<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-27812
MEDALLION FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE No. 04-3291176
(State of Incorporation) (IRS Employer Identification No.)
437 MADISON AVE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
(212) 328-2100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Number of shares of Common Stock outstanding at the latest practicable date,
November 10, 1998:
CLASS OUTSTANDING PAR VALUE SHARES OUTSTANDING
----------------- --------- ------------------
Common Stock........................... $.01 14,000,114
================================================================================
<PAGE>
MEDALLION FINANCIAL CORP.
FORM 10-Q
SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Basis of Preparation............................................................... 3
Medallion Financial Corp. Consolidated Balance Sheets
at September 30, 1998 and December 31, 1997................................... 4
Medallion Financial Corp. Consolidated Statement of Operations
for the three and nine months ended September 30, 1998 and 1997............... 5
Medallion Financial Corp. Consolidated Statement of Cash
Flows for the three and nine months ended September 30, 1998 and 1997......... 6
Notes to Consolidated Financial Statements...................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................... 13
General......................................................................... 13
Consolidated Results of Operations (for the three months
ended September 30, 1997 and 1998)............................................ 16
Consolidated Results of Operations (for the nine months ended
September 30, 1997 and 1998).................................................. 20
Asset/Liability Management...................................................... 23
Liquidity and Capital Resources................................................. 25
Investment Considerations....................................................... 26
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................................... 28
SIGNATURES.................................................................................... 30
</TABLE>
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM. 1 BASIS OF PREPARATION
Medallion Financial Corp. (the "Company") was incorporated in Delaware in
1995 and commenced operations on May 29, 1996 in connection with the closing of
its initial public offering (the "Offering") and the simultaneous acquisitions
(the "1996 Acquisitions") of Medallion Funding Corp. ("MFC"), Edwards Capital
Company, Transportation Capital Corp. ("TCC") and Medallion Taxi Media, Inc.
("Taxi"). Media and MFC were subsidiaries of Tri-Magna Corporation ("Tri-
Magna") which was merged into the Company. The Company's acquisition of these
businesses in connection with the Offering and the resulting two-tier structure
were effected pursuant to an order of the Securities and Exchange Commission
(the "Commission") (Release No. I.C. 21969, May 21, 1996) ("the "Acquisition
Order") and the approval of the U.S. Small Business Administration (the "SBA").
The financial information included in this report reflects the acquisition
of Capital Dimensions, Inc. ("CDI") which was subsequently renamed Medallion
Capital, Inc. The acquisition was completed on June 16, 1998 and was accounted
for as a pooling of interests and, accordingly, the information included in the
accompanying financial statements and notes thereto present the combined
financial position and the results of operations of the Company and CDI as if
they had operated as a combined entity for all periods presented. The financial
information in this report is divided into two sections. The first section, Item
1, includes the unaudited consolidated balance sheet of the Company as of
September 30, 1998 and the related statements of operations, stockholders'
equity and cash flows for the three and nine months ending September 30, 1998
and 1997. Item 1 also sets forth the consolidated balance sheet of the Company
as of December 31, 1997. The second section, Item 2, consists of Management's
Discussion and Analysis of Financial Condition and Results of Operations and
sets forth an analysis of the financial information included in Item 1 for the
three and nine months ended September 30, 1998 and 1997.
The consolidated balance sheet of the Company as of September 30, 1998, the
related statements of operations, and cash flows for the three and nine months
ended September 30, 1998 included in Item 1 have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the accompanying consolidated financial statements include all
adjustments (consisting of normal, recurring adjustments) necessary to summarize
fairly the Company's financial position and results of operations. The results
of operations for the three and nine months ended September 30, 1998 are not
necessarily indicative of the results of operations for the full year or any
other interim period. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10K for the fiscal year ended December 31, 1997.
-3-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- -------------
(Unaudited) (Restated
<S> <C> <C>
See Note 2)
ASSETS
Investments :
Medallion loans $275,287,532 $225,961,249
Commercial installment loans 92,108,499 79,803,197
Equity investments 9,234,960 7,490,000
------------ ------------
Net investments 376,630,991 313,254,446
Investment in unconsolidated subsidiary 1,963,433 1,140,424
------------ ------------
Total investments 378,594,424 314,394,870
Cash 6,005,865 6,666,613
Accrued interest receivable 4,501,838 3,237,840
Receivable from sale of loans 7,718,541 2,862,981
Fixed assets, net 1,073,694 356,206
Goodwill, net 7,639,999 6,082,515
Servicing fee receivable 2,087,236 1,617,415
Other assets 3,962,258 4,675,204
------------ ------------
Total assets $411,583,855 $339,893,644
============ ============
LIABILITIES
Accounts payable $ 6,184,888 $ 7,377,222
Dividends payable - 3,594,402
Accrued interest payable 2,437,836 871,194
Notes payable to banks and demand notes 128,700,000 137,750,000
Commercial paper 78,634,452 -
SBA debentures payable 41,590,000 39,770,000
------------ ------------
Total liabilities 257,547,176 189,362,818
------------ ------------
Negative goodwill, net 1,253,516 1,795,316
------------ ------------
Commitments and contingencies (Note 6)
SHAREHOLDERS' EQUITY (Note 1)
Preferred Stock (1,000,000 shares of $.01 par - -
value stock authorized-none outstanding)
Common stock (45,000,000 and 15,000,000 shares of $.01 par
value stock authorized -14,000,114 and 13,908,916 shares
outstanding at September 30, 1998 and December 31, 1997,
respectively) 140,002 139,089
Capital in excess of par value 143,560,751 143,065,650
Accumulated undistributed income 9,082,410 5,530,771
------------ ------------
Total shareholders' equity 152,783,163 148,735,510
------------ ------------
Total liabilities and shareholders' equity $411,583,855 $339,893,644
============ ============
Number of common shares and common share equivalents 14,144,331 14,062,318
============ ============
Net asset value per share $ 10.80 $ 10.58
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---- ---- ---- ----
(Restated) (Restated)
<S> <C> <C> <C> <C>
Investment income:
Interest income on investments $ 8,848,391 $ 6,408,287 $26,290,506 $17,922,121
Interest income on s/t investments 93,372 43,000 261,009 155,678
----------- ----------- ----------- -----------
Total investment income 8,941,763 6,451,287 26,551,515 18,077,799
Interest expense:
Notes payable to banks 2,027,737 1,385,984 6,865,979 4,844,742
Commercial paper 1,112,697 - 2,024,638 -
SBA debentures 794,886 807,256 2,352,689 2,240,501
----------- ----------- ----------- -----------
Total interest expense 3,935,320 2,193,240 11,243,306 7,085,243
Net interest income 5,006,443 4,258,047 15,308,209 10,992,556
----------- ----------- ----------- -----------
Non-interest income:
Equity in earnings of unconsolidated subsidiary 480,561 47,749 823,009 80,551
Accretion of negative goodwill 180,600 180,600 541,800 541,800
Gain on sale of loans 407,369 - 1,565,944 -
Other income 419,114 265,999 1,007,652 703,980
----------- ----------- ----------- -----------
Total non-interest income 1,487,644 494,348 3,938,405 1,326,331
----------- ----------- ----------- -----------
Expenses:
Administrative and advisory fees 64,630 66,832 181,192 180,724
Professional fees 184,794 157,051 481,573 465,054
Salaries and benefits 1,388,080 590,784 3,964,189 1,590,318
Other operating expenses 1,198,496 608,401 3,355,498 1,696,217
Amortization of goodwill 135,542 105,060 375,961 315,180
Merger related expenses - - 1,494,491 -
----------- ----------- ----------- -----------
Total expenses 2,971,542 1,528,128 9,852,904 4,247,493
Net investment income 3,522,545 3,224,267 9,393,710 8,071,394
----------- ----------- ----------- -----------
Net realized gain on investments 595,965 211,000 1,622,591 2,015,398
Change in net unrealized depreciation 41,890 127,783 264,292 1,827
Income tax benefit (provision) 40,007 - 78,573 (932,000)
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations $ 4,200,407 $ 3,563,050 $11,359,166 $ 9,156,619
=========== =========== =========== ===========
Net increase in net assets resulting from
operations per common share
Basic $0.30 $0.26 $0.81 $0.79
=========== =========== =========== ===========
Diluted $0.30 $0.25 $0.81 $0.78
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic Average Shares 13,998,420 13,934,904 13,950,806 11,560,794
=========== =========== =========== ===========
Diluted Average Shares 14,090,424 14,030,078 14,095,023 11,667,536
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Restated)
<S> <C> <C>
Net increase in net assets resulting from operations $ 11,359,164 $ 9,156,619
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by (used for) operating activities:
Depreciation and amortization 241,808 38,815
Increase in equity in earnings of unconsolidated subsidiary (823,009) (80,551)
Change in unrealized depreciation - 25,000
Amortization of goodwill 375,961 315,180
Increase in accrued interest receivable (1,130,706) (1,110,474)
Decrease (Increase) in other assets 681,025 (1,716,122)
Increase (Decrease) in accounts payable and accrued expenses (1,367,334) 1,058,020
Increase in receivable from sale of loans (4,855,560) -
Increase in servicing fee receivable (469,821) -
Accretion of negative goodwill (541,800) (541,800)
Increase (decrease) in accrued interest payable 1,449,560 423,747
------------- -------------
Net cash provided by operating activities 4,919,288 7,568,434
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Originations of investments (157,331,497) (119,353,432)
Proceeds from sales and maturities of investments 110,700,614 46,639,443
Payment for purchase of VG1, VGII & VOC (11,963,072) -
Capital expenditures (1,284,620) 4,096
------------- -------------
Net cash used for investing activities (47,283,936) (72,709,893)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable to banks (9,050,000) (5,575,000)
Proceeds from issuance of commercial paper 78,634,452 -
Proceeds from (payment of) SBA debentures (4,380,000) 1,102,082
Proceeds from exercise of stock options 496,014 -
Proceeds from sale of common stock - 74,586,285
Payment of declared dividends to current stockholders (11,401,927) (6,374,500)
------------- -------------
Net cash provided by financing activities 54,298,539 63,738,867
------------- -------------
NET DECREASE IN CASH (660,748) (1,402,592)
CASH beginning of period 6,666,613 6,099,512
------------- -------------
CASH end of period $ 6,005,865 $ 4,696,920
============= =============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 9,676,664 $ 6,661,496
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(1) FORMATION OF MEDALLION FINANCIAL CORP.
Medallion Financial Corp. (the "Company") is a closed-end management
investment company organized as a Delaware corporation in 1995. The Company has
elected to be regulated as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act"). On May 29, 1996, the Company
completed an initial public offering (the "Offering") of its common stock. In
connection with the Offering, the Company issued and sold 5,750,000 shares at
$11.00 per share and split the existing 200 shares of common stock outstanding
into 2,500,000 shares. All share and related amounts in the accompanying
financial statements have been restated to reflect this stock split. Offering
costs incurred by the Company in connection with the sale of shares totaling
$7,102,944 were recorded as a reduction of capital upon completion of the
Offering. These costs were recorded, net of $200,000 payable by Tri-Magna and
its subsidiaries in accordance with the merger agreement. In parallel with the
Offering, the Company merged with Tri-Magna, acquired substantially all of the
assets and assumed certain liabilities of Edwards Capital Company, a limited
partnership and acquired all of the outstanding voting stock of Transportation
Capital Corp. ("TCC") collectively, the ("1996 Acquisitions") (see note 3). The
assets acquired and liabilities assumed from Edwards Capital Company were
acquired and assumed by Edwards Capital Corporation ("Edwards"), a newly formed
and wholly owned subsidiary of the Company. As a result of the merger with Tri-
Magna in accordance with the Merger Agreement, dated December 21, 1995, between
the Company and Tri-Magna, MFC and Taxi Media Inc., formerly subsidiaries of
Tri-Magna, became wholly-owned subsidiaries of the Company.
MFC, Edwards and TCC are closed-end management investment companies
registered under the 1940 Act and are each licensed as a small business
investment company (SBIC) by the SBA. As an adjunct to the Company's taxicab
medallion finance business, Medallion Media, Inc. ("Media"), successor to Taxi,
operates a taxicab rooftop advertising business. The Company decided to merge
all of the assets and liabilities of Edwards and TCC into MFC subject to the
approval of the Small Business Administration ("SBA"). As of September 30, 1998,
the Company is awaiting such approval from the SBA.
(2) ACQUISITIONS
On October 31, 1997, the Company consummated the purchase of
substantially all of the assets and liabilities of Business Lenders, Inc.
through the Company's wholly owned subsidiary, BLI Acquisition Co., LLC. In
connection with the transaction, BLI Acquisition Co., LLC was renamed Business
Lenders, LLC. ("Business Lenders"). Business Lenders is licensed by the SBA
under its section 7a program.
In connection with the 1996 Acquisitions and the Business Lenders
Acquisition, the Company received the approval from the Connecticut State
Department of Banking, as well as approval from the SBA.
On June 16, 1998, the Company completed the acquisition of Capital
Dimensions, Inc. ("CDI") an SSBIC lender, headquartered in Minneapolis,
Minnesota. CDI was subsequently renamed Medallion Capital, Inc. ("Medallion
Capital"). The charter was amended to convert Medallion
-7-
<PAGE>
Capital to an SBIC. The Company issued 1,112,677 shares of its common stock for
the outstanding shares of CDI; common stock by exchanging 0.59615 shares of its
common stock for each outstanding share of CDI common stock. The transaction was
accounted for as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, and was treated under the pooling of interests
method of accounting. Under this method, the historical book values of the
assets and liabilities of CDI, as reported in its balance sheet are carried over
onto the Company's consolidated balance sheet, and no goodwill or other
intangible assets are created. The following tables set forth the results of
operations of CDI and the Company for the six months ended June 30, 1998 and the
three and nine months ended September 30, 1997 and are included in the
accompanying consolidated statement of operations.
<TABLE>
<CAPTION>
(Dollars in thousands, except shares and per share
amounts)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 The Company CDI Combined
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Investment Income $16,322 $1,288 $17,610
Net increase in net assets from operations $ 5,692 $1,467 $ 7,159
Net increase in net assets from operations per share
Basic $ .44 $ 1.40 $ .51
Diluted $ .44 $ 1.29 $ .51
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 The Company CDI Combined
- --------------------------------------------------------------------------------------
Total Investment Income $ 5,971 $ 480 $ 6,451
Net increase in net assets from operations $ 3,470 $ 93 $ 3,563
Net increase in net assets from operations per share
Basic $ .27 $ .05 $ .26
Diluted $ .27 $ .05 $ .25
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 The Company CDI Combined
- --------------------------------------------------------------------------------------
Total Investment Income $16,142 $1,936 $18,078
Net increase in net assets from operations $ 7,726 $1,430 $ 9,156
Net increase in net assets from operations per share
Basic $ .73 $ .85 $ .79
Diluted $ .73 $ .76 $ .78
</TABLE>
On May 27, 1998, the Company completed the acquisition of certain assets
and assumption of certain liabilities of Venture Group I, Inc. ("VGI"), Venture
Group II, Inc. ("VGII") and Venture Opportunities Corp., an SBIC lender
headquartered in New York, New York for an aggregate purchase price of
$11,963,072. This acquisition was accounted for under the purchase method of
accounting. Included in the purchase price was certain premiums paid totaling
$1,545,000, which represented goodwill and the signing of ten year non-compete
agreements with certain individuals associated with the former companies.
In conjunction with the acquisitions, liabilities were assumed as
follows:
VGI, VGII AND VENTURE OPPORTUNITIES CORP
- -------------------------------------------------------
Fair value of assets acquired $18,455,155
Cash paid 11,963,072
Liabilities assumed $ 6,492,083
===========
-----------
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The 1996 Acquisitions were accounted for under the purchase method of
accounting. Under this accounting method, the Company has recorded as its cost
the fair value of the acquired assets and assumed liabilities. The difference
between the cost of acquired companies and the sum of the fair values of
tangible and identifiable intangible assets less liabilities assumed was
recorded as goodwill
-8-
<PAGE>
or negative goodwill.
Deferred offering costs incurred by the Company in connection with the
sale of shares were recorded as a reduction of capital upon completion of the
Offering. These costs were recorded net of $200,000 payable by Tri-Magna in
accordance with the merger agreement between the Company and Tri-Magna.
Under the 1940 Act and the Small Business Investment Act of 1958 and
regulations thereunder (the "SBIA"), 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 Company and the Board
of Directors take into consideration factors including the financial condition
of the borrower, the adequacy of the collateral and the relationships between
market interest rates and portfolio interest rates and maturities. Loans are
valued at cost less unrealized depreciation. Any change in the fair value of
the Company's investments as determined by the Board of Directors is reflected
in net unrealized depreciation of investments. Total unrealized depreciation
was $2,143,217 and $2,233,717 on total investments of $376,630,991 and
$313,254,446 at September 30, 1998 and December 31, 1997, respectively, of which
$1,522,417 existed at the date of the Company's 1996 Acquisitions. The Board of
Directors has determined that this valuation approximates fair value.
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share". SFAS No.
128 establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
The Company has applied the provisions of SFAS No. 128 retroactively to all
periods presented. The dilutive effect of potential common shares in 1997 and
1998, consisting of outstanding stock options is determined using the treasury
method in accordance with SFAS No. 128. Basic and fully diluted EPS for the
three and nine months ended September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except shares and per share amounts)
THREE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- ------------------------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $4,200 $3,563
Basic EPS:
Income available to 4,200 13,998,420 $.30 3,563 13,934,904 $.26
common stockholders
Effect of dilutive
options
Stock options 92,004 95,174
Diluted EPS:
Income available to 4,200 14,090,424 $.30 3,563 14,030,078 $.25
common stockholders
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $11,359 $9,157
Basic EPS:
Income available to 11,359 13,950,806 $.81 9,157 11,560,794 $.79
common stockholders
Effect of dilutive
options
Stock options 144,217 106,742
Diluted EPS:
Income available to 11,359 14,095,023 $.81 9,157 11,667,536 $.78
common stockholders
</TABLE>
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which is to become effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 established standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the total of net income and all other non-owner changes in equity.
Reclassification of financial statements of earlier periods presented for
comparative purposes is required. The Company has adopted this statement and it
does not have a significant impact on the Company's financial position or
results of operations.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The new
standard establishes new guidelines regarding the disclosure requirements for
business segments. The Company is required to adopt the new standard in its 1998
year end financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes new standards regarding accounting and reporting requirements for
derivative instruments and hedging activities. The new standard is effective for
fiscal years beginning after June 15, 1999. The Company is presently studying
the effect of the new pronouncement and, as required, expects to adopt SFAS No.
133 beginning January 1, 2000. As of September 30, 1998, the Company did not own
any derivative instruments.
(4) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The Company's investment in Media is accounted for under the equity method
because as a non-investment company, Media cannot be consolidated with the
Company which is an investment company under the 1940 Act. Financial
information presented for Media includes the balance sheets as of September 30,
1998 and December 31, 1997 and unaudited statement of operations for the three
and nine months ended September 30, 1998 and 1997:
-10-
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Cash $ 580,236 $ 594,377
Accounts receivable 1,327,825 700,392
Equipment, net 1,708,369 1,422,284
Goodwill 1,032,111
Other 538,120 533,541
---------- ----------
Total assets $5,186,661 $3,250,594
========== ==========
Notes payable to parent $2,018,192 1,555,637
Accounts payable and accrued expenses 615,818 283,915
Federal income taxes payable 480,599 162,000
---------- ----------
Total liabilities 3,114,609 2,001,552
Equity 1,001,000 1,001,000
Retained earnings 1,071,052 248,042
---------- ----------
Total equity 2,072,052 1,249,042
---------- ----------
Total liabilities and shareholders'
equity $5,186,661 $3,250,594
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
STATEMENT OF OPERATIONS 1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Advertising revenue $2,256,908 $725,766 $5,229,234 $1,716,926
Cost of service 606,150 273,812 1,677,200 690,385
---------- -------- ---------- ----------
Gross margin 1,650,758 451,954 3,552,034 1,026,541
Other operating expenses 870,377 379,205 2,179,024 920,990
---------- -------- ---------- ----------
Income before taxes 780,381 72,749 1,373,010 105,551
Income taxes 300,000 25,000 550,000 25,000
---------- -------- ---------- ----------
Net income $ 480,381 $ 47,749 $ 823,010 $ 80,551
========== ======== ========== ==========
</TABLE>
On September 1, 1998, the Company purchased for cash substantially all of the
operations and assets of New Orleans-based Taxi Ads, LLC, for an aggregate
purchase price of $1,200,000. This acquisition was accounted for under the
purchase method of accounting. Included in the purchase price was certain
premiums paid totaling $1,001,766, which represented goodwill.
(5) DEBT
The table below summarizes the various debt agreements the Company and its
subsidiaries had outstanding at September 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Notes payable to banks:
Total facilities $257,250,000 $228,000,000
Maturity of facilities 10/98-7/00 1/98-6/99
Total amounts outstanding $128,700,000 $137,750,000
============ ============
SBA debentures payable $ 41,590,000 $ 39,770,000
============ ============
Maturity 9/00-9/04 6/98-9/04
</TABLE>
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<PAGE>
Under the revolving credit agreement between MFC and its lenders, as
amended, MFC is required to maintain minimum tangible net assets of $45,000,000
and certain financial ratios. The Company believes that MFC was in compliance
with such requirements at September 30, 1998.
(6) COMMERCIAL PAPER
On March 13, 1998, MFC entered into a commercial paper agreement with Salomon
Smith Barney to sell up to an aggregate principal amount of $195 million in
secured commercial paper through private placements pursuant to Section 4(2) of
the Securities Act of 1933. Amounts outstanding at any time under the program
are limited by certain covenants, including a requirement that MFC retain an
investment grade rating from at least two of the four nationally recognized
rating agencies, and borrowing base calculations as set forth in MFC's
syndicated credit facilities, which act as backup to the commercial paper
program on a pari passu basis. The commercial paper program has no specified
maturity and may be terminated by the Company at any time. As of September 30,
1998, MFC had $78,634,452 outstanding at a weighted average interest rate of
5.90%
(7) SUBSEQUENT EVENTS
On November 4, 1998, MFC declared a dividend payable to the Company in the
amount of $210 per share payable on November 5, 1998 (aggregating $1,398,390),
Edwards declared a dividend payable to the Company in the amount of $4,400 per
share payable on November 5, 1998 (aggregating $440,000) and TCC declared a
dividend payable to the Company in the amount of $1,240 per share payable on
November 5, 1998 (aggregating $124,000). With the proceeds of these dividends,
on November 4, 1998 the Company declared a dividend in the amount of $0.30 per
share (aggregating $4,200,034) payable on November 30, 1998 to the stockholders
of record on November 16, 1998.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in this section should be read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing in this
Report on Form 10-Q and the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997. In addition, this Management's Discussion and
Analysis contains forward-looking statements. These forward-looking statements
are subject to the inherent uncertainties in predicting future results and
conditions. Certain factors that could cause actual results and conditions to
differ materially from those projected in these forward-looking statements are
set forth below in the Investment Considerations section. All amounts have been
restated to include the historical amounts of Medallion Capital, Inc. (formerly
Capital Dimensions, Inc.)
GENERAL
The Company's principal activity is the origination and servicing of loans
secured by taxicab medallions ("Medallion Loans") and loans to small businesses
secured by equipment and other suitable collateral ("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 secured credit facilities with bank syndicates, secured
commercial paper and 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.
In addition, through its Medallion Capital subsidiary, the Company invests
in minority owned small businesses in selected industries. Medallion Capital's
investments are typically in the form of secured debt instruments with fixed
interest rates accompanied by warrants to purchase an equity interest for a
nominal exercise price (such warrants constituting "Equity Investments").
Interest income is earned on the debt investments. Realized gains (losses) on
investments are recognized when investments are sold and represent the
difference between the proceeds received from the disposition of portfolio
assets and the cost of such portfolio assets. In addition, changes in unrealized
appreciation (depreciation) of investments is recorded and represents the net
change in the estimated fair values of the portfolio assets at the end of the
period as compared with their estimated fair values at the beginning of the
period or the cost of such portfolio assets, if purchased during the period.
Generally, "realized gains (losses) on investments" and "changes in unrealized
appreciation (depreciation) of investments" are inversely related. When an
appreciated asset is sold to realize a gain, a decrease in unrealized
appreciation occurs when the gain associated with the asset (if previously
recognized as an unrealized gain) is transferred from the "unrealized" to the
"realized" category. Conversely, when a loss previously recognized as an
unrealized loss is realized by the sale or other disposition of a depreciated
portfolio asset, the reclassification of the loss from "unrealized" to
"realized" causes an increase in net unrealized appreciation and an increase in
realized loss.
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Trend in Loan Portfolio Yield. The Company's investment income is driven by
the principal amount of and yields on Medallion Loans and Commercial Installment
Loans. The following table illustrates the Company's weighted average portfolio
yield at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
WEIGHTED PERCENTAGE WEIGHTED PERCENTAGE
AVERAGE PRINCIPAL OF TOTAL AVERAGE PRINCIPAL OF TOTAL
YIELD AMOUNTS PORTFOLIO YIELD AMOUNTS PORTFOLIO
--------- ------------ ----------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Medallion Loan Portfolio 9.28% $225,961,249 72.1% 9.03% $275,287,534 73.1%
Commercial Installment Loan Portfolio 12.74 79,803,197 25.5 12.69 92,108,497 24.4
Equity Investments - 7,490,000 2.4 - 9,234,960 2.5
----- ------------ ----- ----- ------------ -----
Total Portfolio 10.20% $313,254,446 100.0% 9.96% $376,630,991 100.0%
============ ===== ============ =====
</TABLE>
The weighted average yield e.o.p./1/ of the Medallion Loan portfolio
decreased 25 basis points from 9.28% at December 31, 1997 to 9.03% at September
30, 1998. Medallion Loans constituted 72.1% of the total portfolio of $313.3
million at December 31, 1997 and 73.1% of the total portfolio of $376.6 million
at September 30, 1998. The decrease in the average yield on Medallion Loans was
caused by a reduction in loan yields due to lower long-term interest rates and
competition. To offset the resulting decline in investment income, the Company
increased the origination of loans with shorter interest rate maturity dates,
thereby reducing the Company's interest rate risk exposure. 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. As a result of this
decline in the Medallion Loan portfolio yield, the weighted average yield e.o.p.
of the entire portfolio decreased 24 basis points from 10.20% at December 31,
1997 to 9.96% at September 30, 1998.
The Company had been shifting the portfolio mix toward a higher percentage
of Commercial Installment Loans, which historically have had a yield of
approximately 300 basis points higher than the Company's Medallion Loans and 250
to 600 basis points higher than the Prime Rate; however, the Company was able to
grow the Medallion Loan portfolio faster than anticipated. The weighted average
yield e.o.p. of the Commercial Installment Loan portfolio decreased 5 basis
points from 12.74% at December 31, 1997 to 12.69% at September 30, 1998.
Although the percentage of the entire portfolio composed of Commercial
Installment Loans decreased from 25.5% at December 31, 1997 to 24.4% at
September 30, 1998, the actual outstanding balances increased from $79.8 million
at December 31,1997 to $92.1 million at September 30, 1998. The Company expects
to try to increase both the percentage of Commercial Installment Loans in the
total portfolio and the number of floating rate loan originations.
Equity Investments represented 2.4% and 2.5% of the Company's entire portfolio
at December 31, 1997 and September 30, 1998, respectively.
Trend in Interest Expense. 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, secured commercial paper and, to a lesser degree, fixed-
rate, long-term debentures issued to or guaranteed by the SBA. In recent years,
the Company has reduced its reliance on SBA financing and increased the
- ---------------------------------
/1/ e.o.p. or "end of period," indicates that a calculation is made at the
date indicated rather than for the period then ended.
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<PAGE>
relative proportion of bank debt to total liabilities. SBA financing has offered
attractive rates however, 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 when SBA financing rates are
particularly attractive, and to fund loans that qualify under the Small Business
Investment Act of 1958, as amended (the "SBIA") and SBA Regulations through
subsidiaries subject to SBA restrictions. The Company believes that its
transition to financing operations primarily with short-term LIBOR-based secured
bank debt and secured commercial paper 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 which the Company attempts to mitigate with
certain matching strategies. The Company also expects that net interest income
should increase as the Company issues more commercial paper in lieu of bank debt
and will thus permit an increase in the size of the loan portfolio. At the
present time commercial paper is generally priced at approximately 40-50 basis
points below the rate charged under the Company's revolving credit facilities.
At December 31, 1997 and September 30, 1998, short-term LIBOR-based debt
constituted 70.3% and 51.7% of total debt, respectively. At September 30, 1998,
commercial paper constituted 31.6% of total debt. The Company began issuing
commercial paper on March 16, 1998.
The Company's cost of funds is primarily driven by (i) the average maturity of
debt issued by the Company, (ii) the premium over LIBOR paid by the Company on
its LIBOR-based debt and secured commercial paper, and (iii) the ratio of LIBOR-
based debt to SBA financing. The Company incurs LIBOR-based debt for terms
generally ranging from 1-180 days. The Company's debentures issued to or
guaranteed by the SBA typically have initial terms of ten years. The Company's
cost of funds reflect 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 90- and 180-day LIBOR (the "LIBOR Benchmark"). The
Company's average cost of funds e.o.p. decreased from 7.14% or 131 basis points
over the LIBOR Benchmark of 5.83% at December 31, 1997 to 6.51%, or 91 basis
points over the LIBOR Benchmark of 5.60% at September 30, 1998.
Taxicab Rooftop Advertising. In addition to its finance business, the Company
also conducts a taxicab rooftop advertising business through Media, which began
operations in November 1994. Media's revenue is affected by the number of
taxicab rooftop advertising displays ("Displays") that it owns and the occupancy
rate and advertising rate of those Displays. At September 30, 1998, Media had
approximately 4,790 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 Securities and Exchange Commission regulations prohibit the
consolidation of non-investment companies, with investment companies.
Factors Affecting Net Assets. 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 sale or foreclosure of a loan and
the cost basis of such loan or equity investments. 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 and the SBIA, the Company's loan
portfolio and other investments 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
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<PAGE>
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 or other investments
as determined by the Company is reflected in net unrealized depreciation or
appreciation of investments and affects net increase in net assets resulting
from operations but has no impact on net investment income or distributable
income. Therefore, if recent decrease in prevailing interest rates lead to a
trend of lower interest rates, net increase in net assets resulting from
operations could increase. Upon the completion of the Acquisitions on May 29,
1996, the Company's loan portfolio was recorded on the balance sheet at fair
market value, which included $1.5 million of net unrealized depreciation, as
estimated by the Company in accordance with the 1940 Act and the purchase method
of accounting. Application of the "marked to market" policy to the Company's
loan portfolio could result in greater volatility in the Company's earnings than
was the case for the businesses acquired in the 1996 Acquisitions because the
"marked to market" policy was not applied in all cases to the 1996 Acquisitions.
CONSOLIDATED RESULTS OF OPERATIONS
For the Three Months Ended September 30, 1997 and 1998.
Performance Summary. For the three months ended September 30, 1998, net
investment income has been positively impacted by the growth of the Loan
Portfolio, an increase in spread and an increase in realized gains from the sale
of stock warrants, offset by an increase in operating expenses. The gross
spread for the period was higher due to a reduction in the Company's cost of
funds resulting from a reduction in the spread over LIBOR on the Company's
revolving credit facilities and the issuance of commercial paper offset by lower
yields being realized on net investments.
Investment Income. Investment income increased $2.5 million or 38.6% from
$6.5 million for the three months ended September 30, 1997 to $8.9 million for
the three months ended September 30, 1998. The Company's investment income
reflects the positive impact of portfolio growth during the three months ended
September 30, 1998. Total portfolio growth was $12.1 million or 3.3% from $364.5
million at June 30, 1998 to $376.6 million at September 30, 1998 as compared to
$30.2 million or 12.6% from $239.6 million at June 30, 1997 to $269.8 million at
September 30, 1997. The average portfolio outstanding was $255.7 million, for
the three month period ended September 30, 1997, which produced investment
income of $6.5 million at a weighted average interest rate of 10.39% compared to
an average of $372.3 million for the three month period ended September 30,
1998, which produced investment income of $8.9 million at a weighted average
interest rate of 9.76%.
Loan originations net of participations increased by $6.4 million or 16.9%
from $44.2 million for the three month period ended September 30, 1997 to $37.8
million for the three-month period ended September 30, 1998. The originations
were offset by prepayments, terminations and refinancings by the Company
aggregating $14.1 million for the three month period ended September 30, 1997
compared to $25.7 million for the three month period ended September 30, 1998.
Average yield e.o.p. of the entire portfolio decreased 25 basis points from
10.20% at September 30, 1997 to 9.96% at September 30, 1998. The decrease in
the yield of the entire loan portfolio was caused by a decrease in the average
yield on Medallion Loans, coupled with a decrease in the average yield on
Commercial Installment Loans and a decrease in the percentage of the portfolio
composed of higher
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<PAGE>
yielding Commercial Installment Loans which historically were originated at a
yield of approximately 300 basis points higher than Medallion Loans and 250 to
600 basis points higher than the prevailing Prime Rate. The average yield e.o.p.
of the Medallion Loan portfolio decreased 35 basis points from 9.38% at
September 30, 1997 to 9.03% at September 30, 1998 and the average yield of the
Commercial Installment Loan portfolio decreased 59 basis points from 13.28% at
September 30, 1997 to 12.69% at September 30, 1998. The decline in the
commercial portfolio yield is the result of the acquisition and growth of the
Business Lenders portfolio of approximately $21.8 million of floating rate loans
tied to prime at an average yield of 11.05%. This acquisition shifts the average
yield on commercial yields lower however, interest rate exposure is mitigated by
the floating rate nature of these loans. The decrease in the average yield on
Medallion Loans was caused by a reduction in loan yields due to lower long-term
interest rates and competition. To offset the resulting decline in investment
income, the Company increased the origination of loans with shorter interest
rate maturity dates, thereby reducing the Company's interest rate risk exposure.
The decrease in average yield e.o.p. of the entire loan portfolio was offset in
part by the growth in the Medallion loan portfolio during the period. The
percentage of the portfolio composed of Commercial Installment Loans increased
from 21.2% at September 30, 1997 to 24.4% at September 30, 1998. Although the
Company continues to pursue a shift in its portfolio mix towards higher yielding
Commercial Installment Loans, this shift was reversed by higher than expected
growth in the Medallion Loan portfolio during the period.
