<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 June 30,1999
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,
August 13, 1999:
Class Outstanding Par Value Shares Outstanding
----------------- --------- ------------------
Common Stock.......................................$.01..........14,019,133
================================================================================
-1-
<PAGE>
MEDALLION FINANCIAL CORP.
FORM 10-Q
June 30, 1999
INDEX
Page
----
PART I. Financial Information
Item 1. Basis of Preparation.............................................. 3
Medallion Financial Corp. Consolidated Balance Sheets
at June 30, 1999 and December 31, 1998...................... 4
Medallion Financial Corp. Consolidated Statement of Operations
for the three and six months ended June 30, 1999 and 1998... 5
Medallion Financial Corp. Consolidated Statement of Cash
Flows for the six months ended June 30, 1999 and 1998....... 6
Notes to Consolidated Financial Statements..................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 17
General........................................................ 17
Consolidated Results of Operations (for the three months
ended June 30, 1999 and 1998)............................... 20
Consolidated Results of Operations (for the six months
ended June 30, 1999 and 1998)............................... 23
Asset/Liability Management..................................... 27
Liquidity and Capital Resources................................ 28
Investment Considerations...................................... 30
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................................. 33
SIGNATURES................................................................. 35
-2-
<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.
("Media"). 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
June 30, 1999 and the related statements of operations for the three and six
months ended June 30, 1999 and cash flows for the six months ended June 30, 1999
and 1998. Item 1 also sets forth the consolidated balance sheet of the Company
as of December 31, 1998. 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 six months ended June 30, 1999 and 1998.
The consolidated balance sheet of the Company as of June 30, 1999, the
related statements of operations for the three and six months ended June 30,
1999, and cash flows for the six months ended June 30, 1999 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
six months ended June 30, 1999 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 10-K for the fiscal year
ended December 31, 1998.
-3-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1999 and DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------------------------------------
(Unaudited)
ASSETS
Investments:
<S> <C> <C>
Medallion loans $276,049,548 $266,061,808
Commercial installment loans, net 137,319,997 106,422,835
Equity investments, net 16,268,689 11,579,329
------------ ------------
Net investments 429,638,234 384,063,972
Investment in and loans to unconsolidated subsidiary 3,944,528 5,033,661
------------ ------------
Total investments 433,582,762 389,097,633
Cash 8,297,194 6,027,596
Accrued interest receivable 4,172,844 3,640,301
Receivable from sale of loans 5,569,169 9,569,989
Servicing fee receivable 2,494,259 2,290,303
Fixed assets, net 1,762,228 1,662,973
Goodwill, net 6,527,754 6,706,879
Other assets 2,901,407 3,229,568
------------ ------------
Total assets $465,307,617 $422,225,242
============ ============
LIABILITIES
Accounts payable $ 6,617,843 $ 5,593,101
Dividends payable - 4,764,681
Accrued interest payable 1,620,127 2,308,229
Notes payable to banks and demand notes 112,950,000 115,600,000
Private placement debt 22,500,000 -
Commercial paper 137,184,345 103,081,785
SBA debentures payable 29,810,000 41,590,000
------------ ------------
Total liabilities $310,682,315 $272,937,796
Negative goodwill, net 711,716 1,072,916
Commitments and contingencies
SHAREHOLDER'S EQUITY
Preferred Stock (1,000,000 shares of $.01 par value stock
authorized-none outstanding) - -
Common stock (45,000,000 shares of $.01 par value stock
authorized - 14,019,133 and 14,013,768 shares outstanding at
June 30, 1999 and December 31, 1998, respectively)
$ 140,191 $ 140,138
Capital in excess of par value 141,412,014 141,376,068
Accumulated undistributed income 12,361,381 6,698,324
------------ ------------
Total shareholder's equity 153,913,586 148,214,530
------------ ------------
Total liabilities and shareholder's equity $465,307,617 $422,225,242
============ ============
Number of common shares and common stock equivalents 14,090,481 14,143,537
Net asset value per share $10.92 $10.48
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------------ ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Investment income:
Interest and dividend income on investments $10,774,938 $ 8,793,956 $20,056,692 $17,442,115
Interest income on short-term investments 59,929 90,540 158,049 167,637
----------- ----------- ----------- -----------
Total investment income 10,834,867 8,884,496 20,214,741 17,609,752
Interest expense:
Notes payable to banks 1,891,449 3,096,964 3,810,279 5,750,183
Commercial paper 1,845,311 - 3,406,658 -
SBA debentures 687,108 778,867 1,445,413 1,557,803
Notes payable LT 138,955 - 138,955 -
----------- ----------- ----------- -----------
Total interest expense 4,562,823 3,875,831 8,801,305 7,307,986
Net interest income 6,272,044 5,008,665 11,413,436 10,301,766
Non-interest income:
Equity in earnings (losses)of
unconsolidated subsidiary (82,992) 187,058 300,472 342,448
Accretion of negative goodwill 180,600 180,600 361,200 361,200
Gain on sale of loans 831,278 477,000 1,443,524 1,157,934
Other income 586,444 294,012 1,093,056 588,538
----------- ----------- ----------- -----------
Total non-interest income 1,515,330 1,138,670 3,198,252 2,450,120
Expenses:
Administrative and advisory fees 63,228 60,058 124,988 116,562
Professional fees 523,963 83,458 844,103 296,779
Salaries and benefits 2,454,354 1,486,337 4,264,387 2,711,092
Rent expense 203,146 198,338 393,185 378,993
Other operating expenses 1,017,508 844,623 2,170,721 1,642,387
Amortization of goodwill 147,460 123,800 312,011 240,419
Prepayment penalty on SBA bond 77,272 - 77,272 -
Merger-related expenses - 1,494,491 - 1,494,491
----------- ----------- ----------- -----------
Total expenses 4,486,931 4,291,105 8,186,667 6,880,723
Net investment income 3,300,443 1,856,230 6,425,021 5,871,163
Net realized gains (losses) on investments (168,988) 1,003,339 635,834 1,026,741
Change in unrealized appreciation, net 1,985,691 50,000 2,590,985 222,402
Income tax benefit (provision) (10,857) 57,666 (62,313) 38,566
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations $ 5,106,289 $ 2,967,235 $ 9,589,527 $ 7,158,872
=========== =========== =========== ===========
Net increase in net assets resulting from
Operations per common share
BASIC $ 0.36 $ 0.21 $ 0.68 $ 0.51
DILUTED $ 0.36 $ 0.21 $ 0.68 $ 0.51
Weighted average common shares outstanding:
Basic Average Shares 14,016,749 13,942,732 14,015,258 13,926,520
Diluted Average Shares 14,096,024 14,143,452 14,086,606 14,125,374
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE>
MEDALLION FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net increase in net assets resulting from operations $ 9,589,527 $ 7,158,872
Adjustments to reconcile net increase in net assets resulting from
Operations to net cash provided by (used for) operating
activities:
Depreciation and amortization 264,950 120,254
Increase in equity in earnings of unconsolidated subsidiary (300,472) (342,448)
Decrease (increase) in receivable from unconsolidated subsidiary 1,389,605 (29,151)
Increase in unrealized appreciation, net (2,590,985) -
Amortization of goodwill 312,011 240,419
Decrease (increase) in accrued interest receivable (532,543) (865,529)
Decrease (increase) in other assets 328,161 (166,030)
Increase (decrease) in accounts payable and accrued expenses 1,024,742 (3,306,614)
Decrease (increase) in receivable from sale of loans 4,000,820 (2,210,824)
Increase in servicing fee receivable (203,956) (351,400)
Accretion of negative goodwill (361,200) (361,200)
Decrease (increase) in accrued interest payable 688,102 856,564
------------- -------------
Net cash provided by operating activities 13,608,762 742,913
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Originations of investments (126,984,560) (119,562,691)
Proceeds from sales and maturities of investments 82,210,148 85,058,815
Payment for purchase of VGI, VGII and VOC - (11,963,072)
Capital expenditures (481,549) (817,103)
------------- -------------
Net cash used for investing activities (45,255,961) (47,284,051)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable to banks (2,650,000) (13,050,000)
Proceeds from private placement debt 22,500,000 -
Proceeds from issuance of commercial paper 34,102,560 70,497,389
Repayment of notes payable to the SBA (11,780,000) (4,380,000)
Proceeds from exercise of stock options 35,999 436,014
Payment of declared dividends to current stockholders (8,691,151) (7,201,893)
------------- -------------
Net cash provided by financing activities 33,517,408 46,301,510
------------- -------------
NET INCREASE (DECREASE) IN CASH 1,870,209 (239,628)
CASH, beginning of period 6,426,985 6,666,613
------------- -------------
CASH, end of period $ 8,297,194 $ 6,426,985
============= =============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 5,250,925 $ 6,451,422
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(1) Organization of Medallion Financial Corp. And Its Subsidiaries
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, 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 Corporation and subsidiaries ("Tri-Magna") 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"). 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, Medallion Funding
Corp. ("MFC") and Medallion Taxi Media, Inc. ("Media"), 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 Small Business Administration ("SBA"). As an adjunct to the
Company's taxicab medallion finance business, Media 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 SBA. On
June 1, 1999, the SBA gave preliminary approval for the mergers to occur,
subject to certain additional documentation from MFC.
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 (the "Business Lenders
Acquisition"). In connection with the transaction, BLI Acquisition Co., LLC was
renamed Business Lenders, LLC ("BLL"). BLL is licensed by the SBA under its
section 7(a) program.
-7-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
In connection with the 1996 Acquisitions, the Company received the
Acquisition Order under the 1940 Act from the Securities and Exchange
Commission. Approval from the Connecticut State Department of Banking and the
SBA was obtained for the Business Lenders Acquisition.
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., ("VOC"), an SBIC lender
headquartered in New York, New York.
On June 16, 1998, the Company completed the merger with 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 Capital to an SBIC. 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.
In September 1998, the Company created Medallion Business Credit LLC
("MBC"), as a wholly-owned subsidiary. MBC originates loans to small businesses
for the purpose of financing inventory and receivables.
(2) 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 or negative goodwill.
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 appreciation/depreciation of investments. Total net
unrealized appreciation was $5,566,130 and $2,964,917 on total investments of
$429,638,234 and $384,063,972 at June 30, 1999 and December 31, 1998,
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.
-8-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
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 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 six months
ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands, except shares and per share amounts)
Three months ended June 30, 1999 June 30, 1998
- - - ------------------------------------------------------------------------------------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $5,106 $2,967
Basic EPS:
Income available to
common stockholders 5,106 14,016,749 $.36 2,967 13,942,732 $.21
Effect of dilutive
options
Stock options 79,275 200,720
Diluted EPS:
Income available to 5,106 14,096,024 $.36 2,967 14,143,452 $.21
common stockholders
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands, except shares and per share amounts)
Six months ended June 30, 1999 June 30, 1998
- - - ------------------------------------------------------------------------------------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $9,590 $7,159
Basic EPS:
Income available to
common stockholders 9,590 14,015,258 $.68 7,159 13,926,520 $.51
Effect of dilutive
options
Stock options 71,348 198,854
Diluted EPS:
Income available to 9,590 14,086,606 $.68 7,159 14,125,374 $.51
common stockholders
</TABLE>
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
all fiscal quarters of all fiscal years beginning after June 15, 1999.
In June 1999, the Board issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." The new standard defers the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. The Company is presently studying
the effect of the new pronouncement and, as required, will adopt SFAS No. 133
beginning January 1, 2001.
-9-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
(3) Acquisitions
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. ("VOC"), SBIC lenders
headquartered in New York, (hereinafter known as "VG Group"), for an aggregate
purchase price of $18.5 million which included the assumption of $6.5 million in
liabilities. The purchase price was allocated to the assets based on their
estimated fair values and approximately $16.7 million were allocated to
investments. The excess of the purchase price over the fair value of the net
assets acquired (goodwill) was $1.2 million and is being amortized on a
straight-line basis over 15 years.
These acquisitions were accounted for under the purchase method of accounting.
Accordingly, the results of operations for these acquisitions have been included
in the consolidated results of the Company from the date of acquisition. Under
this accounting method, the Company has recorded as its cost the fair value of
the acquired assets and liabilities assumed. The difference between the cost of
acquired companies and the sum of the fair values of tangible and identifiable
intangible assets less liabilities assumed was recorded as goodwill.
In conjunction with the acquisitions, assets and 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
===========
(4) Merger
On June 16, 1998, the Company completed the merger with Capital Dimensions,
Inc. ("CDI"), a Specialized Small Business Investment Company ("SSBIC") lender,
headquartered in Minneapolis, MN. CDI was subsequently renamed Medallion
Capital, Inc. ("Medallion Capital"). The Company issued 0.59615 shares of its
common stock for each outstanding share of CDI. A total of 1,112,677 shares of
the Company's common stock was issued as a result of the merger, and each of
CDI's outstanding stock options were converted to purchase common shares of the
Company. 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. The following tables set
forth the results of operations of CDI and the Company for the three months June
30, 1998 and are included in the accompanying consolidated statement of
operations.
-10-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C> <C>
For the three months ended June 30, 1998 The Company CDI Combined
-------------------------------------------------------------------------------
Total Investment Income $ 8,300 $ 584 $ 8,884
Net increase in net assets from operations $ 1,853 $1,114 $ 2,967
For the six months ended June 30, 1998 The Company CDI Combined
-------------------------------------------------------------------------------
Total Investment Income $16,322 $1,288 $17,610
Net increase in net assets from operations $ 5,692 $1,467 $ 7,159
</TABLE>
(5) Unrealized Appreciation/(Depreciation) and Realized Gains/(Losses) on
Investments
The change in unrealized appreciation/(depreciation) on investments is the
amount by which the fair value estimated by the Company is greater/(less) than
the cost basis of the investment portfolio. Realized gains or losses on
investments consist of the excess of the proceeds derived upon foreclosure over
the cost basis of a loan, write-offs of loans or assets acquired in satisfaction
of loans, net of recoveries, or sale of investments. For the three and six
months ended June 30, 1999, gross unrealized appreciation and depreciation and
gross realized gains and losses were as follows:
<TABLE>
<CAPTION>
Three months Six months
Ended Ended
June 30, 1999 June 30, 1999
<S> <C> <C>
Increase in net unrealized appreciation on investments:
Unrealized appreciation $ 7,556,404 $ 9,304,974
Unrealized depreciation (5,742,848) (6,376,329)
Realized gain - (509,795)
Realized loss 172,135 172,135
----------- -----------
Total $ 1,985,691 $ 2,590,985
----------- -----------
Net realized gain on investments:
Realized gain $ 3,147 $ 807,969
Realized loss (172,135) (172,135)
----------- -----------
Total $ (168,988) $ 635,834
----------- -----------
</TABLE>
Unrealized appreciation for the three and six months ended June 30, 1999,
respectively relates primarily to the Company's investment in Radio One, Inc.
("Radio One"). During the three months ended June 30, 1999, Radio One completed
an initial public offering of its stock. At June 30, 1999, the Company's
investment in Radio One consists of 479,122 shares. The Company has certain
restrictions as to the time period over which this investment can be sold. At
June 30, 1999, the per share market price for Radio One was $46.50. At August
11, 1999, such price was $42.875. Due to the restriction related to the
Company's ability to dispose of the stock, the brief time period that Radio One
stock has been publicly traded and the price volatility and the trading volume
of the stock, the Company has applied a discount to market in determining the
Company's unrealized appreciation on this investment. At June 30, 1999, the
Company valued its investment in Radio One at a weighted average per share
amount of $30.00. Subsequent to June 30, 1999, the Company received permission
from the underwriters of the Radio One stock
-11-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
offering to sell 100,000 shares of stock. Such transaction was completed at a
price of approximately $45.00 per share.
(6) 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 June 30, 1999
(unaudited) and December 31, 1998 and unaudited statement of operations for the
three and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Balance Sheet June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Cash $ 247,089 $1,381,893
Accounts receivable 1,965,829 2,614,842
Equipment, net 1,603,239 1,564,341
Goodwill 1,670,399 991,279
Other 704,278 571,058
---------- ----------
Total assets $6,190,834 $7,123,413
========== ==========
Notes payable to parent $1,303,242 $2,692,847
Accounts payable and accrued
expenses 453,175 327,392
Other Liabilities and
income taxes payable 1,684,514 1,653,743
---------- ----------
Total liabilities 3,440,931 4,673,982
Equity
Common Stock 1,001,000 1,001,000
Retained earnings 1,748,903 1,448,431
---------- ----------
Total equity 2,749,903 2,449,431
Total liabilities and shareholders'
equity $6,190,834 $7,123,413
========== ==========
</TABLE>
-12-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
<TABLE>
<CAPTION>
Statement of Operations Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advertising revenue $2,057,110 $1,515,316 $4,815,150 $2,972,326
Cost of service 1,046,708 535,432 2,035,785 1,071,275
---------- ---------- ---------- ----------
Gross margin 1,010,402 979,884 2,779,365 1,901,051
Other operating expenses 1,186,894 642,826 2,316,751 1,308,622
---------- ---------- ---------- ----------
Income (loss) before taxes (176,492) 337,058 462,614 592,429
Income tax benefit (provision) 93,500 (150,000) (162,142) (250,000)
---------- ---------- ---------- ----------
Net income (loss) $ (82,992) $ 187,058 $ 300,472 $ 342,429
========== ========== ========== ==========
</TABLE>
The Company has deferred approximately $300,000 of advertising revenue
during the quarter ended June 30, 1999 related to tops displayed in new markets.
The deferral will continue until such time that documentation is obtained which
will complete the criteria for appropriate revenue recognition. This revenue
will be recognized in future periods when such criteria are met.
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 and is being
amortized over 15 years.
On February 2, 1999, Media purchased 100% of the common stock of Transit
Advertising Displays, Inc. ("TAD") for $848,500. TAD is a taxicab rooftop
advertising company headquartered in Washington, D.C. operating 1,300 installed
rooftop advertising displays in the Baltimore, MD and Washington, D.C. areas.
The purchase was accounted for under the purchase method of accounting and the
results of operations are consolidated with those of Media. Included in the
purchase price was certain premiums paid totaling $712,701, which represented
goodwill and is being amortized over 15 years.
-13-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
(7) Debt
The table below summarizes the various debt agreements the Company and its
subsidiaries had outstanding at June 30, 1999 and December 31, 1998:
June 30, 1999 December 31, 1998
------------- -----------------
Notes payable to banks:
Total facilities $295,000,000 $252,500,000
Maturity of facilities 6/00-6/01 6/99-7/99
Total amounts outstanding $112,950,000 $115,600,000
============ ============
SBA debentures payable $ 29,810,000 $ 41,590,000
============ ============
Maturity date 9/00-6/07 9/00-6/07
Private placement debt $ 22,500,000 $ --
============ ============
Maturity date 6/04 --
Under the revolving credit agreement between MFC and its lenders, as
amended, MFC is required to maintain minimum tangible net assets of $65,000,000
and certain financial ratios. The Company believes that MFC was in compliance
with such requirements at June 30, 1999.
On June 1, 1999, MFC issued $22.5 million of senior secured notes (the
"Notes") that mature on June 1, 2004. The Notes bear a fixed rate of interest of
7.2% and interest is paid quarterly in arrears. The Notes rank pari pasu with
the bank debt and commercial paper through inter-creditor agreements. MFC also
has a commitment from the note-holders to purchase and additional $22.5 million
on September 1, 1999 under the same terms and conditions. The proceeds of the
notes are being used to pre-pay all the outstanding SBA debentures of MFC, TCC
and ECC. Prepayment of some of these SBA debentures will cause MFC to incur
penalties.
On June 1, 1999, MFC extended its $195 million revolving credit facility
until June 30, 2001.
On June 29, 1999, Medallion Financial increased its revolving credit
facility to $100 million and extended the maturity until June 28, 2000.
(8) 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,
-14-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
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 June 30, 1999, MFC had $137,184,345 outstanding at a weighted
average interest rate of 5.93%.
(9) Segment Reporting
The Company has two reportable business segments, lending and taxicab rooftop
advertising. The lending segment originates and services secured commercial
loans. The taxicab rooftop advertising segment sells advertising space to
advertising agencies and companies in several major markets across the United
States. The segment is reported as an unconsolidated subsidiary, Medallion Taxi
Media, Inc. The accounting policies of the operating segments are the same as
those described in the summary of significant accounting policies.
