of the 3%
preferred stock being repurchased exceeds the Purchase Price.
"Distressed" shall mean a financial condition of a small business
investment company, evidenced by its having, as of the fiscal year end
immediately preceding April 1, 1994, undistributed realized losses and a capital
impairment percentage (as defined in 13 CFR Part 107) of at least 10%.
"Indebtedness" shall mean (a) all indebtedness for borrowed money, and (b)
all obligations evidenced by bonds, debentures, notes or other similar
instruments.
"Liquidating Interest" shall mean a preferential limited ownership interest
in the Restricted Contributed Capital Surplus account granted to SBA by the
SSBIC as of the date of this Agreement. The initial value of the Liquidating
Interest shall equal the amount of the Discount.
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Repurchase Documents" shall mean this Agreement, the Application, and any
other documents furnished by the SSBIC in connection with this transaction and
any and all ancillary documents and statements executed, delivered or filed in
connection therewith, as they may be amended from time to time.
-4-
<PAGE>
"Restricted Contributed Capital Surplus" shall have the meaning set forth
in Section 3.1 hereof.
"SBA Regulations" shall mean Part 107 of Title 13 of the Code of Federal
Regulations, as amended.
"Shares" shall mean the aggregate number of shares of 3% preferred stock
being repurchased, as set forth in the recitals hereto.
ARTICLE 2. REPURCHASE AND SALE OF SHARES
-----------------------------
2.1. Repurchase and Sale. On the terms and subject to the conditions
-------------------
hereinafter set forth, the SSBIC hereby agrees to repurchase from SBA, and SBA
agrees to sell, convey, transfer and assign to the SSBIC the Shares.
2.2. Price To Be Paid. The purchase price to be paid by the SSBIC to SBA
----------------
for the Shares is $350 per share, or $1,184,166.55 (the "Purchase Price"), to be
paid by the certified check or wire transfer.
2.3. Accrued 3% Preferred Dividends. Because the SSBIC is not
------------------------------
Distressed, the payment of the Purchase Price by the SSBIC shall not extinguish
the unpaid dividends accrued on the Shares to the date of this Agreement in the
amount of $152,250. Such accrued dividends will be reduced on a straight line
basis over a period of five years as set forth in Section 3.4 hereof.
ARTICLE 3. PREFERENTIAL LIQUIDATING INTEREST AND SECURITY INTEREST;
--------------------------------------------------------
TREATMENT OF ACCRUED DIVIDENDS
------------------------------
3.1. Grant of Liquidating Interest. In consideration for the approval
-----------------------------
and sale of the Shares at the Purchase Price,
(a) the SSBIC has established a new capital account designated
Restricted Contributed Capital Surplus which, pursuant to Section
5.16 hereof, the SSBIC agrees to credit in an amount equal to the
Discount, and
(b) the SSBIC hereby grants to SBA the Liquidating Interest in the
Restricted Contributed Capital Surplus account.
The initial value of the Liquidating Interest shall be equal to the amount of
the Discount and shall decline on a straight-line basis at the end of each month
by an amount equal to 1/60th (1.6667%) of its original amount. Upon the
occurrence of any Event of Default (as hereinafter defined) the value of the
Liquidating Interest shall become fixed at the level immediately preceding the
Event of Default And shall not decline further until such time as the default is
cured or waived.
3.2. Expiration of the Liquidating Interest. The Liquidating Interest
--------------------------------------
shall expire on (i) the date sixty (60) months from the date of this Agreement,
or (ii) if an Event of Default has
-5-
<PAGE>
occurred and such default has been cured or waived, such later date on which the
Liquidating Interest is fully amortized.
3.3. Effect of Liquidation on Liquidating Interest. The SSBIC agrees
---------------------------------------------
that if, prior to the expiration of the Liquidating Interest as set forth above,
its Board of Directors or its shareholders authorizes the liquidation of the
SSBIC, or a judicial order is issued directing the voluntary or involuntary
liquidation of the SSBIC, or SBA initiates receivership or liquidation
proceedings, any assets which are available after the payment or the provision
for the payment of all debts of the SSBIC shall be distributed first to SBA,
until the fair market value of such assets is equal to the amount of the
Liquidating Interest or all remaining assets have been distributed to SBA. [For
non-Distressed licensees, see also Section 3.4 hereof.]