Interest Expense. The Company's interest expense increased $1.7 million or
79.4% from $2.2 million for the three months ended September 30, 1997 to $3.9
million for the three months ended September 30, 1998. The Company's average
cost of funds e.o.p. decreased 105 basis points from 7.13% or 124 basis points
over the LIBOR benchmark of 5.89% at September 30, 1997 to 6.51% or 91 basis
points over the LIBOR benchmark of 5.60% at September 30, 1998. The decrease in
the average cost of funds e.o.p. was caused by a reduction in the premium to
LIBOR paid by the Company combined with a 29 basis point decrease in the LIBOR
benchmark. Also contributing to the decrease in cost of funds e.o.p. was the
Company's issuance of commercial paper, which at the present time is priced
approximately 40-50 basis points less than the Company's revolving credit
facilities. Average total borrowings increased $126.4 million or 108.5% from
$116.5 million for the three months ended September 30, 1997, which produced an
interest expense of $2.2 million at a weighted average interest rate of 7.53% to
$242.9 million for the three months ended September 30, 1998 which produced an
interest expense of $3.9 million at a weighted average interest rate of 6.48%.
The weighted average interest rates include commitment fees and amortization of
premiums on existing interest rate cap agreements as a reflection of total cost
of funds borrowed. The percentage of the Company's short-term LIBOR based
indebtedness and commercial paper increased as a percentage of total
indebtedness from 67.1% at September 30, 1997 to 80.5% at September 30, 1998.
Net Interest Income. Net interest income increased $748,000 or 17.6% from
$4.3 million for the three months ended September 30, 1997 to $5.0 million for
the three months ended September 30, 1998. Net interest income reflects the
positive impact of the portfolio growth during the three months ended September
30, 1998 in conjunction with an increase in the spread between average yield and
average cost of funds. The average spread between the average yield on the
portfolio and the average cost of funds increased 42 basis points or 14.7% from
2.86% for the three-month period ended September 30, 1997 to 3.28% for the
three-month period ended September 30, 1998.
Equity in Earnings of Unconsolidated Subsidiary. Advertising revenue increased
$1,531,000 or 211.0% from $726,000 for the three months ended September 30, 1997
to $2,257,000 for the three months ended September 30, 1998. Display rental
costs increased $332,000 or 121.4% from $274,000 for the three months ended
September 30, 1997 to $606,000 for the three months ended
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<PAGE>
September 30, 1998. This resulted in a gross margin of approximately $452,000 or
62.3% of advertising revenue for the three months ended September 30, 1997
compared to $1,650,000 or 73.1% for the three months ended September 30, 1998.
The significant increase in advertising revenue and display rental cost is
directly related to the increase in the number of Displays owned by Media. The
number of Displays owned by Media increased 1,163 or 24.3% from 3,625 at
September 30, 1997 to 4,790 at September 30, 1998. Operating costs increased
$491,000 or 129.5% from $379,000 for the three months ended September 30, 1997
to $870,000 for the three months ended September 30, 1998. The increase in
operating costs is a reflection of the expansion of the Media operations. Income
tax expense amounted to $300,000 for the three months ended September 30, 1998.
Media generated net income of $48,000 for the three-month period ended September
30, 1997 compared to net income of $480,000 for the three-month period ended
September 30, 1998. The increase in net income is the result of increases in the
number of Displays owned and improved margin and occupancy rates. Display
occupancy increased from 97.9% for the three months ended September 30, 1997 to
100% for the three months ended September 30, 1998. Net income is recorded as
equity in earnings or losses of unconsolidated subsidiary on the Company's
statement of operations.
Gain on sale of loans. The Company experienced a gain on the sale of the
guaranteed portion of SBA 7a loans in the amount of $407,000 on loans sold
amounting to $6.9 million during the three months ended September 30, 1998.
There were no sales during the three months ended September 30, 1997. The
Company accounts for gains on sale of loans in accordance with SFAS No. 125
(Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities) and EIFT 88-11. Because of its limited experience with this
portfolio, the Company has assumed a 15% prepayment speed in calculating of the
gains and excess servicing assets. Management will continue to review industry
data as well as its experience with the portfolio and will adjust discount rates
and prepayment speeds, if deemed appropriate.
Other Income. The Company's other income increased $153,000 or 57.5% from
$266,000 for the three months ended September 30, 1997 to $419,000 for the three
months ended September 30, 1998. Other income was primarily derived from late
charges, prepayment fees and miscellaneous income. Prepayment fees are heavily
influenced by the level and volatility of interest rates and competition.
Non-Interest Expenses. The Company's non-interest expenses increased $1.5
million or 94.5% from $1.5 million for the three months ended September 30, 1997
to $3.0 million for the three months ended September 30, 1998. Other operating
expenses increased $590,000 or 97.0% from $608,000 for the three months ended
September 30, 1997 to $1,198,000 for the three months ended September 30, 1998.
Salaries and benefits increased $797,000 or 135.0% from $591,000 for the three
months ended September 30, 1997 to $1,388,000 for the three months ended
September 30, 1998. Professional fees increased $28,000 or 17.7% from $157,000
for the three months ended September 30, 1997 to $185,000 for the three months
ended September 30, 1998. Administrative and advisory fees decreased $2,000
from $67,000 for the three months ended September 30, 1997 to $65,000 for the
three months ended September 30, 1998. The operating expense ratio increased to
2.7% for the three-month period ended September 30, 1998 from 2.2% for the
three-month period ended September 30, 1997, on an annualized basis. The
operating expense ratio is computed as non-interest expenses divided by average
assets excluding the merger related expenses. The increase in other operating
expenses and salary expense is principally the result of the acquisition of
certain assets and operations of Business Lenders LLC, which added 50 full time
employees and the related overhead of seven satellite offices principally
located in the eastern part of the country, to the Company's non-interest
expense for the three month period ended September 30, 1998 compared to the
three month
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period ended September 30, 1997. The additional staff and lending offices should
help to provide additional loan growth for the Company.
Amortization of Goodwill and Accretion of Negative Goodwill. The amortization
of goodwill was $105,000 for the three months ended September 30, 1997 and
$136,000 for the three months ended September 30, 1998, and relates to $6.5
million of goodwill generated in the acquisitions of Edwards and TCC. The
increase in amortization of goodwill is primarily related to the purchases of
assets of VGI, VGII and Venture Opportunities Corp. The goodwill resulting from
these acquisitions amounted to $1,545,000. The acquisition of certain assets and
operations of Business Lenders resulted in the addition of $200,000 of goodwill.
Goodwill is the amount by which the cost of acquired businesses exceeds the fair
value of the net assets acquired. Goodwill is being amortized on a straight-
line basis over 15 years. Negative goodwill is the excess of fair market value
of net assets of an acquired business over the cost basis of such business.
Negative goodwill of $2.9 million was generated in the acquisition of Tri-Magna
and is being amortized on a straight-line basis over four years.
Net Investment Income. Net investment income increased $298,000 or 9.3% from
$3.2 million for the three-month period ended September 30, 1997 to $3.5 million
for the three months ended September 30, 1998. The increase was attributable to
the positive impact of portfolio growth in conjunction with an increase in the
spread between average yield and average cost of funds offset by an increase in
operating expenses.
Change in Net Unrealized Depreciation. The change in net unrealized
depreciation increased $86,000 from $128,000 for the three months ended
September 30, 1997 to $42,000 for the three months ended September 30, 1998.
Net Realized Gain/Loss on Investments. The Company had an increase in
realized net gain on investments of $385,000 from $211,000 for the three months
ended September 30, 1997 to $596,000 for the three months ended September 30,
1998. The increase in realized gains was the result of the sale of common and
preferred stock warrants in connection with the repayment of one loan.
Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased $637,000 or 17.9% from $3.5 million
for the three months ended September 30, 1997 to $4.2 for the three months ended
September 30, 1998. The increase was attributable to the positive impact of
portfolio growth in conjunction with an increase in the spread between average
yield and average cost of funds offset by an increase in operating expenses.
Also included in the increase is a realized gain of approximately $596,000 from
the sale of common and preferred stock warrants in connection with the repayment
of certain loans. Return on average assets and return on average equity for the
three months ended September 30, 1998, on an annualized basis, were 4.4% and
11.0%, respectively, compared to 5.2% and 9.4% for the three months ended
September 30, 1997.
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CONSOLIDATED RESULTS OF OPERATIONS
For the Nine Months Ended September 30, 1997 and 1998.
Performance Summary. For the nine months ended September 30, 1998, net
investment income has been positively impacted by the growth of the Loan
Portfolio and an increase in realized gains from the sale of common and
preferred stock warrants, offset by an increase in operating expenses and the
one time charge for merger related expenses.
Investment Income. Investment income increased $8.5 million or 46.9% from
$18.1 million for the nine months ended September 30, 1997 to $26.6 million for
the nine months ended September 30, 1998. The Company's investment income
reflects the positive impact of portfolio growth during the nine months ended
September 30, 1998. Total portfolio growth was $63.3 million or 20.2% from
$313.3 million at December 31, 1997 to $376.6 million at September 30, 1998 as
compared to $73.4 million or 37.4% from $196.4 million at December 31, 1996 to
$269.8 million at September 30, 1997. The average portfolio outstanding was
$234.4 million, for the nine month period ended September 30, 1997, which
produced investment income of $18.1 million at a weighted average interest rate
of 10.49% compared to an average of $346.5 million for the nine month period
ended September 30, 1998, which produced investment income of $26.6 million at a
weighted average interest rate of 10.41%.
Loan originations net of participations increased by $37.9 million or 31.7%
from $119.4 million for the nine month period ended September 30, 1997 to $157.3
million for the nine month period ended September 30, 1998. Not included in
originations for the nine months ended September 30, 1998 are purchases of $16.9
million of loans acquired from VGI, VGII and Venture Opportunities Corp. The
originations were offset by prepayments, terminations and refinancings by the
Company aggregating $46.6 million for the nine month period ended September 30,
1997 compared to $110.7 million for the nine month period ended September 30,
1998. Average yield e.o.p. of the entire portfolio decreased 8 basis points
from 10.49% at September 30, 1997 to 10.41% at September 30, 1998. The decrease
in the yield of the entire loan portfolio was caused by a decrease in the
average yield on Medallion Loans, coupled with a decrease in the average yield
on Commercial Installment Loans and a decrease in the percentage of the
portfolio composed of higher yielding Commercial Installment Loans which
historically have been originated at a yield of approximately 300 basis points
higher than Medallion Loans and 250 to 600 basis points higher than the
prevailing Prime Rate. The average yield e.o.p. of the Medallion Loan portfolio
decreased 35 basis points from 9.38% at September 30, 1997 to 9.03% at September
30, 1998 and the average yield of the Commercial Installment Loan portfolio
decreased 59 basis points from 13.28% at September 30, 1997 to 12.69% at
September 30, 1998. The decline in the commercial portfolio yield is the result
of the acquisition and growth of the Business Lenders portfolio of approximately
$21.8 million of floating rate loans tied to prime at an average yield of
11.05%. This purchase shifts the average yield on commercial yields lower,
however, interest rate exposure is mitigated by the floating rate nature of
these loans. The decrease in the average yield on Medallion Loans was caused by
a reduction in loan yields due to lower long-term interest rates and
competition. To offset the resulting decline in investment income, the Company
increased the origination of loans with shorter interest rate maturity dates,
thereby reducing the Company's interest rate risk exposure. The decrease in
average yield e.o.p. of the entire loan portfolio was offset in part by the
growth in the Medallion loan portfolio during the period. The percentage of the
portfolio composed of Commercial Installment Loans increased from 21.2% at
September 30, 1997 to 24.4% at September 30, 1998. Although the Company
continues to pursue a
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shift in its portfolio mix towards higher yielding Commercial Installment Loans,
this shift slowed by higher than expected growth in the Medallion Loan portfolio
during the period.
Interest Expense. The Company's interest expense increased $4.2 million or
58.7% from $7.1 million for the nine months ended September 30, 1997 to $11.2
million for the nine months ended September 30, 1998. The Company's average
cost of funds e.o.p. decreased 7 basis points from 7.13% or 124 basis points
over the LIBOR benchmark of 5.89% at September 30, 1997 to 6.51% or 91 basis
points over the LIBOR benchmark of 5.60% at September 30, 1998. The decrease in
the average cost of funds e.o.p. was caused by a reduction in the premium to
LIBOR paid by the Company combined with a 29 basis point decrease in the LIBOR
benchmark. Also contributing to the decrease in cost of funds e.o.p. was the
Company's issuance of commercial paper, which at the present time is generally
priced approximately 40-50 basis points less than the Company's revolving credit
facilities. Average total borrowings increased $80.2 million or 60.3% from
$133.0 million for the nine months ended September 30, 1997, which produced an
interest expense of $7.1 million at a weighted average interest rate 7.10% to
$213.2 million for the nine months ended September 30, 1998 which produced an
interest expense of $11.2 million at a weighted average interest rate of 7.03%.
The weighted average interest rates include commitment fees and amortization of
premiums on existing interest rate cap agreements as a reflection of total cost
of funds borrowed. The percentage of the Company's short-term LIBOR based
secured indebtedness which includes secured commercial paper increased as a
percentage of total indebtedness from 67.1% at September 30, 1997 to 80.5% at
September 30, 1998.
Net Interest Income. Net interest income increased $4.3 million or 39.3% from
$11.0 million for the nine months ended September 30, 1997 to $15.3 million for
the nine months ended September 30, 1998. Net interest income reflects the
positive impact of the portfolio growth during the nine months ended September
30. The average spread between the average yield on the portfolio and the
average cost of funds decreased 1 basis point or 0.3% from 3.39% for the nine
month period ended September 30, 1997 to 3.38% for the nine month period ended
September 30, 1998.
Equity in Earnings of Unconsolidated Subsidiary. Advertising revenue increased
$3,512,000 or 204.6% from $1,717,000 for the nine months ended September 30,
1997 to $5,229,000 for the nine months ended September 30, 1998. Display rental
costs increased $987,000 or 142.9% from $690,000 for the nine months ended
September 30, 1997 to $1,677,000 for the nine months ended September 30, 1998.
This resulted in a gross margin of approximately $1,026,000 or 59.8% of
advertising revenue for the nine months ended September 30, 1997 compared to
$3,552,000 or 67.9% for the nine months ended September 30, 1998. The
significant increase in advertising revenue and display rental cost is directly
related to the increase in the number of Displays owned by Media. The number of
Displays owned by Media increased 1,165 or 24.3% from 3,625 at September 30,
1997 to 4,790 at September 30, 1998. Operating costs increased $1,258,000 or
136.6% from $921,000 for the nine months ended September 30, 1997 to $2,179,000
for the nine months ended September 30, 1998. The increase in operating costs
is a reflection of the expansion of the Media operations. Income tax expense
amounted to $550,000 for the nine months ended September 30, 1998. Media
generated net income of $81,000 for the nine month period ended September 30,
1997 compared to net income of $823,000 for the nine month period ended
September 30, 1998. The increase in net income is primarily the result of
increases in the number of Displays owned and occupancy rates. Display occupancy
increased from 97.8% for the nine months ended September 30, 1997 to 100% for
the nine months ended September 30, 1998. Net income is recorded as equity in
earnings or losses of unconsolidated subsidiary on the Company's statement of
operations as a result of increases in the number of Displays owned, improved
margin and occupancy rates.
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Gain on sale of loans. The Company experienced a gain on the sale of the
guaranteed portion of SBA 7a loans in the amount of $19.0 million on loans sold
during the nine months ended September 30, 1998. There were no sales during the
nine months September 30, 1997. The Company accounts for gains on sale of loans
in accordance with SFAS No. 125 (Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities) and SOP 88-5 11. Because of
its limited experience with this portfolio, the Company has assumed a 15%
prepayment speed in calculating of the gains and excess servicing assets.
Management will continue to review industry data as well as its experience with
the portfolio and will adjust discount rates and prepayment speeds, if deemed
appropriate.
Other Income. The Company's other income increased $304,000 or 43.2% from
$704,000 for the nine months ended September 30, 1997 to $1,008,000 for the nine
months ended September 30, 1998. Other income was primarily derived from late
charges, prepayment fees and miscellaneous income. Prepayment fees are heavily
influenced by the level and volatility of interest rates and competition.
Non-Interest Expenses. The Company's non-interest expenses increased $5.6
million or 132.0% from $4.2 million for the nine months ended September 30, 1997
to $9.9 million for the nine months ended September 30, 1998. Included in non-
interest expenses for the nine months ended September 30, 1998 are $1.5 million
of expenses related to the merger with Medallion Capital. Exclusive of these
expenses, non-interest expenses increased $4.2 million or 100.0% from $4.2
million for the nine months ended September 30, 1997 to $8.4 million for the
nine months ended September 30, 1998. Other operating expenses increased $1.5
million or 89.8% from $1.7 million for the nine months ended September 30, 1997
to $3.2 million for the nine months ended September 30, 1998. Salaries and
benefits increased $2.5 million or 151.8% from $1.6 million for the nine months
ended September 30, 1997 to $4.1 million for the nine months ended September 30,
1998. Professional fees decreased $17,000 or 3.6% from $465,000 for the nine
months ended September 30, 1997 to $482,000 for the nine months ended September
30, 1998. Investment advisory fees were unchanged from $181,000 for the nine
months ended June 30, 1997 to $181,000 for the nine months ended September 30,
1998. The operating expense ratio increased to 3.0% for the nine-month period
ended September 30, 1998 from 2.2% for the nine-month period ended September 30,
1997, on an annualized basis. The operating expense ratio is computed as non-
interest expenses divided by average assets excluding the merger related
expenses. The significant increase in other operating expenses and salary
expense is principally the result of the acquisition of certain assets and
operations of Business Lenders LLC, which added 50 full time employees and the
related overhead of seven satellite offices principally located in the eastern
part of the country, to the Company's non-interest expense. The additional
staff and lending offices should help to provide additional loan growth for the
Company.
Amortization of Goodwill and Accretion of Negative Goodwill. The amortization
of goodwill was $315,000 for the nine months ended September 30, 1997 and
$376,000 for the nine months ended September 30, 1998, and relates to $6.5
million of goodwill generated in the acquisitions of Edwards and TCC. The
increase in amortization of goodwill is primarily related to the purchases of
assets of VGI, VGII and Venture Opportunities Corp. The goodwill resulting from
these acquisitions amounted to $1,545,000. The acquisition of Business Lenders
LLC resulted in the addition of $200,000 of goodwill. Goodwill is the amount by
which the cost of acquired businesses exceeds the fair value of the net assets
acquired. Goodwill is being amortized on a straight-line basis over 15 years.
Negative goodwill is the excess of fair market value of net assets of an
acquired business over the cost basis of
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such business. Negative goodwill of $2.9 million was generated in the
acquisition of Tri-Magna and is being amortized on a straight-line basis over
four years.
Net Investment Income. Net investment income increased $1.3 million or 16.4%
from $8.1 million for the nine month period ended September 30, 1997 to $9.4
million for the nine months ended September 30, 1998. Exclusive of the merger
related expenses of $1.5 million, net investment income increased $6.1 million
or 127.1% from $4.8 million for the nine months period ended September 30, 1997
to $10.9 million for the nine months ended September 30, 1998. The increase was
attributable to the positive impact of portfolio.
Change in Net Unrealized Depreciation/Appreciation. The change in net
unrealized appreciation increased $262,000 from a depreciation of $2,000 for
the nine months ended September 30, 1997 to an appreciation $264,000 for the
nine months ended September 30, 1998. The increase was the result of the
increase in the value of equity investments that the Company owns.
Net Realized Gain/Loss on Investments. The Company had an increase in
realized net gain on investments of $539,000 from net realized gains after taxes
of $1.1 million for the nine months ended September 30, 1997 to $1.6 million for
the nine months ended September 30, 1998. The increase in realized gains was
the result of the sale of common and preferred stock warrants in connection with
the repayment of several loans.
Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased $2.2 million or 24.1% from $9.2
million for the nine months ended September 30, 1997 to $11.4 million for the
nine months ended September 30, 1998. Exclusive of the merger related expenses
$1.5 million, net investment income increased $3.7 million or 40.2% from $9.2
million for the nine months period ended September 30, 1997 to $12.9 million for
the nine months ended September 30, 1998. The increase was attributable to the
positive impact of portfolio growth offset by an increase in operating expenses.
Also included in the increase was a realized gain of approximately $1.6 million
from the sale of common and preferred stock warrants in connection with the
repayment of certain loans compared to net realized gains of after tax of $1.1
million in the same period. Return on assets and return on equity for the nine
months ended September 30, 1998, on an annualized basis, were 4.0% and 10.0%,
respectively, compared to 4.8% and 10.9% for the nine months ended September 30,
1997.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity. The Company, like other financial institutions, is
subject to interest rate risk to the extent its interest-earning assets
(consisting of Medallion Loans and Commercial Installment Loans) reprice on a
different basis over time in comparison to its interest-bearing liabilities
(consisting primarily of credit facilities with bank syndicates, secured
commercial paper 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
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given time interval expressed as a percentage of total assets.
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 until the Company is able to
originate new loans at the higher prevailing interest rates.
The effect of changes in market rates of interest is mitigated by regular
turnover of the portfolio. 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 consisting primarily of subordinated SBA
debentures. MFC has entered into interest rate cap agreements to limit the
Company's LIBO interest rate exposure on MFC's revolving credit facility as
summarized below:
LIBO EFFECTIVE MATURITY
AMOUNT RATE DATE DATE
------------- ----- --------- --------
$10,000,000 7.0% 5/13/97 5/13/99
$20,000,000 7.0% 5/13/98 11/13/99
$20,000,000 6.5% 4/7/98 9/30/99
$20,000,000 7.0% 9/30/99 3/30/01
Total premiums paid under the agreements are being amortized over the
respective terms of the agreements. In addition, the Company manages its
exposure to increases in market rates of interest by incurring fixed rate
indebtedness, such as SBA debentures. The Company currently has outstanding SBA
debentures in the principal amount of $41.6 million with a weighted average rate
of interest of 7.32%. At September 30, 1998, these debentures constituted 16.1%
of the Company's total indebtedness.
The Company will seek to manage interest rate risk by evaluating and
purchasing, if appropriate, additional derivatives, originating adjustable-rate
loans, incurring fixed-rate indebtedness 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity are credit facilities with bank syndicates,
secured
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commercial paper, fixed rate, long-term debentures that are issued to or
guaranteed by the SBA and loan amortization and prepayments. As a Regulated
Investment Company ("RIC") under the Internal Revenue Code of 1986, as amended,
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 September 30, 1998, 51.7% of the Company's $248.9 million of
debt consisted of bank debt, substantially all of which was at variable
effective rates of interest with a weighted average rate of 6.63% or 187 basis
points below the Prime Rate, 31.6% or $78.6 million consisted of short-term
commercial paper at a weighted average interest rate of 5.90% and 16.7% or $41.6
million consisted of SBA debentures with fixed rates of interest with a weighted
average rate of 7.32%. 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 MFC and Medallion
Capital which are already subject to certain SBA restrictions. In the event
that the Company seeks SBA funding, no assurance can be given that such funding
will be obtained. In addition to possible additional SBA funding, an additional
$49.9 million of debt was available at September 30, 1998 at variable effective
rates of interest averaging below the Prime Rate under the Company's $257.3
million bank credit facilities.
The following table illustrates the Company's and each of the subsidiaries'
sources of available funds and amounts outstanding under credit facilities at
September 30, 1998.
<TABLE>
<CAPTION>
MEDALLION
FINANCIAL MFC EDWARDS TCC BLLC CDI TOTAL
---------- ------------- ------------- -------- ---- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Cash and cash equivalents $ 67 $ 1,726 $ - $1,420 $ -- $ 2,792 $ 6,006
Revolving lines of credit 57,500 195,000 4,750 -- -- -- 257,250
Amounts available 26,800 23,116(a) - -- -- -- 49,916(a)
Amounts outstanding 30,700 93,250 4,750(b) -- -- -- 128,700
Average interest rate 6.70% 6.59% 6.91% -- -- -- 6.63%
Maturity 7/00 6/99 10/98 -- -- -- 10/98-7/99
Commercial paper
Amounts outstanding -- 78,634 -- -- -- -- 78,634
Average interest rate -- 5.90% -- -- -- -- 5.90%
Maturity -- 6/99 -- -- -- -- 6/99
SBA debentures -- 6,200 19,250 5,640 -- 10,500 41,590
Average interest rate -- 6.27% 7.58% 8.00% -- 7.08% 7.32%
Maturity -- 9/00-9/05 9/02-9/04 6/02 -- 3/06-6/07 9/00-9/07
Total cash and remaining amounts
available under credit facilities 26,867 23,116 - 1,420 -- 2,792 55,916
Total debt outstanding $30,700 $ 178,084 $ 24,000 $5,640 $ -- $ 10,500 $ 248,924
</TABLE>
(a) Commercial paper outstanding is deducted from revolving credit lines
available as the line of credit acts as a liquidity facility for the
commercial paper.
(b) On October 4, 1998, the Company paid off the line of credit for Edwards that
matured.
Loan amortization and prepayments also provide a source of funding for the
Company. Prepayments on loans are influenced significantly by general interest
rates, medallion loan market rates, economic conditions and competition.
Medallion loan prepayments have slowed since early 1994, initially because of
increases, and then stabilization in the level of interest rates and more
recently because of an increase in the percentage of the Company's medallion
loans which are refinanced with the Company rather than through other sources of
financing.
The Company makes limited use of SBA funding and will seek such funding
only when
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advantageous. Since May 30, 1996, the Company has expanded its loan portfolio,
reduced its level of SBA financing and increased its level of bank funding.
Media funds its operations through internal cash flow and inter-company
debt. Media is not a RIC and, therefore, is able to retain earnings to finance
growth.
INVESTMENT CONSIDERATIONS
The following are certain of the factors which could affect the Company's
future results. They should be considered in connection with evaluating
forward-looking statements contained in this Management's Discussion and
Analysis and elsewhere in this Report and otherwise made by or on behalf of the
Company since these factors, among others, could cause actual results and
conditions to differ materially from those projected in these forward-looking
statements.
Interest Rate Spread. The Company's net interest income is largely
dependent upon achieving a positive interest rate spread and other factors.
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.
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 distributes to its shareholders at
least 90% of its investment company taxable income, such earnings are not
available to fund loan originations.
Risk Relating to Integration of CDI and Medallion. The realization of
certain benefits anticipated as a result of the acquisition of Medallion Capital
(formerly CDI) will depend in part on the integration of Medallion Capital's
investment portfolio and specialty finance business with the Company and the
successful inclusion of Medallion Capital's investment portfolio in the
Company's financing operations. There can be no assurance that Medallion
Capital's business can be operated profitably or integrated successfully into
the Company's operations. Such effects could have a material adverse effect on
the financial results of the Company.
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.
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.
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
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<PAGE>
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. 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.
Government Regulation of Tobacco Advertising. Currently, approximately 47%
of Media's taxicab rooftop advertising revenue is derived from tobacco products
advertising. Various federal, state and local government agencies, including
the U.S. Food and Drug Administration (the "FDA") have from, time to time,
proposed regulations restricting the sale and advertising of cigarette and
smokeless tobacco products. Additionally, various tobacco companies have
voluntarily proposed eliminating outdoor tobacco advertising in exchange for
immunity from class action suits. Accordingly, such regulations or voluntary
restrictions could have an adverse effect upon the taxicab rooftop advertising
business of the Company. The Company believes, however, that it could replace
some of the revenue which may be lost due to the loss of tobacco taxicab rooftop
advertising.
Year 2000. The Company is currently addressing the Year 2000 problem,
which concerns the inability of systems, primarily computer software programs,
to properly recognize and process date sensitive information relating to the
Year 2000 and beyond. The Company, in the ordinary course of business, has for
several years had several information system improvement initiatives underway.
These initiatives include the installation of new loan servicing software and
update of the general ledger system; such initiatives are expected to be Year
2000 compliant. The Company has received Year 2000 compliance letters from each
of its major software vendors and its major office systems vendors. Software
system tests will be conducted using fictitious transactions and each individual
workstation and network server will be tested for Year 2000 compliance.
Management anticipates completing testing by the end of the second quarter of
1999. Management believes that such initiatives will adequately address the
Year 2000 problem, although there can be no assurance in this regard. Costs
related to new information systems will be capitalized and amortized over their
useful lives. Management does not believe that the other costs associated with
addressing the Year 2000 problem will be material. The Company will continue to
address the Year 2000 issue in connection with its future acquisitions. The
company has not yet completed its evaluation as to whether its third party
vendors will be able to resolve their year 2000 issues in a satisfactory and
timely manner, or the magnitude of the adverse impact it would have on the
Company's operations, if they fail to do so. Management will send Year 2000
compliance surveys to its third party vendors, however, the ability of third
parties with which the Company transacts business to adequately address their
Year 2000 issues is outside of the Company's control. Failure of such third
parties or the Company to adequately address their respective Year 2000 issues
could have a material adverse effect on the Company's financial condition or
results of operations. At this point in time, management is unable to quantify
the potential loss due to failure of systems to comply with the Year 2000 and is
in the process of developing a contingency plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
2.1 Agreement and Plan of Merger, dated as of March 6, 1998, by and among
Medallion Financial Corp., CD Merger Corp. and Capital Dimensions,
Inc. (Exhibits and Schedules thereto
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<PAGE>
omitted). Filed as Exhibit 2.1 to the Company's Quarterly Report on
Form 10-Q, for the quarter ended June 30, 1998 and incorporated by
reference herein.
3.1 Medallion Financial Corp. Restated Certificate of Incorporation. Filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1996 and incorporated by reference
herein.
3.1.1 Certificate of Amendment of Medallion financial Corp. Restated
Certificate of Incorporation. Filed as Exhibit 3.1.1 to the Company's
Quarterly Report on Form 10-Q, for the quarter ended June 30, 1998 and
incorporated by reference herein.
3.2 Medallion Financial Corp. Restated By-Laws. Filed as Exhibit b to the
Company's Registration Statement on Form K-2 (File No. 333-1670) and
incorporated by reference herein.
4.1 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"). Filed as Exhibit f.2 to the Company's Registration
Statement on Form N-2 (File No. 333-1670) and incorporated by
reference herein.
4.2 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"). Filed as Exhibit f.4 to
the Company's Registration Statement on Form N-2 (File No. 333-1670)
and incorporated by reference herein.
4.3 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. Filed as Exhibit f.5 to the Company's Registration
Statement on Form N-2 (File No. 333-1670) and incorporated by
reference herein.
4.4 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. Filed as Exhibit f.6 to the Company's Registration
Statement on Form N-2 (File No. 333-1670) and incorporated by
reference herein.
4.5 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. Filed as Exhibit f.7 to the Company's Registration
Statement on Form N-2 (File No. 333-1670) and incorporated by
reference herein.
4.6 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.
Filed as Exhibit f.8 to the Company's Registration Statement on Form
N-2 (File No. 333-1670) and incorporated by reference herein. Letter
dated September 19, 1996 from the U.S. Small Business Administration
to Edwards Capital Corp. amending such Letter Agreement was filed as
Exhibit 4.7 to the Company's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1996 and is incorporated by reference
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<PAGE>
herein.
4.7 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. Filed as Exhibit f.10 to the Company's
Registration Statement on Form N-2 (File No. 333-1670) and
incorporated by reference herein.
10.1 Medallion Financial Corp. Amended and Restated 1996 Stock Option Plan.
Filed as Exhibit 10.1 to the Company's Quarterly report on Form 10-Q,
for the quarter ended June 30, 1998 and incorporated by reference
herein.
10.2 Loan Agreement, dated as of July 31, 1998, by and among Medallion
Financial Corp., the Lenders Party thereto, Fleet Bank, National
Association as Agent and Swing Line Lender and Fleet Bank, National
Association as Arranger (Exhibits included). Filed herewith.
27 Medallion Financial Corp. Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K.
There were no reports on Form 8-K were filed during the fiscal
quarter ended September 30, 1998.
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<PAGE>
MEDALLION FINANCIAL CORP.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
MEDALLION FINANCIAL CORP.