For taxicab advertising, the increase in net assets resulting from operations
represents the Company's equity in net income from Media. Segment assets for
taxicab advertising represents the Company's investment in and loan to Media.
<TABLE>
<CAPTION>
Six months ended June 30, 1999 Taxicab
Lending Advertising Total
---------------------------------------------------------------
<S> <C> <C> <C>
Net interest income $ 11,413,436 $ 11,413,436
Depreciation and amortization 264,950 264,950
Income tax benefit (provision) (62,313) (62,313)
Net increase in net assets resulting from 9,289,055 300,472 9,589,527
operations
Segment assets 461,363,089 3,944,528 465,307,617
Capital expenditures 481,549 189,008 **
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1998 Taxicab
Lending Advertising Total
---------------------------------------------------------------
<S> <C> <C> <C>
Net interest income $ 10,301,766 $ 10,301,766
Depreciation and amortization 120,254 120,254
Income tax benefit (provision) 38,566 38,566
Net increase in net assets resulting from
operations 6,816,424 342,448 7,158,872
Segment assets 393,967,083 3,067,660 397,034,743
Capital expenditures 817,103 274,719 **
</TABLE>
** Capital expenditures for the Company are equal to expenditures for the
lending segment. Capital expenditures related to the taxicab advertising
segment are included in order to provide additional information.
-15-
<PAGE>
MEDALLION FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 1999
(10) Subsequent Events
On August 12, 1999, MFC declared a dividend payable to the Company in the
amount of $250 per share payable on August 13, 1999 (aggregating $1,664,750) and
Medallion Capital declared a dividend payable to the Company in the amount of
$1.40 per share payable on August 13, 1999 (aggregating $1,866,438). With the
proceeds of these dividends, on August 12, 1999, the Company declared a dividend
in the amount of $0.31 per share (aggregating $4,345,931) payable on September
1, 1999 to the shareholders of record on August 23, 1999.
-16-
<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, 1998. 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
-17-
<PAGE>
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.
Trend in Loan Portfolio. 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, 1998 June 30, 1999
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 9.03% $266,061,808 69.0% 9.01% $276,049,548 64.0%
Commercial Installment Loan Portfolio 12.13% 106,422,835 28.0% 11.74% 137,319,997 32.0%
Equity Investments - 11,579,329 3.0% - 16,268,689 4.0%
----- ------------ ----- ----- ------------ -----
Total Portfolio 9.93% $384,063,972 100.0% 9.95% $429,638,234 100.0%
===== ============ ===== ===== ============ =====
</TABLE>
Yield Summary:
The weighted average yields e.o.p./1/ of the Medallion Loan portfolio
decreased 2 basis points to 9.01% at June 30, 1999. 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. The weighted average yields e.o.p. of the
Commercial Installment Loan portfolio decreased 39 basis points to 11.74% at
June 30, 1999 from 12.13% at December 31, 1998 due to the drop in prime rate and
the increase in the number of loans tied to the prime rate. The weighted
average yields e.o.p. of the entire portfolio increased 2 basis points to 9.95%
at June 30,1999 from 9.93% at December 31, 1998 due to the decline in the
Commercial portfolio offset by a shift in mix of the portfolio to the higher
yielding Commercial loans.
Portfolio Summary:
Medallion Loans constituted 64.0% of the total portfolio of $429.6 million
at June 30, 1999 and 69.0% of the total portfolio of $384.1 million at December
31, 1998. The Medallion Loan portfolio increased by $10.0 million or 3.8%. The
increase is due to growth in markets outside New York such as Chicago, Newark
and Baltimore. The Commercial Installment loan portfolio comprised 32.0%, of
the total portfolio at June 30, 1999 compared to 28.0% at December 31, 1998.
The Commercial Loan portfolio grew by $30.9 million or 29.0% due to strong
growth in the mezzanine finance, SBA 7(a) program and asset-based lending
portfolios.
- - - ------------------
/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.
-18-
<PAGE>
Equity Investments represented 4.0% and 3.0% of the Company's entire
portfolio at June 30, 1999 and December 31, 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 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 70 basis
points below the rate charged under the Company's revolving credit facilities.
At June 30, 1999 and December 31, 1998, short-term LIBOR-based debt including
commercial paper constituted 82.7% and 84.0% of total debt, respectively. At
June 30, 1999 and December 31, 1998, commercial paper constituted 45.4% and
39.6% of total debt, respectively.
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. at June 30, 1999 was 6.21% or 107 basis
points over the LIBOR Benchmark of 5.14% down from 6.42% or 121 basis points
over the LIBOR Benchmark of 5.21% at December 31, 1998.
-19-
<PAGE>
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 June 30, 1999, Media
had approximately 6,900 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 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.
Consolidated Results of Operations
For the Three Months Ended June 30, 1999 and 1998.
Performance Summary. For the three months ended June 30, 1999, net
increase in net assets resulting from operations has been positively impacted by
the growth of the loan portfolio, a decrease in the average cost of funds and an
increase in unrealized gains from the shares of stock held in an investment.
Investment Income. Investment income increased $2.0 million or 22.0% to
$10.8 million for the three months ended June 30, 1999 from $8.9 million for the
three months ended June 30, 1998. The Company's investment income reflects the
positive impact of portfolio growth and dividend income from equity investments.
The average portfolio outstanding was $400.6 million, for the second quarter of
1999, which produced interest income of $9.6 million at a weighted average
interest rate of 9.59% compared to an average of
-20-
<PAGE>
$352.5 million for the second quarter of 1998, which produced investment income
of $8.9 million at a weighted average interest rate of 10.04%.
Loan originations net of participations increased by $17.1 million or 29.1%
to $75.9 million for the three month period ended June 30, 1999 compared to
$59.9 million for the three month period ended June 30, 1998. The originations
were offset by prepayments, terminations and refinancings by the Company
aggregating $47.0 million in the second quarter of 1999 compared to $43.2
million in the second quarter of 1998.
The weighted average yield e.o.p. of the entire portfolio decreased 5 basis
points to 9.95% at June 30, 1999 from 10.00% at June 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 offset by an increase in the percentage of the
portfolio composed of higher 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
6 basis points to 9.01% at June 30, 1999 from 9.07% at June 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. The average
yield of the Commercial Installment Loan portfolio decreased 97 basis points to
11.74% at June 30, 1999 from 12.71% at June 30, 1998. The decline in the
commercial portfolio yield is due in part to the drop in prime rate as the
quantity of floating rate loans tied to prime has increased as a percentage of
the Commercial portfolio. Thus, shifting the average yield on commercial loans
lower. In addition, the current interest rate environment is such that the
Company has increased the origination of loans with shorter interest rate
maturity dates, which are issued at a lower interest rate further contributing
to the decline in the portfolio yield. However, the shorter maturity dates
further reduces 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 Commercial loan portfolio during the period.
Interest Expense. The Company's interest expense increased $687,000 or
17.7% to $4.6 million for the three months ended June 30, 1999 from $3.9 million
for the three months ended June 30, 1998. The Company's average cost of funds
e.o.p. decreased 38 basis points to 6.21% or 107 basis points over the LIBOR
benchmark of 5.14% at June 30, 1999 from 6.59% or 86 basis points over the LIBOR
benchmark of 5.73% at June 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 59 basis point decrease in the LIBOR benchmark. Also
contributing to the decrease in average cost of funds e.o.p. was the Company's
issuance of commercial paper, which at the present time is priced approximately
70 basis points less than the Company's revolving credit facilities. Average
total borrowings increased $69.6 million or 31.6% from $220.2 million for the
three months ended June 30, 1998, which produced an interest expense of $3.9
million at a weighted average interest rate of 7.04%, to $289.8 million for the
three months ended June 30, 1999, which produced an interest expense of $4.6
million at a weighted average interest rate of 6.30%. 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
-21-
<PAGE>
LIBOR based indebtedness and commercial paper decreased as a percentage of total
indebtedness from 80.4% at June 30, 1998 to 82.7% at June 30, 1999.
Net Interest Income. Net interest income increased $1.3 million or 25.2%
to $6.3 million for the three months ended June 30, 1999 from $5.0 million for
the three months ended June 30, 1998. The increase in net interest income is
the result of the 29 basis point or 21.7% increase in the average spread between
the average yield on the portfolio and the average cost of funds to 3.29% for
the three-month period ended June 30, 1999 from 3.00% for the three-month period
ended June 30, 1998.
Equity in Earnings of Unconsolidated Subsidiary. Advertising revenue
increased $542,000 or 35.8% to $2.1 million in the second quarter of 1999
compared to $1.5 million in the second quarter of 1998. Display rental costs
increased $511,000 or 95.5% for the quarter. Gross margin was $1.0 million or
49.1% of advertising revenue for the second quarter of 1999 compared to $980,000
or 64.7% for the second quarter of 1998. The increase in advertising revenue and
display rental cost is directly related to the increase in the number of taxicab
rooftop advertising displays ("Displays") owned by Media. The number of Displays
owned by Media increased approximately 3,000 or 77.3% to approximately 6,900 at
June 30, 1999 from approximately 3,890 at June 30, 1998. Operating costs
increased $544,000 or 84.6% to $1.2 million in the second quarter of 1999 from
$643,000 in the second quarter of 1998. The increase in operating costs is a
reflection of the expansion of Media's operations. Media experienced a net loss
of $83,000 in the second quarter of 1999 compared to net income of $187,000 in
the second quarter of 1998. The decrease in net income is the result of the loss
of tobacco advertising contracts due to the nationwide tobacco ban which took
effect in March 1999. 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 7(a) loans in the amount of $831,000 during the second
quarter of 1999 compared to $477,000 during the second quarter of 1998. The
increase of $354,000 is due to an increase in the volume of loans sold in the
secondary market. 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 EITF 88-11.
Other Income. The Company's other income increased $292,000 or 99.5% to
$586,000 for the three months ended June 30, 1999 from $294,000 for the three
months ended June 30, 1998. Other income was primarily derived from late
charges, prepayment fees and miscellaneous income. The increase in other income
is primarily due to an increase in fees collected in connection with several
refinancings completed during the quarter.
Non-Interest Expenses. The Company's non-interest expenses increased
$196,000 or 4.6% to $4.5 million for the three months ended June 30, 1999 from
$4.3 million for the three months ended June 30, 1998. Included in non-interest
expenses for the three months ended June 30, 1998 are $1.5 million of expenses
related to the merger with Medallion Capital. Exclusive of these expenses, non-
interest expenses increased $1.7 million or 60.4% from $2.8 million for the
three months ended June 30, 1998 to $4.5 million for the three months ended June
30, 1999. Other operating expenses increased $173,000 or 20.5% as compared to
the second quarter of 1998 due to expenditures related to a new loan accounting
system. The
-22-
<PAGE>
increase in salaries and benefits of $968,000 or 65.1% in the second quarter of
1999 compared to the second quarter of 1998 is the result of the effect of
year-end raises, salaries of personnel hired since June 30, 1998, and bonuses
paid and accrued for in the quarter.
Net Investment Income. Net investment income increased $1.4 million or
77.8% to $3.3 million in the second quarter of 1999 from $1.9 million in the
second quarter of 1998. Exclusive of the merger-related expenses of $1.5
million, net investment income decreased $50,000 or 1.5% from $3.35 million for
the three months ended June 30, 1998 to $3.3 million for the three months ended
June 30, 1999. The decrease is attributable to an increase in operating
expenses and the $250,000 decline in earnings of the unconsolidated Media
subsidiary.
Net Realized Gain on Investments. The Company had net realized losses of
$169,000 for the three months ended June 30, 1999, a decrease of $1.2 million
from net realized gains of $1.0 million for the three months ended June 30,
1998. The realized gains during the second quarter of 1998 were primarily the
result of the sale of common and preferred stock warrants in connection with the
repayment of three loans.
Change in Net Unrealized Appreciation (Depreciation). The change in net
unrealized appreciation increased $1.9 million for the three months ended June
30, 1999 from $50,000 for the three months ended June 30, 1998. The unrealized
appreciation during the second quarter of 1999 resulted from unrealized gains
recognized on the increase in value of common stock of one investment offset by
an increase in the depreciation of loan values.
Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased $2.1 million or 72.1% to $5.1 million
for the three months ended June 30, 1999 from $3.0 million for the three months
ended June 30, 1998. Exclusive of the merger-related expenses $1.5 million, net
increase in net assets resulting from operations increased $645,000 or 14.4%
from $4.5 million for the three months ended June 30, 1998 to $5.1 million for
the three months ended June 30, 1999. The increase was attributable to the
positive impact of portfolio growth, higher unrealized gains on investments
offset by an increase in interest and operating expenses. Return on average
assets and return on average equity for the three months ended June 30, 1999, on
an annualized basis, were 4.5% and 13.3%, respectively, compared to 3.1% and
7.8% for the three months ended June 30, 1998.
Consolidated Results of Operations
For the Six Months Ended June 30, 1998 and 1999.
Performance Summary. For the six months ended June 30, 1999, net increase
in net assets resulting from operations has been positively impacted by the
growth of the loan portfolio, a increase in the spread of average yield over
average cost of funds and an increase in unrealized gains on common stock of an
investment offset by an increase in operating expenses.
-23-
<PAGE>
Investment Income. Investment income increased $2.6 million or 14.8% from
$17.6 million for the six months ended June 30, 1998 to $20.2 million for the
six months ended June 30, 1999. The Company's investment income reflects the
positive impact of portfolio growth and dividend income on equity investments
during the six months ended June 30, 1999. Total portfolio growth totaled $45.6
million or 11.9% from $384.0 million at December 31, 1998 to $429.6 million at
June 30, 1999 as compared to $51.2 million or 16.3% from $313.3 million at
December 31, 1997 to $364.5 million at June 30, 1998. The average portfolio
outstanding was $393.0 million for the six month period ended June 30, 1999,
which produced interest income of $19.0 million at a weighted average interest
rate of 9.66% compared to an average of $338.9 million for the six-month period
ended June 30, 1998, which produced investment income of $17.6 million at a
weighted average interest rate of 10.29%.
Loan originations net of participations increased by $7.4 million or 6.21%
from $119.6 million for the six-month period ended June 30, 1998 to $127.0
million for the six-month period ended June 30, 1999. Not included in
originations for the six months ended June 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 $85.2 million for the six month period ended June 30, 1998
compared to $82.2 million for the six month period ended June 30, 1999.
Weighted average yield e.o.p. of the entire portfolio decreased 5 basis
points from 10.00% at June 30, 1998 to 9.95% at June 30, 1999. 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 offset by an increase 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 6 basis points from 9.07% at June 30, 1998 to 9.01% at June 30, 1999.
The decrease in the average yield on Medallion Loans was caused by a reduction
in loan yields due to loans being originated at lower long-term interest rates
due to 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 average
yield of the Commercial Installment Loan portfolio decreased 97 basis points
from 12.71% at June 30, 1998 to 11.74% at June 30, 1999. The decline in the
commercial portfolio yield is the result of the decrease in prime rate and the
increase in the number of loans tied to prime. This shifts the average yield on
commercial yields lower, however, interest rate exposure is mitigated by the
floating rate nature of these loans... The percentage of the portfolio composed
of Commercial Installment Loans increased from 25.2% at June 30, 1998 to 32.0%
at June 30, 1999. The Company continues to pursue a shift in its portfolio mix
towards higher yielding Commercial Installment Loans.
Interest Expense. The Company's interest expense increased $1.5 million or
20.4% from $7.3 million for the six months ended June 30, 1998 to $8.8 million
for the six months ended June 30, 1999. The Company's average cost of funds
e.o.p. decreased 38 basis points from 6.59% or 86 basis points over the LIBOR
benchmark of 5.73% at June 30, 1998 to 6.21% or 107 basis points over the LIBOR
benchmark of 5.14% at June 30, 1999. The decrease in the average cost of funds
e.o.p. was caused by a reduction in the premium to
-24-
<PAGE>
LIBOR paid by the Company combined with 59 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 70 basis points less than the Company's revolving credit
facilities. Average total borrowings increased $62.4 million or 30.1% from
$207.2 million for the six months ended June 30, 1998, which produced an
interest expense of $7.3 million at a weighted average interest rate of 7.06% to
$269.6 million for the six months ended June 30, 1999 which produced an interest
expense of $8.8 million at a weighted average interest rate of 6.26%. 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 80.4% at June 30, 1998 to 82.7% at June
30, 1999.
Net Interest Income. Net interest income increased $1.1 million or 10.8%
from $10.3 million for the six months ended June 30, 1998 to $11.4 million for
the six months ended June 30, 1999. Net interest income reflects the positive
impact of the portfolio growth during the six months ended June 30, 1999 coupled
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 17 basis points or 14.2% from 3.23% for the six-month
period ended June 30, 1998 to 3.40% for the six-month period ended June 30,
1999.
Equity in Earnings of Unconsolidated Subsidiary. Advertising revenue
increased $1.8 million or 62.0% from $3.0 million for the six months ended June
30, 1998 to $4.8 million for the six months ended June 30, 1999. Display rental
costs increased $965,000 or 90.0% from $1.1 million for the six months ended
June 30, 1998 to $2.0 million for the six months ended June 30, 1999. This
resulted in a gross margin of approximately $1.9 million or 64.0% of advertising
revenue for the six months ended June 30, 1998 compared to $2.8 million or 57.7%
for the six months ended June 30, 1999. The 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 77.4%
from 3,890 at June 30, 1998 to 6,900 at June 30, 1999. Operating costs increased
$1.0 million or 77.0% from $1.3 million for the six months ended June 30, 1998
to $2.3 million for the six months ended June 30, 1999. The increase in
operating costs is a reflection of the expansion of Media's operations. Income
tax expense amounted to $162,000 for the six months ended June 30, 1999. Media
generated net income of $342,000 for the six month period ended June 30, 1998
compared to net income of $300,000 for the six month period ended June 30, 1999.
The decrease in net income is primarily the result of an increase in operating
expenses. Net income is recorded as equity in earnings or losses of the
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 7(a) loans in the amount of $1.4 million on $22.5
million loans sold during the six months ended June 30, 1999 as compared to a
gain of $1.2 million on $12.1 million of loans sold during the six months ended
June 30, 1998. 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.
-25-
<PAGE>
Other Income. The Company's other income increased $504,000 or 85.7% from
$589,000 for the six months ended June 30, 1998 to $1,093,000 for the six months
ended June 30, 1999. 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 $1.3
million or 19.0% from $6.9 million for the six months ended June 30, 1998 to
$8.2 million for the six months ended June 30, 1999. Included in non-interest
expenses for the six months ended June 30, 1998 are $1.5 million of expenses
related to the merger with Medallion Capital. Exclusive of these expenses, non-
interest expenses increased $2.8 million or 52.0% from $5.4 million for the six
months ended June 30, 1998 to $8.2 million for the six months ended June 30,
1999. Other operating expenses increased $528,000 or 32.2% from $1.6 million for
the six months ended June 30, 1998 to $2,171,000 for the six months ended June
30, 1999 due to cost associated with the installation of a new loan accounting
program. Salaries and benefits increased $1.5 million or 57.3% from $2.7
million for the six months ended June 30, 1998 to $4.2 million for the six
months ended June 30, 1999 is the result of the effect of year-end raises,
salaries of personnel hired since June 30, 1998, and bonuses paid and accrued
for in the period. Professional fees increased $547,000 or 184.4% from $297,000
for the six months ended June 30, 1998 to $844,000 for the six months ended June
30, 1999. Investment advisory fees increased $8,000 from $117,000 for the six
months ended June 30, 1998 to $125,000 for the six months ended June 30, 1999.
Amortization of Goodwill and Accretion of Negative Goodwill. The
amortization of goodwill was $240,000 for the six months ended June 30, 1998 and
$312,000 for the six months ended June 30, 1999, 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 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 $554,000 or 9.4%
from $5.9 million for the six-month period ended June 30, 1998 to $6.4 million
for the six months ended June 30, 1999. Exclusive of the merger-related
expenses of $1.5 million, net investment income decreased $940,000 or 12.8% from
$7.4 million for the six months period ended June 30, 1998 to $6.4 million for
the six months ended June 30, 1999. The decrease is attributable to a faster
decline in the average yield a compared to the decline in the cost of funds
together with an increase in operating expenses.