3.4. Treatment of Accrued 3% Preferred Dividends. Unpaid dividends on
-------------------------------------------
the Shares which are accrued to the date of this Agreement will be extinguished
over the five year period which begins at the date of this Agreement. The amount
of such dividends shall be reduced on a straight-line basis at the end of each
month by an amount equal to 1/60th (1.6667%) of the amount of such dividends on
the date hereof. The "unamortized" balance of accrued dividends shall be paid to
SBA before any distribution may be made to any shareholders of the SSBIC other
than SBA. Upon the occurrence of any event set forth in Section 3.3 hereof, the
"unamortized" balance of accrued dividends shall be immediately payable to SBA.
[See also Section 5.5 hereof.]
ARTICLE 4. CONDITIONS PRECEDENT
--------------------
The agreement of SBA to sell the Shares to the SSBIC on the terms set forth
herein is subject to the satisfaction of the following conditions precedent:
4.1. Execution of this Agreement. SBA shall have received one or more
---------------------------
originals of this Agreement, executed and delivered by the Corporate Official of
the SSBIC.
4.2. Corporate Proceedings. SBA shall have received a copy of the
---------------------
resolutions, in the form attached hereto as Exhibit A, of the Board of Directors
of the SSBIC authorizing
(i) the execution, delivery and performance of the Repurchase Documents,
(ii) the grant of the Liquidating Interest to SBA,in each case certified
by the Secretary of the SSBIC as of the date hereof, with such
certificate stating that the resolutions have not been amended,
modified, revoked or rescinded as of the date of such certificate.
4.3. Charter Amendment and New Capital Account. SBA shall have received
-----------------------------------------
evidence satisfactory to it that the SSBIC has amended its charter or Articles
of Incorporation to provide for the Liquidating Interest and has established the
Restricted Contributed Capital Surplus Account in its system of accounts.
4.4. Opinion of Counsel. SBA shall have received an opinion of counsels
------------------
in the form attached hereto as Exhibit E, from independent counsel satisfactory
to SBA.
-6-
<PAGE>
4.5. Additional Matters. All proceedings and all documents, instruments
------------------
and other legal matters in connection with the repurchase and sale contemplated
herein shall be satisfactory in form and substance to SBA.
ARTICLE 5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SSBIC
------------------------------------------------------
In order to induce SBA to enter into this Agreement and to allow the SSBIC to
repurchase its 3% preferred stock at the Purchase Price, the SSBIC hereby
represents and warrants to and agrees with SBA that:
5.1. Organization and Good Standing. The SSBIC is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The SSBIC is duly licensed as a small business
investment company under Section 301(d) of the Act.
5.2. Authority. The SSBIC has the power, authority and legal right to
---------
execute, deliver and perform the Repurchase Documents, and the SSBIC has taken
all necessary action to authorize the execution, delivery and performance of the
Repurchase Documents. No consent of any other person or entity is required in
connection with the execution, delivery, performance, validity or enforceability
of the Repurchase Documents by or against the SSBIC. The Repurchase Documents
have been executed and delivered by the Corporate Official of the SSBIC and the
Repurchase Documents constitute the legal, valid and binding obligations of the
SSBIC enforceable against the SSBIC in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity.
5.3. Agreement to Remain in the SSBIC Program. The SSBIC agrees to
----------------------------------------
remain as an active licensee (within the meaning of 13 CFR (S) 107.902) in the
SSBIC Program for a period of at least five years from the date of this
Agreement.