Date: By: /s/ Daniel F. Baker
---------------------------------------
Daniel F. Baker
Chief Financial Officer
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EXHIBIT 10.2
LOAN AGREEMENT
by and among
MEDALLION FINANCIAL CORP.,
THE LENDERS PARTY HERETO,
FLEET BANK, NATIONAL ASSOCIATION
AS AGENT AND SWING LINE LENDER
and
FLEET BANK, NATIONAL ASSOCIATION
AS ARRANGER
Dated as of July 31, 1998
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TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.................................................. 1
SECTION 1.1. Defined Terms............................................. 1
SECTION 1.2. Other Definitional Provisions............................. 26
ARTICLE 2. AMOUNT AND TERMS OF REVOLVING CREDIT LOANS................... 26
SECTION 2.1. Commitments and Loans..................................... 26
SECTION 2.2. Revolving Credit, Term Loan and Swing Line Notes.......... 30
SECTION 2.3. Procedures Applicable to Borrowings and Conversions....... 34
SECTION 2.4. Termination and Reduction of Aggregate Revolving Credit
Commitment.............................................. 38
SECTION 2.5. Prepayments............................................... 39
SECTION 2.6. Interest on Delinquent Payments........................... 41
SECTION 2.7. Increased Costs........................................... 42
SECTION 2.8. Existing Indebtedness; Existing Fees; Existing Interest;
Use of Proceeds......................................... 44
SECTION 2.9. Payment on Non-Business Days.............................. 45
SECTION 2.10. Term of Revolving Credit Commitments..................... 45
SECTION 2.11. Funding Losses........................................... 46
SECTION 2.12. Alternate Rate of Interest............................... 47
SECTION 2.13. Changes In Legality...................................... 48
SECTION 2.14. Participations........................................... 48
ARTICLE 3. FEES AND PAYMENTS............................................ 49
SECTION 3.1. Fees...................................................... 49
SECTION 3.2. Payments.................................................. 49
SECTION 3.3. Taxes..................................................... 50
ARTICLE 4. REPRESENTATIONS AND WARRANTIES............................... 51
SECTION 4.1. Corporate Status.......................................... 52
SECTION 4.2. Subsidiaries.............................................. 52
SECTION 4.3. Location of Offices, Books and Records.................... 52
SECTION 4.4. Corporate Power; Authorization............................ 53
SECTION 4.5. Enforceable Obligations................................... 53
SECTION 4.6. No Violation of Agreements; Compliance with Law........... 53
SECTION 4.7. Agreements................................................ 54
SECTION 4.8. No Material Litigation.................................... 54
SECTION 4.9. Good Title to Properties.................................. 54
SECTION 4.10. Margin Regulations....................................... 54
SECTION 4.11. SBIC..................................................... 55
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SECTION 4.12. Investment Company....................................... 55
SECTION 4.13. Disclosure............................................... 55
SECTION 4.14. Taxes and Claims......................................... 56
SECTION 4.15. Licenses and Permits..................................... 56
SECTION 4.16. Consents................................................. 56
SECTION 4.17. Employee Benefit Plans................................... 56
SECTION 4.18. Financial Condition...................................... 57
SECTION 4.19. Environmental Laws, Etc.................................. 58
SECTION 4.20. Event of Default......................................... 58
SECTION 4.21. Solvency................................................. 58
SECTION 4.22. Priority................................................. 59
SECTION 4.23. Advertising, Origination and Servicing Activities........ 59
SECTION 4.24. Activities............................................... 59
SECTION 4.25 Year 2000 Issue.......................................... 59
ARTICLE 5. CONDITIONS PRECEDENT......................................... 60
SECTION 5.1. Conditions to Initial Revolving Credit Loan and Initial
Swing Line Loan......................................... 60
SECTION 5.2. Conditions to All Revolving Credit and Term Loans......... 63
ARTICLE 6. AFFIRMATIVE COVENANTS........................................ 64
SECTION 6.1. Financial Statements and Other Information................ 64
SECTION 6.2. Taxes and Claims.......................................... 67
SECTION 6.3. Insurance................................................. 68
SECTION 6.4. Books and Records......................................... 68
SECTION 6.5. Properties in Good Condition.............................. 69
SECTION 6.6. Inspection by the Banks................................... 69
SECTION 6.7. Pay Indebtedness to Agent and Perform Other Covenants..... 69
SECTION 6.8. Compliance With Laws...................................... 69
SECTION 6.9. Notice of Certain Events.................................. 70
SECTION 6.10. Environmental Laws, Etc.................................. 70
SECTION 6.11. Further Assurances....................................... 71
SECTION 6.12. ERISA.................................................... 71
SECTION 6.13. Corporate Existence...................................... 71
SECTION 6.14. Maintenance of Security Interest......................... 72
SECTION 6.15. [Reserved]............................................... 72
SECTION 6.16. Year 2000 Issue.......................................... 72
SECTION 6.17. Credit Party's Manuals................................... 72
SECTION 6.18. Principal Office of Clients.............................. 72
ARTICLE 7. FINANCIAL COVENANTS.......................................... 73
SECTION 7.1. Minimum Tangible Net Worth................................ 73
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SECTION 7.2. Maximum Liability Ratio................................... 73
SECTION 7.3. Minimum Net Finance Assets................................ 73
SECTION 7.4. Minimum Net Income to Interest Expense Ratio.............. 74
ARTICLE 8. NEGATIVE COVENANTS........................................... 74
SECTION 8.1. Liens..................................................... 74
SECTION 8.2. Indebtedness.............................................. 76
SECTION 8.3. Limitation on Loans and Investments....................... 76
SECTION 8.4. Limitation on Subsidiaries................................ 78
SECTION 8.5. Restricted Payments....................................... 78
SECTION 8.6. Merger, Consolidation, Sale or Transfers Assets........... 78
SECTION 8.7. Transfer of Proceeds...................................... 78
SECTION 8.8. Compliance with ERISA..................................... 79
SECTION 8.9. Change in Business........................................ 79
SECTION 8.10. Amendments of Agreements................................. 79
SECTION 8.11. Transactions with Affiliates............................. 80
SECTION 8.12. Negative Pledges......................................... 80
SECTION 8.13. Inconsistent Agreements.................................. 80
SECTION 8.14. Capital Expenditures..................................... 80
SECTION 8.15. [Reserved]............................................... 80
SECTION 8.16. Portfolio Purchases...................................... 80
SECTION 8.17. Intercompany Demand Loan Documents....................... 81
ARTICLE 9. DEFAULTS AND REMEDIES........................................ 81
SECTION 9.1. Events of Default......................................... 81
SECTION 9.2. Suits for Enforcement..................................... 85
SECTION 9.3. Rights and Remedies Cumulative............................ 85
SECTION 9.4. Rights and Remedies Not Waived............................ 86
SECTION 9.5. Further Payments.......................................... 86
ARTICLE 10. MISCELLANEOUS............................................... 87
SECTION 10.1. Collection Costs......................................... 87
SECTION 10.2. Modification and Waiver.................................. 87
SECTION 10.3. GOVERNING LAW............................................ 88
SECTION 10.4. Notices.................................................. 89
SECTION 10.5. Accounting Terms......................................... 89
SECTION 10.6. Costs and Expenses; Indemnity............................ 89
SECTION 10.7. WAIVER OF JURY TRIAL AND SETOFF.......................... 91
SECTION 10.8. Captions................................................. 91
SECTION 10.9. Lien; Setoff by Banks.................................... 91
SECTION 10.10. Security................................................ 93
SECTION 10.11. Jurisdiction; Service of Process........................ 93
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SECTION 10.12. Benefit of Agreement.................................... 93
SECTION 10.13. Counterparts............................................ 94
SECTION 10.14. Interest................................................ 94
SECTION 10.15. Attorneys' Fees......................................... 95
SECTION 10.16. Severability............................................ 95
SECTION 10.17. Confidentiality......................................... 95
SECTION 10.18. Loss, Theft, Etc. of Notes.............................. 96
ARTICLE 11. AGENCY...................................................... 96
SECTION 11.1. Appointment and Actions.................................. 96
SECTION 11.2. Independent Credit Decisions............................. 99
SECTION 11.3. Indemnification of Agent................................. 100
SECTION 11.4. Resignation and Succession............................... 100
ARTICLE 12. SALES AND TRANSFERS......................................... 101
SECTION 12.1. Sales and Transfers...................................... 101
SECTION 12.2. New Banks................................................ 104
Exhibits and Schedules
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Exhibit A-Percentages
Exhibit B-Form of Revolving Credit Note
Exhibit C-Form of Term Note
Exhibit D-Form of Swing Line Note
Exhibit E-Form of Loan Request
Exhibit F-Form of Borrower Security Agreement
Exhibit G-Form of Multi-Party Letter Agreement
Exhibit H-Form of Borrowing Base Certificate
Exhibit I-Form of Opinion of Counsel to Borrower
Exhibit J-Form of Assignment and Acceptance
Exhibit K-Form of Guaranty and Security Agreement
Exhibit L-Form of Intercompany Demand Note
Schedule I-Locations, Chief Executive Office
Schedule II-Subsidiaries
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LOAN AGREEMENT, dated as of July 31, 1998, among MEDALLION FINANCIAL CORP.,
a Delaware corporation (the "Borrower" or "MFC"), the banks that from time to
time are signatories hereto (including Assignees (as hereinafter defined),
collectively, the "Banks" and individually, a "Bank"), FLEET BANK, NATIONAL
ASSOCIATION , as a Bank ("Fleet"), as Swing Line Lender (the "Swing Line
Lender"), as Arranger and as Agent for the Banks (including any successor, the
"Agent").
WHEREAS, the Borrower and Fleet are parties to a Letter Agreement dated as
of December 1, 1996 and such Letter Agreement was previously amended by
Amendment One, Amendment Two, Amendment Three, Amendment Four and Amendment Five
thereto (as so previously amended, the "Prior Agreement"); and
WHEREAS, the Borrower, the Agent, the Swing Line Lender and the Banks
desire to enter into a new credit facility which will supercede, replace, amend
and restate in its entirety the Prior Agreement and make further changes
thereto, 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 1 DEFINITIONS
Section 1.1 Defined Terms.
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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:
"Account Debtor" shall mean any Person which is or which may become
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obligated to a Client under or on account of a Receivable.
"Accumulated Funding Deficiency" shall have the meaning set forth in
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Section 302 of ERISA.
"Additional Commitment Amount" shall have the meaning set forth in Section
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12.2 hereof.
"Adjusted LIBO Rate" shall mean, with respect to any Interest Period
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applicable to any LIBO Rate Loan, the rate of interest per annum, as determined
by the Agent, equal to the quotient (rounded to the nearest 1/100 of 1.00% or,
if there is no nearest 1/100 of
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1.00%, then to the next higher 1/100 of 1.00%) obtained by dividing the 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 shall be adjusted automatically on and as of the opening of business
on the effective date of any change in the Eurodollar Reserve Percentage.
"Adjusted Net Income" shall mean, with respect to any Credit Party, the
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aggregate income (or loss) of such Credit Party for such period which shall be
an amount equal to net revenues and other proper items of income less the
----
aggregate such Credit Party of any and all items that are treated as expenses
under GAAP, and less, without duplication, Federal, state and local income taxes
----
as determined in accordance with GAAP.
"Adjusted Tangible Net Worth" shall mean, as to the Borrower and BL taken
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together but otherwise on an unconsolidated basis, the sum of capital surplus,
earned surplus, capital stock and Satisfactory Subordinated Debt minus deferred
charges, intangibles, treasury stock, Investments in Subsidiaries (other than
Investments by the Borrower in BL) and amounts due to the Borrower and/or BL
from any Subsidiary(ies) of the Borrower and/or BL, all determined in accordance
with GAAP consistently applied.
"Affiliate" shall mean any Person which, directly or indirectly, controls
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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
"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.
"Agent Payment Office" shall mean with respect to all amounts owing under
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the Loan Documents, initially, the office, branch, affiliate, or correspondent
bank of the Agent designated as its "Payment Office" below its signature to this
Agreement and, thereafter, such other office, branch, affiliate, or
correspondent bank thereof as it may from time to time designate in writing as
such to the Borrower, the Swing Line Lender and each Bank.
"Aggregate Revolving Credit Commitment" shall mean $57,500,000, as the same
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may be reduced, terminated or increased from time to time pursuant to Sections
2.4, 2.10, 9.1 or 12.2 hereof.
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"Agreement" shall mean this Loan Agreement, as the same may be amended and
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supplemented from time to time.
"Amount" shall mean, (a) with respect to any Loan, the principal amount of,
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plus all accrued and unpaid interest on, and all other amounts due in respect
of, such Loan and (b) with respect to any Receivable, all amounts due in respect
of such Receivable.
"Applicable Facility Percentage" means 0.15%.
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"Applicable Cost of Funds Margin" means 1.15%.
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"Applicable LIBO Margin" means 1.10%.
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"Assignee" or "Assignees" shall have the meaning set forth in Section 12.2
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hereof.
"Assignment" or "Assignments" shall have the meaning set forth in Section
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12.2 hereof.
"Assignor" or "Assignors" shall have the meaning set forth in Section 12.2
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hereof.
"Authorized Representative" shall mean, with respect to the Borrower, its
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chairman, president, chief executive officer, chief operating officer, chief
accounting officer, vice president or chief financial officer, or any other
officer of the Borrower designated as such from time to time by the Borrower in
a written notice to the Agent, accompanied by an incumbency certificate with
specimen signature included.
"Banking Day" shall mean any Business Day on which dealings in deposits in
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Dollars are transacted in the London interbank market.
"BL" shall mean Business Lenders, LLC a Delaware limited liability company
--
the sole member of which is the Borrower.
"BL Borrowing Base" shall mean, as determined pursuant to the most recently
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required Borrowing Base Certificate
(i) cash and Short Term Investments shown on BL's balance sheet as of
such date, plus
----
(ii) 100% of the aggregate outstanding principal balances of, plus
accrued interest on, the SBA guaranteed portion of all Guaranteed BL Loans
from time to time outstanding that are Retained Loans, plus
----
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(iii) 67% of the aggregate outstanding principal balances of, plus
accrued interest on, (a) all of BL's Eligible Commercial Loans (other than
the SBA guaranteed portion of Guaranteed BL Loans) and (b) that portion of
the Guaranteed BL Loans that are not guaranteed by the SBA; provided such
Loans would be Eligible Medallion Loans or Eligible Commercial Loans, each
as from time to time outstanding that are Retained Loans;
provided, that, if all or any part of any Loan would be excluded as an Eligible
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Commercial Loan or Eligible Medallion Loan under any of the provisions of this
Agreement, then the entire outstanding principal amount of, plus accrued
interest on, such Loan shall be excluded.
"Board" shall mean the Board of Governors of the Federal Reserve System.
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"Borrowing Base Certificate" shall mean a certificate substantially in the
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form of Exhibit H hereto, which Borrowing Base Certificate shall identify all
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such information separately for the Borrower and BL.
"Borrower and Guarantor Financing Statements" shall mean financing
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statements approved for filing in accordance with the Uniform Commercial Code,
and all other titles, certificates, assignments and other documents that the
Agent or any Bank may require to perfect the security interests to be granted
under the Borrower Security Agreement and the Guaranty and Security Agreement.
"Borrower Obligations" shall mean all of the obligations and liabilities of
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the Borrower under the Loan Documents, in each case whether fixed, contingent,
now existing or hereafter arising, created, assumed, incurred or acquired
including (i) any obligation or liability in respect of any breach of any
representation or warranty, and (ii) all post-petition interest and funding
losses.
"Borrower Security Agreement" shall mean the Borrower Security Agreement
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dated the Effective Date, between the Borrower and the Agent for the benefit of
the Banks and the Swing Line Lender, substantially in the form of Exhibit F
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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
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day on which the Agent is not open for business at its offices set forth in this
Agreement.
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"Capital Stock" with respect to any corporation, shall mean common stock,
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preferred stock, and any and all shares or other equivalents (however
designated) of any other corporate stock, of such corporation.
"Client" shall mean, with respect to any Loan, any Person, not disapproved
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by the Agent or the Required Banks in writing in its or their sole discretion,
which is obligated to make payments in respect of such Loan (other than any
Account Debtor). For purposes of this Agreement and the other Loan Documents,
any Client that is an Affiliate of another Client shall be deemed to be one and
the same Client.
"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.
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"Collateral" shall mean and include the assets, property or interests in
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property of whatever nature whatsoever, real, personal or mixed, tangible or
intangible, of the Borrower and/or BL securing the Revolving Credit Loans, Swing
Line Loans and/or Term Loans and all other property and interests in personal
property that shall, from time to time, secure the Revolving Credit Loans, Swing
Line Loans and/or Term Loans.
"Collateral Account" shall have the meaning set forth in the Borrower
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Security Agreement.
"Commercial Loans" shall mean Loans that are secured in whole or in part by
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Real Property, Inventory, Equipment and/or Receivables and that are not
Medallion Loans.
"Cost of Funds" means the per annum rate of interest which Fleet is
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required to pay, or is offering to pay, for wholesale liabilities, adjusted for
reserve requirements and such other requirements as may be imposed by federal,
state or local government and regulatory agencies, as determined in the sole
discretion of Fleet and agreed to by the Required Lenders.
"Cost of Funds Loan" shall mean a Revolving Credit Loan or Term Loan
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hereunder that bear interest for the Interest Period applicable thereto at a
fixed rate of interest determined by reference to the Cost of Funds plus the
applicable margin.
"Credit Party" shall mean either of the Borrower or BL individually and
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"Credit Parties" shall mean the Borrower and BL collectively.
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"Default" shall mean any of the events specified in Section 9.1 hereof,
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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.
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"Delinquent Receivables Loan" shall mean a Loan secured by Receivables as
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to which any payment with respect to any amount due in connection with any such
Receivable is not made within 90 calendar days after such payment was originally
due (without regard to any stated grace period).
"Distressed Person" shall mean any Person (a) that files a petition or
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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 seq.), or files a petition or seeks relief under or takes
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advantage of any other similar law or statute of the United States of America,
any state thereof or any foreign country; or
(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.
"Dividends" shall mean, for the most recently completed four fiscal
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quarters of the applicable Credit Party, the sum of all paid and accrued and
unpaid cash dividends on Capital Stock plus any paid and accrued and unpaid
repurchase or redemption for cash of Capital Stock.
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"Dollars" and "$" shall mean dollars in lawful currency of the United
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States of America.
"Domestic Investment" shall mean an Investment in respect of a Person which
-------------------
is a resident of the United States, Canada or Bermuda or a Person (other than a
Governmental Authority) organized or qualified under the laws of any State,
excluding any Domestic Investment that is a Portfolio Purchase.
"Domestic Loan" shall mean a Loan that is denominated and payable only in
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Dollars, the Person in respect of which is a resident of the United States,
Canada or Bermuda or a Person (other than a Governmental Authority) organized or
qualified under the laws of any State.
"EBIT" shall mean, with respect to any Credit Party for any period, the sum
----
of (i) Adjusted Net Income, (ii) Interest Expense and (iii) Federal, state and
local income taxes, in each case of such Credit Party for such period, computed
in accordance with GAAP.
"Effective Date" of this Agreement shall mean the date on which (i)
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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.
"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) [Reserved],
(d) such Loan is pledged in accordance with the Borrower Security
Agreement or the Guaranty and Security Agreement,
(e) such Loan is made to an Eligible Client,
(f) the representations, warranties and covenants contained in the
Borrower Security Agreement and the Guaranty and Security Agreement are true and
correct, and have been complied with, with respect to such Loan,
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(g) the Agent, on behalf of the Banks, has a perfected, first priority
security interest in such Loan, and
(h) such Loan is made in accordance with the credit policy in
existence at the time of such Loan of the applicable Credit Party.
Notwithstanding the foregoing, no Loan shall be deemed to have satisfied
the Eligibility Requirements if the Agent or the Required Banks believe that
such Loan may not be paid in accordance with its original terms or are insecure
for any reason, including, without limitation, because of the Eligible Client's
financial inability to pay or because the Eligible Client has disputed the
liability, asserted any right of set-off or has made a claim with respect to any
other Loan made to such Eligible Client by the applicable Credit Party, other
than as a nominal adjustment in the ordinary course of business and in
accordance with regular commercial practice.
"Eligible Client" shall mean, on any date, any Client that meets all the
---------------
following criteria:
(a) such Client is not an Affiliate of a Credit Party or its
Subsidiaries,
(b) less than 50% of the Amount of all Loans to such Client constitute
Delinquent Receivables Loans, and
(c) the Amount of Loans to such Client in the aggregate does not
exceed 20% of the applicable Credit Party's Tangible Net Worth as of such
date.
"Eligible Commercial Loan" shall mean any Commercial Loan that satisfies
------------------------
the Eligibility Requirements and (a) that is secured by Eligible Equipment,
Eligible Inventory, Eligible Real Estate or Eligible Receivables and (b) that is
made to an Eligible Client that is an ongoing business concern; provided, that,
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no Loan shall be an Eligible Commercial Loan (i) if a Credit Party, in its
reasonable business judgment, deems such Eligible Commercial Loan to be
uncollectible or subject to classification as non-accruing and for which it has
not made appropriate credits to its reserves, or (ii) if the Loan or accrued
interest thereon is more than 60 days past due.
"Eligible Equipment" of any Credit Party shall mean Equipment in which a
------------------
perfected security interest has been obtained by such Credit Party in accordance
with its standard credit policy and underwriting criteria at such time to secure
the obligations of a Client under a Loan by such Credit Party to such Client, or
in the case of such beneficial owner, to secure a guaranty which shall have been
made by such beneficial owner
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guaranteeing the Loan, and the same has been assigned to the Agent, for the
benefit of the Banks, pursuant to the Borrower Security Agreement or Guaranty
and Security Agreement and the same is otherwise satisfactory to the Agent.
"Eligible Inventory" of any Credit Party shall mean Inventory in which a
------------------
first priority perfected security interest has been obtained by such Credit
Party to secure the obligations of a Client under a Loan by such Credit Party to
such Client, or in the case of such beneficial owner, to secure a guaranty which
shall have been made by such beneficial owner guaranteeing the Loan, and the
same has been assigned to the Agent, for the benefit of the Banks, pursuant to
the Borrower Security Agreement or the Guaranty and Security Agreement.
Notwithstanding the foregoing, Eligible Inventory does not include any of the
following: (a) catalogs and other promotional materials of any kind; (b) work
in process; (c) any returned items; (d) any damaged, defective or recalled
items; (e) any obsolete items; (f) any items used as demonstrators, prototypes
or salesmen's samples; (g) any items of inventory which have been consigned to a
Client or as to which a Person claims a Lien; (h) any items of inventory which
have been consigned by the Client to a consignee; (i) packing and shipping
materials; (j) inventory located on premises leased by the Client from a
landlord with whom the applicable Credit Party has not entered into a landlord's
waiver on terms satisfactory to such Credit Party; and (k) inventory which in
the reasonable judgment of the Credit Party, in accordance with its standard
criteria, is considered to be slow moving or otherwise not merchantable.
Eligible Inventory shall be valued at the lower of (a) cost, (b) market value,
or (c) the valuation consistent with that employed in the preparation of the
financial statements of the applicable Client.
"Eligible Medallion Loan" shall mean any Medallion Loan that satisfies the
-----------------------
Eligibility Requirements and (a) that is secured by Medallion Rights and (b)
that is made to an Eligible Client that is an ongoing business concern;
provided, that, no Loan shall be an Eligible Medallion Loan (i) if a Credit
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Party, in its reasonable business judgment, deems such Eligible Medallion Loan
to be uncollectible or subject to classification as non-accruing and for which
it has not made appropriate credits to its reserves, or (ii) if the Loan or
accrued interest thereon is more than 60 days past due..
"Eligible Loans" shall mean any Loan that constitutes or comprises either
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an Eligible Medallion Loan or Eligible Commercial Loan or Guaranteed BL Loan.
"Eligible Real Estate" of any Credit Party shall mean Real Property in
--------------------
which a mortgage interest has been obtained (and continuously maintained) by
such Credit Party to secure the obligations of the Client under a Loan by such
Credit Party to such Client, or in the case of such beneficial owner, to secure
a guaranty which shall have been made by such beneficial owner guaranteeing the
Loan, and assigned to the Agent, for the benefit of the Banks, pursuant to a
Mortgage Assignment.
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"Eligible Receivables" of any Credit Party shall mean Receivables (i) that
--------------------
are reasonably determined in good faith to be eligible by such Credit Party,
(ii) that arise in the ordinary course of a Person's business, (iii) that are
net of credits, rebates, offsets, holdbacks or adjustments and (iv) in which a
first priority perfected security interest has been obtained by such Credit
Party to secure the obligations of such Person under a Loan by such Credit Party
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, and
the same has been assigned to the Agent, for the benefit of the Banks, pursuant
to the Borrower Security Agreement or the Guaranty and Security Agreement.
Notwithstanding the foregoing, no Receivable shall be an Eligible Receivable
(a) if payment with respect to any amount due in connection therewith
is not made within 90 calendar days after such payment was originally due
(without regard to any stated grace period);
(b) to the extent that such Receivable is subject to any offset,
discount, counterclaim, contra-account or any other defense of any kind or
character; or
(c) if the Agent or the Required Banks believe that such Receivable
may not be paid in accordance with its original terms or are insecure for
any reason, including, without limitation, because of the Account Debtor's
bankruptcy, death, incapacity or financial inability to pay or because the
Account Debtor has disputed the liability, asserted any right of set-off or
has made a claim with respect to any other Receivable payable by such
Account Debtor to such Client, other than as a nominal adjustment in the
ordinary course of business and in accordance with regular commercial
practice.
"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, either Credit Party
within the meaning of Section 4001 of ERISA.
-10-
<PAGE>
"ERISA Termination Event" shall mean (i) a Reportable Event, (ii) the
-----------------------
withdrawal of any Credit Party or any of its ERISA Affiliates from a Plan during
a plan year in which it was a "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 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.l
----------------
hereof.
"Existing Indebtedness" shall mean the aggregate amount of Revolving Credit
---------------------
Loans made by Fleet under or pursuant to the Prior Agreement which remain
outstanding as of the Effective Date.
"Exposure Percentage" shall mean as of any date and with respect to the
-------------------
Swing Line Lender or any Bank, as the case may be, a fraction the numerator of
which is the Exposures on such date of the Swing Line Lender or such Bank, as
applicable, and the denominator of which is the aggregate Exposures on such date
of the Swing Line Lender and all Banks.
"Exposures" shall mean, as of any date, with respect to the Swing Line
---------
Lender or any Bank, as the case may be, and, as the context requires, the
Revolving Credit Loans, Swing Line Loans and/or Term Loans (each a "Loan Type"),
an amount equal to (i) the outstanding principal amount on such date of all
loans of such Loan Type owed to such Bank, plus (ii) with respect to the Swing
----
Line Lender only and only when the Loan Type is a Swing Line Loan, the excess of
(a) the outstanding principal amount on such date of all Swing Line Loans, over
(b) all payments made to the Swing Line Lender by the Borrower
-11-
<PAGE>
and the Banks in repayment thereof or participation therein, as the case may be,
plus (iii) with respect to each Bank, the excess of (a) the aggregate sum of all
- ----
payments by such Bank in participation of the Swing Line Loans, over (b) all
reimbursements of such Bank in respect thereof.
"Facility Fee" shall mean the fee required to be paid pursuant to Section
------------
3.1 hereof.
"Federal Funds Rate" shall mean, for any day, a rate per annum (expressed
------------------
as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that, (i) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average of the quotations for such day on such transactions
received by the Agent.
"Fee Letter" shall mean that certain letter agreement between the Borrower
----------
and the Agent dated as of July 31, 1998.
"Fixed Rate Loan" shall mean any LIBO Rate Loan and/or any Cost of Funds
---------------
Loan and/or any Negotiated Rate Loan.
"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.
"Guaranteed BL Loans" shall mean Loans by BL whereby a portion of the
-------------------
payment of such Loans are guaranteed by the SBA in accordance with 13 C.F.R.
Part 120 and a Small Business Administration Loan Guaranty Agreement (SBA Form
750).
"Guaranty and Security Agreement" shall mean the Guaranty and Security
-------------------------------
Agreement dated the Effective Date, between BL, as guarantor, and the Agent for
the benefit of the Banks and the Swing Line Lender, substantially in the form of
Exhibit K hereto, as the same may be amended or supplemented from time to time.
- ---------
-12-
<PAGE>
"Hazardous Materials" shall mean and include, without limitation, gasoline,
-------------------
petroleum products, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous 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 nationally recognized firm of independent certified public accountants
selected by the Borrower.
"Initial Revolving Credit Loan" shall mean the Revolving Credit Loan or
-----------------------------
Revolving Credit Loans made by the Banks to the Borrower on the Effective Date.
"Initial Term" shall mean the period from and including the Effective Date
------------
to and including July 30, 1999.
"Instrument of Adherence" shall have the meaning set forth in Section 12.2
-----------------------
hereof.
"Intercompany Demand Loan Collateral" shall mean all of the Loans,
-----------------------------------
Underlying Collateral and other property now or hereafter securing payment of
the Intercompany Demand Note.
"Intercompany Demand Loan Documents" shall mean the Intercompany Demand
----------------------------------
Note, the Intercompany Demand Loan Security Documents and each other document,
instrument and agreement executed pursuant to or in connection with any of the
foregoing, each as amended, supplemented or modified from time to time, as
pledged to the Agent pursuant to the Borrower Security Agreement and/or
Guarantee and Security Agreement.
-13-
<PAGE>
"Intercompany Demand Loan Security Documents" shall mean the security
-------------------------------------------
documents executed by BL in favor of the Borrower in order to grant the Borrower
a first Lien in the Intercompany Demand Loan Collateral.
"Intercompany Demand Note" shall mean one or more negotiable demand
------------------------
promissory notes made by BL to the order of the Borrower evidencing loans by the
Borrower to BL, substantially in the form of Exhibit L.
"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 any Credit Party or any of its
Subsidiaries during such period on Indebtedness of any Credit Party or any of
such Subsidiaries (determined on a consolidated basis).
"Interest Period" shall have the meaning set forth in Section 2.2(d)
---------------
hereof.
"Inventory" shall mean, with respect to any Person, all goods held by such
---------
Person for sale or lease by such Person, or to be furnished under contracts of
service, in each case in the ordinary course of such Person's business.
"Inventory Loans" shall mean Loans secured in whole or in part by
---------------
Inventory.
"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 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, but shall not include (a) any Loan, (b) any
Investment permitted by Section 8.14 hereof and (c) any Portfolio Purchase.
"LIBO Base Rate" shall mean, with respect to any Interest Period, the rate
--------------
reported by the Agent as the rate per annum (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%) at which deposits in Dollars are offered by Fleet or any of its
Affiliates to prime commercial banks in the London interbank market at
approximately 11:00 a.m., prevailing New York time (or as soon thereafter as
practicable), or, if Fleet is not making offers in the London interbank market,
at a rate quoted as "London Eurodollar deposits 11:00 hours offered side,"
currently shown on Telerate Page 3750 or subsequent page, or if such quotation
is no longer available, such other similar quotation for Eurodollar deposits as
the Agent and the Borrower reasonably agree, on the second Banking Day prior to
the commencement of such Interest Period, in an amount comparable to the
principal amount of the LIBO Rate Loan
-14-
<PAGE>
and having a scheduled maturity comparable to such Interest Period (as set forth
in the Loan Request) for delivery in immediately available funds on the first
day of such Interest Period.
"LIBO Rate Loan" shall mean a Revolving Credit Loan or Term Loan bearing
--------------
interest during an Interest Period applicable to such Revolving Credit Loan or
Term Loan at a fixed rate of interest determined by reference to the Adjusted
LIBO Rate plus the applicable margin as specified in Section 2.2(c)(i), in the
case of a Revolving Credit Loan and as specified in Section 2.2(c)(iii) in the
case of a Term Loan.
"Lien" shall mean any interest in property securing an obligation owed to a
----
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions and encumbrances,
including but not limited to mechanics', materialmen's, warehousemen's,
carriers' and other similar encumbrances, affecting property.
"Loan" any loan or advance made in the ordinary course of business by a
----
Credit Party (which for purposes of this definition shall include those acquired
pursuant to a Portfolio Purchase that is permitted pursuant to the terms of this
Agreement) to or for the account of any Client or customer of such Credit Party,
which loan, advance or extension of credit is permitted pursuant to the terms of
this Agreement. Any loan, advance or extension of credit made at a different
point in time than another loan, advance or extension of credit shall be deemed
to be separate and distinct Loans.
"Loan Documents" shall mean and include this Agreement, the Revolving
--------------
Credit Notes, the Term Notes, the Swing Line Note, the Multi-Party Agreement,
the Multi-Party Letter Agreement, the Intercompany Demand Loan Documents, the
Borrower Security Agreement, the Guaranty and Security Agreement, any Mortgage
Assignment, the Borrower and Guarantor Financing Statements, the Borrowing Base
Certificates. and each other document, instrument or agreement executed pursuant
to, or in connection with, any Loan Document.
"Loan Request" shall mean a request for one or more Revolving Credit Loans
------------
or Swing Line Loans or for the continuation or conversion of any Revolving
Credit Loan, Term Loan or Swing Line Loan substantially in the form of Exhibit E
---------
hereto, executed by an Authorized Representative on behalf of the Borrower.
"Material Adverse Effect" shall mean an event, action or condition
-----------------------
affecting any Person, or any of its properties or revenues, an event, action or
condition that would (i)
-15-
<PAGE>
adversely affect the validity or enforceability of, or the authority of such
Person to perform its obligations under, any of the Loan Documents to which it
is a party, or (ii) materially adversely affect the business, operations, assets
or condition (financial or otherwise) of such Person or the ability of such
Person to perform its obligations under any of the Loan Documents to which it is
a party or (iii) materially adversely affect the 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 either Credit Party.
"Maturity" shall have the meaning set forth in Section 2.2(b) hereof.
--------
"Medallion" shall mean the 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.
"Medallion Rights" shall mean, as to any Credit Party, 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
such Credit Party to secure the Loan made by such Credit Party to such Person,
and assigned to the Agent, for the benefit of the Banks, pursuant to the
Borrower Security Agreement or the Guaranty and Security Agreement, as the case
may be.
"MFC Borrowing Base" shall mean, as determined pursuant to the most
------------------
recently required Borrowing Base Certificate
(i) cash and Short Term Investments shown on MFC's balance sheet as of
such date, plus
----
(ii) 83.3% of the aggregate outstanding principal balances of, plus
accrued interest on, all of the Borrower's Eligible Medallion Loans from
time to time outstanding that are Retained Loans, plus
----
(iii) 75% of the aggregate outstanding principal balances of, plus
accrued interest on, all of the Borrower's Eligible Commercial Loans from
time to time outstanding that are Retained Loans;
-16-
<PAGE>
provided, that, if all or any part of any Loan would be excluded as an Eligible
- -------- ----
Commercial Loan or Eligible Medallion Loan under any of the provisions of this
Agreement, then the entire outstanding principal amount of, plus accrued
interest on, such Loan shall be excluded.
"Mortgage Assignment" shall mean a Mortgage Assignment between a Credit
-------------------
Party or a Subsidiary and the Agent for the benefit of the Banks, in such form
as the Agent shall determine as necessary or desirable under the law applicable
to the property covered by such Mortgage Assignment, delivered from time to time
by such Credit Party to the Agent as contemplated by the definition of "Eligible
Real Estate."
"Multiemployer Plan" shall mean a Plan that is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Multi-Party Agreement" shall mean a multi-party agreement by and among the
---------------------
Agent, on behalf of the Banks, SBA, BL, the Borrower and Colson Services Corp.,
in form and substance satisfactory to the Agent and the Required Banks, and as
such agreement is amended form time to time, with the consent of the Agent and
the Required Banks.
"Multi-Party Letter Agreement" shall mean a letter agreement between the
----------------------------
Agent and the Borrower substantially in the form of Exhibit G hereto.
"Negotiated Rate" shall mean with respect to each Swing Line Loan, the rate
---------------
per annum equal to, (i) at all times during the period, if any, commencing on
the date of delivery of a notice of an Event of Default by the Agent to the
Banks with respect to such Swing Line Loan and terminating on the date on which
such Event of Default shall no longer be continuing, the Prime Rate, and (ii) at
all other times, the rate agreed to by the Borrower and the Swing Line Lender in
accordance with Section 2.2(c)(ii) as the interest rate that such Swing Line
Loan shall bear.
"Negotiated Rate Loan" shall mean any Swing Line Loan that bears interest
--------------------
at a Negotiated Rate.
"Net Realized Loss" as to any Loan shall mean the gross realized loss (as
-----------------
determined by GAAP) with respect to such Loan minus actual cash recoveries with
respect to such Loan.
"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.
--------
-17-
<PAGE>
"Note(s)" or "Revolving Credit Note(s)" or "Swing Line Note(s)" or "Term
------- ------------------------ ------------------ ----
Notes" shall mean the promissory note(s) of the 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.
"Participant" or "Participants" shall mean any Person, including a Bank,
----------- ------------
that pursuant to the terms of this Agreement, buys a participation in any of the
Indebtedness owing in connection with the Loan Documents.
"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 unsecured Indebtedness of a Credit Party
--------------
owed to Permitted Lenders.
"Permitted Lenders" shall mean the financial institutions approved from
-----------------
time to time by the Required Banks, which approval will not be unreasonably
withheld.
"Permitted Liens" shall having the meaning set forth in Section 8.1 hereof.
---------------
"Person" or "person" shall mean any individual, partnership, firm,
------ ------
corporation, association, joint venture, trust or other entity, or any
Governmental Authority.
"Plan" shall mean, as to any Credit Party, at any particular time, any
----
employee benefit plan which is covered by ERISA and in respect of which such
Credit Party 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.
"Portfolio Purchase" shall mean, as to any Credit Party, any purchase or
------------------
acquisition by such Credit Party, whether for cash, for stock, pursuant to
financing or otherwise, of any assets, business, Capital Stock, obligations or
securities of, any Person; or other interest in or capital contribution to, any
Person that results in, or would result in (after taking into account the
applicable Portfolio Purchase), such Credit Party having any additional Loans.
-18-
<PAGE>
"Prime Rate" shall mean the annual rate of interest designated by Fleet
----------
from time to time as its "prime rate" 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
necessarily the lowest rate of interest charged by Fleet 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, Swing Line 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 a Credit Party.