-26-
<PAGE>
Change in Net Unrealized Depreciation/Appreciation. The change in net
unrealized appreciation increased $2.4 million from a net appreciation of
$222,000 for the six months ended June 30, 1998 to an appreciation $2.6 million
for the six months ended June 30, 1999. 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 a decrease in
realized net gain on investments of $391,000 from net realized gains of $1.0
million for the six months ended June 30, 1998 to $636,000 for the six months
ended June 30, 1999. The decrease in realized gains was the result of the lower
volume of sales of warrants in connection with repayments of loans in 1999
compared to 1998.
Net Increase in Net Assets Resulting from Operations. Net increase in net
assets resulting from operations increased $2.4 million or 34.0% from $7.2
million for the six months ended June 30, 1998 to $9.6 million for the six
months ended June 30, 1999. Exclusive of the merger-related expenses $1.5
million, net increase in net assets resulting from operations increased $936,000
or 10.8% from $8.7 million for the six months period ended June 30, 1998 to $9.6
million for the six months ended June 30, 1999. The increase was attributable to
the positive impact of portfolio growth coupled with an increase in the spread
between average yield and average cost of funds. Return on assets and return on
equity for the six months ended June 30, 1999, on an annualized basis, were 4.3%
and 12.7%, respectively, compared to 4.7% and 11.5% for the six months ended
June 30, 1998.
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 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
-27-
<PAGE>
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% 5/12/97 5/13/99
$10,000,000 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 $29.8 million with a weighted average rate
of interest of 7.16%. At June 30, 1999, these debentures constituted 9.9% 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 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%
-28-
<PAGE>
of its investment company taxable income; consequently, the Company primarily
relies upon external sources of funds to finance growth. At June 30, 1999, the
Company's total debt outstanding was $302.4 million at a weighted average
interest rate of 6.21%. Of the total debt outstanding, $113 million or 37.3%
consisted of bank debt, substantially all of which was at variable effective
rates of interest with a weighted average rate of 6.11% or 189 basis points
below the Prime Rate, 45.4% or $137.2 million consisted of short-term commercial
paper at a weighted average interest rate of 5.93%, 9.9% or $29.8 million
consisted of SBA debentures with fixed rates of interest with a weighted average
rate of 7.16% and 7.4% or $22.5 million consisted of private placement debt with
a weighted average interest rate of 7.20%. 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 $44.9 million of debt was available at June 30, 1999
at variable effective rates of interest averaging below the Prime Rate under the
Company's $295.0 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
June 30, 1999:
<TABLE>
<CAPTION>
Medallion
Financial MFC BLLC MCI MBC Total
--------- --- ---- --- --- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 57 $ 4,105 $ -- $ 3,069 $1,066 $ 8,297
Revolving lines of credit 100,000 195,000 -- -- -- 295,000
Amounts available 37,500 7,366 -- -- -- 44,866*
Amounts outstanding 62,500 50,450 -- -- -- 112,950
Average interest rate 6.11% 6.11% -- -- -- 6.11%
Maturity 7/00 6/01 -- -- -- 7/00-6/01
Commercial paper
Amounts outstanding -- 137,184 -- -- -- 137,184
Average interest rate -- 5.93% -- -- -- 5.93%
Maturity -- 6/01 -- -- -- 6/01
SBA debentures -- 19,310 -- 10,500 -- 29,810
Average interest rate -- 7.20% -- 7.08% -- 7.16%
Maturity -- 9/00-9/05 -- 3/06-6/07 -- 9/00-6/07
Bonds -- 22,500 -- -- -- 22,500
Average interest rate -- 7.20% -- -- -- 7.20%
Maturity -- 6/04 -- -- -- 6/04
Total cash and remaining amounts
available under credit facilities 37,557 11,471 -- 3,069 1,066 53,163
Total debt outstanding $ 62,500 $ 229,444 $ -- $ 10,500 $ -- $ 302,444
</TABLE>
* Note 1) Commercial paper outstanding is deducted from revolving credit lines
available as the line of credit acts as a liquidity facility for the commercial
paper.
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
-29-
<PAGE>
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 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
-30-
<PAGE>
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
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. In 1998, approximately 58.7%
of Media's taxicab rooftop advertising revenue was 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. Effective March 31, 1999, under the Master Settlement
Agreement between tobacco manufactures and the attorneys general of various
states (including the states in which the Company conducts its outdoor
advertising business), the tobacco manufacturers have agreed to eliminate
general outdoor and transit advertising of tobacco products. Accordingly, such
restrictions may have an adverse effect upon the taxicab rooftop advertising
business of the Company.
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 and such initiatives are expected to be Year
2000 compliant. The Company has implemented a five phase plan to remediate its
information technology ("IT") and non-IT systems: (1) compiling an inventory of
the company's computer hardware and software ("IT systems") and equipment ("non-
IT systems"); (2) identifying and verifying the Year 2000 readiness of third
parties; (3) assessing whether the systems can be remediated or must be
replaced; (4) remediating or replacing IT and non-IT systems; (5) testing the
remediated or replaced IT and non-IT systems. An
-31-
<PAGE>
inventory of IT and non-IT systems was completed by December 31, 1998. The
Company has received Year 2000 compliance letters from each of its major
software vendors and its major office systems vendors and is awaiting responses
from additional parties. Phase three is substantially complete as of June 30,
1999. Planning for phases four and five began in the first quarter of 1999 and
testing of critical systems are continuing and are scheduled to be completed by
the end of the third quarter. Software and operating system tests are being
conducted using fictitious transactions and each individual workstation and
network server will be tested for Year 2000 compliance.
The Company estimates that the total cost involved in the Year 2000 project
is approximately $30,000. This excludes the costs related to new loan servicing
software and an update of the general ledger system. These costs will be
expenses as incurred, except for capitalizable hardware. The project is staffed
with both external contractors and internal personnel. Approximately $12,500 has
been spent to date.
Management believes that the Year 2000 project is on schedule and such
measures will adequately address the Year 2000 issues, although there can be no
assurance in this regard. Further, both the cost estimates and completion
timeframes are subject to change based on new circumstances that may arise. 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 has
sent 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. The Company is in the process of developing a contingency plan to address
the potential for business disruption due to systems failure or the failure of
third parties to modify their systems timely that may have a material or adverse
effect on the Company's operations. The Year 2000 disclosure set forth above is
a "year 2000 statement" as defined in the Year 2000 Information and Readiness
Disclosure Act of 1998 (the "Year 2000 Act") and, to the extent the disclosure
related to year 2000 processing of the Company or to products or services
offered by the Company, is also a "year 2000 readiness disclosure" as defined in
the Year 2000 Act.
-32-
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on June 16, 1999 (the
"Annual Meeting").
The Company's stockholders were asked to take the following actions at the
meeting:
(1) Elect two Class III Directors to serve until the 2002 annual meeting of
stockholders or until their successors shall otherwise be elected (the
"Board Proposal");
(2) Approve certain amendments to the Company's 1996 Non-employee Director
Stock Option Plan to adjust the calculation of the number of shares of the
Company's Common Stock issuable under options to be granted to a Non-
employee Director upon his or her re-election. (the "Incentive Plan
Proposal");
(3) Approve the renewal of the sub-advisory agreement between the Company and
FMC Advisers, Inc. (the "Advisory Contract Proposal"); and
(4) Ratify the Board of Directors' selection of Arthur Andersen LLP to serve as
the Company's independent auditors for the fiscal year ending December 31,
1999 (the "Auditors Proposal").
With respect to the Board Proposal, the two individuals nominated for director
were elected by the affirmative vote of a majority of shares of common stock
present at the Annual Meeting.
The nominees and the votes received by each are as follows:
Votes cast for Withheld
----------------------------------------------------------------
Alvin Murstein 10,880,427 36,817
Benjamin Ward 10,880,427 36,817
The Incentive Plan Proposal, Advisory Contract Proposal and Auditors Proposal
were also approved by affirmative vote of a majority of shares of common stock
present at the Annual Meeting. Each of the proposals received the following
votes:
Votes cast for Against Abstentions
----------------------------------------------------------------
Incentive Plan Proposal 10,576,029 287,329 53,886
Advisory Contract Proposal 10,709,091 172,241 35,912
Auditors Proposal 10,878,741 14,346 24,157
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
-33-
<PAGE>
(a) Exhibits
10.1 Amended and Restated Loan Agreement by and among Medallion Financial
Corp., Medallion Business Credit, LLC, the Lenders Party Hereto, Fleet
Bank, National Association as Agent and Swing Line Lender and Fleet
Bank, National Association as Arranger, dated June 29, 1999.
10.2 Medallion Funding Corp. $22,500,000 7.20% Senior Secured Notes, Series
A Due June 1, 2004 Note Purchase Agreement, dated as of June 1, 1999.
10.3 Security Agreement between Medallion Funding Corp., as debtor, and
Fleet Bank, N.A., as Agent and secured party, for the benefit of the
Travelers Insurance Company, the First Citicorp Life Insurance
Company, Citicorp Life Insurance Company, United of Omaha Life
Insurance Company and Companion Life Insurance Company dated June 1,
1999.
10.4 Security Agreement between Medallion Business Credit, LLC, 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 Amended and Restated
Loan Agreement, dated as of June 29, 1999, among Medallion Financial
Corp., Medallion Business Credit LLC, the Banks Signatory thereto, the
Swing Line Lender and Fleet Bank, N.A., as Arranger and Agent, dated
as of June 29, 1999.
10.5 Intercreditor Agreement, dated June 1, 1999, among Fleet Bank, N.A.,
as agent for and on behalf of the Banks, the Banks, the Senior
Noteholders, Fleet, acting as collateral agent to the Senior
Noteholders and Fleet as intercreditor collateral agent for the Senior
Creditors.
10.6 $5,000,000 Swing Line Note, dated June 29, 1999.
10.7 $20,000,000 Revolving Credit Note No. 1, dated June 29, 1999.
10.8 $15,000,000 Revolving Credit Note No. 2, dated June 29, 1999.
10.9 $10,000,000 Revolving Credit Note No. 3, dated June 29, 1999.
10.10 $10,000,000 Revolving Credit Note No. 4, dated June 29, 1999.
10.11 $10,000,000 Revolving Credit Note No. 5, dated June 29, 1999.
10.12 $5,000,000 Revolving Credit Note No. 6, dated June 29, 1999.
10.13 $10,000,000 Revolving Credit Note No. 7, dated June 29, 1999.
10.14 $10,000,000 Revolving Credit Note No. 8, dated June 29, 1999.
10.15 $10,000,000 Revolving Credit Note No. 9, dated June 29, 1999.
27 Mediallion Financial Corp. Financial Data Schedule. Filed herewith.
-34-
<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: August 13, 1999 By: /s/ Daniel F. Baker
-------------------
Daniel F. Baker
Chief Financial Officer
Signing on behalf of the registrant and as
principal financial and accounting officer
-35-
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED LOAN AGREEMENT
by and among
MEDALLION FINANCIAL CORP.,
MEDALLION BUSINESS CREDIT, LLC
THE LENDERS PARTY HERETO,
FLEET BANK, NATIONAL ASSOCIATION
AS AGENT AND SWING LINE LENDER
and
FLEET BANK, NATIONAL ASSOCIATION
AS ARRANGER
Dated as of June 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 DEFINITIONS..................................................................... 1
Section 1.1 Defined Terms................................................................... 1
Section 1.2 Other Definitional Provisions................................................... 22
ARTICLE 2 AMOUNT AND TERMS OF REVOLVING
CREDIT LOANS................................................................... 23
Section 2.1 Commitments and Loans........................................................... 23
Section 2.2 Revolving Credit, Term Loan and Swing Line Notes................................ 25
Section 2.3 Procedures Applicable to Borrowings and
Conversions..................................................................... 29
Section 2.4 Termination and Reduction of Aggregate Revolving
Credit Commitment............................................................... 32
Section 2.5 Prepayments..................................................................... 34
Section 2.6 Interest on Delinquent Payments................................................. 35
Section 2.7 Increased Costs................................................................. 36
Section 2.8 Use of Proceeds................................................................. 38
Section 2.9 Payment on Non-Business Days.................................................... 38
Section 2.10 Term of Revolving Credit Commitments............................................ 38
Section 2.11 Funding Losses.................................................................. 40
Section 2.12 Alternate Rate of Interest...................................................... 41
Section 2.13 Changes In Legality............................................................. 41
Section 2.14 Participations.................................................................. 41
ARTICLE 3 FEES AND PAYMENTS............................................................... 42
Section 3.1 Fees............................................................................ 42
Section 3.2 Payments........................................................................ 42
Section 3.3 Taxes........................................................................... 43
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................................. 44
Section 4.1 Corporate Status................................................................ 45
Section 4.2 Subsidiaries.................................................................... 45
Section 4.3 Location of Offices, Books and Records.......................................... 45
Section 4.4 Corporate Power; Authorization.................................................. 45
Section 4.5 Enforceable Obligations......................................................... 46
Section 4.6 No Violation of Agreements; Compliance with Law................................. 46
Section 4.7 Agreements...................................................................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4.8 No Material Litigation.......................................................... 46
Section 4.9 Good Title to Properties........................................................ 47
Section 4.10 Margin Regulations.............................................................. 47
Section 4.11 [Reserved]...................................................................... 47
Section 4.12 Investment Company.............................................................. 47
Section 4.13 Disclosure...................................................................... 47
Section 4.14 Taxes and Claims................................................................ 48
Section 4.15 Licenses and Permits............................................................ 48
Section 4.16 Consents........................................................................ 48
Section 4.17 Employee Benefit Plans.......................................................... 48
Section 4.18 Financial Condition............................................................. 49
Section 4.19 Environmental Laws, Etc......................................................... 50
Section 4.20 Event of Default................................................................ 50
Section 4.21 Solvency........................................................................ 50
Section 4.22 Priority; Continued Effectiveness............................................... 50
Section 4.23 Advertising, Origination and Servicing Activities............................... 51
Section 4.24 Activities...................................................................... 51
Section 4.25 Year 2000 Issue................................................................. 51
Section 4.26 No Transfer to BL............................................................... 51
ARTICLE 5 CONDITIONS PRECEDENT............................................................ 52
Section 5.1 Conditions to Initial Revolving Credit Loan and Initial
Swing Line Loan................................................................. 52
Section 5.2 Conditions to All Revolving Credit and Term Loans............................... 54
ARTICLE 6 AFFIRMATIVE COVENANTS........................................................... 55
Section 6.1 Financial Statements and Other Information...................................... 55
Section 6.2 Taxes and Claims................................................................ 58
Section 6.3 Insurance....................................................................... 58
Section 6.4 Books and Records............................................................... 59
Section 6.5 Properties in Good Condition.................................................... 59
Section 6.6 Inspection by the Banks......................................................... 59
Section 6.7 Pay Indebtedness to Agent and Perform Other
Covenants....................................................................... 59
Section 6.8 Compliance With Laws............................................................ 60
Section 6.9 Notice of Certain Events........................................................ 60
Section 6.10 Environmental Laws, Etc......................................................... 60
Section 6.11 Further Assurances.............................................................. 61
Section 6.12 ERISA........................................................................... 61
Section 6.13 Corporate or Limited Liability Company Existence................................ 61
Section 6.14 Maintenance of Security Interest................................................ 61
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 6.15 Maximum Percentage of Commercial Loans.......................................... 62
Section 6.16 Year 2000 Issue................................................................. 62
Section 6.17 Borrowers' Manuals.............................................................. 62
Section 6.18 Principal Office of Clients..................................................... 62
ARTICLE 7 FINANCIAL COVENANTS............................................................. 63
Section 7.1 Maximum Leverage Ratio.......................................................... 63
Section 7.2 Maximum Adjusted Leverage Ratio................................................. 63
Section 7.3 Borrowing Base.................................................................. 63
Section 7.4 Minimum EBIT to Interest Expense Ratio.......................................... 63
Section 7.5 Minimum Asset Quality........................................................... 64
ARTICLE 8 NEGATIVE COVENANTS.............................................................. 64
Section 8.1 Liens........................................................................... 64
Section 8.2 Indebtedness.................................................................... 65
Section 8.3 Limitation on Loans and Investments............................................. 65
Section 8.4 [Reserved]...................................................................... 66
Section 8.5 Restricted Payments............................................................. 66
Section 8.6 Merger, Consolidation, Sale or Transfers Assets................................. 67
Section 8.7 Transfer of Proceeds............................................................ 67
Section 8.8 Compliance with ERISA........................................................... 67
Section 8.9 Change in Business.............................................................. 68
Section 8.10 Amendments of Agreements........................................................ 68
Section 8.11 Transactions with Affiliates.................................................... 68
Section 8.12 Negative Pledges................................................................ 68
Section 8.13 Inconsistent Agreements......................................................... 68
Section 8.14 Capital Expenditures............................................................ 68
Section 8.15 [Reserved]...................................................................... 69
ARTICLE 9 DEFAULTS AND REMEDIES........................................................... 69
Section 9.1 Events of Default............................................................... 69
Section 9.2 Suits for Enforcement........................................................... 73
Section 9.3 Rights and Remedies Cumulative.................................................. 73
Section 9.4 Rights and Remedies Not Waived.................................................. 73
Section 9.5 Further Payments................................................................ 73
ARTICLE 10 MISCELLANEOUS................................................................... 74
Section 10.1 Collection Costs................................................................ 74
Section 10.2 Modification and Waiver......................................................... 74
Section 10.3 GOVERNING LAW................................................................... 75
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 10.4 Notices......................................................................... 75
Section 10.5 Accounting Terms................................................................ 76
Section 10.6 Costs and Expenses; Indemnity................................................... 76
Section 10.7 WAIVER OF JURY TRIAL AND SETOFF................................................. 77
Section 10.8 Captions........................................................................ 78
Section 10.9 Lien; Setoff by Banks........................................................... 78
Section 10.10 Security; Continued Effectiveness............................................... 79
Section 10.11 Jurisdiction; Service of Process................................................ 79
Section 10.12 Benefit of Agreement............................................................ 80
Section 10.13 Counterparts.................................................................... 80
Section 10.14 Interest........................................................................ 80
Section 10.15 Attorneys' Fees................................................................. 81
Section 10.16 Severability.................................................................... 81
Section 10.17 Confidentiality................................................................. 81
Section 10.18 Loss, Theft, Etc. of Notes...................................................... 82
ARTICLE 11 AGENCY.......................................................................... 82
Section 11.1 Appointment and Actions......................................................... 82
Section 11.2 Independent Credit Decisions.................................................... 84
Section 11.3 Indemnification of Agent........................................................ 85
Section 11.4 Resignation and Succession...................................................... 85
ARTICLE 12 SALES AND TRANSFERS............................................................. 86
Section 12.1 Sales and Transfers............................................................. 86
Section 12.2 New Banks....................................................................... 88
Section 12.3 Joint and Several Liability..................................................... 90
ARTICLE 13 GUARANTEE....................................................................... 90
Section 13.1 Guarantee....................................................................... 90
Section 13.2 Absolute Obligation............................................................. 92
Section 13.3 Repayment in Bankruptcy......................................................... 93
Section 13.4 Miscellaneous................................................................... 93
Section 13.5 Subordination................................................................... 93
ARTICLE 14 BORROWER AGENCY................................................................. 94
Section 14.1 Appointment and Actions......................................................... 94
</TABLE>
Exhibits and Schedules
- - - ----------------------
Exhibit A Percentages
-iv-
<PAGE>
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 MBC Security Agreement
Exhibit G Form of Borrowing Base Certificate
Exhibit H Form of Opinion of Counsel to Borrower
Exhibit I Form of Assignment and Acceptance
Schedule I Locations, Chief Executive Office
Schedule II Subsidiaries
-v-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT, dated as of June 29, 1999, among
MEDALLION FINANCIAL CORP., a Delaware corporation ("MFC"), MEDALLION BUSINESS
---
CREDIT, LLC, a Delaware limited liability company ("MBC;" MBC and MFC are
----
sometimes hereinafter referred to individually as a "Borrower" and together as
--------
the "Borrowers"), 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, MFC, the Agent, the Swing Line Lender and the Banks are parties to
a Loan Agreement dated as of July 31, 1998 and amended as of May 6, 1999 and
June 1, 1999 (as so amended, the "Original Agreement");
------------------
WHEREAS, the parties to the Original Agreement wish to amend and restate
the Original Agreement in its entirety as set forth herein to, among other
things, add MBC as an additional Borrower and extend the maturity of the
Original Agreement, all on the terms and conditions hereinafter set forth; and
WHEREAS, for convenience, this Agreement is dated as of June 29, 1999, and
references to certain matters related to the period prior thereto have been
deleted;
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.