5.4. No Violations. The SSBIC is not in violation of its charter or by-
-------------
laws, or its small business investment company license, or any of the provisions
of the Act or the SBA Regulations except as disclosed to SBA. The execution,
delivery and performance of the Repurchase Documents will not violate any
provision of any existing law and will not result in any violation of the
charter or by-laws of the SSBIC and will not constitute a default under or a
violation of any agreement to which the SSBIC is a party, and will not result in
the imposition of any lien on any of the SSBIC's assets.
5.5. Management and Ownership. There has been no change in the officers,
------------------------
directors, beneficial owners of 10 percent or more of the securities of the
SSBIC, or the control (as defined in SBA Regulations) of the SSBIC, since the
issuance of its small business investment company license, except as indicated
by post-licensing amendment(s) heretofore filed with and approved by SBA. The
SSBIC will not change any of its officers, directors, managers or investment
advisers, and will not allow any change in the beneficial owners of 10 percent
or more of its securities, without the prior written approval of SBA granted
subsequent to the date hereof. [For non-Distressed Licensees: if a change of
ownership of the SSBIC occurs after
-7-
<PAGE>
April 1, 1994, the "unamortized" balance of accrued dividends at the time of the
ownership change must be paid to SBA before any distributions are made to the
shareholders (other than SBA) of the SSBIC. The monetary amount of this
obligation to pay SBA will not decline further with the passage of time. For
purposes of this subsection, a change of ownership of the SSBIC shall be deemed
to have occurred only if any current stockholder in the SSBIC receives anything
of value for conveyance or exchange of all or part of its interest, other than
as permitted under 13 CFR (S) 107.802.]
5.6. Investment Policy Operations and Capital. There has been no change
----------------------------------------
in the investment policy or operations, and no decrease in the capital, of the
SSBIC since the issuance of its small business investment company license,
except as indicated by post-licensing amendment(s) and financial reports
heretofore filed with and approved by SBA. The SSBIC will not change its
investment policy or operations and will not decrease capital without the prior
written approval of SBA granted subsequent to the date hereof.
5.7. Material Adverse Change. There has been no material adverse change
-----------------------
in the financial condition of the SSBIC since the filing of its last fiscal
year-end audited Financial Report (SBA Form 468), dated December 31, 1994 (the
"Audited Financial Report").
5.8. Financial Condition. The Audited Financial Report presents fairly
-------------------
the financial condition of the SSBIC as of the date of such report, and was
prepared in accordance with SBA Regulations. The SSBIC has no contingent assets
in the form of claims or contingent liabilities not provided for or disclosed in
the Audited Financial Report.
5.9. No Litigation. There is no claim, action, suit or proceeding
-------------
pending or, to the knowledge of the SSBIC, threatened against or relating to the
SSBIC or any of its affiliates before any court or governmental authority
(including without limitation any proceeding or action for the assessment or
collection of additional taxes) which might have a material adverse effect on
the business, assets or financial condition of the SSBIC.
5.10. No Liens, etc. The SSBIC has good and marketable title to all its
--------------
Assets, subject to no liens except as set forth in Schedule I hereto. The SSBIC
has not contracted with any person or entity the result of which is the
attachment or perfection of any security interest in any of the SSBIC's Assets
or contingent claims, nor has the SSBIC pledged, hypothecated, or assigned any
of its Assets or contingent claims except as reported in the Application or
disclosed on Schedule I hereto.
5.11. Insider Financing. The SSBIC has no outstanding loans, investments
-----------------
in, or advances to or from any officer, director, stockholder, or other
Associate (as defined in 13 CFR Section 107.3) of the SSBIC not heretofore
disclosed to SBA and, if required, approved in writing by SBA; nor has the SSBIC
made or received any loan, investment, or advance to or from any of its
Associates or, knowingly, to or from any Associate of another licensed
specialized or regular small business investment company, without disclosure to
SBA or, if required, SBA's prior written approval.
5.12. No Redemption. Notwithstanding the provisions of Section 107.802 of
-------------
SBA Regulations, as long as this Agreement is in effect, the SSBIC will not
purchase, redeem, retire
-8-
<PAGE>
or otherwise acquire directly or indirectly any shareholder's interest in the
SSBIC now or hereafter outstanding, or set aside any sum for such purpose,
without the prior written consent of SBA granted subsequent to the date hereof.