"Real Estate Loans" shall mean Loans that are secured in whole or in part
-----------------
by Real Property.
"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.
"Receivables" shall mean, with respect to any Person, all present and
-----------
future rights to payment for goods sold or leased or for services rendered by
such Person whether or not evidenced by an instrument or chattel paper.
"Receivables Loans" shall mean Loans secured in whole or in part by
-----------------
Receivables.
"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. 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, the Agent and
--------------
such Bank or Banks as have Revolving Credit Commitments or Term Loans
outstanding in
-19-
<PAGE>
excess of 51% of the sum of the Aggregate Revolving Credit Commitment plus all
Term Loans then outstanding.
"Restricted Investment" shall mean any Investment, to the extent it does
---------------------
not constitute a Short Term Investment.
"Restricted Payment" shall mean, with respect to any Credit Party, 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 such
Credit Party (other than the payment of Dividends required to be paid in order
to avoid the imposition of income taxes pursuant to the Code, or, for so long as
such Credit Party is a registered investment company under the 1940 Act, the
payment of such Dividends as may be required by the 1940 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, Swing Line Note or the Term
Notes or of any Indebtedness having a maturity date subsequent to the maturity
of the Revolving Credit Notes, Swing Line Note or the Term Notes (other than
Permitted Debt), (iii) the redemption, repurchase, retirement or other
acquisition of any Capital Stock of such Credit Party or of any warrants, rights
or options to purchase or acquire any Capital Stock of such Credit Party, (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.
"Retained Loans" as to either Credit Party shall mean the percentage of
--------------
each Eligible Loan not granted by such Credit Party to any other Person as a
participation in the principal amount and accrued interest of such Eligible
Loan.
"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 Exposure" shall mean with respect to any Bank as of any
-------------------------
date, the sum as of such date of (i) the outstanding principal amount of such
Bank's Revolving Credit Loans and (ii) such Bank's Swing Line Exposure.
-20-
<PAGE>
"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.
"Satisfactory Subordinated Debt" shall mean Subordinated Debt; provided,
------------------------------ --------
that, no such Subordinated Debt shall be deemed Satisfactory Subordinated Debt
- ----
unless and until the Agent has provided written notice to the Borrower that same
shall be deemed Satisfactory Subordinated Debt for purposes of this Agreement.
"SBA" shall mean the Small Business Administration.
---
"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.
------
"Scheduled Swing Line Commitment Termination Date" shall mean the fifth
------------------------------------------------
Business Day preceding the Term Out Date.
"Senior Debt" shall mean all Indebtedness of the 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.
-21-
<PAGE>
"Single Employer Plan" shall mean any Plan which is covered by Title IV of
--------------------
ERISA, but is not a Multiemployer Plan.
"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).
"Subordinated Debt" shall mean all Indebtedness of the Borrower for
-----------------
borrowed money that is subordinated to the Revolving Credit Loans, Swing Line
Loans and the Term Loans on terms that are, and pursuant to a form of
subordination that is, acceptable in form and substance to the Agent and the
Required Banks.
"Subsidiary" or "Subsidiaries" of a Credit Party shall mean any corporation
---------- ------------
or entity more than 50% of the outstanding Voting Interests (or similar rights
to the extent the Subsidiary is not a corporation) of which is at the time
owned, directly or indirectly, by such Credit Party 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 Worth of which constitute less than 5%
of the Tangible Net Worth of such Credit Party.
"Super-majority Banks" shall mean, as of any date of determination, the
--------------------
Agent and such Bank or Banks as have Revolving Credit Commitments or Term Loans
outstanding equal to or in excess of 75% of the sum of the Aggregate Revolving
Credit Commitment plus all Term Loans then outstanding.
"Swing Line Commitment" shall mean the undertaking of the Swing Line Lender
---------------------
during the Swing Line Commitment Period to make Swing Line Loans, subject to the
terms and conditions hereof, in an aggregate outstanding principal amount not in
excess of the Swing Line Commitment Amount, and the commitment of the Banks to
participate therein as set forth in Section 2.1(c), as the same may be adjusted
from time to time pursuant to Sections 2.4 and ARTICLE 12.
"Swing Line Commitment Amount" shall mean $5,000,000.
----------------------------
"Swing Line Commitment Period" shall mean the period from the Effective
----------------------------
Date until the Swing Line Commitment Termination Date.
"Swing Line Commitment Termination Date" shall mean the earlier of the
--------------------------------------
Business Day immediately preceding the Scheduled Swing Line Commitment
Termination Date or
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<PAGE>
such other date upon which the Swing Line Commitment shall have been terminated
in accordance with Section 2.4 or Section 9.1.
"Swing Line Exposure" shall mean at any time, in respect of any Bank, an
-------------------
amount equal to the aggregate outstanding principal amount of the Swing Line
Loans at such time, multiplied by such Bank's Percentage at such time.
-------------
"Swing Line Interest Period" shall mean with respect to any Swing Line Loan
--------------------------
requested by the Borrower, the period commencing on the borrowing date with
respect to such Swing Line Loan and ending not in excess of five days
thereafter, as selected by the Borrower in the applicable Loan Request therefor,
provided, however, that (i) if any Swing Line Interest Period would otherwise
- -------- -------
end on a day that is not a Business Day, such Swing Line Interest Period shall
be extended to the next succeeding Business Day, unless such next succeeding
Business Day would be a date on or after the Scheduled Swing Line Commitment
Termination Date, in which event such Swing Line Interest Period shall end on
the next preceding Business Day, and (ii) no Swing Line Interest Period shall
end after the Scheduled Swing Line Commitment Termination Date. Interest shall
accrue from and including the first day of a Swing Line Interest Period to, but
excluding, the last day of such Swing Line Interest Period.
"Swing Line Loan" and "Swing Line Loans" shall have the meaning set forth
--------------- ----------------
in Section 2.1(c).
"Swing Line Maturity Date" shall mean the Scheduled Swing Line Commitment
------------------------
Termination Date, or such earlier date on which the Swing Line Loans shall
become due and payable, whether by acceleration or otherwise.
"Swing Line Participation Amount" shall have the meaning set forth in
-------------------------------
Section 2.1(c)(iii).
"Tangible Net Worth" shall mean, as to the Borrower on a consolidated
------------------
basis, the sum of capital surplus, earned surplus, capital stock and
Satisfactory Subordinated Debt minus deferred charges, intangibles, treasury
stock, Investments in Subsidiaries and Affiliates (other than BL) and amounts
due to the Borrower and/or BL from any Subsidiary and/or Affiliate (other than
the Borrower and/or BL), all determined in accordance with GAAP consistently
applied.
"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.
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<PAGE>
"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 the Borrower on such
Bank's Term Out Date equal to the principal amount of its Revolving Credit Loans
then outstanding to the Borrower.
"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,
-------------
July 30, 1999, subject, however, in each case, to the renewal provisions set
forth in Section 2.10 hereof.
"Total Adjusted Liabilities" shall mean, as of any date of calculation, the
--------------------------
aggregate unconsolidated outstanding Indebtedness of the Borrower as of such
date, plus the aggregate unconsolidated outstanding Indebtedness of BL as of
----
such date, each determined in accordance with GAAP.
"Total Liabilities" shall mean, as to any Credit Party, as of any date of
-----------------
calculation, the aggregate outstanding Indebtedness of such Credit Party as of
such date, determined on a consolidated basis in accordance with GAAP.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
---
Code as then in effect in that jurisdiction.
"Underlying Collateral" shall mean, as to any Credit Party, all of such
---------------------
Credit Party's rights with respect to, or interest in, any and all present and
future Medallion Rights, Equipment, Inventory, Real Property, Receivables,
machinery, future accounts, accounts receivable, receivables, contracts,
contract rights, general intangibles, books, desks, notes, bills, drafts,
acceptances, chases in action, chattel paper, instruments, documents and other
-24-
<PAGE>
forms of obligations and property, real, personal or mixed, tangible or
intangible, at any time owing to or owned by any Client to whom such Credit
Party has made a Loan, or any guarantor of such Client.
"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.
"Year 2000 Issue" shall mean failure of computer software, hardware and
---------------
firmware systems and equipment containing embedded computer chips to properly
receive, transmit, process, manipulate, store, retrieve, re-transmit or in any
other way utilize data and information due to the occurrence of the year 2000 or
the inclusion of dates on or after January 1, 2000.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) All 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.
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<PAGE>
ARTICLE 2 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 (and not jointly) agrees to make one or more Revolving
Credit Loans to the 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, the Borrower may borrow, prepay and re- borrow the Revolving
Credit Loans, all in accordance with the terms and conditions hereof; provided,
--------
however, that immediately after giving effect thereto, (i) such Bank's Revolving
- -------
Credit Exposure shall not exceed such Bank's Revolving Credit Commitment, (ii)
the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the
----
aggregate unpaid balance of all Revolving Credit Loans to the Borrower plus the
----
aggregate unpaid balance of all Term Loans to the Borrower shall not exceed the
sum of the MFC Borrowing Base and the BL Borrowing Base, (iii) the aggregate
unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid
----
balance of all Revolving Credit Loans to the Borrower plus the aggregate unpaid
----
balance of all Term Loans to the Borrower, to the extent same are used directly
or indirectly by BL, shall not exceed the BL Borrowing Base, (iv) the aggregate
unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid
----
balance of all Revolving Credit Loans to the Borrower plus the aggregate unpaid
----
balance of all Term Loans to the Borrower, to the extent same are used directly
or indirectly by the Borrower, shall not exceed the MFC Borrowing Base and (v)
the aggregate unpaid balance of all Swing Line Loans to the Borrower plus the
----
aggregate unpaid balance of all Revolving Credit Loans to the Borrower 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 severally (and not jointly) agrees to make a Term Loan to the Borrower
on the Term Out Date in a principal amount equal to the principal amount of its
Revolving Credit Loan or Loans outstanding on such Term Out Date to the
Borrower; provided, that immediately after making each Term Loan (i) the
-------- ----
aggregate unpaid balance of all Term Loans to the Borrower shall not exceed the
aggregate of the Term Loan Commitments of all the Banks, (ii) the aggregate
unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid
----
balance of all Revolving Credit Loans to the Borrower plus the aggregate unpaid
----
balance of all Term Loans to the Borrower shall not exceed the sum of the MFC
Borrowing Base and the BL Borrowing Base, (iii) the aggregate unpaid balance of
all Swing Line Loans to the Borrower plus the aggregate unpaid balance of all
----
Revolving Credit Loans to
-26-
<PAGE>
the Borrower plus the aggregate unpaid balance of all Term Loans to the
----
Borrower, to the extent same are used directly or indirectly by BL, shall not
exceed the BL Borrowing Base (iv) the aggregate unpaid balance of all Swing
Line Loans to the Borrower plus the aggregate unpaid balance of all
----
Revolving Credit Loans to the Borrower plus the aggregate unpaid balance of all
----
Term Loans to the Borrower, to the extent same are used directly or indirectly
by the Borrower, shall not exceed the MFC Borrowing Base and (v) the aggregate
unpaid balance of all Swing Line Loans to the Borrower plus the aggregate unpaid
----
balance of all Revolving Credit Loans to the Borrower plus the aggregate unpaid
----
balance of all Term Loans to the Borrower shall not exceed the sum of the
Aggregate Revolving Credit Commitment and the aggregate unpaid balance of all
outstanding Term Loans. The proceeds of each Term Loan shall be made available
to the 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 to the Borrower. Prior to each Term
Loan's Maturity, the Borrower may prepay (and is required to prepay) such Term
Loan, only in accordance with the provisions hereof, but thereafter may not
reborrow amounts so prepaid.
(c) Swing Line Loans.
----------------
(i) Subject to the terms and conditions hereof, the Swing Line Lender
agrees to make swing line loans (each a "Swing Line Loan" and, collectively, the
---------------
"Swing Line Loans") to the Borrower in Dollars from time to time during the
----------------
Swing Line Commitment Period in an aggregate principal amount at any one time
outstanding not to exceed the Swing Line Commitment Amount, provided, however,
-------- -------
that, immediately after making each Swing Line Loan, (v) the aggregate unpaid
balance of the Swing Line Loans to the Borrower would not exceed the Swing Line
Commitment Amount, (w) the aggregate unpaid balance of all Swing Line Loans to
the Borrower plus the aggregate unpaid balance of all Revolving Credit Loans to
----
the Borrower plus the aggregate unpaid balance of all Term Loans to the Borrower
----
shall not exceed the sum of the MFC Borrowing Base and the BL Borrowing Base,
(x) the aggregate unpaid balance of all Swing Line Loans to the Borrower plus
----
the aggregate unpaid balance of all Revolving Credit Loans to the Borrower plus
----
the aggregate unpaid balance of all Term Loans to the Borrower, to the extent
same are used directly or indirectly by BL, shall not exceed the BL Borrowing
Base (y) the aggregate unpaid balance of all Swing Line Loans to the Borrower
plus the aggregate unpaid balance of all Revolving Credit Loans to the Borrower
- ----
plus the aggregate unpaid balance of all Term Loans to the Borrower, to the
- ----
extent same are used directly or indirectly by the Borrower, shall not exceed
the MFC Borrowing Base and (z) the aggregate unpaid balance of all Swing Line
Loans to the Borrower plus the aggregate unpaid balance of all Revolving Credit
----
Loans to the shall not exceed the Aggregate Revolving Credit Commitment. During
the Swing Line Commitment Period, the Borrower may borrow, prepay in whole or in
part and reborrow under the Swing Line Commitment, all in accordance with the
terms and
-27-
<PAGE>
conditions of this Agreement. No Swing Line Loan shall be made prior to the
making of the first Revolving Credit Loans on the Effective Date.
(ii) The Swing Line Lender shall not be obligated to make any Swing
Line Loan at a time when any Bank shall be in default of its obligations under
this Agreement unless arrangements to eliminate the Swing Line Lender's risk
with respect to such defaulting Bank's participation in such Swing Line Loan
shall have been made for the benefit of the Swing Line Lender and such
arrangements are in all respects satisfactory to the Swing Line Lender. The
Swing Line Lender will not make any Swing Line Loan if the Agent or any Bank, by
notice to the Swing Line Lender and the Borrower no later than one Business Day
prior to the borrowing date with respect to such Swing Line Loan, shall have
determined that the conditions set forth in ARTICLE 5 have not been satisfied
and such conditions remain unsatisfied as of the requested time of the making of
such Swing Line Loan. Each Swing Line Loan shall be due and payable on the
earlier to occur of the last day of the Swing Line Interest Period applicable
thereto and the Swing Line Maturity Date.
(iii) Upon (1) a request by the Swing Line Lender, (2) a receipt by a
Bank of notice of an Event of Default from the Agent, or (3) the acceleration of
any loan or termination of the Revolving Credit Commitment, Term Loan Commitment
or the Swing Line Commitment, each Bank shall purchase unconditionally,
irrevocably, and severally (and not jointly) from the Swing Line Lender a
participation in the outstanding Swing Line Loans (including accrued interest
thereon) in an amount (the "Swing Line Participation Amount") equal to the
-------------------------------
product of its Percentage and the aggregate outstanding principal amount of the
Swing Line Loans plus all accrued and unpaid interest thereon. Each Bank shall
also be liable for an amount equal to the product of its Percentage and any
amounts paid by the Borrower pursuant to this Section that are subsequently
rescinded or avoided, or must be otherwise restored or returned. Such
liabilities shall be absolute and unconditional and without regard to the
occurrence of any Default or the compliance by the Borrower with any of its
obligations under the Loan Documents.
(iv) In furtherance of Section 2.2(c), upon the occurrence of any
event set forth in Section 2.1(c)(iii), such Bank shall promptly make available
its Swing Line Participation Amount to the Agent for the account of the Swing
Line Lender at the applicable Agent Payment Office, in Dollars, and in
immediately available funds. The Agent shall deliver the payments made by each
Bank pursuant to the immediately preceding sentence to the Swing Line Lender
promptly upon receipt thereof in like funds as received. Each Bank shall
indemnify and hold harmless the Agent and the Swing Line Lender from and against
any and all losses, liabilities (including liabilities for penalties), actions,
suits, judgments, demands, costs and expenses resulting from any failure on the
part of such Bank to pay, or from any delay in paying the Agent any amount such
Bank is required to pay in accordance with this Section 2.1(c)(iv) (except in
respect of losses, liabilities, actions, suits,
-28-
<PAGE>
judgments, demands, costs and expenses suffered by the Agent or the Swing Line
Lender, as the case may be, resulting from the gross negligence or willful
misconduct of the Agent or the Swing Line Lender, as the case may be), and such
Bank shall be required to pay interest to the Agent for the account of the Swing
Line Lender from the date such amount was due until paid in full, on the unpaid
portion thereof, at a rate of interest per annum equal to the Federal Funds Rate
payable upon demand by the Swing Line Lender. The Agent shall distribute such
interest payments to the Swing Line Lender upon receipt thereof in like funds as
received.
(v) Whenever the Agent is reimbursed by the Borrower, for the account
of the Swing Line Lender, for any payment in connection with Swing Line Loans
and such payment relates to an amount previously paid by a Bank pursuant to this
Section, the Agent will promptly pay over such payment to such Bank.
Section 2.2 Revolving Credit, Term Loan and Swing Line Notes.
------------------------------------------------
(a) (i) Revolving Credit Notes. The Revolving Credit Loans of each
----------------------
Bank shall be evidenced by a separate Revolving Credit Note of the Borrower, in
substantially the form of Exhibit B hereto, payable to the order of such Bank
---------
and representing the obligation of the 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, a LIBO
Rate Loan or a Cost of Funds 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 the 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 to the Borrower shall
---------------
be evidenced by a separate Term Note of the Borrower, in substantially the form
of Exhibit C hereto, payable to the order of such Bank and representing the
---------
obligation of the the 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, LIBO Rate Loan or Cost of Funds 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 Term Note, which endorsement shall constitute prima facie evidence of the
----- -----
accuracy of the
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<PAGE>
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 the Borrower to repay any Term Loan in
accordance with the terms of this Agreement.
(iii) Swing Line Note. The Swing Line Loans of the Swing Line Lender
---------------
to the Borrower shall be evidenced by a Swing Line Note of the Borrower, in
substantially the form of Exhibit D, payable to the order of the Swing Line
---------
Lender and representing the obligation of the Borrower to pay the aggregate
principal amount of the Swing Line Loans from time to time outstanding from such
Swing Line Lender, together with interest thereon. The Swing Line Lender is
hereby authorized to endorse the date, amount and Swing Line Interest Period of
each Swing Line Loan, and each payment or prepayment of principal thereof on the
schedule (including additional pages thereto added by the Swing Line Lender as
required) annexed to and constituting a part of its Swing Line Note, which
endorsement shall constitute prima facie evidence of the accuracy of the
-----------
information so endorsed; provided, however, that the failure of the Swing Line
-------- -------
Lender to insert any such date or amount or other information on such schedule
shall not in any manner affect the obligation of the Borrower to repay any Swing
Line Loans 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 the Swing Line 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, (ii) with respect
to any Swing Line Loan, on the earlier of (A) the date such Swing Line Loan
shall be or become due and payable, in whole or in part, in accordance with the
terms of this Agreement whether by stated maturity, required or optional
prepayment, declaration, acceleration, or otherwise, or (B) the Swing Line
Commitment Termination Date and (iii) with respect to any Term Loan made by a
Bank to replace its existing Revolving Credit Loans pursuant to Section 2.1(b)
hereof, the earlier of (A) the first 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.
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<PAGE>
(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 the 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 plus the Applicable LIBO Margin; or (c) the
Cost of Funds plus the Applicable Cost of Funds Margin. 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 Swing Line Note. The Swing Line 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 equal to the Negotiated Rate for the applicable Swing Line Interest
Period. The rate of interest of the Swing Line Note shall be computed on the
basis of a 360-day year for the actual number of days elapsed.
(c)(iii) 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 the 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 plus the Applicable LIBO Margin or (c) the Cost of Funds plus the
Applicable Cost of Funds Margin.. 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)(iv) 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 the Borrower, such termination to be effective two
business days after the selection of a LIBO Rate Loan or Cost of Funds Loan to
replace such Prime Rate Loan, (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 and (iii) any Cost of
Funds 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 30, 60, 90, 120, 150 or 180 days thereafter, as set forth in the Loan
Request. Notwithstanding the foregoing:
(A) in the case of a Fixed Rate Loan, (I) if the numerically corresponding
date in the appropriate month is not a Banking Day, such Interest Period
shall be extended to
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<PAGE>
the next succeeding day that is a Banking Day; provided, that, in the case
of LIBO Rate Loans if such day falls in the succeeding calendar month, 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 the case of any Cost of Funds Loan made on or after the Term Out
Date, the Interest Period shall be limited to a period of 30 days, and
(D) 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, Swing Line 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, Swing
Line 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 Swing Line Loans and with respect to any
portion of the outstanding principal amount of Revolving Credit Loans and Term
Loans maintained as Prime Rate Loans or Cost of Funds 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,
Swing Line Loans or Term Loans as, or, with respect to Revolving Credit Loans
and Term Loans, 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, in 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; and
(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, Cost of
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<PAGE>
Funds Loans or 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 and to the provisions of Section 2.4(b)
hereof, the 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 the Borrower shall give the Agent
-------- -------
irrevocable written notice in the form of a Loan Request (which may be sent via
teletransmission) substantially in the form of Exhibit E hereto, specifying the
---------
aggregate amount of the loan it is seeking as follows:
(A) in the case of a borrowing of a Revolving Credit Loan as a Prime
Rate Loan or Cost of Funds Loan, on or before 10:00 a.m., prevailing New
York City time, on the first Business Day preceding the requested borrowing
date, which borrowing date shall be a Business Day (or irrevocable oral
notice on or before 10:00 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 first
Business Day preceding 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
third 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 third Banking Day preceding the first day of the requested Interest
Period).
If the Borrower furnishes a Loan Request to the Agent, 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 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 on
the same Business Day, of at least (x) $1,000,000 or any integral multiple of
$100,000 in excess thereof in the case of LIBO Rate Loans and Cost of Funds
Loans and (y) $100,000 or any integral multiple of $50,000 in excess thereof in
the case of Prime Rate Loans.
(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
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Term Loan shall replace. Each Term Loan shall, for its first Interest Period, be
a Prime Rate Loan unless the Borrower gives irrevocable written notice to the
Agent that it wants such loan, for its first Interest Period, to be a LIBO Rate
Loan or Cost of Funds Loan. Such notice specifying a LIBO Rate Loan or Cost of
Funds Loan must be received by the Agent on or before 11:00 a.m., prevailing New
York City time, on the third 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 third Banking Day preceding the date on which such Term Loan
is to be made. Such first Interest Period shall continue until the Borrower has
notified the Agent, 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 Agent shall revise Exhibit A hereto to
---------
reflect the corresponding reduction in the Aggregate Revolving Credit
Commitment. Each Term Loan shall be as provided in Section 2.5(b) hereof.
(iii) Swing Line Loans. The Borrower may borrow under the Swing Line
----------------
Commitment on any Business Day during the Swing Line Commitment Period, provided
that the Borrower shall notify the Agent and the Swing Line Lender (by telephone
or facsimile confirmed promptly by the delivery to the Agent and the Swing Line
Lender of a Loan Request manually signed by the Borrower) no later than 3:00
p.m. on the requested borrowing date, specifying a) the aggregate principal
amount to be borrowed under the Swing Line Commitment, b) the requested
borrowing date, and c) the amount of, and the length of the Swing Line Interest
Period for, each Swing Line Loan. The Swing Line Lender will then, subject to
its determination that the terms and conditions of this Agreement have been
satisfied, make the requested amount available, in Dollars, and in immediately
available funds, promptly on that same day, to the Agent at the applicable Agent
Payment Office who, thereupon, will promptly make such amount available to the
Borrower at the such Agent Payment Office, in Dollars, and in immediately
available funds. Each borrowing of Swing Line Loans shall be in an aggregate
principal amount equal to $100,000 or such amount plus an integral multiple of
$50,000 in excess thereof or, if less, the unused portion of the Swing Line
Commitment Amount.
(b)(i) Designation of Use of Funds; Funding of Revolving Credit Loans
--------------------------------------------------------------
and Term Loans. Notwithstanding anything to the contrary contained in this
- --------------
Agreement, each Loan Request shall be executed and acknowledged by each Credit
Party and shall indicate that portion, if any, of the amount requested that will
be used directly or indirectly by MFC and that portion, if any, of the amount
requested that will be used directly or indirectly by BL. Upon receipt of each
Loan Request requesting Revolving Credit Loans or Term Loans, the Agent shall
promptly notify each Bank thereof. Subject to its receipt of the notice
referred to in the preceding sentence, each Bank will make the amount of its
Percentage of
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<PAGE>
the requested Revolving Credit Loans, or Term Loans, as the case may be,
available to the Agent for the account of the Borrower at the applicable Agent
Payment Office in the Dollars not later than 2:00 p.m. (New York City time), on
the relevant borrowing date requested by the Borrower, in funds immediately
available to the Agent at such Agent Payment Office. The amounts so made
available to the Agent on such borrowing date will then, subject to the
satisfaction of the terms and conditions of this Agreement, as determined by the
Agent, be made available on such borrowing date to the Borrower by the Agent at
such Agent Payment Office, in Dollars, and in immediately available funds, no
later than 3:00 p.m. (New York City time).
(b)(ii) Failure to Fund. Unless the Agent shall have received prior
---------------
notice from a Bank (by telephone or otherwise, such notice to be promptly
confirmed by facsimile or other writing) that such Bank will not make available
to the Agent such Bank's Percentage of the Revolving Credit Loans or Term Loans,
as the case may be, to be made on a borrowing date, the Agent may assume that
such Bank has made such amount available to the Agent on the borrowing date in
accordance with this Section, provided that such Bank received notice thereof
from the Agent in accordance with the terms hereof, and the Agent may, in
reliance upon such assumption, make available to the Borrower on such borrowing
date a corresponding amount. If and to the extent such Bank shall not have so
made such amount available to the Agent, such Bank and the Borrower severally
agree to pay to the Agent, forthwith on demand, such corresponding amount (to
the extent not previously paid by the other), together with interest thereon for
each day from the date such amount is made available to the Borrower until the
date such amount is paid to the Agent, at a rate per annum equal to, in the case
of the Borrower, the applicable interest rate then applicable to such loan(s),
and, in the case of such Bank, to the extent such amount is paid to the Agent
(A) no later than the second day after the date such amount is made available to
the Borrower, the Federal Funds Rate and (B) after the second day after the date
such amount is made available to the Borrower, the applicable interest rate then
applicable to such loan(s). Such payment by the Borrower, however, shall be
without prejudice to its rights against such Bank. If such Bank shall pay to
the Agent such corresponding amount, such amount so paid shall constitute such
Bank's Revolving Credit Loan or Term Loan, as the case may be, as part of such
Revolving Credit Loans and Term Loans for purposes of this Agreement, which
Revolving Credit Loan and Term Loan, as the case may be, shall be deemed to have
been made by such Bank on such borrowing date. 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
Rate Loans and Cost of Funds Loans, the Borrower may continue any LIBO Rate Loan
or Cost of
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<PAGE>
Funds 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
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) The Borrower shall give the Agent the 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 Interest
Period therefor and such Loan Request shall also contain a certification as to
which portion of such Revolving Credit Loan, if any, will be made available to
the Borrower and which portion of such Revolving Credit Loan, if any, will be
made available to BL;
(ii) in the case of the continuation of less than all of the
outstanding Revolving Credit Loans or of only a portion of a Term Loan of a
given loan type on the same Business Day, the aggregate principal amount of the
Revolving Credit Loans or the Term Loan of such loan type to be continued as
such, together with any Revolving Credit Loans or portion of a Term Loan to be
made as or converted to the same loan type on such Business Day, shall not be
less than $1,000,000 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 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 of such other loan type to be made
or continued as such on such Business Day, shall not be less than $1,000,000;
(iv) LIBO Rate Loans and Cost of Funds Loans may be converted
only at the end of the then applicable Interest Period;
(v) no LIBO Rate Loan or Cost of Funds Loan may be continued as such,
nor may any Revolving Credit Loan or Term Loan be converted to a LIBO Rate Loan
or Cost of Funds Loan, for less than the minimum applicable Interest Period
therefor; and
(vi) no LIBO Rate Loan or Cost of Funds Loan may be continued as such,
nor may any Revolving Credit Loan or Term Loan be converted to a LIBO Rate Loan
or Cost of Funds Loan, if any Default or Event of Default shall have occurred
and be continuing as of any date during the period commencing on the date the
Loan Request is
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<PAGE>
required to be submitted to the Agent and ending on the first day of the
requested Interest Period.
If the 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 or
Cost of Funds Loan, to furnish a Loan Request to the Agent 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 or Cost of Funds 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 Loan 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, the 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
Agent 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 must also include a termination of the Swing Line
Commitment and such termination must be accompanied by repayment of all
outstanding Revolving Credit Loans, Swing Line Loans and outstanding Term Loans
in full (which shall include all such loans payable by the Borrower and all such
loans payable by BL), together with all other amounts owed to the Agent or any
Bank or the Swing Line Lender 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 and Swing Line Loans outstanding exceeds
the amount of the Aggregate Revolving Credit Commitment after taking into
account the Aggregate Revolving Credit Commitment as then 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 applied by the Agent pro rata among the Banks in proportion
to their Revolving Credit Commitments. Any repayment of outstanding Term Loans
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<PAGE>
required by a reduction in the Aggregate Revolving Credit Commitment shall be
applied by the Agent pro rata among the Agent 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 Agent shall revise Exhibit A hereto
---------
to reflect such reduction and shall promptly send a copy thereof to the Banks.
Upon termination of the Aggregate Revolving Credit Commitment pursuant to this
Section 2.4 and upon payment of all amounts due by the Borrower to the Agent,
the Swing Line Lender and 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 the Borrower or otherwise, all as if such
payment had not been made. Upon any reduction of the Aggregate Revolving Credit
Commitment, it shall be in the Agent's discretion as to whether to apply any
prepayments of loans in connection therewith against (i) the Borrower's
obligations to the Agent, Swing Line Lender and the Banks and/or (ii) BL's
obligations to the Agent, Swing Line Lender and the Banks.
Section 2.5 Prepayments.
-----------
(a) Voluntary. The Borrower from time to time may prepay its Revolving
----------
Credit Loans, the Swing Line Loans, or the Term Loans, in whole or in part,
without premium or penalty, upon irrevocable written notice to the Agent 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) the entire Aggregate Revolving Credit Commitment 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(b) hereof, each partial prepayment of the Revolving Credit Loans or Swing
Line Loans shall be in an amount not less than $500,000 or any integral multiple
of $100,000 in excess thereof, (iii) except for prepayments necessitated by the
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,
the Borrower may not prepay any Term Loan unless all Revolving Credit Loans have
been paid off in full and the Aggregate Revolving Credit Commitment terminated,
(iv) the Borrower may not prepay any Fixed Rate Loan prior to the last day of
the Interest Period, or Swing Line Interest Period, as the case may be,
therefor. To the extent possible, the Borrower shall, in connection with any
voluntary prepayment, prepay Prime Rate Loans first and Fixed Rate Loans second.
Any prepayment of Fixed Rate Loans shall be subject to Section 2.11 hereof. If
any notice of prepayment is given, the amount
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<PAGE>
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 twelve month period. Such payments (the
"Principal Payments") shall be paid by the Borrower to the Agent 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.
----------------------------
(i) If, at any time, (A) the aggregate outstanding principal balance
of the Revolving Credit Loans, plus the aggregate outstanding balance of all
----
Swing Line Loans, exceeds the Aggregate Revolving Credit Commitment, or (B) the
aggregate outstanding principal balance of the Swing Line Loans exceeds the
Swing Line Commitment, or (C) the aggregate principal balance of all Revolving
Credit Loans, plus the aggregate principal balance of all Swing Line Loans, plus
---- ----
the aggregate principal balance of all Term Loans, exceeds the sum of the
Aggregate Revolving Credit Commitment and the aggregate principal balance of all
Term Loans, the Borrower shall make a prepayment of such Revolving Credit Loans,
or Swing Line Loans, as the case may be (or if no such loans shall then be
outstanding, the Borrower shall make a prepayment of the Term 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. To the extent possible, the Borrower shall,
in connection with such mandatory prepayment, prepay Prime Rate Loans first, and
Fixed Rate Loans second. Any prepayment of Fixed Rate Loans shall be subject to
Section 2.11 hereof.
(ii) If, at any time, (A) the aggregate unpaid balance of all Swing
Line Loans plus the aggregate unpaid balance of all Revolving Credit Loans plus
---- ----
the aggregate unpaid balance of all Term Loans shall exceed the sum of the MFC
Borrowing Base and the BL Borrowing Base, or (B) the aggregate unpaid balance of
all Swing Line Loans plus the aggregate unpaid balance of all Revolving Credit
----
Loans plus the aggregate unpaid balance of all Term Loans that have been used
----
directly or indirectly by BL shall exceed the BL Borrowing Base, or (C) the
aggregate unpaid balance of all Swing Line
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<PAGE>
Loans plus the aggregate unpaid balance of all Revolving Credit Loans plus the
---- ----
aggregate unpaid balance of all Term Loans that have been used directly or
indirectly by the Borrower shall exceed the MFC Borrowing Base, within five days
of the first day there exists any such deficiency the Borrower shall make
payment to the Agent (to be applied against the Borrower's Swing Line Loans
first, then Revolving Credit Loans and then Term Loans) in an amount necessary
to eliminate such excess, together with accrued interest thereon to the date of
prepayment as provided in Section 2.2(c) hereof. To the extent possible, the
Borrower shall, in connection with such mandatory prepayment, prepay Prime Rate
Loans first, and Fixed Rate Loans second. Any prepayment of Fixed Rate Loans
shall be subject to Section 2.11 hereof.
(d) Application of Prepayments. With respect to all prepayments
--------------------------
pursuant to subsections (a), (b) and (c) above, upon receipt of any notice of
prepayment and/or any such prepayment, the Agent shall promptly notify each Bank
thereof and with respect to Revolving Credit Loans and Term Loans each such
prepayment shall be effected pro rata amongst all the Banks in proportion to
each Bank's then outstanding Revolving Credit Loans, or Term Loans, as the case
may be.
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 Loan then
in effect, (ii) in the case of any Fixed Rate Loan, 2% in excess of the rate
then applicable to such Fixed Rate Loan. 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 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.