----------- -------------
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
--------------
obligated to a Client under or on account of a Receivable.
"Accumulated Funding Deficiency" shall have the meaning set forth in
------------------------------
Section 302 of ERISA.
"Additional Commitment Amount" shall have the meaning set forth in Section
----------------------------
12.2 hereof.
"Adjusted LIBO Rate" shall mean, with respect to any Interest Period
------------------
applicable to any LIBO Rate Loan, 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 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
-1-
<PAGE>
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 either Borrower, the
-------------------
aggregate income (or loss) of such Borrower for such period which shall be an
amount equal to net revenues and other proper items of income less the aggregate
----
for such Borrower 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 MFC and MBC taken 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 MFC in MBC) and amounts due to MFC and/or MBC from any
Subsidiary(ies) of any of them, all determined in accordance with GAAP
consistently applied.
"Affiliate" shall mean any Person which, directly or indirectly, controls
---------
or is controlled by or is under common control with any other Person and,
without limiting the generality of the foregoing, shall include any Person who
(a) beneficially owns or holds 20% or more of the Voting Interests of such other
Person (determined either by number of shares or number of votes) or (b) is an
associate (as such term is defined in Rule 405 of the Securities Act of 1933, as
in effect on the Restatement 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
--------------------
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 Borrowers, the Swing Line Lender and each Bank.
"Aggregate Revolving Credit Commitment" shall mean $100,000,000, as the
-------------------------------------
same may be reduced, terminated or increased from time to time pursuant to
Sections 2.4, 2.10, 9.1 or 12.2 hereof.
"Agreement" shall mean this Loan Agreement, as the same may be amended and
---------
supplemented from time to time.
"Amount" shall mean, (a) with respect to any Loan, the principal amount of,
------
plus all accrued and unpaid interest on, and all other amounts due in respect
of, such Loan and (b) with respect to any Receivable, all amounts due in respect
of such Receivable.
"Applicable Facility Percentage" means 0.15%.
------------------------------
-2-
<PAGE>
"Applicable Cost of Funds Margin" means 1.15%.
-------------------------------
"Applicable LIBO Margin" means 1.10%.
----------------------
"Assignee" or "Assignees" shall have the meaning set forth in Section 12.2
-------- ---------
hereof.
"Assignment" or "Assignments" shall have the meaning set forth in Section
---------- -----------
12.2 hereof.
"Assignor" or "Assignors" shall have the meaning set forth in Section 12.2
-------- ---------
hereof.
"Authorized Representative" shall mean, with respect to either Borrower,
-------------------------
its chairman, president, chief executive officer, chief operating officer, chief
accounting officer, vice president or chief financial officer, or any other
officer of such Borrower designated as such from time to time by such 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
-----------
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 MFC.
"Board" shall mean the Board of Governors of the Federal Reserve System.
-----
"Borrowing Base Certificate" shall mean a certificate substantially in the
--------------------------
form of Exhibit G hereto, which Borrowing Base Certificate shall identify all
---------
such information separately for MFC and MBC.
"Borrower Financing Statements" shall mean financing statements approved
-----------------------------
for filing in accordance with the Uniform Commercial Code, and all other titles,
certificates, assignments and other documents that the Agent or any Bank may
require to perfect the security interests to be granted under the MFC Security
Agreement and the MBC Security Agreement.
"Borrower Obligations" shall mean, with respect to MFC, all of the
--------------------
obligations and liabilities of MFC under the Loan Documents and, with respect to
MBC, all of the obligations and liabilities of MBC 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.
"Business Day" shall mean any day other than a Saturday, Sunday or other
------------
day on which the Agent is not open for business at its offices set forth in this
Agreement.
-3-
<PAGE>
"Capital Stock" with respect to any corporation, shall mean common stock,
-------------
preferred stock, and any and all shares or other equivalents (however
designated) of any other corporate stock, of such corporation.
"Client" shall mean, with respect to any Loan, any Person, not disapproved
------
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.
-----------------
"Collateral" shall mean and include the assets, property or interests in
----------
property of whatever nature whatsoever, real, personal or mixed, tangible or
intangible, of MFC and/or MBC 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.
"Commercial Loans" shall mean Loans that are secured in whole or in part by
----------------
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
-------------
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
------------------
hereunder that bears 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.
"Default" shall mean any of the events specified in Section 9.1 hereof,
-------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Default Rate" shall have the meaning set forth in Section 2.6 hereof.
------------
"Delinquent Receivables Loan" shall mean a Loan secured by Receivables as
---------------------------
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
-----------------
seeks relief under or takes advantage of any insolvency law; makes an assignment
for the benefit of its creditors;
-4-
<PAGE>
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 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
---------
quarters of the applicable Borrower, 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.
"Dollars" and "$" shall mean dollars in lawful currency of the United
------- -
States of America.
"Domestic Investment" shall mean an Investment in respect of a Person which
-------------------
is a resident of the United States, 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
-------------
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 either Borrower 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 Borrower for such period, computed in
accordance with GAAP.
"Edwards Debt" shall mean the outstanding amount owed by Medallion Funding
------------
to the SBA under the following notes, originally given by Edwards Capital Corp.,
a Delaware corporation (which merged with and into Medallion Funding), to the
SBA: two debentures dated September 23, 1992, in the original principal amount
of $3,500,000 and $6,050,000, respectively; a debenture
-5-
<PAGE>
dated June 29, 1994, in the original principal amount of $4,600,000; and a
debenture dated September 28, 1994, in the original principal amount of
$5,100,000.
"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 MFC Security Agreement or
the MBC Security Agreement,
(e) such Loan is made to an Eligible Client,
(f) the representations, warranties and covenants contained in the MFC
Security Agreement and the MBC Security Agreement are true and correct, and have
been complied with, with respect to such Loan,
(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 Borrower.
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 Borrower, 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 Borrower 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 Borrower'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,
-------- ----
no Loan shall be an Eligible Commercial Loan (i) if a Borrower, in its
reasonable business judgment, deems such Eligible Commercial Loan to be
uncollectible or subject
-6-
<PAGE>
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 Borrower shall mean Equipment in which a
------------------
perfected security interest has been obtained by such Borrower 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 Borrower to such Client, or in
the case of a beneficial owner of such Client, to secure a guaranty which shall
have been made by such beneficial owner guaranteeing such Loan, and the same has
been assigned to the Agent, for the benefit of the Banks, pursuant to the MFC
Security Agreement or MBC Security Agreement and the same is otherwise
satisfactory to the Agent.
"Eligible Inventory" of any Borrower shall mean Inventory in which a first
------------------
priority perfected security interest has been obtained by such Borrower to
secure the obligations of a Client under a Loan by such Borrower to such Client,
or in the case of a beneficial owner of such Client, to secure a guaranty which
shall have been made by such beneficial owner guaranteeing such Loan, and the
same has been assigned to the Agent, for the benefit of the Banks, pursuant to
the MFC Security Agreement or the MBC 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 Borrower has not entered into a landlord's waiver on terms
satisfactory to such Borrower; and (k) inventory which in the reasonable
judgment of the applicable Borrower, 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 Loans" shall mean any Loan that constitutes or comprises either
--------------
an Eligible Medallion Loan or Eligible Commercial Loan.
"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 Borrower,
- - - -------- ----
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 Real Estate" of either Borrower shall mean Real Property in which
--------------------
a mortgage interest has been obtained (and continuously maintained) by such
Borrower to secure the obligations of the Client under a Loan by such Borrower
to such Client, or in the case of a beneficial owner of such Client, to secure a
guaranty which shall have been made by such beneficial owner
-7-
<PAGE>
guaranteeing the Loan, and assigned to the Agent, for the benefit of the Banks,
pursuant to a Mortgage Assignment.
"Eligible Receivables" of either Borrower shall mean Receivables (i) that
--------------------
are reasonably determined in good faith to be eligible by such Borrower, (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 Borrower to
secure the obligations of such Person under a Loan by such Borrower to such
Person, or in the case of a beneficial owner of such Client, to secure a
guaranty which shall have been made by such beneficial owner guaranteeing such
Loan, and the same has been assigned to the Agent, for the benefit of the Banks,
pursuant to the MFC Security Agreement or the MBC 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 Borrower
within the meaning of Section 4001 of ERISA.
"ERISA Termination Event" shall mean (i) a Reportable Event, (ii) the
-----------------------
withdrawal of either Borrower 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
-8-
<PAGE>
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.
"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 Borrowers 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
-9-
<PAGE>
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 MFC 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 Obligations" shall mean the obligation of Medallion Funding to
----------------------
pay to the SBA on September 1, 1999 in respect of the SBA Debt a principal
amount not in excess of $20,000,000 together with interest thereon accrued
through the date of payment and prepayment penalties (if any) due pursuant to
the terms of the SBA Debt.
"Guaranty and Security Agreement" shall mean the Guaranty and Security
-------------------------------
Agreement dated the Original 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 to the Original Agreement, as the same may be amended or
---------
supplemented from time to time.
"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 Borrowers.
-10-
<PAGE>
"Initial Revolving Credit Loan" shall mean the Revolving Credit Loan or
-----------------------------
Revolving Credit Loans made by the Banks to either or both of the Borrowers on
the Restatement Effective Date.
"Initial Term" shall mean the period from and including the Restatement
------------
Effective Date to and including June 26, 2000.
"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 MFC Security Agreement and/or the Guaranty
and Security Agreement.
"Intercompany Demand Loan Security Documents" shall mean the security
-------------------------------------------
documents executed by BL in favor of MFC in order to grant MFC 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 MFC evidencing loans by MFC to BL,
substantially in the form of Exhibit L to the Original Agreement.
"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 either Borrower or any of its
Subsidiaries during such period on Indebtedness of either Borrower 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
-11-
<PAGE>
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 Borrowers 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 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) hereof in
the case of a Revolving Credit Loan and as specified in Section 2.2(c)(iii)
hereof 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" shall mean any loan or advance made in the ordinary course of
----
business by a Borrower (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 Borrower, 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 a separate and distinct Loan.
"Loan Documents" shall mean and include this Agreement, the Revolving
--------------
Credit Notes, the Term Notes, the Swing Line Note, the MFC Security Agreement,
the MBC Security Agreement, any Mortgage Assignment, the Borrower Financing
Statements, the Borrowing Base Certificates. and each other document, instrument
or agreement executed pursuant to, or in connection with, any Loan Document.
-12-
<PAGE>
"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 a Borrower.
"Material Adverse Effect" shall mean an event, action or condition
-----------------------
affecting any Person or any of its properties or revenues that would (i)
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
Borrower.
"Maturity" shall have the meaning set forth in Section 2.2(b) hereof.
--------
"MBC" shall mean Medallion Business Credit, LLC, a Delaware limited
---
liability company the sole member of which is MFC.
"MBC Borrowing Base" shall mean, as determined pursuant to the most
------------------
recently required Borrowing Base Certificate
(i) cash and Short Term Investments shown on MBC's balance sheet as
of such date, plus
----
(ii) 83.3% of the aggregate outstanding principal balances of, plus
accrued interest on, all of MBC'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 MBC's Eligible Commercial Loans 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 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.
"MBC Security Agreement" shall mean the Security Agreement dated the
----------------------
Restatement Effective Date, between MBC and the Agent for the benefit of the
Banks and the Swing Line Lender, substantially in the form of Exhibit F hereto,
---------
as the same may be amended or supplemented from time to time.
"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
-13-
<PAGE>
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 Funding" shall mean Medallion Funding Corp., a New York
-----------------
corporation which is a wholly owned Subsidiary of MFC.
"Medallion Funding Debt" shall mean the outstanding amount owed by
----------------------
Medallion Funding to the SBA under the following notes to the SBA: a debenture
dated September 26, 1990, in the original principal amount of $510,000; a
debenture dated December 19, 1990, in the original principal amount of $640,000;
a debenture dated September 23, 1992, in the original principal amount of
$1,950,000; a debenture dated June 29, 1994, in the original principal amount of
$900,000; a debenture dated March 29, 1995, in the original principal amount of
$1,700,000 and a debenture dated September 27, 1995, in the original principal
amount of $500,000;
"Medallion Loans" shall mean Loans secured in whole or in part by Medallion
---------------
Rights.
"Medallion Rights" shall mean, as to either Borrower, 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 Borrower to secure the Loan made by such Borrower to such Person, and
assigned to the Agent, for the benefit of the Banks, pursuant to the MFC
Security Agreement or the MBC 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 MFC'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 MFC's Eligible Commercial Loans 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 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.
"MFC Security Agreement" shall mean the Security Agreement dated the
----------------------
Original Effective Date, between MFC and the Agent for the benefit of the Banks
and the Swing Line Lender, substantially in the form of Exhibit F to the
---------
Original Agreement, as the same may be amended or supplemented from time to
time.
-14-
<PAGE>
"Mortgage Assignment" shall mean a Mortgage Assignment between a Borrower
-------------------
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
Borrower 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.
"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 borrowing such Swing Line
Loan 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.
--------
"Note(s)" or "Revolving Credit Note(s)" or "Swing Line Note(s)" or "Term
------- ------------------------ ------------------ ----
Notes" shall mean the promissory note(s) of the Borrowers referred to in
- - - -----
Sections 2.2 and 12.2 hereof and shall include any replacement(s) therefor
issued pursuant to Section 10.18 or 12.1 hereof.
"Original Effective Date" shall mean July 31, 1998.
-----------------------
"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) and/or 2.4 (b) hereof.
-15-
<PAGE>
"Permitted Debt" shall mean (i) all unsecured Indebtedness of a Borrower
--------------
owed to the Permitted Lenders and (ii) Indebtedness of MFC in respect of the
Guaranteed Obligations pursuant to the SBA Guaranty.
"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, limited liability company, association, joint venture, trust or
other entity, or any Governmental Authority.
"Plan" shall mean, as to either Borrower, at any particular time, any
----
employee benefit plan which is covered by ERISA and in respect of which such
Borrower or an ERISA Affiliate is (or, if such plan were terminated at such
time, under Section 4069 of ERISA would be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Portfolio Purchase" shall mean, as to either Borrower, any purchase or
------------------
acquisition by such Borrower, 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 Borrower having any additional Loans.
"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 Borrower.
"Real Estate Loans" shall mean Loans that are secured in whole or in part
-----------------
by Real Property.
-16-
<PAGE>
"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 excess of 51% of the sum of the Aggregate Revolving Credit
Commitment plus all Term Loans then outstanding.
"Restatement Effective Date" shall mean June 29, 1999, provided that (i)
--------------------------
counterparts of this Agreement executed and delivered by the parties hereto
shall have been received by the Agent and (ii) the conditions precedent set
forth in Article V hereof shall have been satisfied or waived in writing by all
of the Banks.
"Restricted Investment" shall mean any Investment, to the extent it does
---------------------
not constitute a Short Term Investment.
"Restricted Payment" shall mean, with respect to either Borrower, any of
-------------------
the following when paid (or when the proceeds of which are paid) to any Person
during the continuance of any Default or Event of Default: (i) the payment of
any dividend on or any distribution in respect of any Capital Interests of such
Borrower (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 Borrower 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 Borrower or of any warrants, rights or options to purchase
or acquire any Capital Stock of such Borrower, (iv) any expenditure or the
incurrence of any liability to make any expenditure for any Restricted
Investment, (v) the payment of any principal of, interest on, or any amounts due
in respect of, any Indebtedness not permitted by Section 8.2 hereof, and (vi)
the payment of any principal of, or interest on, or any other amounts due in
respect of, any Subordinated Debt,
-17-
<PAGE>
"Retained Loans" as to either Borrower shall mean the percentage of each
--------------
Eligible Loan not granted by such Borrower 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 Restatement 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.
"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 Borrowers that
same shall be deemed Satisfactory Subordinated Debt for purposes of this
Agreement.
"SBA" shall mean the Small Business Administration.
---
"SBA Debt" shall mean the Edwards Debt, the TCC Debt and the Medallion
--------
Funding Debt in an aggregate principal amount as of the date of the Second
Amendment of $31,090,000 as set forth in greater detail on Schedule I to the
Second Amendment.
"SBA Guaranty" shall mean that certain Guaranty Agreement dated as of June
------------
1, 1999 by and between MFC and the SBA relating to the Guaranteed Obligations.
"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.
------
-18-
<PAGE>
"Scheduled Swing Line Commitment Termination Date" shall mean the fifth
------------------------------------------------
Business Day preceding the Term-Out Date.
"Second Amendment" shall mean Amendment Number Two to Loan Agreement, dated
----------------
as of June 1, 1999, among MFC, the Banks, the Swing Line Lender and the Agent,
relating to the Original Agreement.
"Security Documents" shall mean the MFC Security Agreement, the MBC
------------------
Security Agreement, any Mortgage Assignment, the Borrower Financing Statements
and each other document, instrument or agreement executed pursuant to, or in
connection with, any of the foregoing.
"Senior Debt" shall mean all Indebtedness of either or both of the
-----------
Borrowers other than Subordinated Debt.
"Short Term Investment" shall mean an Investment in (i) direct obligations
---------------------
of the United States of America; (ii) negotiable certificates of deposit issued
by, or negotiable bankers' acceptances (eligible for discount at Federal Reserve
Banks) of, or repurchase agreements in respect of obligations described in
clause (i) with, any bank or trust company organized under the laws of the
United States of America or any State thereof having capital and surplus of not
less than $250,000,000; and (iii) readily marketable commercial paper which, at
the time of acquisition, is rated at least A-1 by Standard & Poor's Corporation
or P-1 by Moody's Investor Services, Inc.; provided, that all of such
-------- ----
Investments described in clauses (i), (ii) and (iii) shall be payable in Dollars
and shall mature within twelve months after the date of acquisition thereof.
"Single Employer Plan" shall mean any Plan which is covered by Title IV of
--------------------
ERISA, but is not a Multiemployer Plan.
"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 either or both of the
-----------------
Borrowers 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 Borrower 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 Borrower and/or by one or more of its
Subsidiaries; provided, however, that the term "Subsidiary" shall be deemed to
----------
exclude all Subsidiaries the Tangible Net Worth of which constitutes less than
5% of the Tangible Net Worth of such Borrower.
-19-
<PAGE>
"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 Restatement
----------------------------
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 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 a 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 such 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).
-20-
<PAGE>
"Tangible Net Worth" shall mean, as to any Person on a consolidated basis,
------------------
the sum of capital surplus, earned surplus, capital stock and Satisfactory
Subordinated Debt minus deferred charges, intangibles, treasury stock, 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 New York City 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.
"TCC Debt" shall mean the outstanding amount owed by Medallion Funding to
--------
the SBA under a debenture dated as of June 24, 1992, originally given by
Transportation Capital Corp., a New York corporation (which merged with and into
Medallion Funding), to the SBA in the original principal amount of $5,600,000.
"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 2.1(b) hereof, to make a Term Loan to each Borrower on such
Bank's Term-Out Date equal to the principal amount of its Revolving Credit Loans
then outstanding to such 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,
-------------
June 26, 2000, 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 MFC as of such date plus
----
the aggregate unconsolidated outstanding Indebtedness of MBC (excluding, in each
case, intercompany Indebtedness among any of MFC, MBC or any Subsidiary or
Affiliate of either) as of such date, each determined 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 either Borrower, all of such
---------------------
Borrower's rights with respect to, or interest in, any and all present and
future Medallion Rights, Equipment,
-21-
<PAGE>
Inventory, Real Property, Receivables, machinery, future accounts, accounts
receivable, receivables, contracts, contract rights, general intangibles, books,
desks, notes, bills, drafts, acceptances, choses in action, chattel paper,
instruments, documents and other forms of obligations and property, real,
personal or mixed, tangible or intangible, at any time owing to or owned by any
Client to whom such Borrower 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
are 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.