5.13. Indebtedness. As long as this Agreement is in effect, the SSBIC
------------
will not, without the prior written consent of SBA granted subsequent to the
date hereof, create, incur, assume or suffer to exist any secured Indebtedness.
Notwithstanding the provisions of the preceding sentence, the SSBIC may retain
any Indebtedness existing on the date hereof set forth on Schedule II hereof,
and any Indebtedness resulting from the refinancing of any such Indebtedness,
provided that the principal amount of any such refinancing Indebtedness (as
- - - --------
determined as of the date of the incurrence of such refinancing Indebtedness)
does not exceed the principal amount of the Indebtedness refinanced thereby.
5.14. No SBA Funds. No portion of the Purchase Price shall be derived,
------------
either directly or indirectly, from the issuance of preferred stock to SBA or
from funds acquired from or guaranteed by SBA after November 21, 1989. Payments
made within 90 days of such issuance of preferred stock or receipt of SBA funds
shall be presumed to have been derived therefrom.
5.15. Cancellation of Stock. The SSBIC cell take any and all action
---------------------
necessary to cancel the Shares immediately upon the repurchase and receipt
thereof from SBA.
5.16. Restricted Contributed Capital Surplus Account. The SSBIC hereby
----------------------------------------------
agrees that the Restricted Contributed Capital Surplus Account will be used
solely for the purpose of recording the Discount on the accounts of the SSBIC.
The SSBIC further agrees that, within 30 days of the consummation of the
purchase of the Shares, the appropriate series of accounting entries will be
made, in accordance with generally accepted accounting principles, to reflect
the purchase transaction and to credit the Restricted Contributed Capital
Surplus Account in a dollar amount equal to the Discount.
5.17. Regulatory Treatment. Notwithstanding anything contained in SBA
--------------------
Regulations to the contrary, the balance in the Restricted Contributed Capital
Surplus Account shall:
(a) be included in the definition of Regulatory Capital set forth in 13
CFR (S) 107.3:
(i) for the purpose of calculating the overline limitation
pursuant to 13 CFR (S) 107.303; and
(ii) for the purpose of calculating Capital Impairment pursuant to
SBA Regulations;
(b) not be included in the definition of Private Capital or Regulatory
Capital set forth in 13 CFR (S) 107.3:
(i) for the purpose of reaching the Minimum capital requirement
pursuant to 13 CFR (S) 107.101(e); or
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<PAGE>
(ii) for any other purpose not set forth above;
(c) not be included in the definition of Leverageable Capital set forth
in 13 CFR (S) 107.3;
(d) not be considered assets, income or gain for any purpose whatsoever,
including the determination of compensation for any officer or
employee of the SSBIC; and
(e) not be used for any other purpose not set forth above.
5.18. Leverage. The balance in the Restricted Contributed Capital Surplus
--------
Account shall not be considered outstanding Leverage for purposes of SBA
Regulations; provided, however, that the balance in the Restricted Contributed
Capital Surplus Account shall be considered outstanding Leverage for purposes of
13 CFR (S) 107.802, but only to the extent of the value of the Liquidating
interest at that time.
5.19. Misrepresentation. None of the Repurchase Documents, or any
-----------------
statement, financial statement, or certification furnished to SBA by or on
behalf of the SSBIC in connection therewith, contains an untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein not misleading or, insofar as the SSBIC can now
foresee, may in the future materially adversely affect the Assets or the
financial condition of the SSBIC. All statements, representations and warranties
made in this Agreement and the other Repurchase Documents are true and complete
and are made for the purpose of inducing SBA to enter into this Agreement and
consummate the transactions contemplated hereunder, and are made with the full
knowledge of the provisions of 15 U.S.C. 645, 18 U.S.C. 1001, and 18 U.S.C.