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
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<PAGE>
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, or the Swing Line Lender, to any tax levy,
impost, duty, charge, fee, deduction or withholding of any nature with respect
to its Revolving Credit and/or Term Loan and/or Swing Line Commitment to make
Fixed Rate Loans or any Revolving Credit Loan or Term Loan or Swing Line Loan
that is a Fixed Rate Loan; or
(ii) changes the basis of taxation of payments to such Bank of
principal of and/or interest on its Fixed Rate Loans or its Revolving Credit
and/or Term Loan and/or Swing Line Commitment to make Fixed Rate Loans and/or
fees and other amounts payable hereunder in respect of its Fixed Rate Loans or
its Revolving Credit or Term Loan or Swing Line Commitment to make Fixed 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
Fixed 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 and/or Swing Line Commitment to
make Fixed Rate Loans or any Revolving Credit Loan or Term Loan or Swing Line
Loan of which any Fixed 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 and/or Swing
Line Commitment to make Fixed Rate Loans or its Revolving Credit Loans or Term
Loans or Swing Line Loans hereunder that are Fixed 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 Fixed Rate Loan or its Revolving
Credit or Term Loan or Swing Line Commitment to make Fixed 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, or the Swing Line Lender, as the case may be, shall
promptly notify the Borrower in writing of the happening of such event;
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<PAGE>
(2) such Bank, or the Swing Line Lender, as the case may be, shall
promptly deliver to the Borrower a certificate of such Bank, or such Swing Line
Lender, stating the event that has occurred or the reserve or requirements or
other conditions that have been imposed on such Bank, or such Swing Line Lender,
the request, directive, guideline or requirement with which it has complied,
together with the date thereof and the amount (based upon such Bank's, or such
Swing Line Lender's, as the case may be, 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) The Borrower(s) shall pay within 10 days after demand therefor
such amount or amounts as will compensate such Bank, or the Swing Line Lender,
as the case may be, for such additional cost, reduction or payment.
(b) If, after the Effective Date, any Bank or the Swing Line Lender,
as the case may be, 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 the Swing Line
Lender, as the case may be, or any corporation controlling any of the Banks or
the Swing Line Lender, as the case may be, or such Bank, or the Swing Line
Lender, as the case may be, determines that the amount of capital required is
increased by or based upon the existence of the revolving credit, swing line 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 or the Swing Line Lender, as the case may be, may give written notice
to the Borrower of such fact (the "Increased Costs Notice"). To the extent that
the costs of such increased capital requirements are not then reflected in the
Prime Rate, the Cost of Funds or the LIBO Base Rate, the Borrower shall
thereafter attempt to negotiate in good faith an adjustment of the compensation
payable hereunder which will adequately compensate such Bank, or the Swing Line
Lender, as the case may be, in light of such changed circumstances. Each Bank
and the Swing Line Lender, as the case may be, hereby agrees that any Increased
Cost Notice from it to the Borrower shall be delivered to the Borrower no later
than 90 days following the end of any financial period with respect to which
such compensation is sought. If the Borrower and such Bank, or the Swing Line
Lender, as the case may be, 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
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<PAGE>
payable to such Bank, or the Swing Line Lender, as the case may be, hereunder
shall increase by an amount which will, in such Bank's, or the Swing Line
Lender's, as the case may be, reasonable determination, provide adequate
compensation. Such Bank, or the Swing Line Lender, as the case may be, shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
(c) The certificate of such Bank, or the Swing Line Lender, as the
case may be as to the additional amounts payable pursuant to this Section 2.7
delivered to the Borrower, in the absence of manifest error, shall be conclusive
as to the amount thereof. A claim by any Bank, or the Swing Line Lender, as the
case may be, for all or any part of any additional amount required to be paid by
the 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 Section 2.7
shall be available to such Bank and the Swing Line Lender 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 is to eradicate any such additional cost, reduction or payment, such
Bank, or the Swing Line Lender, as the case may be, shall promptly pay to the
Borrower an amount equal to the amount of compensation paid by the Borrower to
such Bank, or the Swing Line Lender, as the case may be, for its account as a
result of such invalid or inapplicable law, regulation or condition.
Section 2.8 Existing Indebtedness; Use of Proceeds.
--------------------------------------
(a) The proceeds of the Initial Revolving Credit Loans shall be used
to refinance the Existing Indebtedness that is to be repaid pursuant to this
Section 2.8.
(b) The proceeds of all Revolving Credit Loans, (other than the
Initial Revolving Credit Loans), Swing Line Loans and the Term Loans made to the
Borrower hereunder shall be used only (i) to fund Medallion Loans and Commercial
Loans of the Borrower and BL made in the ordinary course of business of the
Borrower and BL, (ii) to refinance existing Indebtedness of the Borrower owing
to Fleet Bank, National Association and (iii) for other working capital purposes
of the Borrower; provided, that, (i) in no event shall proceeds of Revolving
Credit Loans (A) be distributed or in any way transferred by the Borrower to BL
in an amount in excess of the BL Borrowing Base, or (B) be used for the direct
or indirect benefit of any Subsidiary of the Borrower other than BL, except as
would otherwise be permitted by Section 8.3(e).
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
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<PAGE>
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 July 30 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 the Borrower by May 30 of the
year during which such obligations are to be terminated (May 30, 1999, in the
case of the Initial Term) (the "Renewal Deadline"). The Borrower, shall then
----------------
have until the fifth Business Day following the Renewal Deadline to reject (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, not later than three Business Days after the
Rejection of Renewal Deadline the Borrower shall provide each Bank and the Agent
a list indicating each Bank that has elected to renew its Revolving Credit
Obligations and 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 the Borrower, which must be received by no later than 5:00 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 July 30 of the year to which such financing
arrangement shall be extended by such renewal, and (ii) each Revolving Credit
Note shall be deemed
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<PAGE>
amended to reflect the extended Maturity. If any Bank elects not to renew its
Revolving Credit Obligations, or if the 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 the
Borrower in accordance with the provisions of Section 2.1(b) hereof. The
procedures set forth above shall also separately apply to the Swing Line
Lender with respect to the Swing Line Commitment; provided, that, in the event
-------- ----
all Banks extending Revolving Credit Loans elect not to renew as set forth
above, the Swing Line Lender shall be deemed to have made a similar election.
(c) Within five Business Days after the commencement of any Renewal
Term, the Agent 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 the Borrower, and
such rights and remedies and such obligations shall survive until the Borrower
shall have fully paid and performed all its obligations hereunder and thereunder
in full.
Section 2.11 Funding Losses.
--------------
(a) The Borrower shall pay, within 10 days after demand therefor, such
amount as will compensate the Banks and the Swing Line Lender 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 termination or
reduction of the Aggregate revolving Credit Commitment pursuant to Section 2.4
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
Fixed Rate Loan prior to the last day of the applicable Interest Period, or
Swing Line Interest Period, as the case may be, therefor, or (ii) any failure to
borrow, convert to or continue any Fixed Rate Loan as such after submitting a
Loan Request (whether oral or written) relating thereto, 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 Fixed
Rate Loan or any part thereof or (B) any loss of margin on reemployment of the
funds so received or recovered.
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<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 or the Swing Line Lender, as the case
may be, 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 or the Swing Line Lender for
all or any part of any additional amount required to be paid by the 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 prior to the commencement of
any Interest Period for any LIBO Rate Loans, (i) the Required Banks shall have
notified the Agent that they have determined, or the Agent or Fleet shall have
determined, that 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) the Agent or Fleet shall
determine that reasonable means do not exist for ascertaining the LIBO Base
Rate, the Agent, as soon as practicable thereafter, shall give oral notice of
such determination to the Borrower, promptly confirmed in writing (which may be
by teletransmission). In the event of any such determination and until the
Agent notifies the Borrower (and provides a copy of this notice to the Banks)
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 a Bank, or the Agent or Fleet,
as the case may be, 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
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<PAGE>
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 the 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 the Borrower shall be
prohibited from 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 Loans 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.
--------------
The Borrower may grant participations to other Persons of the 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) the
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) the Borrower's interest shall be pari passu or superior in right of payment
to the interest of such participant in such Loan or otherwise in accordance with
the Borrower's standard underwriting criteria and credit policy at the time
thereof and (d) the Borrower's rights to any payment under such Loan shall be
prior to, or pro-rata with, any such participant. Upon request by the Agent or
the Required Banks, the Borrower shall provide the Banks in writing with a
description of all Loans in respect of which participations have been granted.
ARTICLE 3 FEES AND PAYMENTS
Section 3.1 Fees.
----
(a) Annual Facility Fee. The Borrower shall pay to the Agent, for the pro
-------------------
rata benefit of each Bank (based on each Bank's Percentage of the Revolving
Credit Commitment), an annual fee (the "Facility Fee") equal to the Applicable
Facility Percentage of the average daily Aggregate Revolving Credit Commitment
(regardless of usage). Such fee shall be payable to the Agent for the period
from the Effective Date to
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<PAGE>
and including the last day of the Revolving Credit Commitment Period, payable
quarterly in arrears on the first day of each calendar quarter during the
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.
(b) Agent Fees. The Borrower agrees to pay to the Agent, for its own
----------
account, all the fees set forth in the Fee Letter.
Section 3.2 Payments.
--------
(a) Routine Payments. Except as otherwise specifically provided in
----------------
this Agreement, each payment (including each prepayment) by the Borrower
pursuant to this Agreement or the Notes, whether in respect of principal,
interest, or increased costs and the Facility Fee and all other fees to be paid
to the Agent, the Swing Line Lender and the Banks in connection with the Loan
Documents (collectively, "Payments"; and the portion of such payments that are
on account of the Facility Fee, together with all of such other fees, is
sometimes hereinafter collectively referred to as the "Fees") shall be made by
the Borrower without set-off, withholding, deduction, or counterclaim, to the
Agent at the applicable Agent Payment Office in funds immediately available to
the Agent at such office by 12:00 noon (local time in the city in which such
Agent Payment Office is located) on the due date for such Payment. The failure
of the Borrower to make any such Payment by such time shall not constitute a
default hereunder, provided that such payment is made on such due date, but any
such Payment made after 12:00 p.m. (local time in the city in which such payment
is to be made in accordance with the terms hereof) on such due date shall be
deemed to have been made on the next Business Day for the purpose of calculating
interest on amounts outstanding on the applicable loans. Subject to Section
9.5, promptly upon receipt thereof by the Agent, (a) each Payment of principal
and interest on the Revolving Credit Loans, Term Loans and Swing Line Loans
shall be remitted by the Agent in like funds as received to each Bank and the
Swing Line Lender, as the case may be, pro rata according to its Exposure
Percentage of such loans, and (b) each payment of the Facility Fee shall be
remitted by the Agent in like funds as received to each Bank pro rata according
to such Bank's Revolving Credit Commitment.
(b) Alternate Payment Dates. If any Payment hereunder shall be due and
-----------------------
payable on a day which is not a Business Day the due date thereof (except as
otherwise provided in this Agreement) shall be extended to the next Business Day
and (except with respect to Payments in respect of the Fees) interest shall be
payable at the applicable rate specified herein during such extension, provided,
however, that, if such next Business Day is after the Maturity of such loan, any
such payment shall be due on the immediately preceding Business Day.
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<PAGE>
Section 3.3 Taxes.
-----
(a) Any and all payments by the Borrower pursuant to this Agreement,
the Revolving Credit Notes, the Term Notes or the Swing Line Note 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, the Swing Line Lender or any Bank by the
jurisdiction under the laws of which the Agent, the Swing Line Lender 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 the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Agent,
or the Swing Line Lender 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, the Swing Line Lender or such Bank shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law, and (iv) the Borrower shall deliver to the Agent evidence
of such payment to the relevant Governmental Authority.
(b) In addition, the 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 Agent and the Banks evidence of such
payment to the relevant Governmental Authority.
(c) The Borrower will indemnify the Agent, the Swing Line Lender 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, the Swing Line Lender 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 therefor by the Agent, the Swing Line Lender
or any Bank. Should the 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, the Swing Line Lender
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<PAGE>
or the Bank being indemnified agrees to cooperate in such contest, at the
Borrower's expense, and to make available to the 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 the
Borrower hereunder, the agreements and obligations of the 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.
(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 the Borrower, to execute and deliver to the 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 the 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 the Borrower additional or supplemental tax forms with respect to
amounts due to such Bank under the Loan Documents.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
In order to induce the Agent, the Swing Line Lender and the Banks to enter
into this Agreement and to make the Revolving Credit Loans, Swing Line Loans and
Term Loans, each Credit Party 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, Swing Line Loans or Term Loans
are requested by the Borrower or made by any Bank or the Swing Line Lender, as
the case may be:
Section 4.1 Corporate Status.
----------------
Each Credit Party is a duly organized and validly existing corporation, in
the case of the Borrower, and limited liability company, in the case of BL, in
good standing under the laws of its state of organization, is properly licensed
and has the corporate, or limited liability company, as the case may be, 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 organization in good standing under the laws of each
jurisdiction where the failure to qualify as such would have a Material Adverse
Effect.
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Section 4.2 Subsidiaries.
------------
Except as set forth on Schedule II hereof (as the same may be amended from
time to time to include entities the Tangible Net Worth of which constitute less
than 5% of the Tangible Net Worth of the Borrower), there are no corporations of
which the 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 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 the 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 each Credit
Party maintains its books and records relating to, among other things, its
Loans, (ii) at any Credit Party has any places of business and (iii) at which
each Credit Party has its chief executive office.
Section 4.4 Corporate Power; Authorization.
------------------------------
Each Credit Party has the corporate, or limited liability company, as the
case may be, 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. Each
Credit Party has taken all necessary corporate, or limited liability company, as
the case may be, 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 in the case of the Borrower and obtaining of any consent of members
required by law or by the Certificate of Formation or Operating Agreement in the
case of BL) 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 a
Credit Party and delivered to the Agent pursuant to Section 5.1 hereof,
constitutes the legal, valid and binding obligation of such Credit Party,
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
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or proceedings pending or, to the knowledge of such Credit Party, threatened
against, or affecting, a Credit Party 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.
-----------------------------------------------
No Credit Party is 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 a Credit
Party 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 a Credit Party
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 a Credit Party
except as expressly permitted by this Agreement, or violate any provision of the
Certificate of Incorporation, By-Laws or any preferred stock provisions of the
Borrower or violate any provision of the Certificate of Formation or Operating
Agreement of BL.
Section 4.7 Agreements.
----------
No Credit Party is a party to any agreement or instrument or subject to any
corporate restriction (including any restriction set forth in the Certificate of
Incorporation, By-Laws or preferred stock provisions in the case of the Borrower
or set forth in the Certificate of Formation or Operating Agreement in the case
of BL) 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
each Credit Party, threatened, against, or affecting any Credit Party 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 any Credit Party or the conduct of its business or
inconsistent with the due consummation of such transactions has been issued by
any Governmental Authority. No Credit Party is in default under any applicable
statute, rule, order, decree or regulation of any court, arbitrator or
governmental body or agency having jurisdiction over such Credit Party.
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Section 4.9 Good Title to Properties.
------------------------
Each Credit Party 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.
------------------
No Credit Party is obligated to register with the Board as a "lender" as
such term is defined in Regulation U 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 the Borrower (and also by BL to the extent the Borrower lends sums to
BL in accordance with the terms of this Agreement) 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 a Credit Party will be used, directly or indirectly,
for the purpose of purchasing or carrying any "margin stock" as such term is
defined in Regulation U as amended (12 C.F.R. Part 221), issued by the Board, 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, Swing Line
Loans or Term Loans under this Agreement or any such loans or advances a
"Purpose credit" within the meaning of said Regulation U or Regulation X (12
C.F.R. Part 224) of the Board. Neither Credit Party 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 1933, as amended.
Section 4.11 SBIC.
----
BL is, and has been since the date of its incorporation, a qualified "7(a)"
lender under the Small Business Administration Act and is in compliance with all
conditions or requirements imposed by the SBA or any other applicable
Governmental Authority with respect to its status thereof, including, without
limitation, all conditions and requirements imposed under the Small Business
Administration Act and the SBA Regulations promulgated thereunder.
Section 4.12 Investment Company.
------------------
The Borrower is a "business development company" and an "investment
company," as such term is defined in the 1940 Act. The acquisition of the Notes
by the Banks, the application of the proceeds and repayment thereof by the
Borrower and the performance of the transactions contemplated by this Agreement
and the other Loan
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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 either Credit Party 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 any Credit Party or any of
its officers or directors which has, or which in the future might have, in the
reasonable judgment of any Credit Party, 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.
----------------
Each Credit Party 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 the applicable Credit
Party); and no tax liens have been filed and, to the knowledge of each Credit
Party, no claims are being asserted with respect to any such taxes, fees or
other charges. Each Credit Party, 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 the
applicable Credit Party).
Section 4.15 Licenses and Permits.
--------------------
Each Credit Party 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. No
Credit Party has received any notice nor does any Credit Party have any
knowledge or reason to believe that any appropriate authority
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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.
--------
Except as provided in the Multi-Party Agreement, 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 any Credit Party 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.
Section 4.17 Employee Benefit Plans.
----------------------
(a) None of the Plans maintained at any time by any Credit Party, 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 any Credit Party, 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 any Credit Party in excess of $50,000, nor has
any Credit Party, any ERISA Affiliate thereof, or any such Plan of any Credit
Party 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; no Credit Party 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 any Credit Party in excess of $50,000; and each Credit
Party 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 any
Credit Party 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 any Credit Party 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
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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 each Credit Party
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
December 31, 1997 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 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 any Credit Party.
Section 4.19 Environmental Laws, Etc.
-----------------------
(a) All Property heretofore, now or hereafter owned or operated by
each Credit Party 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;
(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; and
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(d) all property that heretofore has secured, is now securing or
hereafter shall secure any Loan shall be subject to the same representations and
warranties made in respect of the Property in subsections (a), (b) and (c) of
this Section 4.19.
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.
--------
Each Credit Party 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, the Agent, for the ratable benefit
of the Banks and the Swing Line Lender, has a valid and perfected first priority
security interest in and to all Collateral, enforceable against each Credit
Party and all third parties in all relevant jurisdictions and securing the
payment of the Revolving Credit Loans, Swing Line Loans and Term Loans and all
other sums payable under or in connection with the Loan Documents.
Section 4.23 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 any Credit Party 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 each Credit Party in the ordinary
course of its business consist of: (i) the making and servicing of Loans and
Investments (in the case of BL in compliance with the SBI Act and the SBA
Regulations promulgated thereunder); and (ii) transactions incidental to the
foregoing.
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Section 4.25 Year 2000 Issue.
---------------
Each Credit Party and its Subsidiaries have reviewed the effect of the Year
2000 Issue on the computer software, hardware and firmware systems and equipment
containing embedded microchips owned or operated by or for such Credit Party and
its Subsidiaries or used or relied upon in the conduct of their business
(including systems and equipment supplied by others or with which such computer
systems of such Credit Party and its Subsidiaries interface). The costs to such
Credit Party and its Subsidiaries of any reprogramming required as a result of
the Year 2000 Issue to permit the proper functioning of such systems and
equipment and the proper processing of data, and the testing of such
reprogramming, and of the reasonably foreseeable consequences of the Year 2000
Issue to such Credit Party or any of its Subsidiaries (including reprogramming
errors and the failure of systems or equipment supplied by others) are not
reasonably expected to result in a Default or Event of Default or to have a
material adverse effect on the business, assets, operations, prospects or
condition (financial or otherwise) of any Credit Party or any of its
Subsidiaries.
ARTICLE 5 CONDITIONS PRECEDENT
Section 5.1 Conditions to Initial Revolving Credit Loan and Initial
-------------------------------------------------------
Swing Line Loan.
- ---------------
The obligation of (i) the Banks to make the Initial Revolving Credit Loan
and (ii) the Swing Line Lender to make its first Swing Line Loan hereunder, are
each subject to the satisfaction on the Effective Date of the following
conditions precedent:
(a) The Agent and the Swing Line Lender shall have received, on or
before making the initial Swing Line Loan, a Swing Line Note conforming to the
requirements hereof in the form of Exhibit D hereto, executed by an Authorized
---------
Representative of the Borrower, as the case may be; and the Agent and each Bank
shall have received, on or before making the Initial Revolving Credit Loan, the
following, each in form and substance satisfactory to the Agent and 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 the Borrower, as the case may be;
(ii) evidence satisfactory to the Banks that there is no
outstanding Indebtedness or Liens except Permitted Indebtedness and
Permitted Liens;
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(iii) the Borrower Security Agreement in the form of Exhibit E,
---------
executed by an Authorized Representative of each Borrower and the
Guaranty and Security Agreement in the form of Exhibit K, executed by
---------
an Authorized Representative of BL;
(iv) the duly executed Multi-Party Letter Agreement substantially
in the form of Exhibit G;
---------
(v) evidence satisfactory to the Banks that the Borrower and
Guarantor Financing Statements have been executed and delivered to the
Agent in a form acceptable to the Agent, such that the security
interests described therein 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 each
Credit Party under the UCC as in effect in any relevant state,
indicating that the Collateral is free and clear of any Lien or
encumbrance, other than Permitted Liens;
(vii) opinions of counsel to each Credit Party substantially in
the form of Exhibit I 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 the
Borrower and a copy of the Certificate of Formation of BL and with
respect to each all amendments thereto, certified as of the date
hereof by the Chief Financial Officer of the applicable Credit Party;
(ix) copies of the By-laws of the Borrower and copies of the
Operating Agreement of BL, each in effect as of the Effective Date,
certified by the Chief Financial Officer of the applicable Credit
Party;
(x) certified copies of the resolutions of the Board of
Directors of the Borrower and of the Managers or applicable governing
body of BL, each 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 Chief Financial Officer of the applicable Credit
Party, and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect thereto;
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(xi) certificates of the Chief Financial Officer of each Credit
Party certifying the names and true signatures of the officers of such
Credit Party 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 Chief Financial Officer of each Credit
Party to the effect that (A) the financial statements referred to in
Section 4.18 hereof present fairly the financial condition of such
Credit Party as of the date and for the period of such financial
statements and (B) no material adverse change in the condition,
financial or otherwise, of such Credit Party has occurred since the
date of such financial statements;
(xiii) a certificate of an Authorized Representative of each
Credit Party to the effect that such Credit Party 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;
(xvi) a Borrowing Base Certificate in the form of Exhibit H;
----------
(xvii) the Intercompany Demand Note in the form of Exhibit L
---------
payable by BL to the order of the Borrower, duly executed by the
Borrower and duly endorsed in blank by Borrower to the Agent, the
originals of each of the Intercompany Demand Documents and assignments
of financing statements from the Borrower to the Agent; and
(xviii) the rights of the Agent and the Banks under each of the
Borrower Security Agreement, the Guaranty and Security Agreement, the
Multi-Party Letter Agreement, the Mortgage Assignments and the
Borrower and Guarantor Financing Statements shall be and continue in
full force and effect after the Effective Date.
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(b) The Borrower is a corporation, and BL is a limited liability
company, each 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 Agent and the Banks, and the Agent 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
Agent, the Banks and Emmet, Marvin & Martin, as counsel to the Agent, 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, each 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.
(f) The Borrower shall have paid to each Bank the sums set forth in
Section 2.8 hereof that are required to be paid to such Bank on or before 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 and the obligation of the
Swing Line Lender to make any Swing Line Loan (including any initial Swing Line
Loan) is further subject to the satisfaction of the following conditions
precedent:
(a) each of the representations and warranties made by a Credit Party
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
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<PAGE>
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 or
Swing Line 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 or Swing Line Loans to be made on such date;
(c) no event, action or condition has occurred that would adversely
affect the validity or enforceability of, or the authority of the Borrower to
perform its obligations under, any of the Loan Documents to which it is a party.
(d) after taking into account Revolving Credit Loans and/or Term Loans
and/or Swing Line Loans to be made on such date, (i) the aggregate unpaid
balance of all Swing Line Loans to the Borrower plus the aggregate unpaid
----
balance of all Revolving Credit Loans to the Borrower plus the aggregate unpaid
----
balance of all Term Loans to the Borrower shall not exceed the MFC Borrowing
Base plus the BL Borrowing Base and (ii) the aggregate unpaid balance of all
Swing Line Loans to the Borrower plus the aggregate unpaid balance of all
----
Revolving Credit Loans to the Borrower plus the aggregate unpaid balance of all
----
Term Loans to the Borrower that are utilized directly or indirectly by BL shall
not exceed the BL Borrowing Base and (iii) the aggregate unpaid balance of all
Swing Line Loans to the Borrower plus the aggregate unpaid balance of all
----
Revolving Credit Loans to the Borrower plus the aggregate unpaid balance of all
----
Term Loans to the Borrower that are utilized directly or indirectly by the
Borrower shall not exceed the MFC Borrowing Base.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by each Credit Party as of the date of such borrowing that the
conditions in clauses (a), (b), (c) and (d) of this Section 5.2 have been
satisfied.
ARTICLE 6 AFFIRMATIVE COVENANTS
Each Credit Party covenants and agrees that, until the Notes together with
interest and all other Indebtedness of the Borrower to the Agent, the Swing Line
Lender or the Banks under the Loan Documents are paid in full and the Aggregate
Revolving Credit Commitment, the Swing Line Commitment and all Term Loan
Commitments are terminated, unless specifically waived in writing by the Agent
and the Required Banks:
Section 6.1 Financial Statements and Other Information.
------------------------------------------
The Borrower shall furnish to the Agent and each Bank:
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(a) as soon as practicable and in any event within 45 days after the
close of each calendar quarter, beginning with the calendar quarter ending June
30, 1998, a detailed schedule of all outstanding Loans of each Credit Party
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) at the request of the Agent (which request shall not be made,
unless an Event of Default has occurred and is continuing, on more than one
occasion in each calendar year), a schedule setting forth (i) the number of
Medallion Rights pledged to each Credit Party as security for Loans made by it,
(ii) the then outstanding aggregate principal amount of the Loans secured by
such Medallion Rights and (iii) each Credit Party'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) monthly, and not later than 10 Business Days after the last day of
each month, a Borrowing Base Certificate indicating a separate computation of
the MFC Borrowing Base and the BL Borrowing Base monthly covering the period
ending the last day of the immediately preceding month;
(d) as soon as practicable and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, beginning with the fiscal quarter ending June 30, 1998, a consolidated
and consolidating balance sheet, a statement of income and retained earnings and
a statement of cash flow of each Credit Party, 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, if requested by the
Agent, 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 chief
executive officer, chief operating officer, chief financial officer, or chief
accounting officer of each Credit Party 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 the Borrower commencing with the fiscal year ending
December 31, 1998, a consolidated and consolidating balance sheet, a statement
of income and retained
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earnings and a statement of cash flow of each Credit Party, 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, if requested by the Agent, 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 statements of
each Credit Party for the preceding fiscal year, and, with respect to such
consolidated statements, certified (without any qualification or exception
deemed material by the Agent or any Bank) by the Independent Public Accountants;
and concurrently with such financial statements, a written statement, addressed
to the Agent and 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), or 6.(d) hereof, a
certificate signed by the chief executive officer, chief operating officer,
chief financial officer, or chief accounting officer of each Credit Party, 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 chief executive officer, chief operating
officer, chief financial officer, or chief accounting officer of each Credit
Party 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 each Credit Party during such period has been
made under his or their, as the case may be, immediate supervision with a view
to determining whether each such Credit Party 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 each Credit Party 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 the 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 and each such certificate shall also
indicate, with detail, the amount, if any, of Revolving Credit Loans, Term Loans
and/or Swing Line Loans that were utilized directly or indirectly by BL;
(g) concurrently with the delivery of the financial statements
required to be furnished under Section 6.1(e) hereof, (i) any management letters
prepared by the
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Independent Public Accountants described above, setting forth weaknesses in the
accounting and control procedures of any Credit Party and (ii) projections (in a
format satisfactory to the Agent) for the fiscal year immediately following the
fiscal year for which such financial statements were provided;
(h) promptly upon receipt thereof with respect to each Credit Party,
copies of (i) all financial reports (including, without limitation, management
letters), if any, submitted to such Credit Party 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 such Credit Party in connection with
each inspection by such auditors of the documents evidencing such Credit Party's
Loans and the Underlying Collateral securing such Loans, (iii) all audits
submitted to such Credit Party by the SBA or any other Governmental Authority
and (iv) all reports, letters or other documents submitted to such Credit Party
by the SBA or any other Governmental Authority relating to a material change in
such Credit Party's business or the rules and regulations promulgated by any
Governmental Authority applicable thereto, including, without limitation, the
SBI Act, the SBA Regulations, the 1940 Act and the Code;
(i) annually, when furnished to the Borrower, a copy of the
Independent Public Accountant's annual management letter provided to the
Borrower;
(j) as soon as practicable and in any event within 30 Business Days
after the close of each calendar quarter, beginning with the calendar quarter
ending June 30, 1998, BL's recapture summary and delinquencies report; and
(k) with reasonable promptness, such other information respecting the
business, operations and financial condition of each Credit Party as the Agent
or any of the Banks from time to time reasonably may request.
Section 6.2 Taxes and Claims.
----------------
(a) Each Credit Party 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 such Credit Party 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
such Credit Party, 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 such Credit Party or any of its
Subsidiaries, which Lien would not be permitted under this Agreement, unless and
to the extent such claims are
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being diligently contested in good faith by appropriate proceedings and adequate
reserves in conformity with GAAP have been provided therefor on the books of
such Credit Party.
(b) No Credit Party shall 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 any Credit Party 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 the 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) Each Credit Party 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.
(b) Each Credit Party, from time to time upon request of the Agent or
any Bank, promptly shall furnish or cause to be furnished to the Agent and any
such requesting Bank evidence, in form and substance satisfactory to the Agent
and such Bank (if requested by a 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.
-----------------
Each Credit Party shall maintain, at all times, true and complete books,
records and accounts in which true and correct entries shall be made of its
transactions in accordance
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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.
----------------------------
Each Credit Party 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.
-----------------------
Each Credit Party shall allow any representative of the Agent or any of the
Banks to visit and inspect any of the properties of such Credit Party to examine
and audit the books of account and other records and files of such Credit Party,
to make copies thereof and to discuss the affairs, business, finances and
accounts of such Credit Party with its officers and employees, all at such
reasonable times and as often as the Agent any of the Banks may request;
provided, that, at least once each calendar year such an inspection shall be
- -------- ----
conducted by the Agent at the request of the Required Banks (or without such a
request if the Agent shall deem it necessary or advisable). Reasonable expenses
incurred in connection with one such audit and inspection requested by the
Required Banks or the Agent each year shall be paid by the Borrower, with any
additional audits to be at the expense of the Bank performing the same, or at
the expense of all Banks if conducted by the Agent, 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 Agent and Perform Other Covenants.
-----------------------------------------------------
The Borrower shall (a) make full and timely payments to the Agent, for the
ratable benefit of the Banks, and the Swing Line Lender, as the case may be, of
the principal of and interest on the Notes and all other amounts owed by the
Borrower under or pursuant to the Loan Documents, 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, all at the times and
places and in the manner set forth therein.
Section 6.8 Compliance With Laws.
--------------------
Each Credit Party 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
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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 adequate reserves in conformity with GAAP have been provided
therefor on the books of the applicable Credit Party).
Section 6.9 Notice of Certain Events.
------------------------
Each Credit Party shall promptly, but in no event later than three Business
Days after obtaining knowledge thereof, give written notice to the Agent and the
Banks of: (a) any material litigation, including arbitrations, and of any
investigations or proceedings before any Governmental Authority brought against
a Credit Party, whether or not the claim is considered by a Credit Party 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 such Credit Party, would exceed $500,000, and each Credit
Party shall, if requested by the Agent or the Required Banks, set up such
reserves as it deems necessary (provided, that, such reserves shall be in such
amounts such that neither the Agent nor the Required Banks has informed either
such Credit Party that such reserves are not satisfactory to protect the Agent
or the Banks against loss); (b) any written notice of a violation received by a
Credit Party 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 a Credit Party 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 a Credit Party; and (f) any
change in the corporate name or corporate form of a Credit Party, or of any
change in the information disclosed on Schedule I annexed hereto.
Section 6.10 Environmental Laws, Etc.
-----------------------
(a) Each Credit Party 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, no Credit Party shall use any Property to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer,
produce, process or in any manner deal with, Hazardous Materials, and no Credit
Party shall cause or permit, as a result of any intentional or unintentional act
or omission on the part of a Credit Party 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
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Hazardous Materials on any Property. Each Credit Party 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 a Credit Party or any real property adjacent thereto.
(b) Each Credit Party agrees to provide the Banks with copies of any
notifications of releases of Hazardous Materials that are given by or on behalf
of a Credit Party to any Governmental Authority with respect to any real
property owned or operated by a Credit Party. Such copies shall be sent to the
Banks concurrently with the mailing or delivery of such copies to the
Governmental Authority.
Section 6.11 Further Assurances.
------------------
Upon the request of the Agent or the Required Banks, each Credit Party at
its cost and expense shall duly execute and deliver, or cause to be duly
executed and delivered, to the Agent and 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 Agent or the Required Banks to carry out more
effectually the provisions and purposes of this Agreement and the other Loan
Documents.
Section 6.12 ERISA.
-----
Each Credit Party shall deliver to the Agent and 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 such Credit Party'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.
-------------------
Each Credit Party 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
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thereto, so that the business carried on in connection therewith may be properly
conducted at all times.
Section 6.14 Maintenance of Security Interest.
--------------------------------
Each Credit Party 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 and Guaranty and Security Agreement, subject
only to the Liens permitted pursuant to Section 8.1 hereof and taking into
account the time required for the Credit Party to deliver Collateral to the
Agent (which Collateral shall be delivered to the Agent promptly upon receipt
thereof by the Credit Party); provided, that, the Credit Party shall have no
-------- ----
responsibility for a breach of this covenant if caused by the gross negligence
of the Agent..
Section 6.15 [Reserved].
--------
Section 6.16 Year 2000 Issue.
---------------
Each Credit Party shall take, and shall cause each of its Subsidiaries to
take, all necessary action to complete in all material respects by October 31,
1999, the reprogramming of computer software, hardware and firmware systems and
equipment containing embedded microchips owned or operated by or for such Credit
Party and its Subsidiaries or used or relied upon in the conduct of their
business (including systems and equipment supplied by others or with which such
systems of such Credit Party or any of its Subsidiaries interface) required as a
result of the Year 2000 Issue to permit the proper functioning of such computer
systems and other equipment and the testing of such systems and equipment, as so
reprogrammed. At the request of the Bank, each Credit Party shall provide, and
shall cause each of its Subsidiaries to provide, to the Bank reasonable
assurance of its compliance with the preceding sentence.
Section 6.17 Credit Party's Manuals.
----------------------
Not later than 90 days after the Effective Date, each Credit Party shall
provide to the Agent and each Bank a copy of its then operative credit policy
manual and a copy of its then operative operating manual and thereafter shall
notify the Agent and each Bank of any and all material changes to such manuals
from that most recently delivered.
Section 6.18 Principal Office of Clients.
---------------------------
Within five Business Days of any request therefor from the Agent, each
Credit Party shall update Schedule II to this Agreement to provide, to the best
of such Credit Party's knowledge, each location at which Clients have their
principal or chief executive office.