-22-
<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 each Borrower from time to time during the Revolving Credit
Commitment Period in an aggregate amount at any one time outstanding not to
exceed for both Borrowers such Bank's Revolving Credit Commitment. During the
Revolving Credit Commitment Period, the Borrowers 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 MFC plus the aggregate unpaid balance of all Revolving Credit Loans to
----
MFC plus the aggregate unpaid balance of all Term Loans to MFC shall not exceed
----
the MFC Borrowing Base, (iii) the aggregate unpaid balance of all Swing Line
Loans to MBC plus the aggregate unpaid balance of all Revolving Credit Loans to
----
MBC plus the aggregate unpaid balance of all Term Loans to MBC shall not exceed
----
the MBC Borrowing Base, (iv) the aggregate unpaid balance of all Swing Line
Loans to the Borrowers plus the aggregate unpaid balance of all Revolving Credit
----
Loans to the Borrowers shall not exceed the Aggregate Revolving Credit
Commitment and (v) the aggregate unpaid balance of all Swing Line Loans to the
Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans to the
----
Borrowers made by the Swing Line Lender shall not exceed the Revolving Credit
Commitment of the Swing Line Lender.
(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 each 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 such
Borrower; provided, that immediately after making each Term Loan (i) the
-------- ----
aggregate unpaid balance of all Term Loans to the Borrowers 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 MFC plus the aggregate unpaid balance
----
of all Revolving Credit Loans to MFC plus the aggregate unpaid balance of all
----
Term Loans to MFC shall not exceed the MFC Borrowing Base, (iii) the aggregate
unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance
----
of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all
----
Term Loans to MBC shall not exceed the MBC Borrowing Base, (iv) the aggregate
unpaid balance of all Swing Line Loans to the Borrowers plus the aggregate
----
unpaid balance of all Revolving Credit Loans to the Borrowers plus the aggregate
----
unpaid balance of all Term Loans to the Borrowers shall not exceed the sum of
the Aggregate Revolving Credit Commitment and the aggregate unpaid balance of
all outstanding Term Loans and (v) the aggregate unpaid balance of all Swing
Line Loans to the Borrowers plus the aggregate unpaid balance of all Revolving
----
Credit Loans to the Borrowers made by the Swing Line Lender plus the aggregate
----
unpaid balance of all Term Loans to the Borrowers made by the Swing Line Lender
shall not exceed the sum of the Revolving Credit Commitment of the Swing Line
Lender and the aggregate unpaid balance of all outstanding Term Loans of the
Swing Line
-23-
<PAGE>
Lender. The proceeds of each Term Loan to a Borrower shall be made available to
such 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 such Borrower and the Aggregate
Revolving Credit Commitment shall be reduced by an amount equal to the aggregate
principal amount of such Term Loans. Prior to each Term Loan's Maturity, each
Borrower may prepay (and is required to prepay) the Term Loans made to it, 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 each 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 for both Borrowers 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 Borrowers would not
exceed the Swing Line Commitment Amount, (w) the aggregate unpaid balance of all
Swing Line Loans to MFC plus the aggregate unpaid balance of all Revolving
----
Credit Loans to MFC plus the aggregate unpaid balance of all Term Loans to MFC
----
shall not exceed the MFC Borrowing Base, (x) the aggregate unpaid balance of all
Swing Line Loans to MBC plus the aggregate unpaid balance of all Revolving
----
Credit Loans to MBC plus the aggregate unpaid balance of all Term Loans to MBC
----
shall not exceed the MBC Borrowing Base, (y) the aggregate unpaid balance of all
Swing Line Loans to the Borrowers plus the aggregate unpaid balance of all
----
Revolving Credit Loans to the Borrowers shall not exceed the Aggregate Revolving
Credit Commitment and (z) the aggregate unpaid balance of all Swing Line Loans
to the Borrowers plus the aggregate unpaid balance of all Revolving Credit Loans
----
made by the Swing Line Lender to the Borrowers shall not exceed the Revolving
Credit Commitment of the Swing Line Lender. During the Swing Line Commitment
Period, the Borrowers may borrow, prepay in whole or in part and reborrow under
the Swing Line Commitment, all in accordance with the terms and conditions of
this Agreement. No Swing Line Loan shall be made prior to the making of the
first Revolving Credit Loans on the Restatement 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 Borrowers 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.
-24-
<PAGE>
(iii) Upon (1) a request by the Swing Line Lender, (2) 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 a 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 Borrowers with any of their
obligations under the Loan Documents.
(iv) In furtherance of this Section 2.1(c), upon the occurrence of
any event set forth in Section 2.1(c)(iii) hereof, 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, 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 a 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 to
----------------------
each Borrower shall be evidenced by a separate Revolving Credit Note of such
Borrower, in substantially the form of Exhibit B hereto, payable to the order of
---------
such Bank and representing the obligation of such Borrower to pay the aggregate
principal amount of the Revolving Credit Loans from time to time outstanding
from such Bank to such Borrower, together with interest thereon. Each Bank is
hereby authorized to endorse the date, amount and loan type of each Revolving
Credit Loan, the
-25-
<PAGE>
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 each of its
Revolving Credit Notes, 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 either Borrower
to repay its Revolving Credit Loans in accordance with the terms of this
Agreement.
(ii) Term Loan Notes. The Term Loan of each Bank to each Borrower
---------------
shall be evidenced by a separate Term Note of such Borrower, in substantially
the form of Exhibit C hereto, payable to the order of such Bank and representing
---------
the obligation of such Borrower to pay the aggregate principal amount of the
Term Loan from time to time outstanding from such Bank to such Borrower,
together with interest thereon. Each Bank is hereby authorized to endorse the
date, amount and loan type of each 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 each of its Term Notes, 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 either Borrower to repay its Term Loans in accordance with the
terms of this Agreement.
(iii) Swing Line Note. The Swing Line Loans of the Swing Line Lender
---------------
to each Borrower shall be evidenced by a Swing Line Note of such Borrower, in
substantially the form of Exhibit D, payable to the order of the Swing Line
---------
Lender and representing the obligation of such Borrower to pay the aggregate
principal amount of the Swing Line Loans from time to time outstanding from such
Swing Line Lender to such Borrower, 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 each of
its Swing Line Notes, 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 either
Borrower to repay its Swing Line Loans in accordance with the terms of this
Agreement.
(b) Date and Maturity of Each Note. The Swing Line Note of MFC and each
------------------------------
Revolving Credit Note issued by MFC on the Original Effective Date pursuant to
the Original Agreement shall continue to be outstanding hereunder and shall, as
of the Restatement Effective Date, be Notes governed by the terms of this
Agreement. Each Note shall, except as otherwise provided in Section 12.1 or
12.2 hereof, be dated (A) the Original Effective Date, in the case of each
Revolving Credit Note and the Swing Line Note of MFC to the Banks party to the
Original Agreement, (B) the Restatement Effective Date, in the case of each
Revolving Credit Note of MFC
-26-
<PAGE>
issued to any Bank which is party to this Agreement on the Restatement Effective
Date, but was not party to the Original Agreement, (C) the Restatement Effective
Date, in the case of each Revolving Credit Note and the Swing Line Note of MBC
and (D) 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 earliest 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, and (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.
(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 issuing such Revolving Credit Note 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 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. Each 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 issuing such term Note 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.
-27-
<PAGE>
(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 which borrowed such loan, 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 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;
-28-
<PAGE>
(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 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, each 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 such 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 a 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
-29-
<PAGE>
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
Term Loan shall replace. Each Term Loan shall, for its first Interest Period,
be a Prime Rate Loan unless the Borrower borrowing such Term Loan 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 such 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. Each Borrower may borrow under the Swing Line
----------------
Commitment on any Business Day during the Swing Line Commitment Period, provided
that such 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 such 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 such 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 the Borrower
requesting the loan(s) to which such Loan Request relates. 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 the requested Revolving Credit Loans, or Term Loans, as the case
may be, available to the Agent for the account of the Borrower requesting such
loan(s) at the applicable Agent Payment Office in Dollars not later than
-30-
<PAGE>
2:00 p.m. (New York City time), on the relevant borrowing date requested by such
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 such
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 on such borrowing date to the Borrower requesting
such loan(s) 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
requesting such loan(s) 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 such Borrower until the date such amount is paid to the Agent,
at a rate per annum equal to, in the case of such 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 such Borrower, the Federal Funds
Rate and (B) after the second day after the date such amount is made available
to such Borrower, the applicable interest rate then applicable to such loan(s).
Such payment by such 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, a Borrower may continue any of its LIBO Rate
Loans or Cost of Funds Loans as such for an additional Interest Period or
convert any of its Revolving Credit Loans or Term Loans of a given loan type
into Revolving Credit Loans or Term Loans 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) Such 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
-31-
<PAGE>
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;
(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 required to be submitted to the Agent and ending on the
first day of the requested Interest Period.
If a Borrower fails, in connection with the expiration of an Interest
Period applicable to a Revolving Credit Loan or Term Loan made to such Borrower
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 Borrowers 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
-32-
<PAGE>
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 MFC and all such
loans payable by MBC), 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 (allocated
between the loans of MFC and MBC as they shall specify in the notice of such
reduction, provided that such allocation otherwise complies with the terms of
this Agreement) 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 (allocated between the loans
of MFC and MBC as they shall specify in the notice of such reduction, provided
that such allocation otherwise complies with the terms of this Agreement). 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 required by a reduction in
the Aggregate Revolving Credit Commitment shall be applied by the Agent pro rata
among the Banks in proportion to the amount of the principal plus accrued
interest of their Term Loans then outstanding. Within five Business Days after
any reduction in the Aggregate Revolving Credit Commitment pursuant to this
Section 2.4(a), 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(a) and
upon payment of all amounts due by the Borrowers 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 either Borrower or otherwise, all as if such
payment had not been made. Upon any reduction of the Aggregate Revolving Credit
Commitment, in the event that the Borrowers shall fail to specify in the notice
of such reduction the allocation of prepayments between the loans of MFC and MBC
in accordance with the terms of this Agreement, it shall be in the Agent's
discretion as to whether to apply any prepayments of loans in connection
therewith against (i) MFC's obligations to the Agent, the Swing Line Lender and
the Banks and/or (ii) MBC's obligations to the Agent, the Swing Line Lender and
the Banks.
-33-
<PAGE>
Section 2.5 Prepayments.
----------- -----------
(a) Voluntary. Each Borrower from time to time may prepay its Revolving
----------
Credit Loans, Swing Line Loans, or 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 Borrowers'
election to reduce the Aggregate Revolving Credit Commitment pursuant to Section
2.4 hereof, without the prior written approval of the Required Banks, neither
Borrower may prepay any Term Loan unless all Revolving Credit Loans have been
paid off in full and the Aggregate Revolving Credit Commitment terminated, (iv)
neither Borrower may 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 Borrowers 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 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 by the Borrower borrowing such Term Loan 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 such 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 principal 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
-34-
<PAGE>
Aggregate Revolving Credit Commitment and the aggregate principal balance of all
Term Loans, or (D) the aggregate outstanding principal balance of the Revolving
Credit Loans of the Swing Line Lender, plus the aggregate outstanding principal
----
balance of all Swing Line Loans, exceeds the Revolving Credit Commitment of the
Swing Line Lender, the Borrowers 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 Borrowers 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. Such prepayment shall be
allocated between the loans of MFC and MBC as they shall specify in connection
with such prepayment, provided that such allocation otherwise complies with the
terms of this Agreement. In the event that the Borrowers shall fail so to
specify such allocation, it shall be in the Agent's discretion as to whether to
apply any such prepayments against (i) MFC's obligations to the Agent, the Swing
Line Lender and the Banks and/or (ii) MBC's obligations to the Agent, the Swing
Line Lender and the Banks. To the extent possible, the Borrowers 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 made to MBC shall exceed the MBC
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 made to MFC shall exceed the MFC Borrowing
Base, within five days of the first day there exists any such deficiency the
relevant Borrower shall make payment to the Agent (to be applied against such
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, each Borrower shall, in connection with any 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 of a Borrower 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 to such
Borrower, 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(h) or
9.1(i) hereof) at an annual rate equal to the sum of (i) in the case of any
Prime Rate Loan, 2%
-35-
<PAGE>
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 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:
(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
-36-
<PAGE>
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 Borrowers in writing of the happening of such event;
(2) such Bank, or the Swing Line Lender, as the case may be, shall
promptly deliver to the Borrowers 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 Borrowers 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 Original 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), increases 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 Borrowers 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 Borrowers 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 Borrowers
shall be delivered to the Borrowers no later than 90 days following the end of
any financial period with respect to which such compensation is sought. If the
Borrowers 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
Borrowers receive such notice, then, commencing on such thirtieth day and
retroactive to the
-37-
<PAGE>
date of such notice (but not earlier than the effective date of any such
change), the fees 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 Borrowers, 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
Borrowers 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 Borrowers an
amount equal to the amount of compensation paid by the Borrowers 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 Use of Proceeds.
----------- ---------------
The proceeds of all Revolving Credit Loans, Swing Line Loans and Term Loans
made to the Borrowers hereunder shall be used only (i) to fund Medallion Loans
and Commercial Loans of MFC and MBC made in the ordinary course of business of
MFC and MBC, and (ii) for other working capital purposes of the Borrowers;
provided, that, in no event shall proceeds of Revolving Credit Loans be used for
the direct or indirect benefit of any Subsidiary of MFC (other than MBC) or of
MBC, 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 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) with respect
to 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) with respect to each
Renewal Term (as defined in Section 2.10(b) below), the Revolving Credit
-38-
<PAGE>
Commitment and other obligations of each Bank under this Agreement with respect
to Revolving Credit Loans shall terminate on the date which is 364 days after
the date on 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
- - - ------------------
(or, in the event of a renewal, the last day of the then current Renewal Term)
unless such Bank gives written notice of renewal, for a 364-day period, of its
Revolving Credit Obligations to the Borrowers by the date which is 45 days prior
to the date on which such obligations are to be terminated (May 13, 2000, in the
case of the Initial Term) (the "Renewal Deadline"). The Borrowers, 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 Borrowers 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 Borrowers, 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 for each 364-day term following the Initial Term
(each such term, a "Renewal Term") with the Renewal Deadline, the Rejection of
------------
Renewal Deadline and the Renewal Reconsideration Deadline to be applicable with
respect to each such term, 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 date which is 364
days after the date on which such Renewal Term commenced, and (ii) each
Revolving Credit Note shall be deemed amended to reflect the extended Maturity.
If any Bank elects not to renew its Revolving Credit Obligations, or if the
Borrowers reject 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 each Borrower in accordance with the provisions of
Section 2.1(b) hereof and the Aggregate Revolving Credit Commitment shall be
reduced by an amount equal to the aggregate principal amount of such Term Loans.
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.
-39-
<PAGE>
(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 Borrowers, and such rights and
remedies and such obligations shall survive until the Borrowers shall have fully
paid and performed all their obligations hereunder and thereunder in full.
Section 2.11 Funding Losses.
------------ --------------
(a) The Borrowers 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,
reduction or increase 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.
(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 Borrowers under this Section
2.11 may be made at any time and from time to time as often as the occasion
therefor may arise.
-40-
<PAGE>
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 Borrowers, promptly confirmed in writing (which may be
by teletransmission). In the event of any such determination and until the
Agent notifies the Borrowers (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 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 Borrowers 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 Borrowers 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.
------------ --------------
Each Borrower may grant participations to other Persons of such Borrower's
choosing in a portion of its rights and/or obligations under any Loan; provided,
--------
however, that any such
- - - -------
-41-
<PAGE>
participation shall be granted pursuant to a form of participation agreement
which shall provide, among other things, that (a) such 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) such 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 such Borrower's
standard underwriting criteria and credit policy at the time thereof and (d)
such 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 Borrowers shall provide the Banks in writing with a description of
all Loans in respect of which participations have been granted. Notwithstanding
the foregoing, neither Borrower shall grant a participation to any Subsidiary or
Affiliate of either Borrower in any Medallion Loan originated by such Borrower,
except that MFC may grant participations in any of its Medallion Loans to MBC.
ARTICLE 3 FEES AND PAYMENTS
Section 3.1 Fees.
----------- ----
(a) Annual Facility Fee. The Borrowers 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 Restatement Effective Date to 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 Restatement 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 Borrowers agree 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 each 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 such
----
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
such Borrower to make any such Payment by such time shall not
-42-
<PAGE>
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.
Section 3.3 Taxes.
----------- -----
(a) Any and all payments by the Borrowers 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 either 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) such
Borrower shall make such deductions, (iii) such Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) such Borrower shall deliver to the
Agent evidence of such payment to the relevant Governmental Authority.
(b) In addition, the Borrowers agree 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
-43-
<PAGE>
to as "Other Taxes") and to deliver to the Agent and the Banks evidence of such
-----------
payment to the relevant Governmental Authority.
(c) The Borrowers 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 Borrowers elect to contest whether or not the Taxes or Other
Taxes giving rise to their indemnification obligation hereunder were correctly
or legally asserted, the Agent, the Swing Line Lender or the Bank being
indemnified agrees to cooperate in such contest, at the Borrowers' expense, and
to make available to the Borrowers 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
Borrowers hereunder, the agreements and obligations of the Borrowers 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 Borrowers, to execute and deliver to the Borrowers 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 Borrowers 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
Borrowers 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 Borrower hereby makes the following representations and
warranties, which shall survive the execution and delivery of the Loan Documents
and (except to the extent that any of such representations and warranties
expressly relates to earlier dates, in which case it shall continue to be true
as of such 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 either Borrower or made by any Bank or the Swing Line Lender, as the case may
be:
-44-
<PAGE>
Section 4.1 Corporate Status.
----------- ----------------
MFC is a duly organized and validly existing corporation and MBC is a duly
organized and validly existing limited liability company, and each is 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.
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 MFC), there are no corporations of which
MFC 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 MFC or MBC 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 at which (i) each
Borrower maintains its books and records relating to, among other things, its
Loans, (ii) either Borrower has any places of business and (iii) each Borrower
has its chief executive office.
Section 4.4 Corporate Power; Authorization.
----------- ------------------------------
Each Borrower 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
Borrower 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 MFC and obtaining of any consent of members required by law
or by the Certificate of Formation or Operating Agreement in the case of MBC) 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.
-45-
<PAGE>
Section 4.5 Enforceable Obligations.
----------- -----------------------
Each Loan Document, and each other instrument and document executed by a
Borrower and delivered to the Agent pursuant to Section 5.1 hereof, constitutes
the legal, valid and binding obligation of such Borrower, enforceable in
accordance with its respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and general principles
of equity, and there are no actions, suits or proceedings pending or, to the
knowledge of such Borrower, threatened against, or affecting, a Borrower or any
of its officers or directors calling into question the legality, validity or
enforceability of any thereof.
Section 4.6 No Violation of Agreements; Compliance with Law.
----------- -----------------------------------------------
Neither Borrower 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
Borrower pursuant to this Agreement or the other Loan Documents, nor the
consummation of the transactions herein and therein contemplated, nor compliance
with the provisions hereof or thereof will violate any law or regulation, or any
order or decree of any court or governmental instrumentality, or will conflict
with, or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which a Borrower is a
party or by which it may be bound, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property of a Borrower except as
expressly permitted by this Agreement, or violate any provision of the
Certificate of Incorporation, By-Laws or any preferred stock provisions of MFC
or violate any provision of the Certificate of Formation or Operating Agreement
of MBC.
Section 4.7 Agreements.
----------- ----------
Neither Borrower is a party to any agreement or instrument or subject to
any corporate or limited liability company (as the case may be) restriction
(including any restriction set forth in the Certificate of Incorporation, By-
Laws or preferred stock provisions in the case of MFC or set forth in the
Certificate of Formation or Operating Agreement in the case of MBC) 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
either Borrower, threatened, against, or affecting either Borrower or any of its
officers or directors before any court, arbitrator or governmental or
administrative body or agency which, if adversely determined, might have a
Material Adverse Effect. No injunction, writ, restraining order or other order
of any nature adverse to either Borrower or the conduct of its business or
inconsistent with the due consummation of such transactions has been issued by
any
-46-
<PAGE>
Governmental Authority. Neither Borrower 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 Borrower.