1006, which provide certain criminal penalties for making false statements or
representations.
ARTICLE 6. EXPENSES
--------
The SSBIC agrees to pay all reasonable expenses incurred by the SSBIC and
SBA which are directly related to the negotiation and preparation of this
Agreement and the other Repurchase Documents or to the consummation of the
transactions provided for herein and therein. Such expenses include but are not
limited to legal fees, accounting fees, consultant fees, filing and documentary
fees, administrative fees, and any user fee SBA may deem appropriate to recover
the costs and provide for the administration of the transactions contemplated
herein.
SBA represents that the $2,000.00 paid upon the submission of the
Repurchase Application will cover the SBA expenses incurred with respect to this
transaction.
ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES
------------------------------
7.1. Events of Default. The occurrence of one or more of the events
-----------------
listed below ("Events of Default") shall constitute an Event of Default:
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<PAGE>
(a) Covenants and Agreements: The SSBIC shall default in the observance
------------------------
or performance of any covenant or agreement contained in this
Agreement or the other Repurchase Documents, and such default shall
be material and shall continue unremedied for a period of 30 days
after the SSBIC knew or should have known of its existence, or such
longer period as may be agreed to by SBA; or
(b) Representations and Warranties. The SSBIC shall have knowingly made
------------------------------
a false or materially incorrect representation or warranty in any of
the Repurchase Documents on or as of the date when made or deemed to
have been made, or any of the Repurchase Documents shall prove to
have been incomplete, incorrect, false or misleading in any material
respect on or as of the date thereof; or
(c) Sale of Assets. If without the prior written consent of SBA granted
--------------
subsequent to the date hereof, the SSBIC shall, other than in the
ordinary course of business, sell, contract to sell, lease, assign,
mortgage, dispose of or otherwise transfer any of its Assets, or any
part thereof or interest therein, whether now owned or hereafter
acquired, either permanently, temporarily, finally or contingently;
or
(d) Bankruptcy or Reorganization.
----------------------------
(i) The SSBIC shall commence any case, proceeding or other action:
a) under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to
it or its debts, or
b) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any
substantial part of its assets, or the SSBIC shall make
a general assignment for the benefit of creditors,
(ii) there shall be commenced against the SSBIC any case,
proceeding or other action of a nature referred to in clause
(i) above which results in the entry of an order for relief or
any such adjudication or appointment or remains undismissed,
undischarged or unbonded for a period of 60 days,
(iii) there shall be commenced against the SSBIC any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against
all or any substantial part of its
-11-
<PAGE>
Assets which results in the entry of an order for such relief
which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof,
(iv) the SSBIC shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in this Section 7.1(d), or
(v) the SSBIC shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they
become due; or
(e) Failure to Remain an Active SSBIC. The SSBIC shall become inactive
---------------------------------
(as defined in 13 CFR (S) 107.902).
(f) Preservation of SBA Liquidation Interest. The SSBIC or any of its
----------------------------------------
Associates, without SBA's prior written approval granted subsequent to the date
hereof, enters into any transaction, or permits any transaction the financial,
legal, or economic effect of which creates a significant deterioration in the
value of SBA's Liquidating Interest prior to the expiration date thereof as set
forth in this Agreement; or
(g) Dividends, Distributions, Benefits, Payments. The SSBIC, without
--------------------------------------------
the prior written consent of SBA granted subsequent to the date hereof,
declares, grants, contracts for, or pays any benefit, a dividend or distribution
in cash or in kind (excluding any distribution of additional shares of the
SSBIC's stock to existing shareholders) to or for the benefit of any of its
shareholders (other than SBA), directly or indirectly or makes any payment,
whether due or in advance of any due date, on any obligation or debt due to any
Associate, or to any other regular or specialized small business investment
company or any Associate thereof; provided however, that the SSBIC may pay the
management fee to an affiliate if previously approved by SBA, and provided
further that after the SSBIC has fully "amortized" the accrued 3% preferred
stock dividends or has paid the "unamortized" balance of such dividends, the
SSBIC may pay dividends or distributions out of Retained Earnings Available for
Distribution as computed on SBA Form 468; or
(h) Remuneration, Fees, Salaries, Benefits, Emoluments. The SSBIC,
--------------------------------------------------
without SBA's prior written approval granted subsequent to the date hereof,
increases the remuneration, fees, salaries, benefits or emoluments of any
Associate; or
(i) Judgments and Decrees. One or more judgments or decrees shall be
---------------------
entered against the SSBIC involving in the aggregate a liability (not paid or
not fully covered by insurance as to which the insurer has not disclaimed
liability) of $500,000 or more and all such judgments or decrees shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or
(j) Violation of Government Regulations; Cross-Default. The SSBIC
--------------------------------------------------
violates, knowingly or intentionally, any of the material provisions of the Act
or SBA Regulations; or violates any material provision of any agreement with
SBA; or is in default on any obligation
-12-
<PAGE>
to SBA including the provisions of any Debenture or Preferred Security or
Participating Security issued to, or guaranteed by, SBA in connection with
Leverage.