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ARTICLE 7 FINANCIAL COVENANTS
Each Credit Party covenants and agrees that, until the Notes, together with
interest and all other Indebtedness of the Borrower to the Agent, the Swing Line
Lender or the Banks under this Agreement and the other Loan Documents, are paid
in full and the Aggregate Revolving Credit Commitment, the Swing Line Commitment
and all Term Loan Commitments are terminated, no Borrower shall, without the
prior written consent of the Agent and the Required Banks:
Section 7.1 Maximum Leverage Ratio.
----------------------
Suffer or permit the ratio of (A) Total Adjusted Liabilities of the
Borrower to (B) Tangible Net Worth of the Borrower to be more than 1:1 at any
time (notwithstanding the definition of Total Adjusted Liabilities, for purposes
of this Section 7.1, such Total Adjusted Liabilities shall only include the
Total Adjusted Liabilities of the Borrower and shall exclude the Total Adjusted
Liabilities of BL).
Section 7.2 Maximum Adjusted Leverage Ratio.
-------------------------------
Suffer or permit the ratio of (A) the sum of Total Adjusted Liabilities to
(B) Adjusted Tangible Net Worth to be more than 3:1 at any time.
Section 7.3 Borrowing Base.
--------------
Suffer or permit the aggregate unpaid balance of all Swing Line Loans plus
----
the aggregate unpaid balance of all Revolving Credit Loans plus the aggregate
----
unpaid balance of all Term Loans to exceed the sum of the MFC Borrowing Base and
the BL Borrowing Base, or (B) the aggregate unpaid balance of all Swing Line
Loans plus the aggregate unpaid balance of all Revolving Credit Loans plus the
---- ----
aggregate unpaid balance of all Term Loans that have been used directly or
indirectly by BL to exceed the BL Borrowing Base, or (C) the aggregate unpaid
balance of all Swing Line Loans plus the aggregate unpaid balance of all
----
Revolving Credit Loans plus the aggregate unpaid balance of all Term Loans that
----
have been used directly or indirectly by the Borrower to exceed the MFC
Borrowing Base.
Section 7.4 Minimum EBIT to Interest Expense Ratio.
--------------------------------------
(a) Suffer or permit the ratio, on a rolling four quarter basis, of (a) the
Borrower's consolidated EBIT plus the Borrower's consolidated Interest Expense
to (b) the Borrower's consolidated Interest Expense to be less than 1.50:1 at
any period of determination.
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(b) Suffer or permit the ratio, on a rolling four quarter basis, of (a)
EBIT of the Borrower on an unconsolidated basis plus EBIT of BL on an
unconsolidated basis to (b) Interest Expense of the Borrower on an
unconsolidated basis plus Interest Expense of BL on an unconsolidated basis to
be less than 1.35:1 at any period of determination.
Section 7.5 Minimum Asset Quality.
---------------------
Suffer or permit, on a rolling twelve month period, its aggregate Net
Realized Loss to be greater than (i) with respect to Medallion Loans, 3% of the
average aggregate principal balances of all outstanding Medallion Loans during
any applicable period of determination, or (ii) with respect to Commercial
Loans, 5% of the average aggregate principal balances of all outstanding
Commercial Loans during any applicable period of determination.
ARTICLE 8 NEGATIVE COVENANTS
Each Credit Party covenants and agrees that until the Notes together with
interest and all other Indebtedness of the Borrower to the Agent, the Swing Line
Lender or the Banks under this Agreement are paid in full and the Aggregate
Revolving Credit Commitment, the Swing Line Commitment and all Term Loan
Commitments are terminated, no Credit Party shall, without the prior written
consent of the Agent and 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 (the
"Permitted Liens"):
(a) Liens created under the Borrower Security Agreement or under the
Guaranty and Security Agreement or other Liens in favor of the Agent or the
Banks;
(b) Liens existing on property at the time acquired by a Credit Party
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
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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 the applicable Credit Party;
(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 proceedings and adequate reserves in
conformity with GAAP have been provided on the books of the applicable Credit
Party; 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 the Borrower to the Agent, the Swing Line Lender
and the Banks arising hereunder or under any of the other Loan Documents;
(b) Permitted Debt and Subordinated Debt of the Credit Parties;
(c) Indebtedness secured by Liens described in Section 8.1(b), (c) or
(g) hereof;
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(d) 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;
(e) Indebtedness evidenced by the Intercompany Demand Note.
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 20% of the Adjusted
Tangible Net Worth plus Satisfactory Subordinated Debt; provided, that,
notwithstanding the definition of Adjusted Tangible Net Worth, as to this
covenant as to any Credit Party, such term shall mean the Adjusted Tangible Net
Worth of such Credit Party alone without taking into account the Adjusted
Tangible Net Worth of the other Credit Party.
(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, the
applicable Credit Party'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 35% of such Credit Party's total Loans outstanding.
(e) On or after the Effective Date, make any Investment in any
Subsidiary or Affiliate (excluding Investments to BL in accordance with and
subject to all the terms and conditions of this Agreement; provided, that, this
exclusion shall not apply unless and until the Multi-Party Agreement shall have
been executed and approved in writing by the Agent and the Required Lenders), or
any Person that after taking into account such Investment would become a
Subsidiary or Affiliate, when taking into account all such Investments in the
aggregate the amount or value of such Investments would exceed $15,000,000
during the Initial Term or any Renewal Term.
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(f) [Reserved].
--------
(g) Sell, discount or otherwise dispose of Loans or any Collateral;
sell, discount or otherwise dispose of other Receivables or obligations owing to
a Credit Party or any of its Subsidiaries, with or without recourse, otherwise
than (i) in connection with the grant of any participation in accordance with
and to the extent permitted by Section 2.14 hereof, (ii) for collection in the
ordinary course of business or (iii) to the Agent for the benefit of the Banks.
(h) Make, or commit to make, or acquire or commit to acquire, any Loan
to or from any Person unless the applicable Credit Party reasonably believes
that such Loan constitutes, or upon funding or acquisition will constitute, an
Eligible Loan; provided, that, it shall not be a breach of this covenant if the
-------- ----
Loan causing the breach is not in a material amount and in any event is not
included in the BL Borrowing Base and/or the MFC Borrowing Base.
(i) Fail to file upon making or acquiring a Loan, all required
Borrower and Guarantor Financing Statements and Mortgage Assignments in order to
assure that the Agent receives a first priority perfected security interest or
mortgage interest therein; provided, that, it shall not be a breach of this
-------- ----
covenant if the Loan causing the breach is not in a material amount and in any
event is not included in the BL Borrowing Base and/or the MFC Borrowing Base.
Section 8.4 [Reserved].
--------
Section 8.5 Restricted Payments.
-------------------
Make, or obligate itself to make, any Restricted Payment.
Section 8.6 Merger, Consolidation, Sale or Transfers 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 the applicable Credit Party 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 the applicable Credit Party then outstanding unless, immediately upon
such sale or disposition,
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the 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 owing by it equal to the aggregate principal amount, plus accrued
interest, of the Loans so sold or disposed; provided, that, Guaranteed BL Loans
-------- ----
may be sold as long as after taking into account such sale the Borrower is still
within the BL Borrowing Base and MFC Borrowing Base limitations provided in this
Agreement.
(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 Credit Parties may
merge or consolidate with any other Person, provided that (A) a Credit Party
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, each Credit Party would be Solvent and, except for
good will adjustments, would have Tangible Net Worth at least equal to the
Tangible Net Worth such Credit Party had immediately before such consolidation
or merger; provided, that notwithstanding the definition of Tangible Net Worth,
as to this covenant as to BL, such term shall mean the consolidated Tangible Net
Worth of BL alone without taking into account the Tangible Net Worth of MFC.
Section 8.7 Transfer of Proceeds.
--------------------
Except in accordance with the provisions of Section 8.3(e), transfer, or
commit itself to transfer, any portion of the proceeds of the Revolving Credit
Loans, Swing Line Loans and Term Loans to be made to the Borrower from time to
time hereunder to any Affiliate, except that the Borrower may transfer, or
commit itself to transfer, any portion of the proceeds of the Revolving Credit
Loans, Swing Line Loans and Term Loans to BL in an aggregate principal amount up
to the BL Borrowing Base and otherwise subject to the terms and limitations set
forth in the Loan Documents.
Section 8.8 Compliance with ERISA.
---------------------
Take any of the following actions or permit any of the following events to
exist if, as a result thereof, a Credit Party 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 a Credit Party 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
a Credit Party 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
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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 the Agent, the Swing
Line Lender or 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 such Credit Party 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 any Credit Party
of its obligations under any of the Loan Documents where the potential
consequences of such violation or breach would have a Material Adverse Effect.
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Section 8.14 Capital Expenditures.
--------------------
Expend or commit to expend for itself more than an aggregate of $1,000,000
in any fiscal year for capital expenditures, for the acquisition of Equipment or
for leasehold improvements.
Section 8.15 [Reserved].
--------
Section 8.16. Portfolio Purchases.
-------------------
Make, or obligate itself to make, any Portfolio Purchase unless:
(i) no Default or Event of Default exists or would exist after giving
effect to the applicable Portfolio Purchase;
(ii) the applicable Credit Party has provided the Agent and each of
the Banks with a pro forma certificate of the chief financial officer of
such Credit Party evidencing each Credit Party's computation of compliance
with each of the financial ratios, tests or covenants specified in Article
VII, 6.15, 8.2, 8.3, 8.4 and 8.14 hereof after giving effect to the
applicable Portfolio Purchase;
(iii) the applicable Portfolio Purchase has the approval of the
seller;
(iv) (1) the seller of the loans constituting such Portfolio Purchase
is in the business of making loans secured by New York City taxicab
medallions and the loans to be acquired in connection therewith are secured
by New York City taxicab medallions, or (2) the Portfolio Purchase is being
made from a Person in any other line of business; provided, that, to the
--------------
extent the Portfolio Purchase does not entirely involve loans secured by
New York City taxicab medallions, in addition to the foregoing, each such
Portfolio Purchase shall be subject to the following additional
limitations:
(A) if the consideration for such Portfolio Purchase shall be
Capital Stock of the Borrower, the fair market value of such Capital
Stock, less the aggregate outstanding principal balances of all loans
included in such Portfolio Purchase that are secured by New York City
taxicab medallions, if any, shall not exceed $50,000,000 with respect
to any one such Portfolio Purchase or $100,000,000 in any fiscal year
with respect to all such Portfolio Purchases in the aggregate in such
fiscal year; and
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(B) if the consideration for such Portfolio Purchase shall be
other than Capital Stock of the Borrower, the consideration therefor,
less the aggregate outstanding principal balances of all loans
included in such Portfolio Purchase that are secured by New York City
taxicab medallions, if any, shall not exceed $25,000,000 with respect
to any one such Portfolio Purchase or $50,000,000 in any fiscal year
with respect to all such Portfolio Purchases in the aggregate in such
fiscal year.
Section 8.17. Intercompany Demand Loan Documents.
----------------------------------
Take any action to enforce payment under the Intercompany Demand Note
or enforce its security interest under the Intercompany Demand Loan Documents
without the prior written consent of the Agent and the Required Lenders.
ARTICLE 9 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 by the Borrower in the due and punctual
payment of the principal of or interest on any of the Revolving Credit Loans,
Swing Line Loans or Term Loans or any other amounts due and owing to the Agent,
the Swing Line Lender 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 any Credit Party 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 days after such failure shall first have become
known to any officer of any Credit Party;
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(d) if default shall be made by any Credit Party 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, the Swing Line Lender 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 a Default or an Event of Default shall occur and continue under
and as defined in that certain Amended and Restated Loan Agreement dated as of
December 24, 1997 by and among the Borrower's Subsidiary, Medallion Funding
Corp., the Lenders party thereto, Fleet Bank, National Association, as Swing
Line Lender, Administrative Agent, Arranger and Collateral Agent and the Bank of
New York as Documentation Agent, as the same has been or may hereafter be
amended, modified, or supplemented from time to time;
(f) if any Credit Party 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
$250,000, other than Indebtedness under the Revolving Credit Loans, the Swing
Line Loans, or the Term Loans, 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;
(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 any Credit Party to the Agent, the Swing Line
Lender 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 any Credit Party 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;
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(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 any Credit Party or of the whole or substantially
all of its property, or enter an order for relief against any Credit Party 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 any Credit Party or of the whole
or substantially all of its property; or if there is commenced against any
Credit Party any proceeding for any of the foregoing relief or if a petition is
filed against any Credit Party 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 any Credit Party by
any act indicates its consent to, approval of or acquiescence in any such
proceeding or petition;
(j) if any judgment or judgments against any Credit Party or any
attachment or execution against any of its property for any amount or amounts in
excess of $250,000 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) any Credit Party or any of its ERISA Affiliates shall, or is, in the
reasonable opinion of the Agent or the Required Banks, likely to, incur any
liability in connection 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 any Credit Party to any tax, penalty or other
liabilities in the aggregate material in relation to the business, operations,
property or financial or other condition of any Credit Party; or
(1) if there shall occur any change in the Collateral or in the
business of any Credit Party, or its operation, conduct or prospects thereof,
that individually or in the aggregate, could have or result in a Material
Adverse Effect and the Agent has been
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directed to declare such Event of Default by the Super-majority Banks as set
forth below in this Section 9.1;
then, (A) in the case of an Event of Default described in clause (h) or (i)
above, the Aggregate Revolving Credit Commitment, the Swing Line Commitment, and
each Term Loan Commitment shall automatically terminate and (i) the unpaid
balance of the Revolving Credit Notes, the Swing Line Note, 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, (B) in the case of an
Event of Default described in clause (l) above, at any time thereafter, if such
Event of Default shall then be continuing the following action may be taken: the
Agent, upon the direction of the Super-majority Banks, shall, declare (i) the
Aggregate Revolving Credit Commitment, the Swing Line Commitment and all Term
Loan Commitments to be terminated, whereupon the obligation of the Agent the
Banks and the Swing Line Lender to make further Revolving Credit Loans or Term
Loans or Swing Line Loans, as the case may be, hereunder shall terminate
immediately and (ii) the Revolving Credit Notes, Swing Line Note and Term Notes
to be due and payable, whereupon the maturity of the then unpaid balance of the
Revolving Credit Notes, Swing Line Note 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 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,
Swing Line Note or Term Notes to the contrary notwithstanding, and, (C) 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 may (but shall not be obligated to),
and upon the direction of the Required Banks shall, declare (i) the Aggregate
Revolving Credit Commitment, the Swing Line Commitment and all Term Loan
Commitments to be terminated, whereupon the obligation of the Agent the Banks
and the Swing Line Lender to make further Revolving Credit Loans or Term Loans
or Swing Line Loans, as the case may be, hereunder shall terminate immediately
and (ii) the Revolving Credit Notes, Swing Line Note and Term Notes to be due
and payable, whereupon the maturity of the then unpaid balance of the Revolving
Credit Notes, Swing Line Note 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 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, Swing
Line Note or Term Notes to the contrary notwithstanding.
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Section 9.2 Suits for Enforcement.
---------------------
In case any one or more Events of Default shall occur and be continuing,
the Agent may (but shall not be obligated to), and at the request of the
Required Banks shall, proceed to protect and enforce the rights or remedies of
the Agent, the Swing Line Lender and the Banks 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, the Swing Line Lender
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,
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 any Credit Party and any of the Banks, the
Swing Line Lender or the Agent or any failure or delay on the part of any Bank,
the Swing Line Lender 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, the Swing Line Lender 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.
Section 9.5 Further Payments.
----------------
In the event that the Revolving Credit Commitments, the Swing Line
Commitment and the Term Loan Commitments shall have been terminated or the
Revolving Credit Loans, Swing Line Loans and the Term Loans and all other
amounts owing under the Loan Documents shall have been declared due and payable
pursuant to the provisions of this Section, any funds received by the Agent, the
Swing Line Lender and the Banks from or on behalf of the Borrower shall be
remitted to, and applied by, the Agent in the following manner and order: (a)
first, to the payment of interest on, and then the principal portion of, any
Revolving Credit Loans or Term Loans which the Agent may have advanced on behalf
of any Bank for which the Agent has not then been reimbursed by such Bank or the
Borrower; (b) second, to reimburse the Agent and the Swing Line Lender for any
expenses
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due from the Borrower pursuant to the provisions of Section 10.6, (c)
third, to the payment of the outstanding principal amount of the Swing Line
Loans (together with all interest thereon), (d) fourth, to the payment of the
Fees, (e) fifth, to the payment of any other fees, expenses or amounts (other
than the principal of and interest on the Revolving Credit Loans, Swing Line
Loans or Term Loans) payable by the Borrower to the Agent, the Swing Line Lender
or any of the Banks under the Loan Documents, (f) sixth, to the payment, pro
rata according to the Exposure Percentage of each Bank, of interest due on the
Revolving Credit Loans and Term Loans, (g) seventh, to the payment, pro rata
according to Exposure Percentage of each Bank, of principal on the Revolving
Credit Loans and Term Loans, of such principal, (h) eighth, any remaining funds
shall be paid to whomsoever shall be entitled thereto or as a court of competent
jurisdiction shall direct.
ARTICLE 10 MISCELLANEOUS
Section 10.1 Collection Costs.
----------------
In the event that the Banks, the Swing Line Lender 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, the 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 Agent on behalf of such Banks, the Agent on behalf of the
Swing Line Lender, the Swing Line Lender, 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.
-----------------------
With the written consent of the Required Lenders, the Agent and the
Borrower may, from time to time, enter into written amendments, supplements or
modifications of the Loan Documents and, with the consent of the Required
Lenders, the Agent on behalf of the Banks and the Swing Line Lender may execute
and deliver to the Borrower a written instrument waiving or a consent to a
departure from, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of the Loan Documents or any Default and its
consequences; provided, however, that:
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(a) no such amendment, supplement, modification, waiver or consent
shall, without the consent of all of the Banks, (i) increase the Revolving
Credit Commitment or Term Loan Commitment of any Bank or the Aggregate Revolving
Credit Commitment, (ii) decrease the rate, or extend the time of payment, of
interest of, or change or forgive the principal amount or extend the time of
payment of, any Revolving Credit Loan or Term Loan, or decrease the rate, or
extend the time of payment, of the Facility Fee, (iii) change the provisions of
Sections 3.3, 9.1, this 10.2, or 10.9, change the definition of "Eligible
Loan," "Required Banks," "Event of Default," "Prime Rate," "Adjusted LIBO Rate"
"Revolving Credit Commitment Periods," "Revolving Credit Loans," "Term Loans,"
"Term Loan Commitment" and all defined terms included in such definitions, (iv)
change any of the provisions of Article II (other than Sections 2.8(e) and 2.14
thereof) or Article III hereof, or (v) change the Borrower Security Agreement or
the Guaranty and Security Agreement or release all or substantially all of the
Collateral, or (vi) change any provision hereof which expressly requires the
consent, approval or waiver by all Banks;
(b) without the written consent of the Agent, no such amendment,
supplement, modification or waiver shall amend, modify or waive any provision of
Article 11 or otherwise change any of the rights or obligations of the Agent
hereunder or under the Loan Documents;
(c) without the written consent of the Swing Line Lender, no such
amendment, supplement, modification or waiver shall change the Swing Line
Commitment or change any other term or provision that relates to the Swing Line
Commitment or the Swing Line Loans; and
(d) none of the following shall require the consent, authorization or
approval of the Borrower: (i) amendment or modification of any agreement to
which the Borrower is not a party, and (ii) with respect to the agency
relationship between the Agent and the Banks, Article XI (other than Section
11.4) hereof.
Any such amendment, supplement, modification or waiver shall apply equally to
the Agent, the Swing Line Lender, and each of the Banks and shall be binding
upon the parties to the applicable Loan Document, the Banks, the Swing Line
Lender and all future holders of the Revolving Credit Loans, Term Loans and/or
Swing Line Loans. In the case of any waiver, the parties to the applicable Loan
Document, the Banks, the Swing Line Lender and the Agent shall be restored to
their former position and rights hereunder and under the Loan Documents to the
extent provided for in such waiver, and any Default waived shall not extend to
any subsequent or other Default, or impair any right consequent thereon. The
Loan Documents may not be amended orally or by any course of conduct. No notice
to or demand on any Credit Party in any case shall entitle any Credit Party to
any other or further notice or demand in similar or other circumstances.
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Section 10.3 GOVERNING LAW.
-------------
THIS AGREEMENT, THE REVOLVING CREDIT NOTES, THE SWING LINE NOTE 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 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 the Agent at
its address set forth on Exhibit A, with a copy to Emmet, Marvin & Martin, 120
---------
Broadway, New York, New York 10271 (Attention: Richard M. Skoller, Esq.),
Telecopier No. (212) 212-238-3100, and to any Bank at its address specified for
such Bank on Exhibit A; and to the Borrower c/o Medallion Financial Corp., 437
---------
Madison Avenue, 38th Floor, New York, New York 10022 (Attention: Alvin Murstein,
Chief Executive Officer and Daniel Baker, Treasurer and Chief Financial
Officer), Telecopier No. (212) 328-2121, 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 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, the 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 the Borrower's previous accounting
methods or policy. Unless otherwise specified herein all financial
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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) The Borrower agrees to pay on demand all reasonable out-of-pocket
costs and expenses incurred by the Banks, the Swing Line Lender and the Agent in
connection with the preparation, administration, filing and recording of any
amendments, waivers or consents which may be requested by the Borrower, all out-
of-pocket costs and expenses, if any, in connection with the preparation,
administration and 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
(provided, that audit charges will be subject to a cap agreed to between the
- --------- ----
Agent and the Borrower prior to the audit being conducted), 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 Agent under this Agreement, the Borrower Security Agreement, the
Guaranty and Security Agreement and the other Loan Documents. The Borrower also
agrees to pay on demand all reasonable attorneys' fees actually incurred, and
any expenses, costs and charges relating thereto of the Agent if at any time or
times hereafter the Agent employs counsel for advice with respect to this
Agreement or the other Loan Documents, or to intervene, file a petition, answer,
motion or other pleading in any suit or proceeding relating to this Agreement or
any other Loan Document (including, without limitation, the interpretation or
administration, or the amendment, waiver or consent with respect to any term, of
this Agreement or the other Loan Documents) or to represent the Agent in any
pending or threatened litigation with respect to the affairs of the Borrower in
any way relating to any of the Borrower's obligations hereunder or to enforce
any rights of the Agent or any Bank or the Swing Line Lender or liabilities of
the Borrower, any Person to whom the Borrower has made a Loan, or any Person
which may be obligated to the Agent or the Banks or the Swing Line Lender by
virtue of this Agreement or any other Loan Document, instrument or document now
or hereafter delivered to the Agent or any Bank or the Swing Line Lender by or
for the benefit of the Borrower. The Borrower agrees to be responsible for
payment of the amounts referred to in this Section 10.6(a) whether or not any
Revolving Credit Loans, Swing Line Loans or Term Loans are made hereunder.
(b) The Borrower further agrees to indemnify and save harmless each
Bank, the Swing Line Lender and the Agent and each of their respective officers,
directors, employees, agents and Affiliates (each an "Indemnified Party" and
collectively the "Indemnified Parties") from and against any and all actions,
causes of action, suits, losses, liabilities and damages and expenses
(including, without limitation, reasonable attorney's
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fees actually incurred) in connection therewith (herein called the "Indemnified
Liabilities") incurred by any Indemnified Party 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 Indemnified Party 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, the
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(b) shall survive the payment of the
Revolving Credit Notes, the Swing Line Note and the Term Notes and related
obligations and the termination of the Revolving Credit Commitment, Swing Line
Commitment and Term Loan Commitment.
Section 10.7 WAIVER OF JURY TRIAL AND SETOFF.
-------------------------------
EACH OF EACH CREDIT PARTY, THE AGENT, THE SWING LINE LENDER 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 AGREEMENT OR THE OTHER
LOAN DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE, HOWSOEVER ARISING, BETWEEN
EITHER OR BOTH CREDIT PARTIES AND ANY OF THE BANKS, THE SWING LINE LENDER OR THE
AGENT, BETWEEN ANY BANKS, AND BETWEEN THE AGENT AND/OR ANY BANKS; AND EACH
CREDIT PARTY 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.
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Section 10.9 Lien; Setoff by Banks.
---------------------
(a) The Borrower hereby grants to the Agent, the Swing Line Lender and
the Banks a continuing lien for its respective Indebtedness to the Agent, the
Swing Line Lender and the Banks upon 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 Agent, the Swing Line Lender or any of the
Banks from or for the Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of the Borrower with, and any and all claims of
the Borrower against the Swing Line Lender or the Banks, at any time existing.
Upon the occurrence of any Event of Default, the Agent, the Swing Line Lender
and the Banks are hereby authorized at any time and from time to time, without
notice to the Borrower, to setoff, appropriate and apply any or all items
hereinabove referred to against all Indebtedness of the Borrower to the Agent,
the Swing Line Lender and the Banks, whether under this Agreement, the Revolving
Credit Notes, the Term Notes, the Swing Line Note or otherwise, and whether now
existing or hereafter arising. The Agent, the Swing Line Lender and each Bank
agree promptly to notify the Borrower after any such set-off and application is
made by such Bank or Swing Line Lender, as the case may be, provided, that, the
-------- ----
failure to give such notice shall not affect the validity of such setoff and
application.
(b) Each holder of a 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 (based on
- --------
such holder's Exposure Percentage), it shall forthwith purchase from such other
holders a participation in all of the Notes held by such other holders so that
the amount of all unpaid Notes and participations therein held by all holders
shall be pro rata (based on each holder's Exposure Percentage).
--------
(c) The Borrower expressly consents to the foregoing arrangements in
Section lO.9(b) and agrees that any holder of a participation in a Note so
acquired may exercise any and ail rights of banker's lien, setoff, counterclaim
or otherwise with respect to any and all monies owing by such holder to the
Borrower as fully as if such holder were a holder of a 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 lO.9(b) shall be rescinded to the extent of such
recovery, without interest.
(d) Each Bank and the Swing Line Lender agrees that if and to the
extent that any amount received by the Agent, the Swing Line Lender or any Bank
from the 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,
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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 or Swing Line Lender 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 the
Borrower.
Section 10.10 Security.
--------
As Security for the payment of any and all sums owing under the Notes and
all other obligations (i) of the Borrower hereunder and the other Loan Documents
and (ii) of BL under the Guaranty and Security Agreement and the other Loan
Documents, each Credit Party shall execute and deliver to the Agent, the Banks
and the Swing Line Lender, on the Effective Date, the Borrower Security
Agreement, in the case of the Borrower and the Guaranty and Security Agreement
in the case of BL, and grant to the Agent, on behalf of the Banks and the Swing
Line Lender, 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 and Guarantor Financing Statements.
Section 10.11 Jurisdiction; Service of Process.
--------------------------------
Each Credit Party 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, each Credit Party
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
the Borrower at its address set forth in Section 10.4 hereof. Nothing herein
shall affect the right of the Agent, the Swing Line Lender or any Bank to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against a Credit Party in any other jurisdiction.
Section 10.12 Benefit of Agreement.
--------------------
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Agent, the Swing Line Lender and the Banks and their respective
successors and assigns, and all subsequent holders of the Notes except that the
obligation of the Banks to make
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Revolving Credit Loans or Term Loans hereunder and the obligation of the Swing
Line Lender to make any Swing Line Loan hereunder shall not inure to the benefit
of any successors or assigns of the 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 the 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 the 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 the the 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
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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, the Borrower agrees, to the full extent permitted by law, to pay to the
Agent for the ratable benefit of the Banks and the Swing Line Lender, as the
case may be, an amount equal to the positive difference, if any, derived by
subtracting (x) the amount of Interest which accrued on the Notes pursuant to
the provisions of the foregoing two paragraphs from (y) the lesser of (i) the
amount of Interest which would 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 the Borrower to the Agent, the
Swing Line Lender 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, the Swing Line Lender 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 any or all Credit Partys
which may be furnished to it hereunder or otherwise, to any regulatory body or
agency having jurisdiction over the Agent, the Swing Line Lender or such Bank or
to any Person which shall, or shall have any right or obligation
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to, succeed to all or any part of the interest of the Agent, the Swing Line
Lender 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, the Swing Line Lender and the Banks agree that
from the date hereof, they will not, without the prior written consent of any or
all Credit Parties, submit or disclose to or file with any Person other than the
Agent, the Swing Line Lender or 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 any Credit Party, except
where disclosure may be required by law or pursuant to valid legal process, or
where such disclosure is to such Person's professionals regulators.
Section 10.18 Loss, Theft, Etc. of Notes.
--------------------------
Upon receipt by the Borrower of (i) an affidavit of an authorized officer
of any Bank or the Swing Line Lender 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, or the Swing Line
Lender, as the case may be, agrees in writing to indemnify the Borrower from all
expenses, claims and liabilities (including without limitation, reasonable
attorneys' fees actually incurred) in the defense of any such claims resulting
from the loss, theft, destruction or mutilation of the old Note and the
execution and delivery of the new Note.
ARTICLE 11 AGENCY
Each Credit Party, the Banks and the Swing Line Lender agree with the Agent
as follows:
Section 11.1 Appointment and Actions.
-----------------------
(a) Each Bank and the Swing Line Lender hereby irrevocably designates
and appoints Fleet Bank, National Association as the Agent of such Bank and the
Swing Line Lender under the Loan Documents (including any additional documents
referred to therein as "Loan Documents"), and each such Bank and the Swing Line
Lender 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
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Borrower Security Agreement and the Guaranty and 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 or the Swing Line Lender,
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 the Swing Line Lender or Participant for any recitals, statements,
representations or warranties made by any Credit Party 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
any Credit Party 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 any Credit Party.
(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 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 a Credit Party), 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
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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, the Swing Line Lender 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 the 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 Swing Line Lender and 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 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
and the Swing Line Lender.
(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.
The foregoing shall also apply to the Swing Line Lender with respect to the
Swing Line Loans and the Swing Line Commitment.
(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 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).
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(i) Each Bank expressly (i) consents to the Agent's, on behalf of such
Bank, entering into the Borrower Security Agreement and Guaranty and Security
Agreement, provided each such document is substantially similar to the form of
the respective document attached as an Exhibit hereto; and (ii) agrees that to
the extent either the Borrower Security Agreement or the Guaranty and Security
Agreement expressly imposes any obligation on any Bank it shall comply with each
such obligation.
Section 11.2 Independent Credit Decisions.
----------------------------
Each Bank and the Swing Line Lender expressly acknowledges that neither the
Agent nor any of its respective 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 any Credit Party shall be deemed to constitute any representation or
warranty by the Agent to any Bank or the Swing Line Lender. Each Bank and the
Swing Line Lender represents to the Agent that it has, independently and without
reliance upon the Agent, or the Swing Line Lender, 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 each Credit Party and made
its own decision to enter into this Agreement. Each Bank and the Swing Line
Lender also represents that it will, independently and without reliance upon the
Agent, the Swing Line Lender, 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 each Credit Party. Except for notices, reports and other
documents expressly required to be furnished to the Banks and/or the Swing Line
Lender by the Agent hereunder, the Agent shall have no duty or responsibility to
provide any Bank or the Swing Line Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of any Credit Party 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 and the Swing Line
Lender with a copy of any financial audit of the Credit Parties actually
received by the Agent.
Section 11.3 Indemnification of Agent.
------------------------
Each Bank jointly and severally agrees to indemnify Fleet in its capacity
as Agent (to the extent not reimbursed by the Borrower), ratably according to
its Percentage of the Aggregate Revolving Credit Commitment from and against any
and all liabilities,
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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 the related obligations and the termination of the
Revolving Credit Commitment, the Swing Line Commitment and the Term Loan
Commitment.
Section 11.4 Resignation and Succession.
--------------------------
The Agent may resign as Agent upon ten days' written notice to the Banks,
the Swing Line Lender and the Borrower, provided, however, that such resignation
-------- -------
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 the Borrower (or the Required Banks, if the
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 the 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.
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ARTICLE 12 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, which assignment and acceptance shall be
substantially in the form of Exhibit J hereto (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 (i) be in an
aggregate principal amount of not less than $5,000,000; (ii) be of a constant,
and not a varying percentage of the Assignor's rights and obligations under the
Loan Documents; (iii) require the prior written consent of the 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 the Borrower shall not be considered unreasonable);
provided, that, such consent shall not be required if a Default shall have
occurred and then be continuing, or such Assignee is a subsidiary or affiliate
of such Assignor, or such Assignee is a subsidiary or affiliate of another Bank,
or such Assignee is another Bank; (iv) require the prior written consent of the
Agent and the Swing Line Lender, which consent shall not be unreasonably
withheld; provided, that, such consent shall not be required if such Assignee is
another Bank; (v) be subject to the requirement that after giving effect to such
Assignment, the Revolving Credit Commitment and Term Loan Commitment of such
Assignor remaining is not less than $5,000,000 and (vi) be subject to the
delivery to the Agent of an Assignment signed by the Assignor and the Assignee,
along with an assignment fee in the sum of $3,500 for the account of the Agent.
(c) Upon execution, delivery and acceptance of each Assignment and the
satisfaction of the conditions set forth in subclauses (a) and (b) above, from
and after the effective date specified therein, which effective date shall be at
least five Business Days after the execution thereof, the 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,
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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, the 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, the 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, forward a photostatic copy thereof to the Borrower. Within 5
Business Days after its receipt of a photostatic copy of such Assignment, the
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 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
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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 the Borrower.
(d) Within five Business Days after each Assignment has been accepted
by the Agent in accordance with the terms hereof, the 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 the Borrower and the Agent shall initial each
such revision.
(e) The foregoing provisions shall be equally applicable to the Swing
Line Lender, Swing Line Note and Swing Line Commitment with such changes
necessary to conform the foregoing to the Swing Line Lender, Swing Line Note and
Swing Line Commitment.
(f) In addition to the participations provided for in this Agreement,
including those set forth in Section 2.1(c) and Section 10.9, each Bank may
grant participations in all or any part of its rights under the Loan Documents
to one or more party that would be eligible to be an Assignee, provided that (i)
such Bank's obligations under this Agreement and the other Loan Documents shall
remain unchanged, (ii) such Bank shall remain solely responsible to the other
parties to this Agreement and the other Loan Documents for the performance of
such obligations, (iii) the Borrower, the Agent, the Swing Line Bank and the
other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement and the
other Loan Documents, (iv) no sub-participations shall be permitted without the
consent of the Borrower and the Agent (which consent shall not be unreasonably
withheld), (v) neither the granting nor the offering of such participation would
require that any additional loss, cost or expense be borne by the Borrower at
any time or would require any registration or qualification under any applicable
federal or state securities laws, and (vi) the voting rights of any holder of
any participation shall be limited to the those matters requiring the consent of
all Banks as set forth under Section 10.2.
(g) No Bank shall, as between and among the Borrower, the Agent, the
Swing Line Lender and such Bank, as the case may be, be relieved of any of its
obligations under the Loan Documents as a result of any Assignment or the
granting of any participation in all or any part of its rights under the Loan
Documents.
(h) Subject to Section 12.1(g), any Bank may at any time or from time
to time assign all or any portion of its rights under the Loan Documents to a
Federal Reserve Bank, provided that any such assignment shall not release such
assignor from its obligations thereunder.