Section 4.9 Good Title to Properties.
----------- ------------------------
Each Borrower has good and marketable title to all its properties and
assets, subject to no Liens of any kind (except as expressly permitted under
this Agreement).
Section 4.10 Margin Regulations.
------------ ------------------
Neither Borrower 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 Borrowers 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
Borrower 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 a
Borrower nor any agent acting on behalf of either of them 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 [Reserved]
------------ ----------
Section 4.12 Investment Company.
------------ ------------------
MFC is a "business development company" and an "investment company," as
such term is defined in the 1940 Act. MBC is not a "business development
company" and is not 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 Borrowers and the performance of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of said Act, or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
Section 4.13 Disclosure.
------------ ----------
No representation or warranty made by either Borrower in any Loan Document
or any other document furnished from time to time in connection herewith or
therewith contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
herein or therein, in light of the circumstances under
-47-
<PAGE>
which they were made, not misleading. There is no fact known to either Borrower
or any of its officers or directors which has, or which in the future might
have, in the reasonable judgment of either Borrower, a Material Adverse Effect,
except as set forth or referred to in this Agreement or in another document or
instrument heretofore furnished to the Banks.
Section 4.14 Taxes and Claims.
------------ ----------------
Each Borrower has filed or caused to be filed, all Federal, state and local
tax returns and reports which are required to be filed and has paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its property and all other taxes, fees or charges imposed on it or
any of its property by any Governmental Authority (other than those the amount
or validity of which are currently being diligently contested in good faith by
appropriate proceedings and in respect of which adequate reserves in conformity
with GAAP have been provided on the books of the applicable Borrower); and no
tax liens have been filed and, to the knowledge of each Borrower, no claims are
being asserted with respect to any such taxes, fees or other charges. Each
Borrower, to the best of its knowledge, has paid and discharged all lawful
claims for labor, material, supplies and anything else which might or could, if
unpaid, become a Lien on any of its properties (other than those the amount or
validity of which are currently being diligently contested in good faith by
appropriate proceedings and in respect of which adequate reserves in conformity
with GAAP have been provided on the books of the applicable Borrower).
Section 4.15 Licenses and Permits.
------------ --------------------
Each Borrower possesses all the licenses, permits, approvals and consents
of Federal, state and local governments and regulatory authorities and rights in
any thereof, adequate for the conduct of its business as now conducted, without
conflict with the rights or claimed rights of others. Neither Borrower has
received any notice nor does either Borrower have any knowledge or reason to
believe that any appropriate authority intends to cancel, terminate or modify
any of such licenses or permits or that valid grounds for such cancellation,
termination or modification exist.
Section 4.16 Consents.
------------ --------
No consent, authorization or action of, or filing with, any Governmental
Authority or any other Person is required to authorize, or is otherwise required
of either Borrower in connection with, the execution, delivery, performance,
validity or enforceability of the Loan Documents or any of the instruments or
documents to be delivered pursuant to the Loan Documents.
Section 4.17 Employee Benefit Plans.
------------ ----------------------
(a) None of the Plans maintained at any time by either Borrower, or any
ERISA Affiliate thereof or the trusts created thereunder has engaged in a
Prohibited Transaction which
-48-
<PAGE>
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 either Borrower, or any ERISA Affiliate thereof, or the trusts
created thereunder has been terminated in a manner that results or could result
in a liability to either Borrower in excess of $50,000, nor has either Borrower,
any ERISA Affiliate thereof, or any such Plan of either Borrower or any ERISA
Affiliate incurred any liability to the PBGC in excess of $50,000, other than
for required insurance premiums which have been paid when due; neither a
Borrower nor any ERISA Affiliate thereof 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 either Borrower in excess of $50,000; and each Borrower
and each ERISA Affiliate has made or provided for all contributions to all
employee pension benefit plans which they maintain and which were required under
ERISA or the Code as of the end of the most recent fiscal year under each such
plan; no such employee pension benefit plan has incurred any Accumulated Funding
Deficiency the effect of which was a liability or potential liability to either
Borrower in excess of $50,000, whether or not waived; nor has there been any
Reportable Event, or other event or condition which presents a risk of
termination of any such Plan by the PBGC, which termination could result in a
potential liability to either Borrower in excess of $50,000.
(c) The present value of all accrued benefits under the Plans, if any,
which are employee pension benefit plans did not, as of the most recent
valuation date for each such Plan, exceed by more than $50,000 the then current
value of the assets of such Plans allocable to such accrued benefits.
(d) Each employee pension benefit plan maintained by each Borrower and each
ERISA Affiliate has been administered in accordance with its terms and is in
compliance in all material respects with all applicable requirements of ERISA
and other applicable laws, regulations and rulings.
(e) As used in this Section 4.17 the term "employee Pension benefit Plan"
and "accrued benefits" shall have the respective meanings assigned to them in
ERISA.
Section 4.18 Financial Condition.
------------ -------------------
The consolidated balance sheets of MFC for the fiscal years ended December
31, 1997 and December 31, 1998 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 MFC as at the date of such balance sheets,
and the results of its operations for such periods. 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 relating to the
-49-
<PAGE>
fiscal year ended December 31, 1998 mentioned above, there has been no material
adverse change in the consolidated condition, financial or otherwise, of either
Borrower.
Section 4.19 Environmental Laws, Etc.
------------ -----------------------
(a) All Property heretofore, now or hereafter owned or operated by each
Borrower complied, complies and will comply in all material respects with all
applicable Federal, state and local, environmental, health and safety statutes,
guidelines, codes, ordinances and regulations;
(b) such Property does not contain and is not being and has not been used
to generate, manufacture, refine, produce, store, handle, transfer, process,
dispose of, or transport, any Hazardous Materials in violation of any material
applicable Federal, state or local law or regulation;
(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
(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 as are 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 Borrower is Solvent, and will not, as a result of the transactions
contemplated hereby or by the Loan Documents cease to be Solvent.
Section 4.22 Priority; Continued Effectiveness.
------------ ---------------------------------
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
Borrower 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. The MFC
Security Agreement continues to be effective to create in favor of the Agent,
for the ratable benefit of the Banks and the Swing Line Lender, a valid and
perfected first priority (except as otherwise permitted hereunder) security
interest in and to the Collateral described therein securing the payment of the
Revolving Credit Loans, Swing Line Loans and Term
-50-
<PAGE>
Loans and all other sums payable under or in connection with the Loan Documents,
whether incurred prior to or after the Restatement Effective Date. No additional
Borrower Financing Statements are required to be filed as of the Restatement
Effective Date in order to maintain the perfection and priority of the security
interests created pursuant to the MFC Security Agreement.
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 either Borrower comply with all applicable Federal, state and local
laws, ordinances, rules and regulations, including but not limited to those
related to usury, truth in lending, real estate settlement procedures, consumer
protection, equal credit opportunity, fair debt collection, rescission rights
and disclosures, except where failure to comply would not have a Material
Adverse Effect.
Section 4.24 Activities.
------------ ----------
The only transactions engaged in by each Borrower in the ordinary course of
its business consist of: (i) the making and servicing of Loans and Investments
[(in the case of MBC, in compliance with the SBI Act and the SBA Regulations
promulgated thereunder)]; and (ii) transactions incidental to the foregoing.
Section 4.25 Year 2000 Issue.
------------ ---------------
Each Borrower 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 Borrower 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 Borrower and its Subsidiaries interface). The costs to such Borrower 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 Borrower 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
either Borrower or any of its Subsidiaries.
Section 4.26 No Transfer to BL.
------------ -----------------
No transfers of the proceeds of the Revolving Credit Loans, Swing Line
Loans or Term Loans were made by MFC to BL prior to the Restatement Effective
Date.
51
<PAGE>
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 under the
Original Agreement, were each subject to the satisfaction on the Original
Effective Date of the conditions precedent set forth in Section 5.1 of the
Original Agreement. 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 Restatement
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 MBC; 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 MBC
---------
and, in addition, for each Bank party to this Agreement as of the Restatement
Effective Date which was not party to the Original Agreement, a Revolving Credit
Note conforming to the requirements hereof in the form of Exhibit B hereto,
---------
executed by an Authorized Representative of MFC;
(ii) evidence satisfactory to the Banks that there is no outstanding
Indebtedness or Liens except Permitted Indebtedness and Permitted Liens;
(iii) the MBC Security Agreement in the form of Exhibit F, executed
---------
by an Authorized Representative of MBC;
(iv) evidence satisfactory to the Banks that such additional Borrower
Financing Statements as the Agent and the Banks require in connection with the
amendments effected by this Agreement have been executed and delivered to the
Agent in a form acceptable to the Agent, such that the security interests
described in the Security Documents constitute valid and perfected first
priority security interests, subject only to Liens permitted pursuant to Section
8.1 hereof;
(v) the results of a search of all filings made against MBC 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;
(vi) an opinion of counsel to the Borrowers substantially in the form
of Exhibit H 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;
(vii) (A) a copy of the Certificate of Incorporation of MFC and all
amendments thereto, certified as of the date hereof by the Chief Financial
Officer of MFC (or a certificate of even
52
<PAGE>
date herewith of the Chief Financial Officer of MFC certifying that there have
been no amendments to the Certificate of Incorporation of MFC since the
amendment thereto filed in the office of the Secretary of State of Delaware on
July 1, 1998, a certified copy of which was delivered to the Agent on the
Original Effective Date), and (B) a copy of the Certificate of Formation of MBC
and all amendments thereto, certified as of the date hereof by the Chief
Financial Officer of MBC;
(viii) (A) a copy of the By-laws of MFC certified as of the date
hereof by the Chief Financial Officer of MFC (or a certificate of even date
herewith of the Chief Financial Officer of MFC certifying that the Bylaws of MFC
adopted on May 22, 1996, a certified copy of which was delivered to the Agent on
the Original Effective Date, remain in full force and effect) and (B) a copy of
the Operating Agreement of MBC in effect as of the Restatement Effective Date,
certified as of the date hereof by the Chief Financial Officer of MBC;
(ix) certified copies of the resolutions of the Board of Directors
of MFC and of the Managers or applicable governing body of MBC, 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
Borrower, and certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect thereto;
(x) certificates of the Chief Financial Officer of each Borrower
certifying the names and true signatures of the officers of such Borrower
authorized to sign each document to which it is a signatory and which is to be
delivered by it hereunder or pursuant to any other Loan Document to which it is
a party;
(xi) a certificate of the Chief Financial Officer of each Borrower
to the effect that (A) the financial statements referred to in Section 4.18
hereof present fairly the financial condition of such Borrower 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 Borrower has occurred
since the date of such financial statements;
(xii) a certificate of an Authorized Representative of each Borrower
to the effect that such Borrower has in effect all insurance coverage required
pursuant to Section 6.3 hereof;
(xiii) 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;
(xiv) 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;
(xv) a Borrowing Base Certificate in the form of Exhibit G from each
---------
Borrower; and
53
<PAGE>
(xvi) the rights of the Agent and the Banks under each of the MFC
Security Agreement, the MBC Security Agreement, the Mortgage Assignments and the
Borrower Financing Statements shall be and continue in full force and effect
after the Restatement Effective Date (subject to the filing of any continuation
statements required by the UCC).
(b) MFC is a corporation, and MBC 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 or limited liability company (as applicable)
action and proceedings 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, LLP, 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
Restatement Effective Date), as of the Restatement Effective Date.
(f) MFC shall have paid to the Agent and each Bank party to the Original
Agreement all amounts which are required to be paid to the Agent and each such
Bank on or before the Restatement Effective Date pursuant to the Original
Agreement.
(g) The Intercompany Demand Loan Documents shall have been terminated.
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:
54
<PAGE>
(a) each of the representations and warranties made by a Borrower in or
pursuant to any Loan Document or which are contained in any agreement,
instrument, certificate, document or other writing furnished at any time under
or in connection herewith or therewith shall be true and correct in all material
respects when made and on and as of the date of the making of such Revolving
Credit Loan or Term Loan or Swing Line Loan (except to the extent any
representation or warranty expressly relates to an earlier date, in which case
it shall continue to be true as of such 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 either 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 MFC plus the aggregate unpaid balance of all
----
Revolving Credit Loans to MFC plus the aggregate unpaid balance of all Term
----
Loans to MFC shall not exceed the MFC Borrowing Base and (ii) the aggregate
unpaid balance of all Swing Line Loans to MBC plus the aggregate unpaid balance
----
of all Revolving Credit Loans to MBC plus the aggregate unpaid balance of all
----
Term Loans to MBC shall not exceed the MBC Borrowing Base.
Each borrowing by the Borrowers hereunder shall constitute a representation
and warranty by each Borrower 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 Borrower covenants and agrees that, until the Notes together with
interest and all other Indebtedness of the Borrowers to the Agent, the Swing
Line Lender and 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 Borrowers shall furnish to the Agent and each Bank:
(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,
1999, a detailed schedule of all outstanding Loans of each Borrower setting
forth (i) the aging, on a contractual basis, of each Loan and (ii) the aggregate
dollar amount of Loans as to which any amendments or modifications to
55
<PAGE>
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 as to each Borrower (i) the number
of Medallion Rights pledged to such Borrower as security for Loans made by it,
(ii) the then outstanding aggregate principal amount of the Loans secured by
such Medallion Rights and (iii) such Borrower's good-faith best estimate (along
with supporting documentation) of the current fair market value of the operating
rights and licenses evidenced by 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 MBC Borrowing Base, covering 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 MFC, beginning
with the fiscal quarter ending June 30, 1999, a consolidated and consolidating
balance sheet, a statement of income and retained earnings and a statement of
cash flow of each Borrower, as at the end of and for the quarterly period then
ended and for the period commencing at the end of the previous fiscal year and
ending with such quarter, setting forth the corresponding figures for the
appropriate periods of the previous fiscal year in comparative form, all in
reasonable detail (which detail, 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 Borrower
to be true and correct and to have been prepared in accordance with GAAP (except
for the omission of footnotes), subject to normal recurring year-end audit
adjustments;
(e) as soon as practicable and in any event within 90 days after the end of
each fiscal year of MFC commencing with the fiscal year ending December 31,
1999, a consolidated and consolidating balance sheet, a statement of income and
retained earnings and a statement of cash flow of each Borrower, as at the end
of and for the fiscal year just closed, setting forth the corresponding figures
of the previous fiscal year in comparative form, all in reasonable detail (which
detail, 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 Borrower 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;
56
<PAGE>
(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 Borrower, and concurrently with the
delivery of the financial statements required to be furnished under Section
6.1(e) hereof, a certificate signed by the Independent Public Accountants, and
promptly upon the occurrence of any Default or Event of Default, a certificate
signed by the chief executive officer, chief operating officer, chief financial
officer, or chief accounting officer of each Borrower or such Independent Public
Accountants, if a Default or Event of Default shall have occurred during the
period of their review, in each case stating (i) that a review of the activities
of each Borrower 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
Borrower has observed, performed and fulfilled all of its obligations under this
Agreement, and (ii) that there existed during such period no Default or Event of
Default (provided that, as to a certificate prepared by the Independent Public
Accountants, such period, as it relates to the compliance by each Borrower with
covenants contained in Articles VII and VIII hereof shall apply to the fiscal
period covered by their review) or if any such Default or Event of Default
exists, specifying the nature thereof, the period of existence thereof and what
action the Borrowers propose to take, or have 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 and Sections 6.15, 8.2, 8.3, and 8.14
hereof;
(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 Independent Public Accountants described above, setting forth weaknesses in
the accounting and control procedures of either Borrower 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 Borrower, copies of
(i) all financial reports (including, without limitation, management letters),
if any, submitted to such Borrower by its auditors in connection with each
annual, interim or special audit of its books by such auditors, (ii) all "vault
count opinions" submitted to such Borrower in connection with each inspection by
such auditors of the documents evidencing such Borrower's Loans and the
Underlying Collateral securing such Loans, (iii) all audits submitted to such
Borrower by the SBA or any other Governmental Authority and (iv) all reports,
letters or other documents submitted to such Borrower by the SBA or any other
Governmental Authority relating to a material change in such Borrower'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 MFC, a copy of the Independent Public
Accountant's annual management letter provided to MFC; and
57
<PAGE>
(j) with reasonable promptness, such other information respecting the
business, operations and financial condition of either Borrower as the Agent or
any of the Banks from time to time reasonably may request.
Section 6.2 Taxes and Claims.
----------- ----------------
(a) Each Borrower shall pay promptly when due, (i) all material sales, use,
excise, personal property, income, withholding, corporate franchise and all
other taxes, assessments and governmental charges upon or against or relating to
such Borrower or its ownership or use of any of its properties, assets, income
or gross receipts unless and to the extent that such charges are being
diligently contested in good faith by appropriate proceedings and adequate
reserves in conformity with GAAP have been provided therefor on the books of
such Borrower, and (ii) all lawful claims, whether for labor, materials,
supplies, services or anything else which might or could, if unpaid, become a
Lien or charge upon the properties or assets of such Borrower or any of its
Subsidiaries, which Lien would not be permitted under this Agreement, unless and
to the extent such claims are being diligently contested in good faith by
appropriate proceedings and adequate reserves in conformity with GAAP have been
provided therefor on the books of such Borrower.
(b) Neither Borrower 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 either Borrower shall fail to pay any such tax,
assessment, levy or governmental charge or to discharge any such Lien (other
than a Permitted Lien), then the Agent, without waiving or releasing any
obligation or default of the Borrowers 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 Borrower shall (i) keep all of its properties adequately insured
at all times with responsible insurance carriers against loss or damage by fire
and other hazards and (ii) maintain adequate insurance at all times with
responsible carriers against liability on account of damage to persons and
property and under all applicable workers' 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.
58
<PAGE>
(b) Each Borrower, 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 Borrower 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 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 Borrower shall keep its properties in good repair, working order and
condition (subject to such wear and tear as may occur in the ordinary course of
business) and, from time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management.
Section 6.6 Inspection by the Banks.
----------- -----------------------
Each Borrower shall allow any representative of the Agent or any of the
Banks to visit and inspect any of the properties of such Borrower to examine and
audit the books of account and other records and files of such Borrower, to make
copies thereof and to discuss the affairs, business, finances and accounts of
such Borrower 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 Borrowers, 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
Borrowers.
Section 6.7 Pay Indebtedness to Agent and Perform Other Covenants.
----------- -----------------------------------------------------
Each 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 of such Borrower and all other
amounts owed by such 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
59
<PAGE>
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 Borrower shall comply with all applicable laws and regulations,
including but not limited to, those of the SBA and Federal, state and local laws
and regulations relating to consumer lending, disclosure, collection and
licensing where the failure so to 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 Borrower).
Section 6.9 Notice of Certain Events.
----------- ------------------------
Each Borrower 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 Borrower, whether or not the claim is considered by a Borrower to be covered
by insurance, which might, if determined adversely, have a Material Adverse
Effect, or where the amount involved, when added together with all other amounts
involved in any other litigation, investigation, arbitration or proceeding
affecting such Borrower, would exceed $500,000, and each Borrower 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 Borrower 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 Borrower from any
Governmental Authority which, if such violation were established, might have a
Material Adverse Effect; (c) any material attachment, judgment, lien, levy or
order which may be placed on or assessed against or threatened against a
Borrower or the Collateral; (d) any Default or Event of Default or any event
that, after notice or lapse of time or both, would become a Default or Event of
Default; (e) any other matter that has or causes or may have or cause a Material
Adverse Effect with respect to a Borrower; and (f) any change in the corporate
name or corporate form of a Borrower, or any change in the information disclosed
on Schedule I annexed hereto.
Section 6.10 Environmental Laws, Etc.