7.2. Remedies. Upon the occurrence of any Event of Default, SBA,
--------
directly or through its duly appointed representative, shall be entitled to any
and all remedies available to SBA under the Act, SBA Regulations, any other
agreements, and other applicable law and regulation.
ARTICLE 8. TERMINATION
-----------
This Agreement shall be in all respects a continuing agreement and shall
remain in full force and effect until such time as all obligations under this
Agreement and the other Repurchase Documents shall be satisfied in full and the
Liquidating Interest shall have expired.
ARTICLE 9. MISCELLANEOUS
-------------
9.1. Notices. All notices, consents, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing, and shall be
deemed to have been duly given or made when delivered by hand or when deposited
in the mail, certified mail, return receipt requested, postage or delivery
prepaid, to the address appearing on the first page hereof or to such other
address as may be hereafter designated by any of the parties hereto.
9.2. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith, including without
limitation, the other Repurchase Documents and the Application, shall survive
the execution and delivery of this Agreement.
9.3. No Waiver. SBA shall not by Any act, delay, omission or otherwise
---------
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any default or in any breach of any of the terms and conditions hereof. The
rights and remedies herein provided are not exclusive of any rights or remedies
provided by law.
9.4. Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.5. Paragraph Headings. The paragraph headings used in this Agreement
------------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
9.6. Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts and each such
counterpart shall be deemed to be an original, and all such counterparts taken
together shall be deemed to constitute one and the same instrument.
-13-
<PAGE>
9.7. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the SSBIC and SBA and their respective successors and
assigns except that the SSBIC may not assign or transfer any of its respective
rights or obligations under this Agreement without the prior written consent of
SBA.
9.8. Governing Law. This Agreement and the other Repurchase Documents
-------------
and the rights and obligations of the parties under this Agreement and the other
Repurchase Documents, shall be governed by, and construed and interpreted in
accordance with, applicable Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
TRANSPORTATION CAPITAL CORP.
By /s/ Mark Hornstein
-----------------------------------------
Mark Hornstein, President
U.S. SMALL BUSINESS ADMINISTRATION
By /s/ Robert D. Stillman
-----------------------------------------
Robert D. Stillman,
Associate Administrator for Investment
-14-
<PAGE>
SCHEDULE I
Liens
-----
NONE
-15-
<PAGE>
SCHEDULE II
Indebtedness
------------
NONE
-16-
<PAGE>
EXHIBIT A
I, Jonathan H. Hirsch, Secretary of Transportation Capital Corp., a
corporation of the State of New York (the "Corporation"), hereby certify that
the following is a true and complete copy of a resolution adopted by the Board
of Directors of the Corporation at a meeting duly called and held on March 22,
1995, at which a quorum was present throughout, and that the said resolution has
not been amended modified or repealed.