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Section 12.2 New Banks.
---------
Any financial institution approved by the Borrower, the Agent 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) the 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 Agent, the Swing Line Lender and the Required Banks
shall have given their prior written consent (which consent shall not be
unreasonably withheld; provided, that, if the joinder of such New Bank would
-------- ----
result in an increase to the Aggregate Revolving Credit Commitment or the Term
Loan Commitment; such joinder shall require the consent of each Bank and such
consent shall be in the sole and absolute discretion of each Bank), (c) such New
Bank and the Borrower shall have executed and delivered an instrument of
adherence (the "Instrument of Adherence") in form and substance satisfactory to
the Borrower and the Agent 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 the 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 the 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 $5,000,000, (e) such New Bank shall have received such opinions of
counsel to the Borrower, such evidence of proper corporate organization,
existence, authority and appropriate corporate proceedings with respect to the
Borrower, and such other certificates, instruments, and documents, as it shall
have requested in connection with such Instrument of Adherence, (f) such New
Bank shall have paid to the Agent an administrative fee in the sum of $3,500 for
the account of the Agent, and (g) such New Bank shall have confirmed to and
agreed with the Agent, the Swing Line Lender and the Banks and the Borrower as
follows:
(i) the Agent, the Swing Line Lender 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,
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sufficiency, collectibility or value of this Agreement, the other Loan
Documents, and Collateral, or any other Instrument or document furnished
pursuant hereto;
(ii) the Agent, the Swing Line Lender and the Banks have made no
representation or warranty and shall have no responsibility with respect to the
financial condition of any Credit Party 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 any Credit Party 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, the Swing Line Lender, 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 the
Borrower's, the Agent's, the Swing Line Lender's and the Required Banks' consent
thereto, the Percentage of each Bank and the Aggregate Revolving Credit
Commitment shall be adjusted appropriately. Promptly thereafter, the Borrower
shall notify each of the Banks and the 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
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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 the Borrower as of such date. The 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 the Borrower the amount of such payments.
THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY.
SEE SECTION 10.7 HEREOF.
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IN WITNESS WHEREOF, the Borrower, the Agent, the Swing Line Lender and the
Banks have caused this Agreement to be duly executed by their respective
officers hereunto duly authorized as of the day and year first above written.
MEDALLION FINANCIAL CORP.
/s/ Allen S. Greene
By:________________________
Name: Allen S. Greene
Title: Chief Operating Officer
/s/ Daniel F. Baker
By:___________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
FLEET BANK, NATIONAL ASSOCIATION, as Agent, as
Swing Line Lender and as one of the Banks
/s/ Andrea H. Lee
By:_________________________
Title: Vice President
Payment Office:
1185 Avenue of the Americas
New York, New York 10036
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BANKBOSTON, N.A.
/s/ Jeffrey Millman
By:______________________
Title:
THE BANK OF NEW YORK,
/s/ Scott Silverstein
By:_______________________
Title:
EUROPEAN AMERICAN BANK
/s/ Dennis J. Nochowitz
By:_______________________
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
/s/ Robert Fanelli
By:_____________________
Title:
/s/ Maureen McKee
By:_____________________
Title:
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EXHIBIT A
July 31, 1998
Revolving Credit
Name and Address of Bank Facility Available Percentage
- -----------------------------------------------------------------------
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036 $20,000,000 20/57.5
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110 $15,000,000 15/57.5
The Bank of New York
530 Fifth Avenue
New York, NY 10036 $10,000,000 10/57.5
European American Bank
335 Madison Avenue
New York, New York 10017 $ 7,500,000 7.5/57.5
Israel Discount Bank
of New York
511 Fifth Avenue
New York, New York 10022 $ 5,000,000 5/57.5
TOTAL FACILITIES $57,500,000
===========
<PAGE>
Exhibit B
REVOLVING CREDIT NOTE
$_________ No. __
July 31, 1998
FOR VALUE RECEIVED, the undersigned, MEDALLION FINANCIAL CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on
the date of Maturity, as defined in the Loan Agreement (hereinafter referred to)
or on such earlier date as may be required under the Loan Agreement, to the
order of ____________ (the "Bank") at the Agent Payment Office (as defined in
the Loan Agreement), in lawful money of the United States of America and in
immediately available funds, an amount equal to the lesser of (a) ____________
DOLLARS ($__________) 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 July 31, 1998, as amended, among the Borrower, the banks
that from time to time are signatories thereto, the Swing Line Lender and Fleet
Bank, National Association, as Arranger and 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(h) and 9.1(i) 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 rate of interest
then 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 2% plus the rate of interest then 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 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.
<PAGE>
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.
MEDALLION FINANCIAL CORP.
a Delaware Corporation
By:______________________________
Allen S. Greene
Chief Operating Officer
By:______________________________
Daniel F. Baker
Treasurer & Chief Financial Officer
- 2 -
<PAGE>
EXHIBIT C
TERM NOTE
---------
$_______________ No._________
[Date]
FOR VALUE RECEIVED, the undersigned, MEDALLION FINANCIAL CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on
, or on such earlier date as may be required under the Loan Agreement
(hereinafter referred to), to the order of ____________________ (the "Bank") at
the Agent Payment Office (as defined in the Loan Agreement), in lawful money of
the United States of America and in immediately available funds, an amount equal
to the lesser of (a) _____________________ MILLION DOLLARS ($________________)
and (b) the aggregate unpaid principal amount of the Term Loan made by the Bank
to the Borrower pursuant to the Loan Agreement, dated as of July 31, 1998, among
the Borrower, the banks that from time to time are signatories thereto, Fleet
Bank, National Association as Arranger, Swing Line Lender and 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 payments of the principal on the Term Loan represented by this
Note ("Principal Payments') shall be made at such times as provided in the Loan
Agreement. All Principal Payments 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 the Term Loan in accordance with the terms of the Loan
Agreement.
Amounts repaid on this Term Note cannot be reborrowed.
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(h) and 9.1(i) 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 rate of interest
then 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 2% plus the rate of interest then 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
<PAGE>
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 Term 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 Term 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 TERM LOAN 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
TERM 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
-2-
<PAGE>
ASSIGNS OF BORROWER AND INURE TO THE BENEFIT OF THE BANKS AND ITS SUCCESSORS AND
ASSIGNS. If any term or provision of this Term 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 FINANCIAL CORP.,
a Delaware corporation
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
-3-
<PAGE>
Exhibit D
SWING LINE NOTE
$5,000,000.00 No. SL
July 31, 1998
FOR VALUE RECEIVED, the undersigned, MEDALLION FINANCIAL CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on
the date of Swing Line Maturity Date, 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, NATIONAL ASSOCIATION (the "Bank") at
the Agent Payment Office (as defined in the Loan Agreement), in lawful money of
the United States of America and in immediately available funds, an amount equal
to the lesser of (a) FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00) and (b) the
aggregate unpaid principal amount of all Swing Line Loans made by the Bank to
the Borrower pursuant to the Loan Agreement, dated as of July 31, 1998, as
amended, among the Borrower, the banks that from time to time are signatories
thereto, the Swing Line Lender and Fleet Bank, National Association as Arranger
and 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 Swing Line 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 Swing Line 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(h) and 9.1(i) of the Loan Agreement), the outstanding
principal amount of this Note (including, to the extent permitted by law, unpaid
interest thereon) shall bear interest (the "Default Rate") at an annual rate
equal to the sum of 2% plus the Negotiated Rate applicable to such Swing Line
Loan then in effect. At the end of the applicable Swing Line Interest Period
for a Negotiated Rate Loan on which the Default Rate is being charged, such
Negotiated 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 at an annual
rate equal to the sum of 2% plus the Prime Rate then in effect and 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. In each case, interest at the
Default Rate shall be payable on demand, but in no event shall such rate of
interest 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.
This Note is the Swing Line Note 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
Swing Line 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.
<PAGE>
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 SWING LINE 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
SWING LINE 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 Swing Line 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 FINANCIAL CORP.,
a Delaware Corporation
By:____________________________
Allen S. Greene
Chief Operating Officer
By:____________________________
Daniel F. Baker
Treasurer & Chief Financial Officer
-2-
<PAGE>
EXHIBIT E
FORM OF LOAN REQUEST
--------------------
_________, 199
Fleet Bank, N.A., as Agent for
the Banks referred to below
1185 Avenue of the Americas
New York, New York 10036
Attention: _______________
Re: Loan Agreement, dated as of July 31, 1998 by and among Medallion
Financial Corp. (the "Borrower") the banks that from time to time are
signatories thereto, Fleet Bank N.A. as Swing Line Lender, Arranger
and 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, on the Business Day prior to this day in order for
the loan to be advanced on the day requested.]
[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
_______________, l9__ (which is not less than three 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.
[In the case all or a portion of a borrowing is made as a Swing Line Loan.]
Please advance $___________ as a Swing Line 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.] The Swing Line Interest Period
<PAGE>
for such Swing Line Loan will commence on and include the date of advance and
will end on the numerically corresponding date that is [one] [two] [three]
[four] or [five] days thereafter.
II. Conversions
---------------
[In the case of the conversion of all [or a portion] of a Prime Rate Loan into a
LIBO Rate Loan.]
Please convert $_____________, which amount represents the entire
outstanding principal amount] of the Prime Rate Loan or Loans of the
undersigned, into a LIB0 Rate Loan effective on ____________19___ (which is not
less than three 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 three Banking Days from the date hereof).
$__________ of the proceeds of the advance described above will be
used directly or indirectly by Business Lenders, LLC.
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 three 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].
-2-
<PAGE>
The Borrower hereby represents and warrants to the Bank that:
(a) Each and every of the representations and warranties set forth in
the Loan Agreement is true as of the date hereof and with the same effect as
though made on the date hereof, and is hereby incorporated herein in full by
reference as if fully restated herein in its entirety.
(b) No Default or Event of Default and no event or condition which,
with the giving of notice or lapse of time or both, would constitute such a
Default or Event of Default, now exists or would exist under the Loan Agreement.
(c) Each request for a loan as provided above, after taking into
account the loan(s) requested, are within the MFC Borrowing Base and BL
Borrowing Base limitations set forth in the Loan Agreement.
MEDALLION FINANCIAL CORP.
a Delaware Corporation
By:______________________________
By:______________________________
BUSINESS LENDERS, LLC,
as confirmation of receipt of funds
as provided above
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
-3-
<PAGE>
Exhibit F
SECURITY AGREEMENT
between
MEDALLION FINANCIAL CORP., as debtor
and
FLEET BANK, N.A., as Agent
and secured party,
for the benefit of
THE BANKS AND SWING LINE LENDER SIGNATORY TO
THE LOAN AGREEMENT, DATED AS OF JULY 31, 1998,
AMONG MEDALLION FINANCIAL CORP.,
THE BANKS SIGNATORY THERETO, THE SWING LINE LENDER
AND FLEET BANK, N.A. AS ARRANGER AND AGENT
______________________________
dated as of July 31, 1998
______________________________
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of July 31, 1998, is between MEDALLION
FINANCIAL CORP., a Delaware corporation ("Borrower"), and FLEET BANK, N.A., 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;" which term as used in
----- ----
this Security Agreement shall be deemed to include the Swing Line Lender set
forth in such Loan Agreement, unless the context clearly indicates otherwise).
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;" which term as used in this Security Agreement shall be deemed to include
the Swing Line Loans (as defined in the Loan Agreement) unless the context
clearly indicates otherwise) 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, 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 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:
"Accounts" shall have the meaning assigned to it in Section 106 of the UCC.
--------
"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 Investment Property;
(n) all Accounts
(o) all Intercompany Demand Notes;
(p) all Intercompany Demand Loan Documents;
(q) all of the Borrower's right, title and interest in, under and to
the Multi-Party Agreement;
(r) all Receivables;
(s) all property and rights, including, but not limited to, items
described in clauses (b) through (r) 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
<PAGE>
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;
(t) all parts, accessions, accessories, goods, appurtenant or related
to any of the foregoing, replacement parts, trade names, closes in action, now
or hereafter affixed thereto, arising therefrom, used in connection therewith,
or related to the use, possession or operation thereof;
(u) all cash and Short-Term Investments; and
(v) 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 in connection with the obligations, Capital Stock
or dividends of; any ownership, purchase or
<PAGE>
acquisition of any assets, business, Capital Stock, obligations or securities
of; or any other interest in or capital contribution to; such Person.
"Investment Property" shall have the meaning assigned to it in Section 9-
-------------------
115 of the UCC.
"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 this Agreement, or the transactions contemplated by this
Agreement.
"Medallion" shall mean the 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.
"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 or
any other Loan Document between the Agent and/or any Bank and Borrower in
connection with any of the foregoing or in connection with any Loan Document,
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
Bank for all balances owing to any Bank in any account maintained on such Bank's
books under the Loan Agreement 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 or the Loan
Agreement, (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
<PAGE>
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 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 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.
"Receivables" shall mean, with respect to any Person, all present and
-----------
future rights to payment for goods sold or leased or for services rendered by
such Person whether or not evidenced by an instrument or chattel paper.
"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.
<PAGE>
"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, Inventory, Receivables, Accounts, future accounts,
accounts receivable, contracts, contract rights, general intangibles, books,
desks, notes, bills, drafts, acceptances, chases 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.
(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 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 lien on and security
interest in the Collateral, which shall be a first priority lien and, in
furtherance of such grant, Borrower hereby assigns for security all of 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,
<PAGE>
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, REGISTERING, FILING, ETC. At any time or times
after (i) a Default or an Event of Default has occurred, (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 or (iii) the Agent reasonably
deems necessary, 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;
(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 and if
----------------
such Loan is secured by Real Property, a Mortgage Assignment with respect to
each such Loan. In addition, each time Borrower shall make a new Loan, Borrower
shall immediately deliver to the Agent the Collateral Note evidencing such Loan
and if such Loan is secured by Real Property, a Mortgage Assignment with respect
to each Loan. The Agent shall keep all Collateral Notes and Mortgage
Assignments 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 and Mortgage
Assignments; 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 Mortgage
Assignments and
<PAGE>
(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, Mortgage Assignments 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 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 recording of Mortgage Assignments
and/or 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, file and/or record, alone any
financing, renewal and/or continuation statement, any Mortgage Assignment 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
<PAGE>
sign and deliver to the Agent all documents and things necessary to perfect 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:
(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
<PAGE>
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.
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
<PAGE>
the Collateral to anyone except the Agent as long as any of the Obligations
remain unpaid, except for the Permitted Liens.
ARTICLE IV
COLLATERAL
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;
(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 are
and will be true and correct, and the unpaid balance is and will be the amount
actually owing to Borrower;
<PAGE>
(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, mortgage, 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, mortgage 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.
(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
<PAGE>
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.
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, subject to and
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
<PAGE>
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 in accordance with Section 5.3 hereof,
and the 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 with respect to the Obligations 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 (including, without limitation, the
interpretation or administration, or the amendment, waiver or consent with
respect to any term, of 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, 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.
(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 Loan, Borrower
agrees with the Agent as follows:
<PAGE>
(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;
(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 in
accordance with Section 5.3 hereof. 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, pro rata in accordance with
the respective outstanding balances thereof (including principal, interest,
fees and all other amounts due thereunder); 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 to the Banks shall in all events be made pro rata on the basis of
the respective Exposure Percentages of the Obligations. Distributions made
under clause "second" above may also be made in a combination of cash or
property, but distributions to the Banks shall be made pro rata on the basis of
the respective Exposure Percentages of the Obligations. Distributions made
under clauses "first" and "third" may also be made in a combination of cash or
property. Any deficiency
<PAGE>
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 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 purchased 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. The Collateral described in 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.
<PAGE>
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 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
<PAGE>
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.
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 6.10. 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, 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 or the 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 any Bank (including the Agent in its capacity as a Bank
but not as Agent) of a Revolving Credit Note(s) or a Term Note(s) or any portion
thereof, 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) or Term Note(s), whereupon such purchaser or purchasers will
become vested with all of the powers, rights and responsibilities of such Bank
hereunder, and 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.
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.
<PAGE>
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 FINANCIAL CORP.
By:________________________________
Name: Allen S. Greene
Title: Chief Operating Officer
By:________________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
FLEET BANK, N.A.,
as Agent
By:________________________________
Name: Andrea H. Lee
Title: Vice President
<PAGE>
Exhibit G
MEDALLION FINANCIAL CORP.
BUSINESS LENDERS, LLC
437 MADISON AVENUE
NEW YORK, NEW YORK 10022
July 31, 1998
Fleet Bank, National Association, As Agent
1185 Avenue of the Americas
New York, New York 10036
Attention: Andrea H. Lee, Vice President
Dear Andrea:
Reference is made to a Loan Agreement (the "Loan Agreement") dated as of July
31, 1998, among Medallion Financial Corporation, a Delaware corporation (the
"Borrower" or "MFC"), the banks that from time to time are signatories hereto
(including Assignees (as hereinafter defined), collectively, the "Banks" and
individually, a "Bank"), Fleet Bank, National Association, as a Bank ("Fleet"),
as Swing Line Lender (the "Swing Line Lender"), as Arranger and as Agent for the
Banks (including any successor, the "Agent"). Capitalized terms not otherwise
defined herein shall have the respective meanings provided therefor in the Loan
Agreement.
This will confirm the agreement of the Borrower that notwithstanding anything to
the contrary contained in the Loan Agreement, unless and until (i) the Multi-
Party Agreement has been approved in writing by the Agent and the Required
Lenders, (ii) the Multi-Party Agreement has been executed by all parties
thereto, (iii) the Agent, as Agent for the Banks, has become a beneficiary of
all of the Borrower's rights under the Multi-Party Agreement, (iv) the Borrower
shall have assigned, as additional collateral security, all of its rights under
the Multi-Party Agreement to the Agent for the ratable benefit of the Banks and
(v) the SBA shall have provided its written consent to BL's execution of the
Guaranty and Security Agreement and its grant of a security interest in the
Collateral described therein in favor of the Agent for the ratable benefit of
the Banks, (A) no proceeds of loans by the Banks under the Loan Agreement may be
used directly or indirectly by BL other than as permitted pursuant to Section
8.3(e) of the Loan Agreement, (B) the aggregate unpaid balance of all Swing Line
Loans to the Borrower plus the aggregate unpaid balance of all Revolving Credit
----
Loans to the Borrower plus the aggregate unpaid balance of all Term Loans to the
----
Borrower shall not exceed the MFC Borrowing Base, (C) the Loan Agreement shall
be deemed amended as necessary to effect the intent of this Letter Agreement or
as otherwise is determined necessary in the reasonable discretion of the Agent
and (D) all provisions of the Guaranty and Security Agreement relating to Loans
that are Guaranteed BL Loans will not be applicable or effective; provided,
that, all provisions of such document as the same do not apply to Loans that are
Guaranteed BL Loans shall remain
<PAGE>
effective, and, provided, further, that upon the conditions set forth above
being satisfied, all of the provisions of the Guaranty and Security Agreement
relating to Loans that are Guaranteed BL Loans will immediately and
automatically, without any further action, become applicable and enforceable.
In all other respect the Loan Documents remain unchanged and in full force and
effect.
Very truly yours,
MEDALLION FINANCIAL CORPORATION
By:________________________
Name: Allen S. Greene
Title: Chief Operating Officer
By:___________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
BUSINESS LENDERS, LLC
By:________________________________
Name: Thomas Kellogg
Title: President
By:________________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
Agreed and Accepted
This 31st day of July, 1998:
FLEET BANK, NATIONAL ASSOCIATION,
as Agent
By:_____________________________
Name: Andrea H. Lee
Title: Vice President
2
<PAGE>
EXHIBIT H
BORROWING BASE CERTIFICATE
July 31, 1998
To: Fleet Bank, National Association, As Agent (the "Bank") under a certain
Loan Agreement (the "Loan Agreement") dated as of July 31, 1998, among Medallion
Financial Corporation, a Delaware corporation (the "Borrower" or "MFC"), the
banks that from time to time are signatories hereto (including Assignees (as
hereinafter defined), collectively, the "Banks" and individually, a "Bank"),
Fleet Bank, National Association, as a Bank ("Fleet"), as Swing Line Lender (the
"Swing Line Lender"), as Arranger and as Agent for the Banks (including any
successor, the "Agent")..
Terms used in this certificate shall have the same meaning as ascribed thereto
in the Loan Agreement.
The undersigned officers of the Borrower certify that the information furnished
herein as of June 30, 1998 as to the MFC Borrowing Base, the BL Borrowing Base
and Eligible Loans is true and correct and that as of the date hereof no Event
of Default, or event which after notice or lapse of time or both would be an
Event of Default exists under the Loan Agreement.
I. MFC Borrowing Base
A. MFC's Eligible Medallion Loans* _______0
B. Loans in Line A not collectible or 60+ days past due _______0
C. Line A minus Line B _______0
D. 83% of Line C _______0
E. MFC's Eligible Commercial Loans* _______0
F. Loans in Line F not collectible or 60+ days past due* _______0
G. Line E minus Line F _______0
H. 75% of Line G _______0
I. Line D plus Line H _______0
J. MFC Cash and Short Term Investments _______0
K. MFC BORROWING BASE - Line I plus Line J _______0
L. Amount outstanding to MFC (not downstreamed to BL) _______0
M. Line K minus Line L _______0
(if positive, amount available to MFC; if negative amount due)
*without excluding loans not collectable or 60+ days past due.
<PAGE>
II. BL Borrowing Base
A. SBA guaranteed portion of all Guaranteed BL Loans _______0
B. 100% of Line A _______0
C. BL's Eligible Commercial Loans _______0
D. Portion of the Guaranteed BL Loans not guaranteed by the SBA _______0
E. Line C plus Line D _______0
F. Loans in Line E not collectible or 60+ days past due _______0
G. Line E minus Line F _______0
H. 67% of Line G _______0
I. Line B plus Line H _______0
J. BL Cash and Short Term Investments _______0
K. BL BORROWING BASE - LINE I PLUS LINE J _______0
L. Amount outstanding to BL _______0
M. Line K minus Line L _______0
(if positive, amount available to BL; if negative, amount due)
III. Total Borrowing Base
A. Line IK plus Line IIK $________0$
B. Total amount of outstanding Revolving Credit Loans, Term Loans
and Swing Line Loans $________0
C. Line A minus Line B $________0
(If positive, amount available (subject to I and II);
if negative, amount due)
IV. Investments of Investments on Subsidiaries
[Specify the name of the subsidiary and the amount]:
Very truly yours,
MEDALLION FINANCIAL CORPORATION
By:___________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
<PAGE>
EXHIBIT I
July 31, 1998
The Banks signatory to the
Loan Agreement defined below,
Fleet Bank, N.A.
as Agent, Swing Line Lender and Arranger
1185 Avenue of the Americas
New York, New York 10036
Ladies and Gentlemen:
We have acted as counsel to Medallion Financial Corp., a Delaware corporation
(the "Company"), and Business Lenders, LLC, a Delaware limited liability company
("BL"), in connection with the execution and delivery of the Loan Agreement,
dated as of even date herewith (the "Loan Agreement"), executed by and among the
Company, the banks signatory thereto (the "Banks"), and Fleet Bank, N.A., as
Agent, Collateral Agent and Arranger (the "Agent"). BL and the Company are
collectively referred to as the Credit Parties. Capitalized terms used herein
and not otherwise defined have the meanings ascribed to them in the Loan
Agreement.
As such counsel, we have participated in the preparation of, or have examined
and are familiar with, and have relied upon, the following:
(a) Copies of the Loan Agreement, the Notes, the Borrower Security
Agreement, the Multi-Party Letter Agreement and the Borrower Financing
Statements (collectively the "Borrower Loan Documents") and of the Guaranty
and Security Agreement, the Multi-Party Letter Agreement and the Guarantor
Financing Statements (collectively, the "BL Loan Documents" and
collectively with the Borrower Loan Documents, the "Loan Documents").
(b) Certificates dated July 27, 1998, and July 29, 1998 of the Delaware
Secretary of State certifying to the legal existence of the Company and BL,
respectively.
(c) The Certificate of Incorporation and By-Laws of the Company and the
Operating Agreement and Certificate of Formation of BL, each as amended as
of the date hereof.
(d) The corporate proceedings of the Board of Directors of the Company
authorizing among other things, the execution, delivery of and performance
by the Company under the Borrower Loan Documents and execution and delivery
by the Company, as the sole managing member of BL on behalf of BL, the BL
Loan Documents.
<PAGE>
July 31, 1998
Page 2
(e) A certificate or certificates dated as of even date, of the Company's
and BL's officers, certifying that all representations and warranties
relating to such entity in the Loan Documents are true.
(f) Other documents and records as we have deemed necessary in connection
with the opinions hereinafter set forth.
In our examination of the documents referred to in the preceding paragraph, we
have assumed the genuineness of all signatures other than those of the Credit
Parties, the conformity to original documents of all documents submitted to us
as certified or photostatic copies, and the enforceability of each of the Loan
Documents against the parties thereto other than the Credit Parties. For the
purposes of this opinion, we have relied upon representations of the Company and
BL as to factual matters including those contained or referred to in the
documents described in the preceding paragraph, and including the Company's
representation that its chief executive office is located in New York City, and
BL's representation that its chief executive office of BL is in Hartford,
Connecticut, and, except as specifically stated herein, have made no independent
investigation of such factual matters, or examination of dockets or court
records. For purposes of our opinion below relating to the legal existence of
the Company and BL, we have relied solely on the certificates referred to in
clause (b) of the third paragraph of this opinion.
References in this opinion to the phrase "to our knowledge" and words of like
import mean the actual knowledge of the partner of this firm responsible for
preparing this opinion after inquiry of such lawyers in the firm and review of
such documents in our possession as he considered appropriate but without any
independent investigation.
For the purpose of our opinion and views in paragraph 7 below, "Collateral"
refers to the Company's or BL's currently existing Instruments, Equipment (to
the extent it does not constitute vehicles, fixtures or other interests in real
estate), General Intangibles and Chattel Paper and any products or proceeds
thereof which consist of such currently existing Instruments, Equipment (to the
extent it does not constitute vehicles, fixtures or other interests in real
estate), General Intangibles or Chattel Paper. We have also assumed that the
Company or BL, as applicable, has rights in this Collateral. Our opinion as to
the perfection of the security interest in Instruments is limited to Instruments
in the possession of the Agent, and our opinion on the perfection of the
security interest in the Equipment is limited to such Equipment as is located in
the State of New York. To the extent the laws of the State of Connecticut are
applicable to the statements made in paragraph 7, such statements constitute our
views based upon our review of the applicable provisions of Article 9 of the
Uniform Commercial Code of the State of Connecticut (but not of any judicial
interpretations thereof) and do not constitute opinions of law. We also call
your attention to the necessity of filing continuation statements, amendments or
additional financing statements from time to time or under certain circumstances
under the applicable provisions of the UCC in order to maintain the perfection
of the security interest.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation legally existing under the laws of the State of
Delaware. BL is a limited liability company legally existing under the laws of
the State of Delaware. Each
<PAGE>
July 31, 1998
Page 3
Credit Party has the corporate or company power and authority to own its
properties and assets and to carry on its business.
2. Each Credit Party has the corporate or company power, in the case of the
Company, to execute, deliver and perform its obligations under the Loan
Agreement and to borrow thereunder and, in the case of each Credit Party, to
execute, deliver and perform its obligations under each of the other Loan
Documents to which it is a party. The execution, delivery and performance of
the Loan Agreement by the Company and by each Credit Party the other Loan
Documents and the borrowings and granting of collateral security by the Company
or BL under the Loan Documents have been duly authorized by all requisite
corporate or company action. The execution, delivery and performance of the
Company's obligations under the Loan Agreement and of each Credit Party's
obligations under each of the other Loan Documents will not violate any
provision of law (assuming that none of the Banks are affiliates (as such term
is defined in the Investment Company Act of 1940, as amended), including without
limitation the Investment Company Act of 1940, as amended, the Operating
Agreement or the Certificate of Formation of BL or the Certificate of
Incorporation or By-Laws of the Company or, to our knowledge, violate any order
of any court or governmental agency or regulatory authority or any provision of
any material indenture, agreement, or other instrument to which any Credit Party
is a party or by which any Credit Party or any of their respective properties or
assets are bound, or conflict with, result in a breach of, or constitute (with
passage of time or service of notice or both) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, security interest, or encumbrance of any nature
whatsoever upon any of the properties or assets of such Credit Party other than
the security interest created thereunder in favor of the Agent.
3. The Loan Documents have been duly executed on behalf of the Credit Parties
party thereto, and each of the Loan Documents constitutes the valid and binding
obligation of the Credit Party party thereto, enforceable against each Credit
Party in accordance with its respective terms.
4. To our knowledge, there is no action, suit, examination, review, or
proceeding by or before any court or governmental agency now pending or
threatened against any Credit Party or against any property or rights of the
Credit Party, which , if adversely determined, would materially impair the right
of any Credit Party to carry on its business as now being conducted or which
would materially adversely affect the financial condition of any Credit Party.
To our knowledge, no injunction, writ, restraining order or other order of any
nature specifically naming any Credit Party and applicable to it which is
adverse to such Credit Party or the conduct of its business or inconsistent with
the due consummation of such transactions has been issued by any Governmental
Authority.
5. The execution, delivery and performance of each Credit Party's obligations
under the Loan Agreement and each of the other Loan Documents to which it is a
party will not require any approval, consent, order, authorization or license
by, or giving notice to, or taking any other action with respect to, any
governmental or regulatory authority or agency under any provision of any
applicable law, except those approvals, consents, orders, authorizations and
actions which have been obtained or taken or will be obtained or taken prior to
the Effective Date, and except for any required filings to perfect the security
interest in the Collateral.
<PAGE>
July 31, 1998
Page 4
6. To our knowledge, none of the proceeds of the borrowings under the Loan
Agreement 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, Swing Line Loans or Term Loans a "purpose credit" within the
meaning of Regulations U or X of the Board.
7. The provisions of the Borrower Security Agreement and the Guaranty and
Security Agreement are effective under the New York Uniform Commercial Code (the
"UCC") to create a valid security interest in the Collateral (as defined in each
such agreement) in favor of the Agent for the benefit of the Banks to secure the
Obligations of the Company. The offices of Connecticut Secretary of State, New
York Secretary of State and New York County, New York are the only locations
where the filing of UCC financing statements is, under applicable law, necessary
to perfect the security interest granted pursuant to the Borrower Security
Agreement in the Collateral (as defined therein) and the offices of the
Connecticut Secretary of State, New York Secretary of State and New York County,
New York are the only locations where the filing of UCC financing statements is,
under applicable law, necessary to perfect the security interest granted
pursuant to the Guaranty and Security Agreement in the Collateral (as defined
therein) to the extent perfection is accomplished under the UCC by filing. Upon
proper filing in such filing offices of the Borrower Financing Statements and
the Guarantor Financing Statements and any applicable continuation statements
and amendments thereto, and the receipt of the Instruments by the Agent, the
security interest in the Collateral granted pursuant to the Borrower Security
Agreement and the Guaranty and Security Agreement will be a perfected security
interest to the extent perfection is governed by the UCC and, as to BL, the
Uniform Commercial Code of the State of Connecticut ("CUCC").
The foregoing opinions are subject to the following qualifications:
A. We wish to point out that Section 9-103 of the UCC and of the CUCC provide
certain rules for the perfection of security interests in multiple state
transactions. Such rules provide that the law of the jurisdictions in which
certain types of the collateral specified in such rules are situated or deemed
to be situated will necessarily govern the perfection of the security interests
created by the Loan Documents and the effect of perfection or non-perfection.
B. We note that the validity, perfection and enforceability of a security
interest in after-acquired property, money, or certain securities or instruments
or motor vehicles is subject to limitations under the Bankruptcy Code (including
Section 552), and we express no opinion with respect thereto. We also note that
the security interest in the proceeds of any Collateral may be subject to
Section 9-306 of the UCC.
C. The opinions expressed in opinion paragraph 3 above are qualified (i) by the
effects of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) insofar as the remedies of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and the discretion of the court before which any
enforcement
<PAGE>
July 31, 1998
Page 5
thereof may be brought and (iii) insofar as proceedings therefor may be limited
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity), including principles of
commercial reasonableness and an implied covenant of good faith and fair
dealing. Such principles of equity are of general application, and in applying
such principles, a court, among other things, might not allow a creditor to
accelerate the maturity of a debt, to realize upon any security for the payment
of such debt upon the occurrence of a default deemed immaterial, or to exercise
any right of set-off with respect to debt which is neither matured nor
accelerated, or might decline to order any Credit Party to specifically perform
covenants. Such opinions are further subject to the qualification that certain
remedial provisions of the Borrower Security Agreement or the Guaranty and
Security Agreement are or may be unenforceable in whole or in part under the
laws of the State of New York, but the inclusion of such provisions does not
affect the validity of any such agreement in which any such provision is
included, and such agreements contain adequate provisions for enforcing payment
of the obligations thereunder and for the practical realization of the rights
and benefits afforded thereby. Furthermore, we express no opinion as to (i) the
enforceability of any waiver of rights granted by constitutional, statutory, or
decisional law, including any rights to notice and a hearing, (ii) the
enforceability of provisions in the Loan Agreement requiring the payment of
interest in certain circumstances at a rate which exceeds the rate of interest
otherwise payable thereunder if such increase is deemed to constitute a penalty,
or (iii) the enforceability of your rights of set off against the Company's or
BL's deposit accounts to the extent that (a) the funds on deposit in said
accounts have been accepted by you with an intent to apply such funds to a pre-
existing claim rather than to hold the funds subject to withdrawals in the
ordinary course, or (b) the funds on deposit in said accounts are in any manner
special accounts, which by the express terms on which they are created, are made
subject to the rights of a third party or (c) the exercise of such rights is by
a participant rather than a Bank.
D. We express no opinion as to whether any Person has title to any Collateral
or as to any provisions of the Loan Documents insofar as they relate to (i) the
subject matter jurisdiction of the Federal courts to adjudicate any controversy
relating to the Loan Documents, (ii) the waiver of inconvenient forum; (iii)
provisions of any Loan Document which purport to provide for a rate of interest
after judgment, and (iv) the waiver of right to a jury trial.
E. We call to your attention that certain asset coverage requirements pursuant
to the Investment Company Act of 1940, as amended, limit the aggregate amount of
borrowings that the Credit Parties may incur under the Loan Agreement.
F. We express no opinion as the laws of any jurisdiction other than the laws of
the State of New York, the General Corporation Law of the State of Delaware, the
Limited Liability Company Act of the State of Delaware and the federal laws
(other than the SBI Act and the SBA Regulations) of the United States.
No person or entity other than you and your permitted successors and assigns may
rely or claim reliance upon this opinion letter.