------------ -----------------------
(a) Each Borrower shall keep all Property owned or operated by it free of
Hazardous Materials and comply with the requirements of all applicable Federal,
state and local environmental, health, safety and sanitation laws, ordinances,
regulatory and administrative authorities with respect thereto. Except to the
extent it does so on the date hereof and in strict compliance with all
applicable laws, neither Borrower shall use any Property to generate,
manufacture, refine, transport, treat, store, handle, dispose of, transfer,
produce, process or in any manner deal with, Hazardous Materials, and neither
Borrower shall cause or permit, as a result of any intentional or unintentional
act or omission on the part of a Borrower or any occupant, tenant or subtenant,
the installation or placement of Hazardous Materials onto any Property or onto
any other property or suffer the
60
<PAGE>
presence of Hazardous Materials on any Property. Each Borrower shall undertake
promptly and pursue diligently to completion appropriate remedial clean-up
action in the event of any release of Hazardous Materials on, upon or into any
real property owned or operated by a Borrower or any real property adjacent
thereto.
(b) Each Borrower agrees to provide the Banks with copies of any
notifications of releases of Hazardous Materials that are given by or on behalf
of a Borrower to any Governmental Authority with respect to any real property
owned or operated by a Borrower. 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 Borrower 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 Borrower 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 Borrower's proposed response thereto, and (ii)
actual knowledge thereof, copies of any notice of the PBGC's intention to
terminate or to have a trustee appointed to administer any Plan.
Section 6.13 Corporate or Limited Liability Company Existence.
------------ ------------------------------------------------
Each Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its corporate or limited
liability company (as applicable) existence (except as otherwise may be
permitted by Section 8.6 hereof) and all rights, licenses, permits and
franchises, the termination of which would have a Material Adverse Effect;
comply with all laws, regulations, ordinances, rules and orders applicable to
it, noncompliance with which would have a Material Adverse Effect; conduct and
operate its business in substantially the manner in which it is presently
conducted and operated without material alteration or change in the nature of
such business; at all times maintain and preserve all property used or useful in
the conduct of its business and keep the same in appropriate repair and
condition, and from time to time make, or cause to be made, all appropriate
repairs, renewals and replacements thereto, so that the business carried on in
connection therewith may be properly conducted at all times.
Section 6.14 Maintenance of Security Interest.
------------ --------------------------------
Each Borrower shall maintain perfected, first priority security interests
in the Collateral in favor of the Agent for the benefit of the Banks and the
Swing Line Lender in accordance with the
-61-
<PAGE>
terms of the MFC Security Agreement and MBC Security Agreement, subject only to
the Liens permitted pursuant to Section 8.1 hereof and taking into account the
time required for such Borrower to deliver Collateral to the Agent (which
Collateral shall be delivered to the Agent promptly upon receipt thereof by such
Borrower); provided, that, the Borrowers shall have no responsibility for a
-------- ----
breach of this covenant if caused by the gross negligence of the Agent.
Section 6.15 Maximum Percentage of Commercial Loans.
------------ --------------------------------------
For so long as amounts are owed by either Borrower to the Banks, the Swing
Line Lender or the Agent under the Loan Documents or any of the Revolving Credit
Commitments remain in effect, not more than 60% of the aggregate principal
amount of all Loans made by the Borrowers and then outstanding shall be
Commercial Loans.
Section 6.16 Year 2000 Issue.
------------ ---------------
Each Borrower 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
Borrower 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 Borrower 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 Agent, each Borrower shall provide, and
shall cause each of its Subsidiaries to provide, to the Agent and the Banks
reasonable assurance of its compliance with the preceding sentence.
Section 6.17 Borrowers' Manuals.
------------ ------------------
Not later than 90 days after the Restatement Effective Date, MBC 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; not later than July 5,
1999, MFC shall notify the Agent and each Bank of any and all material changes
made to its credit policy manual and/or operating manual from the copies of such
manuals delivered pursuant to Section 6.17 of the Original Agreement and
thereafter each Borrower shall notify the Agent and each Bank of any and all
material changes to such manuals from those most recently delivered.
Section 6.18 Principal Office of Clients.
------------ ---------------------------
Within five Business Days of any request therefor from the Agent, each
Borrower shall update Schedule II to this Agreement to provide, to the best of
such Borrower's knowledge, each location at which each Client has its principal
or chief executive office.
-62-
<PAGE>
ARTICLE 7 FINANCIAL COVENANTS
Each Borrower covenants and agrees that, until the Notes, together with
interest and all other Indebtedness of the Borrowers to the Agent, the Swing
Line Lender and 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, neither 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 MFC to (B)
Tangible Net Worth of MFC 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
MFC and shall exclude the Total Adjusted Liabilities of MBC).
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 (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 to exceed the sum of the MFC
Borrowing Base and the MBC 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 MBC to exceed the MBC 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 MFC 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)
MFC's consolidated EBIT plus MFC's consolidated Interest Expense to (b) MFC's
consolidated Interest Expense to be less than 1.50:1 at any period of
determination.
(b) Suffer or permit the ratio, on a rolling four quarter basis, of (a)
EBIT of MFC (provided that, notwithstanding the definition of EBIT, for purposes
of this Section 7.4(b), Interest Expense included in EBIT of MFC shall include
only the Interest Expense of MFC and shall exclude the Interest Expense of MBC)
plus EBIT of MBC (provided that , notwithstanding the definition of EBIT, for
purposes of this Section 7.4(b), Interest Expense included in EBIT of MBC shall
include only the Interest Expense of MBC) to (b) Interest Expense of MFC (on an
unconsolidated basis, as described in clause (a)) plus Interest Expense of MBC
(on an
-63-
<PAGE>
unconsolidated basis as described in clause (a)) 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 Borrower covenants and agrees that until the Notes together with
interest and all other Indebtedness of the Borrowers to the Agent, the Swing
Line Lender and 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, neither Borrower 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 MFC Security Agreement or the MBC Security
Agreement or other Liens in favor of the Agent or the Banks;
(b) Liens existing on property at the time acquired by a Borrower after
the date of the financial statements referred to in Section 4.18 hereof,
provided that such Lien was not incurred, directly or indirectly, in
- - - --------
anticipation or contemplation of such acquisition;
(c) Liens constituting renewals, extensions or refundings of Liens
permitted by clause (b) above, provided that the principal amount of the
Indebtedness secured by any such new Lien does not exceed the principal amount
of the Indebtedness being renewed, extended or refunded at the time of renewal,
extension or refunding thereof and that such new Lien attaches only to the same
property theretofore subject to such earlier Lien;
(d) Liens securing taxes, assessments or governmental charges or levies,
or the claims or demands of materialmen, mechanics, carriers, workmen,
repairmen, warehousemen, landlords and other like Persons, not yet delinquent or
which are being actively contested in good faith by appropriate proceedings and
in respect of which adequate reserves in conformity with GAAP have been provided
on the books of the applicable Borrower;
-64-
<PAGE>
(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 Borrower;
and
(g) Liens arising in connection with, and securing the cost of, the
acquisition of Equipment, provided, that such Lien attaches to such Equipment
concurrently with or within 90 days after the acquisition thereof (by purchase,
construction or otherwise), and provided, further, that the aggregate amount of
Indebtedness securing all such Liens shall not at any time exceed $1,000,000.
Section 8.2 Indebtedness.
----------- ------------
Create, incur, assume or suffer to exist, contingently or otherwise, any
Indebtedness, except:
(a) Indebtedness of the Borrowers 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 Borrowers;
(c) Indebtedness secured by Liens described in Section 8.1(b), (c) or (g)
hereof; and
(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.
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, provided that, the
foregoing shall not prohibit the SBA Guaranty.
(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.
-65-
<PAGE>
(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 Adjusted Tangible
Net Worth plus Satisfactory Subordinated Debt; provided, that, notwithstanding
the definition of Adjusted Tangible Net Worth, as to this covenant as to either
Borrower, such term shall mean the Adjusted Tangible Net Worth of such Borrower
alone without taking into account the Adjusted Tangible Net Worth of the other
Borrower.
(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 Borrower's Commercial Loan concentration in any given industry
(determined in accordance with the Standard Industrial Classification
promulgated by the Office of Management and Budget) would exceed in principal
amount 35% of such Borrower's total Loans outstanding.
(e) On or after the Restatement Effective Date, make any Investment in any
Subsidiary or Affiliate, 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.
(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
Borrower 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 Borrower 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 MBC Borrowing Base or the MFC Borrowing Base.
(i) Fail to file upon making or acquiring a Loan, all required Borrower
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 MBC Borrowing Base or the MFC Borrowing Base.
Section 8.4 [Reserved].
----------- --------
Section 8.5 Restricted Payments.
----------- -------------------
Make, or obligate itself to make, any Restricted Payment.
-66-
<PAGE>
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 Borrower in
violation of any of the covenants and agreements contained in this Agreement;
(b) Sell or otherwise dispose of an amount of Loans which, in aggregate
principal amount, exceeds 10% of the aggregate principal amount of all Loans of
the applicable Borrower then outstanding unless, immediately upon such sale or
disposition, the Borrowers make, 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 them equal to the aggregate principal amount, plus
accrued interest, of the Loans so sold or disposed of.;
(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 either Borrower may merge or
consolidate with any other Person, provided that (A) a Borrower shall be the
surviving and continuing corporation, (B) no Default or Event of Default shall
have occurred and be continuing and (C) after giving effect to such
consolidation or merger, each Borrower would be Solvent and, except for good
will adjustments, would have Tangible Net Worth at least equal to the Tangible
Net Worth such Borrower had immediately before such consolidation or merger; or
(d) Sell, discount or otherwise dispose of, to any Subsidiary or Affiliate
of either Borrower, any Medallion Loan originated by such Borrower, except that
MFC may make such transfers to MBC, provided that no such transfer shall cause
-------- ----
the principal amount of the Revolving Credit Loans outstanding to MFC to exceed
the MFC Borrowing Base.
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 Borrowers from time to
time hereunder to any Affiliate.
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 Borrower would, or would be likely to, incur a
liability in excess of $50,000: terminate, or permit or suffer any of its ERISA
Affiliates to terminate (other than a standard termination, as defined in
Section 4041(b) of Title IV of ERISA, of a Single Employer Plan), any Plans
maintained by a Borrower or any of its ERISA Affiliates so as to incur any
liability to the PBGC; permit or suffer to exist any Prohibited Transaction
involving any of such Plans or any trust created thereunder which would subject
a Borrower to a tax, liability or penalty on Prohibited Transactions imposed
under Code Section 4975 or ERISA; fail to pay, or permit or suffer any of its
ERISA Affiliates to fail to pay, to any such Plan (including any Multiemployer
Plan) any contribution which
-67-
<PAGE>
it or such ERISA Affiliate is obligated to pay under the terms of such Plan;
permit any Accumulated Funding Deficiency, whether or not waived, with respect
to any Plan; or permit or suffer to exist any occurrence of a Reportable Event,
or any other event or condition, which presents a material risk of termination
by the PBGC of any such Plan.
Section 8.9 Change in Business.
----------- ------------------
Materially change or alter the nature of its business as conducted as of
the Original 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 provided that, the SBA Guaranty shall not be amended,
modified or supplemented without the consent of the Agent and the Required
Lenders.
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 Borrower than those that would be
obtainable at the time from any Person who is not an Affiliate.
Section 8.12 Negative Pledges.
------------ ----------------
Enter into any agreement (excluding this Agreement and the other Loan
Documents) prohibiting the creation or assumption of any Lien upon its
properties, revenues, or assets, whether now owned or hereafter acquired.
Section 8.13 Inconsistent Agreements.
------------ -----------------------
Enter into any agreement containing any provisions which would be violated
or breached by any borrowing hereunder or by the performance by either Borrower
of its obligations under any of the Loan Documents where the potential
consequences of such violation or breach would have a Material Adverse Effect.
Section 8.14 Capital Expenditures.
------------ --------------------
Expend or commit to expend for itself more than an aggregate of $1,000,000
in any fiscal year for capital expenditures, for the acquisition of Equipment or
for leasehold improvements.
-68-
<PAGE>
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 Borrower has provided the Agent and each of
the Banks with a pro forma certificate of the chief financial officer of such
Borrower evidencing each Borrower's computation of compliance with each of the
financial ratios, tests or covenants specified in Article VII and Sections 8.2,
8.3 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 MFC, 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
(B) if the consideration for such Portfolio Purchase shall
be other than Capital Stock of MFC, 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.
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
-69-
<PAGE>
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 either Borrower in the due and punctual
payment of the principal of or interest on any of its Revolving Credit Loans,
Swing Line Loans or Term Loans or any other amounts due and owing by such
Borrower 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 either Borrower in the performance or
observance of, or shall occur under, any other covenant, agreement or provision
of this Agreement (other than Section 6.7 hereof) and such default shall not
have been remedied within 30 days after such failure shall first have become
known to any officer of either Borrower;
(d) if default shall be made by either Borrower in the performance or
observance of, or shall occur under, any covenant, agreement or provision of any
other Loan Document or in any other agreement, instrument or document delivered
to the Agent, 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 MFC's Subsidiary, Medallion Funding, 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 either Borrower shall (i) default in the payment of any principal,
interest or premium with respect to any Indebtedness for borrowed money or any
obligation which is the substantive equivalent thereof in excess of $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 either Borrower to the
-70-
<PAGE>
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 either Borrower shall file a petition or seek relief under or take
advantage of any insolvency law; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of itself or of the whole or substantially
all of its property; file a petition or an answer to a petition under any
chapter of the United States Bankruptcy Code, as amended (11 U.S.C. (S)101 et
seq.), or file a petition or seek relief under or take advantage of any other
similar law or statute of the United States of America, any state thereof or any
foreign country;
(i) if a court of competent jurisdiction shall enter an order, judgment or
decree appointing or authorizing a receiver, trustee, liquidator, custodian or
conservator of either Borrower or of the whole or substantially all of its
property, or enter an order for relief against either Borrower in any case
commenced under any chapter of the United States Bankruptcy Code, as amended, or
grant relief under any other similar law or statute of the United States of
America, any state thereof or any foreign country; or if, under the provisions
of any law for the relief or aid of debtors, a court of competent jurisdiction
or a receiver, trustee, liquidator, custodian or conservator shall assume
custody or control or take possession of either Borrower or of the whole or
substantially all of its property; or if there is commenced against either
Borrower any proceeding for any of the foregoing relief or if a petition is
filed against either Borrower under any chapter of the United States Bankruptcy
Code, as amended, or under any other similar law or statute of the United States
of America or any state thereof or any foreign country and such proceeding or
petition remains undismissed for a period of 60 days; or if either Borrower by
any act indicates its consent to, approval of or acquiescence in any such
proceeding or petition;
(j) if any judgment or judgments against either Borrower 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) either Borrower
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 either Borrower
to any tax,
-71-
<PAGE>
penalty or other liabilities in the aggregate material in relation to the
business, operations, property or financial or other condition of either
Borrower;
(1) if there shall occur any change in the Collateral or in the business
of either Borrower, or the 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 directed to declare such Event of Default by the
Super-majority Banks as set forth below in this Section 9.1; or
(m) if MFC is required to make, or otherwise makes, any payment pursuant
to the SBA Guaranty or in respect of the Guaranteed Obligations;
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.
-72-
<PAGE>
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 either Borrower 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 Borrowers 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
Borrowers; (b) second, to reimburse the Agent and the Swing Line Lender for any
expenses due from the Borrowers 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 Borrowers to the Agent, the Swing Line
Lender or any of the
-73-
<PAGE>
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 Borrowers 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
(including, without limitation, the reasonable allocated costs of in-house
counsel) 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
Borrowers 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 Borrowers 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:
-------- -------
(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 on,
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" or any defined terms included in such definitions, (iv) change any
of the provisions of Article II (other than Section 2.14 thereof) or Article III
hereof, or (v) change the MFC Security Agreement or the MBC Security Agreement
or release all or
-74-
<PAGE>
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 Borrowers: (i) amendment or modification of any agreement to
which neither Borrower is 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 either Borrower in any case shall entitle either Borrower to any
other or further notice or demand in similar or other circumstances.
Section 10.3 GOVERNING LAW.
------------ -------------
THIS AGREEMENT, THE REVOLVING CREDIT NOTES, 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
-75-
<PAGE>
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, LLP, 120 Broadway, New
---------
York, New York 10271 (Attention: Richard M. Skoller, Esq.), Telecopier No. (212)
238-3100, and to any Bank at its address specified for such Bank on Exhibit A;
---------
and to the Borrowers 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 Borrowers
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 Borrowers' previous accounting
methods or policy. Unless otherwise specified herein all financial statements
required to be delivered hereunder, shall be prepared and all financial records
shall be maintained in accordance with GAAP.
Section 10.6 Costs and Expenses; Indemnity.
------------ -----------------------------
(a) The Borrowers agree 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 Borrowers, 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 Borrowers 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 MFC Security Agreement, the MBC
Security Agreement and the other Loan Documents. The Borrowers also agree 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 Borrowers in
any way relating to any of the Borrowers' obligations hereunder or to
-76-
<PAGE>
enforce any rights of the Agent or any Bank or the Swing Line Lender or
liabilities of the Borrowers, any Person to whom either 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 Borrowers. The Borrowers
agree 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 Borrowers further agree 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 attorneys' 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 Borrowers 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 MFC, MBC, THE AGENT, THE SWING LINE LENDER AND EACH BANK 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 BORROWERS 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
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).
-77-
<PAGE>
Section 10.8 Captions.
------------ --------
The captions of the various sections and paragraphs of this Agreement have
been inserted only for the purpose of convenience; such captions are not a part
of this Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.
Section 10.9 Lien; Setoff by Banks.
------------ ---------------------
(a) Each Borrower hereby grants to the Agent, the Swing Line Lender and
the Banks a continuing lien for its Indebtedness to each of the Agent, the Swing
Line Lender and the Banks upon any and all monies, securities and other property
of such 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 such Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or special)
and credits of such Borrower with, and any and all claims of such 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 Borrowers, to setoff, appropriate and apply any or all items hereinabove
referred to with respect to each Borrower against all Indebtedness of such
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 Borrowers 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) Each Borrower expressly consents to the foregoing arrangements in
Section l0.9(b) and agree that any holder of a participation in a Note so
acquired may exercise any and all rights of banker's lien, setoff, counterclaim
or otherwise with respect to any and all monies owing by such holder to such
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 l0.9(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 a
Borrower or any other
-78-
<PAGE>
obligor or from the Collateral is subsequently invalidated, declared to be
fraudulent or preferential, set aside or judicially required to be repaid to a
trustee, receiver or any other Person under any applicable creditors' remedy
proceeding, including without limitation any bankruptcy proceeding, the other
Banks hereto shall purchase from the Bank 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 such
Borrower.
Section 10.10 Security; Continued Effectiveness.
------------- ---------------------------------
(a) As security for the payment of any and all sums owing under the Notes
and all other obligations of MBC hereunder and the other Loan Documents, MBC
shall execute and deliver to the Agent, the Banks and the Swing Line Lender, on
the Restatement Effective Date the MBC Security Agreement, 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 described
therein and cause to be properly filed in all pertinent jurisdictions the
additional Borrower Financing Statements contemplated by Section 5.1(a)(iv).
(b) The MFC Security Agreement continues to be effective to create in
favor of the Agent, for the ratable benefit of the Banks and the Swing Line
Lender, a valid and perfected first priority (except as otherwise permitted
hereunder) security interest in and to the Collateral described therein securing
the payment of the Revolving Credit Loans of MFC, Swing Line Loans of MFC and
Term Loans of MFC and all other sums payable by MFC under or in connection with
the Loan Documents, whether incurred prior to or after the Restatement Effective
Date, and MFC hereby reconfirms its obligations thereunder. No transfers of the
proceeds of the Revolving Credit Loans, Swing Line Loans or Term Loans were made
by MFC to BL prior to the Restatement Effective Date and the Intercompany Demand
Loan Documents have been terminated.
Section 10.11 Jurisdiction; Service of Process.
------------- --------------------------------
Each Borrower hereby irrevocably consents to the non-exclusive jurisdiction
of the courts of the State of New York, County of New York and of any Federal
Court located in the Southern District of New York, and agrees that venue in
each of such Courts is proper, in connection with any action or proceeding
arising out of or relating to this Agreement, the other Loan Documents, or any
document or instrument delivered pursuant to this Agreement or the other Loan
Documents. In any such action or proceeding, each Borrower waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail directed to the Borrowers at
the 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 Borrower in any other jurisdiction.