Resolved, that
(1) The Board of Directors of this Corporation deems at advisable and in
the best interests of this Corporation to enter into the Specialized
Small Business Investment Company 3% Preferred Stock Repurchase
Agreement (the "Repurchase Agreement") with the Small Business
Administration ("SBA"), dated March 22, 1995, pursuant to which this
Corporation will purchase from SBA three thousand three hundred
eighty-three and one third (3,383-1/3) shares of this Corporation's
3% Preferred Stock, the par value of which is equal to $3,383,333
(the "Shares"), at a price of $350 per share or $1,184,166.55 in the
aggregate, paid in cash; and that such Repurchase Agreement is
hereby authorized and approved in all respects; and
(2) Mark Hornstein, President, and Paul Borden, Vice President,
("Corporate Officials") be, and each of them hereby is, authorized
in the name and on behalf of this Corporation to prepare, file, and
execute the Repurchase Agreement and all documentation and
instruments required by SBA in connection with such Repurchase
Agreement; and
(3) This Corporation is hereby authorized to consummate all transactions
contemplated by the Repurchase Agreement; and
(4) This Corporation is hereby authorized to grant to SBA a Liquidating
Interest (as defined in the Repurchase Agreement) in the Restricted
Contributed Capital Surplus Account on terms and conditions set
forth in the Repurchase Agreement and presented for approval to the
sole stockholder of this Corporation for its vote thereon and to be
evidenced by the filing of an amendment to the Corporation's
Articles of Incorporation; and
(5) The Corporate Officials be, and hereby are, authorized and empowered
to execute and deliver, in the name and on behalf of this
Corporations as such other and further instruments and documents,
and to do and perform all such acts and themes, as may be necessary
or desirable in connection with the purchase of the Shares by this
Corporation from SBA or any transaction contemplated by the
Application or the Repurchase Agreement, or otherwise in connection
with the business of this Corporation and to carry out the intent
and accomplish the purpose of ad of the foregoing paragraphs.
-17-
<PAGE>
IN WITNESS HEREOF, I have executed this certificate and caused the seal of
the Corporation to be affixed hereto this 22nd day of March, 1995.
________________________________________
Corporate Secretary
Jonathan H. Hirsch
CORPORATE SEAL
-18-
<PAGE>
[ARTHUR ANDERSEN LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form N-2 of our report dated February 21, 1996, on our
audit of the balance sheet of Medallion Financial Corp., and to all references
to our Firm included in Pre-Effective Amendment No. 1 to registration statement
File No. 333-1670.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 29, 1996
<PAGE>
[ARTHUR ANDERSEN LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form N-2 of our report dated March 14, 1996, on our
audit of the financial statements of Transportation Capital Corp. and to all
references to our Firm included in Pre-Effective Amendment No. 1 to registration
statement File No. 333-1670.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 29, 1996
<PAGE>
[ARTHUR ANDERSEN LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form N-2 of our report dated March 14, 1996, on our
audit of the financial statements of Edwards Capital Company and to all
references to our Firm included in Pre-Effective Amendment No. 1 to this
registration statement File No. 333-1670.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 29, 1996
<PAGE>
[ARTHUR ANDERSEN LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form N-2 of our report dated March 15, 1996, on our
audit of the financial statements of Tri-Magna Corporation and Subsidiaries and
to all references to our Firm included in Pre-Effective Amendment No. 1 to
registration statement File No. 333-1670.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 29, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form N-2 (File
No. 333-1670) of our report dated October 24, 1995, on our audits of the
financial statements and financial statement schedules of Transportation Capital
Corp. We also consent to the reference to our firm under the caption
"Experts".
/s/ COOPERS & LYBRAND L.L.P.
New York, NY
April 29, 1996
<PAGE>
[Friedman Alpren & Green LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Form N-2 of our report dated January 28, 1995 included in or made a part of this
registration statement.
/s/ FRIEDMAN ALPREN & GREEN LLP
New York, New York
April 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 718,217
<TOTAL-ASSETS> 718,217
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 716,217
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,000
<SHARES-COMMON-STOCK> 200
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