This opinion letter is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. This opinion
letter may not be quoted, distributed
<PAGE>
July 31, 1998
Page 6
or disclosed, except to your counsel, to participants or assignees or, to the
extent necessary, to an applicable regulatory authority or pursuant to legal
process, without our prior written consent.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
Very truly yours,
<PAGE>
EXHIBIT J
ASSIGNMENT AND ACCEPTANCE
-------------------------
Dated ___________
Reference is hereby made to the Loan Agreement dated as of July 31,
1998 (the "Loan Agreement") by and among MEDALLION FINANCIAL CORP., a Delaware
corporation ("Borrower"), the banks that from time to time are signatories
thereto (including Assignees (as hereinafter defined), collectively, the "Banks"
and individually, a "Bank"), FLEET BANK, NATIONAL ASSOCIATION , as a Bank
("Fleet"), as swing line lender (the "Swing Line Lender"), as Arranger and as
Agent for the Banks (including any successor, the "Agent"). Capitalized terms
used herein that are defined in the Loan Agreement that are not otherwise
defined herein shall have the respective meanings ascribed thereto in the Loan
Agreement.
_______________________________, a __________________ (the "Assignor")
and _______________________________________, a ________________, (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a __ % interest in and
to all of the Assignor's rights and obligations under the Loan Agreement as of
the Effective Date (as defined below) (including, without limitation, such
percentage interest in the Assignor's Revolving Credit Commitment and Term Loan
Commitment as in effect on the Effective Date, and the Revolving Credit Loans
and/or Term Loans owing to the Assignor on the Effective Date, and the Note(s)
held by the Assignor).
2. The Assignor: (i) represents and warrants that as of the date
hereof its Revolving Credit and Term Loan Commitment (without giving effect to
assignments thereof that have not yet become effective) is $__________ and the
aggregate outstanding principal amount of Revolving Credit Loans and Term Loans
owing to it (without giving effect to assignments thereof that have not yet
become effective) is $__________; (ii) represents and warrants 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; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or any other instrument or document furnished pursuant thereto; and
(iv) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any other Person or the
performance or observance by the Borrower or any other Person of any of its
obligations under the Loan Agreement or any other instrument or document
furnished pursuant thereto; and (v) attaches the Note(s) referred to in
paragraph 1 above and requests that the Agent
<PAGE>
exchange such Note(s) for new Note(s) as follows: [a Revolving Credit Note dated
the Effective Date (as such term is defined below) in the principal amount of $
__________ payable to the order of the Assignee, a Revolving Credit Note dated
the Effective Date in the principal amount of $ __________ payable to the order
of the Assignor, a Term Note dated the Effective Date in the principal amount of
$________ payable to the order of the Assignee and a Term Note dated the
Effective Date in the principal amount of $________ payable to the order of the
Assignor.]
3. The Assignee: (i) confirms that it has received a copy of the
Loan Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment; (ii) agrees that it will,
independently and without reliance upon the Agent, 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; (iii) confirms that it is an Assignee permitted
by the Loan Agreement; (iv) appoints and authorizes the Agent to take such
action as its agent on its behalf and to exercise such powers under the Loan
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Agreement are required to be performed by it as a Bank; and (vi) specifies
as its addresses for Prime Rate Loans and LIBO Rate Loans (and address for
notices) the offices set forth beneath its name on the signature pages hereof.
4. The effective date for this Assignment shall be ________________
(the "Effective Date"). Following the execution of this Assignment, it will be
delivered to the Agent for acceptance by the Agent.
5. Upon such acceptance, as of the Effective Date: (i) the Assignee
shall be a party to the Loan Agreement and, to the extent provided in this
Assignment, have the rights and obligations of a Bank thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment, relinquish its rights
and be released from its obligations under the Loan Agreement.
6. Upon such acceptance, from and after the Effective Date, the
Agent shall make all payments under the Loan Agreement and the Note(s) in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Loan Agreement and the Note(s) for periods prior to the
Effective Date directly between themselves.
-2-
<PAGE>
7. This Assignment shall be governed by, and construed in accordance
with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By_____________________________
Name:
Title:
[NAME OF ASSIGNEE]
By______________________________
Name:
Title:
Lending Office for Prime Rate Loans:
Lending Office for LIBO Rate Loans:
Attention:
Address for Notices:
Attention:
Telephone No.:
Telex No.:
Accepted this ___ day
of ______________, 199_
FLEET BANK, N.A., as Agent
By___________________________
Title
-3-
<PAGE>
Exhibit K
GUARANTY
AND
SECURITY AGREEMENT
by
BUSINESS LENDERS, LCC, as guarantor and debtor
to
FLEET BANK, N.A., as Agent
and secured party,
for the benefit of
THE BANKS AND SWING LINE LENDER SIGNATORY TO
THE LOAN AGREEMENT, DATED AS OF JULY 31, 1998,
AMONG MEDALLION FINANCIAL CORP.,
THE BANKS SIGNATORY THERETO, THE SWING LINE LENDER
AND FLEET BANK, N.A. AS ARRANGER AND AGENT
______________________________
dated as of July 31, 1998
______________________________
<PAGE>
GUARANTY AND
SECURITY AGREEMENT
This GUARANTY AND SECURITY AGREEMENT, dated as of July 31, 1998, is by
BUSINESS LENDERS, LLC, a Delaware limited liability company ("Guarantor"), to
---------
FLEET BANK, N.A., 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;" which term as
----- ----
used in this Guaranty and Security Agreement shall be deemed to include the
Swing Line Lender set forth in such Loan Agreement, unless the context clearly
indicates otherwise).
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 Medallion Financial Corp. ("Borrower")
-------------- --------
providing for revolving credit loans (including the Initial Revolving Credit
Loan) (the "Revolving Credit Loans;" which term as used in this Security
----------------------
Agreement shall be deemed to include the Swing Line Loans (as defined in the
Loan Agreement) unless the context clearly indicates otherwise) 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 Guarantor
shall have executed and delivered this Agreement. Guarantor expects to derive
substantial benefit from the Loan Agreement and the transactions contemplated
thereby and, in furtherance thereof, has agreed to execute and deliver this
Agreement.
WHEREAS, Guarantor wishes to guarantee the Obligations (as hereinafter
defined) and 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, Guarantor 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 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:
"Accounts" shall have the meaning assigned to it in Section 106 of the UCC.
--------
"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 Guarantor or in which Guarantor 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 Guarantor 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 Investment Property;
(n) all Accounts
(o) all of the Guarantor's right, title and interest in, under and to
the Multi-Party Agreement;
(p) all Receivables;
(q) all property and rights, including, but not limited to, items
described in clauses (b) through (p) hereof, repossessed, or otherwise acquired
in connection with any Loans or the exercise by Guarantor 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;
(r) all parts, accessions, accessories, goods, appurtenant or related
to any of the foregoing, replacement parts, trade names, closes in action, now
or hereafter affixed thereto,
2
<PAGE>
arising therefrom, used in connection therewith, or related to the use,
possession or operation thereof;
(s) all cash and Short-Term Investments; and
(t) 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 Guarantor 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 Guarantor containing any
-------------------
deposits or other sums credited to Guarantor, 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.
"Guarantor Obligations" shall mean all of the obligations and liabilities
---------------------
of the Guarantor hereunder, whether fixed, contingent, now existing or hereafter
arising, created, assumed, incurred or acquired.
"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 in connection with the obligations, Capital Stock
or dividends of; any ownership, purchase or
3
<PAGE>
acquisition of any assets, business, Capital Stock, obligations or securities
of; or any other interest in or capital contribution to; such Person.
"Investment Property" shall have the meaning assigned to it in Section 9-
-------------------
115 of the UCC.
"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 Guarantor to or for the account of any client or
customer of Guarantor. 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 Guarantor and/or delivered to the
Agent or the Banks, with respect to this Agreement, or the transactions
contemplated by this Agreement.
"Medallion" shall mean the 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.
"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 or
any other Loan Document between the Agent and/or any Bank and Borrower in
connection with any of the foregoing or in connection with any Loan Document,
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
Bank for all balances owing to any Bank in any account maintained on such Bank's
books under the Loan Agreement 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 or the Loan
Agreement, (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
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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 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 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.
"Receivables" shall mean, with respect to any Person, all present and
-----------
future rights to payment for goods sold or leased or for services rendered by
such Person whether or not evidenced by an instrument or chattel paper.
"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.
5
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"Underlying Collateral" shall mean all of Guarantor's rights with respect
---------------------
to, or interest in, any and all present and future Medallion Rights, Equipment,
Real Property, machinery, Inventory, Receivables, Accounts, future accounts,
accounts receivable, contracts, contract rights, general intangibles, books,
desks, notes, bills, drafts, acceptances, chases 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 Guarantor 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.
(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 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 Guarantor Obligations, Guarantor hereby grants to the Agent for the
ratable benefit of the Agent and the Banks a continuing lien on and security
interest in the Collateral, which shall be a first priority lien and, in
furtherance of such grant, Guarantor 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,
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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, Guarantor 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, REGISTERING, FILING, ETC. At any time or times
after (i) a Default or an Event of Default has occurred, (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 or (iii) the Agent reasonably
deems necessary, Guarantor 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;
(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
Guarantor 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 Guarantor'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), Guarantor shall deliver to the Agent all instruments evidencing
all Loans (collectively, the "Collateral Notes") of Guarantor then outstanding
----------------
and if such Loan is secured by Real Property, a Mortgage Assignment with respect
to each such Loan. In addition, each time Guarantor shall make a new Loan,
Guarantor shall immediately deliver to the Agent the Collateral Note evidencing
such Loan and if such Loan is secured by Real Property, a Mortgage Assignment
with respect to each Loan. The Agent shall keep all Collateral Notes and
Mortgage Assignments at its principal office in New York City in a vault or
other place of similar security. Guarantor 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 and
Mortgage Assignments; provided, however, that (i) Guarantor 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 Mortgage Assignments and
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(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, Guarantor shall immediately deliver to
the Agent or its designee, at Guarantor'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, Guarantor 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 Guarantor, 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, Mortgage Assignments or other documents delivered to it by
Guarantor hereunder, and shall be entitled to assume, and shall be fully
protected in assuming, without inspection or examination, that Guarantor 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 validity, security or perfection of the
security interests and liens granted herein, then, in addition to the acts
specifically required to be performed by Guarantor elsewhere under this
Agreement, Guarantor 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 Guarantor and the Agent, including, without limitation, the Loan
Documents. Such acts shall include but not be limited to the marking of
Guarantor's Books and Records, the chattel paper and instruments to show the
Agent's security interests and liens and the recording of Mortgage Assignments
and/or 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),
Guarantor authorizes the Agent to execute, file and/or record, alone any
financing, renewal and/or continuation statement, any Mortgage Assignment 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 Guarantor'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 Guarantor 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 Guarantor 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
8
<PAGE>
to be rescinded or returned, all as though such payment had not been made, and
Guarantor shall sign and deliver to the Agent all documents and things necessary
to perfect all terminated liens subject to the intervening liens, if any,
granted by Guarantor 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, Guarantor 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),
Guarantor does hereby irrevocably make, constitute and appoint the Agent and any
of its officers, employees or agents as the true and lawful attorneys of
Guarantor with power to:
(a) sign the name of Guarantor 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 Guarantor'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 Guarantor 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 Guarantor's name on any notices to any of Guarantor's clients or
customers; and
(d) upon the occurrence and during the continuance of an Event of Default,
take or bring at Guarantor's cost, in Guarantor'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, Guarantor will hold the
Banks and the Agent
9
<PAGE>
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.
SECTION 2.8. GUARANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (i) Guarantor 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 Guarantor 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 Guarantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION 2.9. AGENT MAY PERFORM. If Guarantor 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 Guarantor, 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 II(A)
GUARANTY
SECTION 2(a).1 Guaranty. (a) Subject to the limitations of Section
2(a).1(b) Guarantor hereby absolutely, irrevocably and unconditionally
guarantees the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations. This Agreement constitutes a
guaranty of payment and neither the Agent nor the Banks shall have any
obligation to enforce any Loan Document or exercise any right or remedy with
respect to any collateral security thereunder by any action, including making or
perfecting any claim against any Person or any collateral security for any of
the Guarantor Obligations, prior to being entitled to the benefits of this
Agreement. The Agent may, at its option, proceed against the Guarantor, in the
first instance, to enforce the Guarantor Obligations without first proceeding
against Borrower or
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any other Person, and without first resorting to any other rights or remedies,
as the Agent may deem advisable. In furtherance hereof, if the Agent or the
Banks are prevented by law from collecting or otherwise hindered from collecting
or otherwise enforcing any of the Obligations, in accordance with its terms, the
Agent or the Banks, as the case may be, shall be entitled to receive hereunder
from the Guarantor after demand therefor, the sums which would have been
otherwise due had such collection or enforcement not been prevented or hindered.
(b) Notwithstanding anything to the contrary contained herein, the
maximum amount of the obligations of the Guarantor hereunder shall not, as of
any date of determination, exceed the lesser of a) the greatest amount that is
valid and enforceable against the Guarantor under principles of New York State
contract law and b) the greatest amount that would not render the Guarantor's
liability hereunder subject to avoidance as a fraudulent transfer or conveyance
under Section 548 of Title 11 of the United States Code or any provisions of
applicable state law (collectively, the "Fraudulent Transfer Laws"), in each
------------------------
case after giving effect to all other liabilities of the Guarantor, contingent
or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, (provided, however, as to the Guarantor, each such exclusion
shall only apply if such exclusion would result in this Agreement being
enforceable against the Guarantor under Fraudulent Transfer Laws) any liability
(A) in respect of intercompany indebtedness to the Borrower, any Subsidiary or
any other Affiliate of the Borrower, to the extent that such intercompany
indebtedness would be discharged in an amount equal to the amount paid by the
Guarantor hereunder, and (B) under any guarantee of (1) senior unsecured
indebtedness or (2) indebtedness subordinated in right of payment to any of the
Obligations, in either case which contains a limitation as to maximum liability
similar to that set forth in this Section 2.1(b) and pursuant to which the
liability of the Guarantor hereunder is included in the liabilities taken into
account in determining such maximum liability) and after giving effect as assets
to the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of the Guarantor pursuant to applicable law or any
agreement providing for an equitable allocation among such Guarantor, the
Subsidiaries and the other Affiliates of the Borrower of obligations arising
under guarantees by such parties.
(c) The Guarantor agrees that the Guarantor Obligations may at any
time and from time to time exceed the maximum liability of the Guarantor
hereunder without impairing this Agreement or affecting the rights and remedies
of the Agent or any Bank hereunder.
SECTION 2(A).2 ABSOLUTE OBLIGATION
-------------------
The Guarantor shall not be released from liability hereunder unless
and until the Termination Date and the Swing Line Maturity Date shall each have
occurred and (a) the Borrower shall have paid in full in cash the outstanding
principal balance of the Revolving Credit Loans and the Term Loans, together
with all accrued interest thereon, and all other Obligations and sums then due
and owing under the Loan Documents, or (b) the Guarantor Obligations shall have
been paid in full in cash. Guarantor acknowledges and agrees that a) neither the
Agent, nor the Banks has made any representation or warranty to the Guarantor
with respect to the Borrower, its Subsidiaries, any Loan Document, or any
agreement, instrument or document executed or delivered in connection therewith,
or any other matter whatsoever, and b) the Guarantor shall be liable hereunder,
and such liability shall not be affected or impaired, irrespective of (1) the
validity or enforceability of any Loan Document, or any agreement, instrument or
document executed or delivered in connection therewith, or the collectability of
any of the Obligations, (2) the preference
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or priority ranking with respect to any of the Obligations, (3) the existence,
validity, enforceability or perfection of any security interest or collateral
security under any Loan Document, or the release, exchange, substitution or loss
or impairment of any such security interest or collateral security, (4) any
failure, delay, neglect or omission by the Agent or the Banks to realize upon,
enforce or protect any direct or indirect collateral security, indebtedness,
liability or obligation, any Loan Document, or any agreement, instrument or
document executed or delivered in connection therewith, or any of the
Obligations, (5) the existence or exercise of any right of set-off by the Agent
or the Banks, (6) the existence, validity or enforceability of any other
guaranty with respect to any of the Obligations, the liability of any other
Person in respect of any of the Obligations, or the release of any such Person
or any other guarantor of any of the Obligations, (7) any act or omission of the
Agent or the Banks in connection with the administration of any Loan Document,
or any of the Obligations, (8) the bankruptcy, insolvency, reorganization or
receivership of, or any other proceeding for the relief of debtors commenced by
or against, any Person, (9) the disaffirmance or rejection, or the purported
disaffirmance or purported rejection, of any of the Obligations, any Loan
Document, or any agreement, instrument or document executed or delivered in
connection therewith, in any bankruptcy, insolvency, reorganization or
receivership, or any other proceeding for the relief of debtor, relating to any
Person, (10) any law, regulation or decree now or hereafter in effect which
might in any manner affect any of the terms or provisions of any Loan Document,
or any agreement, instrument or document executed or delivered in connection
therewith or any of the Obligations, or which might cause or permit to be
invoked any alteration in the time, amount, manner or payment or performance of
any of Obligations and liabilities (including the Obligations), (11) the merger
or consolidation of the Borrower into or with any Person, (12) the sale by the
Borrower of all or any part of its assets, (13) the fact that at any time and
from time to time none of the Obligations may be outstanding or owing to the
Agent or the Banks, (14) any amendment or modification of, or supplement to, any
Loan Document or (15) any other reason or circumstance which might otherwise
constitute a defense available to or a discharge of the Borrower in respect of
its obligations or liabilities (including the Obligations) or of the Guarantor
in respect of any of the Guarantor Obligations (other than by the performance in
full thereof).
SECTION 2(A).3 PAYMENTS IN BANKRUPTCY; STRICT PERFORMANCE
------------------------------------------
(a) If, at any time or times subsequent to the payment of all or any
part of the Borrower Obligations or the Guarantor Obligations, any Bank, the
Swing Line Lender or recipient thereof shall be required to repay any amounts
previously paid by or on behalf of the Borrower or the Guarantor in reduction
thereof by virtue of an order of any court having jurisdiction in the premises,
including as a result of an adjudication that such amounts constituted
preferential payments or fraudulent conveyances, the Guarantor unconditionally
agrees to pay to the Agent, within 10 days after demand, a sum in cash equal to
the amount of such repayment, together with interest on such amount from the
date of such repayment by such Bank, the Swing Line Lender or such recipient to
the date of payment to the Agent at the at the highest rate specified in Section
2.6 of the Loan Agreement.
(b) The Guarantor agrees that the Guarantor Obligations and the
Obligations will be paid and performed strictly in accordance with their
respective terms, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent, the Swing Line Lender or any Bank with respect thereto.
ARTICLE III
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PRIORITY OF SECURITY INTERESTS
SECTION 3.1. PRIORITY OF SECURITY INTERESTS. Guarantor 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. Guarantor 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. Guarantor 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
SECTION 4.1. REPRESENTATIONS, COVENANTS AND WARRANTIES. Guarantor 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) Guarantor 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 and subordinate
Liens granted to the Borrower pursuant to the Intercompany Demand Loan Documents
(which have been assigned to the Agent for the ratable benefit of the Banks as
additional collateral security), of indefeasible title to all of the Collateral,
except for that portion of Guarantor's rights and/or obligations under any Loan
in which Guarantor has granted a participation to any Person in accordance with
Section 2.14 of the Loan Agreement;
(b) To the best of Guarantor'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 Guarantor on or with
respect to such Loans delivered hereunder or under the Loan Agreement, and,
unless otherwise indicated in writing by Guarantor, each outstanding Loan is,
and each future Loan will be, genuine and in all respects what it purports to
be, and, to Guarantor's knowledge, there are no, and, at the time of creation of
each Loan there will not be any, to Guarantor'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
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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
Guarantor were and will continue to be made properly and in a timely manner;
(e) The original amount and unpaid balance of each Loan shown on
Guarantor's books and records and on any statement or schedule delivered to the
Agent are and will be true and correct, and the unpaid balance is and will be
the amount actually owing to Guarantor.
(f) If requested by the Required Banks at any time or from time to time,
Guarantor 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 Guarantor has a Lien, other than
Liens in favor of Guarantor 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) Guarantor 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 Guarantor has indicated on and has
had evidenced by, or will indicate or have evidenced by, in the case of future
Loans, Guarantor's files related to the Loans;
(h) Each security agreement, UCC filing, mortgage, 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, mortgage or security interest which secures any outstanding Loan is, or
any future Loan will be, valid;
(i) To the best knowledge of Guarantor, except as disclosed to the Agent,
any and all policies of insurance related to the property securing any
obligation of a Person to whom Guarantor 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 Guarantor and such
Person or guarantor;
(j) Guarantor 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.
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(l) The information contained on each Loan Request, including such
information relating to proceeds used directly or indirectly by Guarantor, is
true and correct.
SECTION 4.2. COLLECTIONS. (a) Subject to the provisions of this
Agreement and the other Loan Documents, Guarantor 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.
(b) With respect to each of the Collections: Guarantor shall collect all
Collections, receive all payments thereon and immediately deposit the proceeds
thereof into a Depository Account. Guarantor 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 Guarantor, (a) to notify, and upon
the direction of the Agent to Guarantor, the Guarantor will notify, (i) all
Persons to whom Guarantor 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 Guarantor, and (ii) all banks in which Guarantor 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 Guarantor 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 Guarantor 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 Guarantor, whether by
suit or otherwise, notification of Persons to whom Guarantor has made Loans,
including reasonable attorneys' fees actually incurred, court costs and similar
expenses, if any, shall become a part of the Guarantor 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 Guarantor 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 Guarantor to observe, perform or comply with any of the
terms, provisions, conditions, covenants, warranties or representations
contained in Section 4.1 of this
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Agreement, which failure shall not have been remedied within 30 days after such
failure shall first have become known to any officer of Guarantor;
(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.
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 Guarantor 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 and/or the Guarantor Obligations, any
or all Collateral, subject to and 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 Guarantor 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. Guarantor 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 Guarantor 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 in accordance with Section 5.3 hereof, and the Guarantor shall remain
liable to the Agent and the Banks for any deficiency, together with interest
thereon at the rate provided in the Loan Agreement with respect to the
Obligations 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 (including, without limitation, the
interpretation or administration, or the amendment, waiver or consent with
respect to any term, of 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 Guarantor in any way relating to any of the Collateral or to the
Obligations or to enforce any rights of the Agent, any Bank or liabilities of
Guarantor, any Person to whom Guarantor 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 Guarantor 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 Guarantor Obligations secured by the Collateral.
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(c) Upon the occurrence of an Event of Default, the Agent shall have the
right to require Guarantor 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 Guarantor without cost or charge to the Agent, and to use
the same, together with materials, supplies, books and records of Guarantor 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 Guarantor
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 Guarantor (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
Loan, Guarantor agrees with the Agent as follows:
(i) Guarantor 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 Guarantor, and Guarantor shall immediately forward, or
cause to be forwarded, the same to the lockbox service for application to
the Guarantor Obligations;
(ii) Guarantor shall forward to the Agent, on a daily basis, deposit
slips related to all such items of payment received by Guarantor 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 Guarantor;
(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 in
accordance with Section 5.3 hereof. The Agent may, and upon the direction
of the Required Banks shall, release to Guarantor 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 payment
made by Guarantor pursuant to this Guaranty and Security Agreement and 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:
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first, to payment of the expenses of enforcement and/or collection, of
such lockbox or sale and/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 Guarantor Obligations; and
third, after indefeasible payment in full of all Obligations and
Guarantor Obligations, to payment to Guarantor 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 to the Banks shall in all events be made pro rata on the basis of
the respective Exposure Percentages of the Obligations. Distributions made
under clause "second" above may also be made in a combination of cash or
property, but distributions to the Banks shall be made pro rata on the basis of
the respective Exposure 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 Guarantor Obligations, shall continue to be Guarantor
Obligations for which Guarantor 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 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 Guarantor 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 purchased 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 Guarantor of any
of the provisions, warranties, terms and conditions contained in this Agreement
or any of the Other Agreements
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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 Guarantor specifying such waiver.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. CONTINUING GUARANTY AND CONTINUING LIEN. This Agreement
constitutes a continuing guaranty of payment of Guarantor. The Collateral
described in this Agreement secures all present and future Guarantor Obligations
of Guarantor. There is included within the term "Collateral," as used herein,
----------
all other property and all interests therein of any kind hereafter acquired by
Guarantor, 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 GUARANTOR. (a) Guarantor 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 Guarantor 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) Guarantor also waives any and all notices of demand, notice or protest
that Guarantor might be entitled to receive with respect to this Agreement by
virtue of any applicable statute or law, and waives promptness, diligences,
presentment, 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 Guarantor may in any way be liable, notice of
nonpayment at maturity of any and all Loans and/or Obligations, notice of any
action taken by the Agent or the Banks unless expressly required by this
Agreement, all defenses which may be available by virtue of any valuation, stay,
moratorium law or similar law now or hereafter in effect, any right to require
the marshalling of assets of the Borrower or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations, and all
suretyship defenses generally.
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
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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 GUARANTOR 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
GUARANTOR AND ANY OF THE BANKS OR THE AGENT, BETWEEN ANY BANKS AND BETWEEN THE
AGENT AND ANY BANKS AND GUARANTOR 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. Guarantor 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 Guarantor in any other jurisdiction.
SECTION 6.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Guarantor and all terms, provisions,
conditions and agreements to be performed by Guarantor 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 and/or Guarantor 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 Guarantor Obligations, 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
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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 6.10. TERMINATION. This Agreement and the security interest in
the Collateral created hereby will terminate when the Guarantor Obligations and
the Obligations have been irrevocably paid and finally discharged in full in
accordance with the terms hereof and of the Loan Agreement, 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 or the 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 any Bank
(including the Agent in its capacity as a Bank but not as Agent) of a Revolving
Credit Note(s) or a Term Note(s) or any portion thereof, 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) or Term Note(s),
whereupon such purchaser or purchasers will become vested with all of the
powers, rights and responsibilities of such Bank hereunder, and 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. Guarantor may not assign this Agreement
without the express written consent of the Agent and the Banks.
SECTION 6.11. NOTICES. All notices, requests, consents, demands or other
communications provided for herein to be given to the Agent, any Bank, or to the
Borrower shall be given in accordance with the terms of Section 10.4 of the Loan
Agreement. All notices, requests, consents, demands or other communications
provided for herein to be given to the Guarantor shall be given in accordance
with the terms of Section 10.4 of the Loan Agreement c/o Medallion Financial
Corp. at the address provided in Section 10.4 for Medallion Financial Corp.
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.
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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.
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.
BUSINESS LENDERS, LLC
By:________________________________
Name: Thomas Kellogg
Title: President
By:________________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
FLEET BANK, N.A.,
as Agent
By:________________________________
Name: Andrea H. Lee
Title: Vice President
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EXHIBIT L
FORM OF INTERCOMPANY DEMAND NOTE
, 1998
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FOR VALUE RECEIVED, the undersigned, Business Lenders, LLC, a Delaware
limited liability company (the "Borrower"), promises to pay MEDALLION FINANCIAL
CORP., a Delaware corporation (the "Creditor") at Creditor's offices at 437
Madison Avenue, 38th floor, New York, New York 10022, or such other address as
the holder hereof shall have designated to the Borrower, on demand, the
aggregate unpaid principal amount of all loans (the "Intercompany Loans") or
other advances made by the Creditor to the Borrower, as shown either on the grid
(the "Grid") attached to this Note or in the records of Creditor.
The unpaid principal amount of this Note from time to time outstanding
shall bear interest, payable quarterly, at a per annum rate equal to "Prime
Rate." As used herein, the Prime Rate means the "prime rate" as reported in the
Wall Street Journal, such rate to be adjusted automatically (without notice) on
the effective date of any change in such reported rate. Notwithstanding the
foregoing, upon any default in payment of any sum due and payable hereunder,
such interest rate shall not be less than the 2% per annum plus the rate
hereinabove provided, to the extent permitted by applicable law. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America, in immediately available funds without setoff or
counterclaim and free and clear of and exempt from, and without deduction for or
on account of, any present or future taxes, levies, imposts, duties, deduction,
withholdings or other charges of whatsoever nature, imposed, levied, collected,
withheld or assessed by or within [the United States] or any political
subdivision or taxing authority therein or thereof (collectively, "Taxes"). In
the event that, notwithstanding the foregoing provisions of this paragraph, any
payments made hereunder on account of any obligations of the Borrower hereunder
shall not be made free and clear of and exempt from and without deduction for or
on account of any Taxes, then and in any such event, the Borrower shall pay such
additional amounts as may be necessary in order that each net payment made
hereunder after payment or deduction or withholding for or on account of any
Taxes will not be less than the amount provided for in the obligations of the
Borrower hereunder to be then due and payable. If for the purposes of obtaining
a judgment in any court it becomes necessary to convert into any currency any
amount in United States Dollars due hereunder, then the conversion shall be made
at the rate of exchange prevailing on the day before the day on which the
judgment is given. For this purpose, "rate of exchange" means the rate at which
the holder of this Note is able on the relevant date to purchase United States
Dollars for such other currency for commercial transactions. In the event that
there is a change in the rate of exchange prevailing between the day before the
day on which the judgment
<PAGE>
is given and the date of payment, the Borrower will pay such additional amount
(if any) as may be necessary to insure that any amount paid on said date is the
amount in such other currency which when converted at the rate of exchange
prevailing for commercial transactions on the date of payment is the amount then
due under this Note in United States dollars. Any such additional amount due
from the Borrower will be due as a separate debt and shall not be affected by
judgment being obtained for any other sum due under or in respect of this Note.
The undersigned acknowledges that this Note will be pledged to the
Agent (as defined herein), for the ratable benefit of the Banks (as defined
herein), pursuant to the Loan Agreement, dated as of July 31, 1998 (the "Loan
Agreement"), as from time to time amended, modified, supplemented, restated and
in effect, among Creditor, the banks that from time to time are signatories
thereto (the "Banks") and Fleet Bank, National Association as a Bank, as Swing
Line Lender, as Arranger and as Agent (the "Agent"). The undersigned hereby
waives presentment, demand, notice of dishonor, protest, and all other notices
whatsoever.
In addition to and not in limitation of the foregoing the undersigned
further agrees, subject only to any limitation imposed by applicable law, to pay
all expenses, including reasonable attorneys' fees and legal expenses, incurred
by the holder of this Note in endeavoring to collect any amounts payable
hereunder which are not paid when due, whether by acceleration or otherwise.
No delay on the part of the Creditor or any other holder of this Note
in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or remedy preclude
any other or further exercise thereof, or the exercise of any other right, power
or remedy. No amendment, modification or waiver of, or consent with respect to,
any provision of this Note shall in any event be effective unless the same shall
be in writing and signed and delivered by the holder hereof.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, creation or nonpayment of all
or any of the Intercompany Loans.
The provisions of this Note shall be subject to the terms and
conditions of the Loan Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of law principles.
Any legal action or proceeding hereunder against the Borrower may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York and, by the execution and delivery hereof, the Borrower
hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive
-2-
<PAGE>
jurisdiction of the aforesaid courts. It is agreed that service of process out
of either of the aforementioned courts in any
-3-
<PAGE>
action or proceeding may be made by mailing copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth below
and such service shall become effective 30 days after such mailing. Nothing
herein shall affect the right to serve process in any other manner permitted by
law. To the extent that the Borrower has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives such immunity in respect of its obligations under this
Note.
Address: BUSINESS LENDERS, LLC
15 Lewis Street
Hartford, CT 06103 By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Pay to the order of Fleet Bank, National Association, as Agent, under
and pursuant to the Loan Agreement, dated as of July 31, 1998, as from time to
time amended, modified, supplemented, restated and in effect, among Creditor,
the banks that from time to time are signatories thereto and Fleet Bank,
National Association as a Bank, as Swing Line Lender, as Arranger and as Agent.
MEDALLION FINANCIAL CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-4-
<PAGE>
GRID
Loan made by MEDALLION FINANCIAL CORP., a Delaware corporation, to
BUSINESS LENDERS, LLC, a Delaware limited liability company, and payments of
principal of such loan.
Amount of Unpaid
Amount of Interest Principal Principal Notation
Date Loan Rate Payment Balance Made By
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-5-
<PAGE>
SCHEDULES TO LOAN AGREEMENT
<PAGE>
SCHEDULE I
SECTION 4.3(I):
Medallion Financial Corp.: 437 Madison Avenue
38th Floor
New York, NY 10022
Business Lenders, LLC: 15 Lewis Street
Hartford, CT 06103
SECTION 4.3(II):
Medallion Financial Corp.: 437 Madison Avenue
38th Floor
New York, NY 10022
11 W. Washington Street
Chicago, IL 60602
45 Newbury Street
Suite 207
Boston, MA 02116
Business Lenders, LLC: 15 Lewis Street
Hartford, CT 06103
8665 East Via De Ventura
Suite G-231
Scottsdale, AZ 85258
11 W. Washington Street
Chicago, IL 60602
1 Pomperaaug Office Park
Suite 307
Southbury, CT 06103
49 Walnut Park Building 5
Wellesly, MA 02181
175 Route 73 South
West Berlin, NJ 08091
1030 Clifton Avenue 2nd Floor
Clifton, NJ 07013
250 Mill Street
-2-
<PAGE>
Rochester, NY 14614
167 Gano Street
Providence, RI 02906
SECTION 4.3(III):
Medallion Financial Corp.: 437 Madison Avenue
38th Floor
New York, NY 10022
Business Lenders, LLC: 15 Lewis Street
Hartford, CT 06103/1/
- --------------------
/1/ Chief Executive Officer of Business Lenders, LLC is located in New York at
437 Madison Avenue, 38th Floor, New York, NY 10022.
-3-
<PAGE>
SCHEDULE II
Medallion Taxi Media, Inc., a New York corporation
Medallion Funding Corp., a New York corporation
Transportation Capital Corp., a Delaware corporation
Edwards Capital Corp., a Delaware corporation
Medallion Capital, Inc., a Minnesota corporation
Business Lenders, LLC, a Delaware liability company
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<INVESTMENTS-AT-COST> 0 0
<INVESTMENTS-AT-VALUE> 378,594,424 378,594,424
<RECEIVABLES> 4,501,838 4,501,838
<ASSETS-OTHER> 28,487,593 28,487,593
<OTHER-ITEMS-ASSETS> 0 0
<TOTAL-ASSETS> 411,583,855 411,583,855
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<SENIOR-LONG-TERM-DEBT> 248,924,452 248,924,452
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<INTEREST-INCOME> 8,941,763 26,551,515
<OTHER-INCOME> 1,487,644 3,938,405
<EXPENSES-NET> 6,906,862 21,096,210
<NET-INVESTMENT-INCOME> 3,522,545 9,393,710
<REALIZED-GAINS-CURRENT> 635,972 1,701,164
<APPREC-INCREASE-CURRENT> 41,890 264,292
<NET-CHANGE-FROM-OPS> 4,200,407 11,359,166
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<DISTRIBUTIONS-OF-INCOME> 0 0
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<SHARES-REINVESTED> 0 0
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<AVG-DEBT-PER-SHARE> 0 0
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