-79-
<PAGE>
Section 10.12 Benefit of Agreement.
------------- --------------------
This Agreement shall be binding upon and inure to the benefit of the
Borrowers, 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 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 either
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 Borrowers 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 Borrowers 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 Borrowers or credited ratably
on the principal of the Notes; provided, that, nothing contained in this Section
10.14 shall be deemed to imply that the laws of any State other than the State
of New York shall govern this Agreement or the Notes.
(b) Recapture. If, at any time, Interest would exceed the Maximum Amount
---------
but for the foregoing limitation, Interest shall remain at the Maximum Amount,
notwithstanding any subsequent reduction of Interest, until the total amount of
Interest equals the amount of Interest which would have accrued if Interest had
not been limited to the Maximum Amount, but nothing in this paragraph shall
affect or extend the maturity of any of the Notes. If, at maturity or final
payment of any of the Notes, the total amount of Interest paid is less than the
total amount of
-80-
<PAGE>
Interest which would have accrued had Interest not been limited to the Maximum
Amount, the Borrowers agree, 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 Borrowers 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 either or both of the
Borrowers 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 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 the
Borrowers, 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 either Borrower, except where disclosure may
be required by
-81-
<PAGE>
law or pursuant to valid legal process, or where such disclosure is to such
Person's professionals or regulators.
Section 10.18 Loss, Theft, Etc. of Notes.
------------- --------------------------
Upon receipt by the Borrowers 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 Borrowers 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 Borrower, the Banks and the Swing Line Lender agree with the Agent as
follows:
Section 11.1 Appointment and Actions.
------------ -----------------------
(a) Each of 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 of 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 MFC Security Agreement and the MBC 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
-82-
<PAGE>
or the Swing Line Lender or any Participant for any recitals, statements,
representations or warranties made by either Borrower contained herein or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with any of the Loan Documents,
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of any of the Loan Documents or for any failure of either Borrower
to perform its obligations under any of the Loan Documents. The Agent shall not
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of any of the Loan Documents, or to inspect the properties, books or records of
either Borrower.
(d) The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or 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 Borrower), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent.
(e) The Agent shall be fully justified in failing or refusing to take any
action under any of the Loan Documents unless it shall first receive such advice
or concurrence of the Banks as it deems appropriate or as required by the
specific terms of this Agreement or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under any of the Loan Documents in accordance with a request of the
Required Banks (or all Banks if specifically required by the terms of this
Agreement), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Banks, 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 either 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.
-83-
<PAGE>
(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).
(i) Each Bank party to the Original Agreement expressly consented to the
Agent's, on behalf of such Bank, entering into the MFC Security Agreement and
each other Bank expressly agrees that the Agent shall act as agent for such Bank
in connection therewith. Each Bank expressly (i) consents to the Agent's, on
behalf of such Bank, entering into the MBC Security Agreement, provided the MBC
Security Agreement is substantially similar to the form of such document
attached as an Exhibit hereto and (ii) agrees that to the extent either the MFC
Security Agreement or the MBC 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 either Borrower shall be deemed to constitute any representation or
warranty by the Agent to any Bank or the Swing Line Lender. Each of 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 Borrower and made its
own decision to enter into this Agreement. Each of 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 Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Banks
-84-
<PAGE>
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 either Borrower which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates, provided that the Agent
shall supply the Banks and the Swing Line Lender with a copy of any financial
audit of the Borrowers 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 sum of (i) the Aggregate Revolving Credit Commitment and
(ii) the principal amount of the outstanding Term Loans from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including without limitation at any time following the payment of any of
the Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided that no
Bank shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's bad faith, willful
misconduct or gross negligence. The agreements in this subsection shall survive
the payment of the Notes and 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 Borrowers, 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 Borrowers (or the
Required Banks, if the Borrowers fail 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 Borrowers 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
-85-
<PAGE>
Federal Deposit Insurance Corporation or any successor entity, such receiver
commences the liquidation of the Agent, and Banks holding at least 10% of the
sum of the Aggregate Revolving Credit Commitment plus the amount of all Term
Loans then outstanding request the Agent to resign because of such receivership,
the Agent's agency under this Agreement shall terminate.
ARTICLE 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 I 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 Borrowers, 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 either 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 Borrowers, the Agent,
and the Banks agree that, to the extent of any such Assignment,
(i) the Assignee shall, in addition to any rights, benefits and
obligations hereunder held by it immediately prior to such effective date, have
the rights, benefits and obligations of a Bank under this Agreement, the
Assignor's Revolving Credit and/or Term Loan
-86-
<PAGE>
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 Borrowers 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 Borrowers 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 Borrowers. Within 5
Business Days after its receipt of a photostatic copy of such Assignment, the
Borrowers 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 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 Borrowers 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
-87-
<PAGE>
and address and (ii) the Percentage or amount of the Term Loan, if any, retained
by the Assignor, and the appropriate officer of each 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 parties 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 Borrowers, 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 Borrowers 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 Borrowers 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 Borrowers, 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 (except as
provided in Section 12.1(c)(ii)) hereof 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) hereof, 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.
Section 12.2 New Banks.
------------ ---------
Any financial institution approved by the Borrowers, 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 Borrowers shall, in its sole discretion, have
-------- ----
given their 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
-88-
<PAGE>
sole and absolute discretion of each Bank), (c) such New Bank and the Borrowers
shall have executed and delivered an instrument of adherence (the "Instrument of
-------------
Adherence") in form and substance satisfactory to the Borrowers 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 Borrowers 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 Borrowers, such evidence of proper corporate organization, existence,
authority and appropriate corporate proceedings with respect to the Borrowers,
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 Borrowers 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, 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 either Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of their obligations under
this Agreement or any of the other Loan Documents, or the performance or
observance by either Borrower and its Subsidiaries or any other Person primarily
or secondarily liable in respect of their obligations under this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
(iii) such New Bank confirms that it has received a copy of this
Agreement and the other Loan Documents, together with copies of the most recent
financial statements referred to in Sections 4.18 and 6.1 hereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Instrument of Adherence;
(iv) such New Bank will, independently and without reliance upon the
other Banks, 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;
-89-
<PAGE>
(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
Borrowers', 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 Borrowers
shall notify each of the Banks and the Agent of the joinder hereunder of such
New Bank, the resulting increase in the Aggregate Revolving Credit Commitment
and each Bank's new Percentage and provide each of the Banks and the Agent with
a copy of the executed Instrument of Adherence and a copy of Exhibit A
---------
reflecting the necessary adjustments.
Upon the effective date of any Instrument of Adherence, the New Bank shall
make all (if any) such payments to the other Banks as may be necessary to result
in the Revolving Credit Loans made by such New Bank being equal to such New
Bank's Percentage (as then in effect) of the aggregate principal amount of all
Revolving Credit Loans outstanding to the Borrowers as of such date. The
Borrowers hereby agree 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 Borrowers the amount of such payments.
Section 12.3 Joint and Several Liability.
------------ ---------------------------
Except to the extent otherwise expressly provided, the liability of the
Borrowers under this Agreement and each other Loan Document shall be joint and
several without regard to which party receives the proceeds of the loans. Each
Borrower hereby acknowledges that it expects to derive substantial economic
benefit from the loans.
ARTICLE 13 GUARANTEE
Section 13.1 Guarantee.
------------ ---------
(a) Subject to the limitations of Section 13.1(b) hereof, each Borrower
hereby absolutely, irrevocably and unconditionally guarantees the full and
prompt payment when due (whether at stated maturity, by acceleration or
otherwise) of the Borrower Obligations of the
-90-
<PAGE>
other Borrower. This guaranty constitutes a guaranty of payment and neither the
Agent nor any Bank 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 Borrower Obligations, prior to being
entitled to the benefits of this Article 13. The Agent may, at its option,
proceed against any Borrower in the first instance, to enforce the Borrower
Obligations without first proceeding against the other Borrower or 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 any Bank is
prevented by law from collecting or otherwise hindered from collecting or
otherwise enforcing any Borrower Obligation from any Borrower in accordance with
its terms, the Agent or such Bank, as the case may be, shall be entitled to
receive hereunder from the other Borrower 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
aggregate amount of the obligations of each Borrower under this Section 13.1
shall not, as of any date of determination, exceed the lesser of (i) the
greatest amount that is valid and enforceable against such Borrower under
principles of New York State contract law and (ii) the greatest amount that
would not render such Borrower'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 such Borrower, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however (provided that, as
to either Borrower, each such exclusion shall apply only to the extent such
exclusion would result in this Agreement's being enforceable against such
Borrower under Fraudulent Transfer Laws), any liability (A) in respect of
intercompany indebtedness to either Borrower, any Subsidiary or any other
Affiliate of either Borrower, to the extent that such intercompany indebtedness
would be discharged in an amount equal to the amount paid by such Borrower
hereunder, and (B) under any guarantee of (1) senior unsecured indebtedness or
(2) indebtedness subordinated in right of payment to any Borrower Obligation, in
either case which contains a limitation as to maximum liability similar to that
set forth in this Section 13.1(b) and pursuant to which the liability of such
Borrower 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 such Borrower pursuant to applicable law or any agreement
providing for an equitable allocation among such Borrower, the Subsidiaries and
the other Affiliates of the Borrowers of obligations arising under guarantees by
such parties. NOTWITHSTANDING THE LIMITATION OF LIABILITY PROVIDED IN THIS
SECTION 13.1(b), IT IS EXPRESSLY AGREED THAT SUCH LIMITATION SHALL ONLY APPLY TO
A BORROWER'S OBLIGATIONS AS GUARANTOR UNDER THIS ARTICLE 13 AND SHALL NOT IN ANY
CIRCUMSTANCE LIMIT OR IN ANY WAY AFFECT ANY BORROWER'S OTHER LIABILITIES OR
OBLIGATIONS UNDER OR IN CONNECTION WITH ANY LOAN DOCUMENT.
-91-
<PAGE>
(c) Each Borrower agrees that the Borrower Obligations may at any time and
from time to time exceed the maximum liability of such Borrower hereunder
without impairing this Article 13 or affecting the rights and remedies of the
Agent or any Bank hereunder.
Section 13.2 Absolute Obligation.
------------ -------------------
No Borrower shall be released from liability hereunder unless and until the
Termination Date shall have occurred and the outstanding principal balance of
all Revolving Credit Loans, Swing Line Loans and Term Loans shall have been paid
in full in cash, together with all accrued interest thereon and all other sums
then due and owing under the Loan Documents. Each Borrower acknowledges and
agrees that (i) neither the Agent nor any Bank has made any representation or
warranty to such Borrower with respect to the other Borrower, its Subsidiaries,
any Loan Document, or any agreement, instrument or document executed or
delivered in connection therewith, or any other matter whatsoever, and (ii) such
Borrower shall be liable hereunder, and such liability shall not be affected or
impaired, irrespective of (A) the validity or enforceability of any Loan
Document, or any agreement, instrument or document executed or delivered in
connection therewith, or the collectibility of any of the Borrower Obligations,
(B) the preference or priority ranking with respect to any of the Borrower
Obligations, (C) 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, (D) any failure, delay, neglect or omission by
the Agent or any Bank 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 Borrower Obligations, (E) the existence or exercise of
any right of set-off by the Agent or any Bank, (F) the existence, validity or
enforceability of any other guaranty with respect to any of the Borrower
Obligations, the liability of any other Person in respect of any of the Borrower
Obligations, or the release of any such Person or any other guarantor of any of
the Borrower Obligations, (G) any act or omission of the Agent or any Bank in
connection with the administration of any Loan Document, or any of the Borrower
Obligations, (H) the bankruptcy, insolvency, reorganization or receivership of,
or any other proceeding for the relief of debtors commenced by or against, any
Person, (I) the disaffirmance or rejection, or the purported disaffirmance or
purported rejection, of any of the Borrower 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, (J) 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 Borrower Obligations, or which might cause or permit to be invoked any
alteration in the time, amount or manner of payment or performance of any of the
Borrower Obligations and liabilities, (K) the merger or consolidation of either
Borrower into or with any Person, (L) the sale by either Borrower of all or any
part of its assets, (M) the fact that at any time and from time to time none of
the Borrower Obligations may be outstanding or owing to the Agent or any Bank,
(N) any amendment or modification of, or supplement to, any
-92-
<PAGE>
Loan Document or (O) any other reason or circumstance which might otherwise
constitute a defense available to or a discharge of a Borrower in respect of
their respective obligations or liabilities (including the Borrower
Obligations), or any other fact or circumstance which would excuse the
obligation of a guarantor or surety, other than by the performance in full
thereof.. Each Borrower waives, in its capacity as a guarantor hereunder, (i)
presentment, demand, protest and notice of any kind (including, without
limitation, notice of dishonor); (ii) any defense based upon or arising out of
any defense which the other Borrower may have to the payment or performance of
any part of its Borrower Obligations; (iii) any defense based upon any
disbursements by the Agent or the Banks to either Borrower pursuant to any
agreements or instruments governing the Borrower Obligations whether same be
deemed an additional advance or be deemed to be paid out of any special interest
or other fund accounts, as constituting unauthorized payments hereunder or
amounts not guaranteed by this guaranty; (iv) until the indefeasible payment in
full of the Borrower Obligations, all rights of each Borrower in its capacity as
guarantor to proceed against the other Borrower, including but not limited to
all rights of subrogation and all rights to enforce any remedy that the Agent or
any Bank may have against such Borrower and (v) all rights to participate in any
security held by the Agent on behalf of the Banks or by any Bank for the
Borrower Obligations.
Section 13.3 Repayment in Bankruptcy.
------------ -----------------------
If, at any time or times subsequent to the payment of all or any part of
the Borrower Obligations, any Bank shall be required to repay any amounts
previously paid by or on behalf of a Borrower 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 other Borrower 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 Bank to the date of payment to the Agent at the applicable Default Rate.
Section 13.4 Miscellaneous.
------------ -------------
Each Borrower agrees that any statement of account with respect to the
Borrower Obligations from any Bank that binds either Borrower shall be binding
upon both Borrowers, and that copies of said statements of account maintained in
the regular course of such Bank's business may be used in evidence against each
Borrower in order to establish its obligations in respect of its guaranty
provided for in this Article 13.
Section 13.5 Subordination.
------------ -------------
Each Borrower agrees that any and all Indebtedness owed to it by, and
claims it may have against, the other Borrower, whether such Indebtedness or
claims are in connection with the guaranty contemplated by this Article 13 or
the Borrower Obligations, or are completely independent thereof, will be
subordinate to the claims of the Agent and the Banks under this Article 13 and
all Indebtedness guaranteed hereby, and that such Borrower will not
-93-
<PAGE>
assert any such claim against, or collect any amounts in respect thereof from,
the other Borrower until all Borrower Obligations have been indefeasibly
satisfied in full in cash. Notwithstanding such subordination, and without
affecting or impairing in any manner the liability of either Borrower under the
other provisions of this Article 13, any Indebtedness of either Borrower to the
other Borrower, if the Agent so requests, shall be collected, enforced and
received by such Borrower as trustee for the Agent and the Banks and paid over
to the Agent on account of the Borrower Obligations.
ARTICLE 14 BORROWER AGENCY
Section 14.1 Appointment and Actions.
------------ -----------------------
Each Borrower hereby irrevocably designates and appoints the other Borrower
as the agent of such Borrower under the Loan Documents for the purpose of taking
any action, giving or receiving any notice, making any election, exercising any
other rights or powers and fulfilling any obligations of a Borrower under this
Agreement or any other Loan Document, all as effectively as such Borrower could
do, and agrees that any notice given to or received by one Borrower shall be
deemed to have been given to or received by (as the case may be) both Borrowers.
THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY.
SEE SECTION 10.7 HEREOF.
-94-
<PAGE>
IN WITNESS WHEREOF, the Borrowers, 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.
By:/s/ Allen S. Greene
__________________________________________
Name: Allen S. Greene
Title: Chief Operating Officer
By:/s/ Daniel F. Baker
__________________________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
MEDALLION BUSINESS CREDIT, LLC
By:/s/ Alvin Murstein
__________________________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Barker
__________________________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
FLEET BANK, NATIONAL ASSOCIATION, as Agent,
as Swing Line Lender and as one of the Banks
By:__________________________________________
Title: Vice President
Payment Office:
1185 Avenue of the Americas
New York, New York 10036
-95-
<PAGE>
BANKBOSTON, N.A.
By: /s/ Jeff Millman
----------------------------
Title:
THE BANK OF NEW YORK
By: /s/ Scott Silverstein
----------------------------
Title:
EUROPEAN AMERICAN BANK
By: /s/ Dennis Nochowitz
----------------------------
Title:
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Bob Fainelli
----------------------------
Title:
By:__________________________________________
Title:
-96-
<PAGE>
BANK LEUMI USA
By: /s/ Paul Tine
----------------------------
Title:
THE CHASE MANHATTAN BANK
By: /s/ Bill Saya
----------------------------
Title:
HSBC BANK USA
By: /s/ Bruce Wicks
----------------------------
Title:
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Ned Handy
----------------------------
Title:
-97-
<PAGE>
Schedule I
Locations, Chief Executive Office
437 Madison Avenue, 38th Fl
New York, NY 10022
-98-
<PAGE>
Schedule II
Subsidiaries
Medallion Taxi Media, Inc., a New York corporation
Medallion Funding Corp., a New York corporation
Medallion Capital, Inc., a Minnesota corporation
Business Lenders, LLC, a Delaware limited liability company
Medallion Business Credit, LLC, a Delaware limited liability company
-99-
<PAGE>
EXHIBIT A
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 20/100
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110 $ 15,000,000 15/100
Bank Leumi USA
562 Fifth Avenue
New York, NY 10036 $ 5,000,000 5/100
The Bank of New York
1290 Avenue of the Americas
New York, NY 10104 $ 10,000,000 10/100
The Chase Manhattan Bank
600 Fifth Ave
New York, NY 10020 $ 10,000,000 10/100
Citizens Bank of Massachusetts
One Citizens Plaza
Providence, RI 02903 $ 10,000,000 10/100
European American Bank
335 Madison Avenue
New York, New York 10017 $ 10,000,000 10/100
HSBC Bank USA
140 Broadway
New York, NY 10005 $ 10,000,000 10/100
Israel Discount Bank
of New York
511 Fifth Avenue
New York, New York 10022 $ 10,000,000 10/100
TOTAL FACILITIES $100,000,000
------------
-1-
<PAGE>
EXHIBIT 10.2
Execution Copy
=============================================================================
Medallion Funding Corp.
$22,500,000 7.20% Senior Secured Notes, Series A
Due June 1, 2004
and
$22,500,000 7.20% Senior Secured Notes, Series B
Due September 1, 2004
Note Purchase Agreement
Dated as of June 1, 1999
=============================================================================
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES; SECURITY FOR NOTES............................................... 1
Section 1.1. Authorization of Notes................................................................... 1
Section 1.2. Security for Notes....................................................................... 1
SECTION 2. SALE AND PURCHASE OF NOTES............................................................... 2
SECTION 3. CLOSING.................................................................................. 2
SECTION 4. CONDITIONS TO CLOSING.................................................................... 2
Section 4.1.1. Representations and Warranties........................................................... 3
Section 4.1.2. Performance; No Default.................................................................. 3
Section 4.1.3. Compliance Certificates.................................................................. 3
Section 4.1.4. Opinions of Counsel...................................................................... 3
Section 4.1.5. Purchase Permitted By Applicable Law, etc................................................ 3
Section 4.1.6. Sale of Other Notes...................................................................... 4
Section 4.1.7. Payment of Special Counsel Fees.......................................................... 4
Section 4.1.8. Private Placement Number................................................................. 4
Section 4.1.9. Changes in Corporate Structure........................................................... 4
Section 4.1.10. Security Documents....................................................................... 4
Section 4.1.11. Evidence of Insurance.................................................................... 4
Section 4.1.12. Intercreditor Agreement.................................................................. 4
Section 4.1.13. Consents................................................................................. 4
Section 4.1.14. Funding Instructions..................................................................... 5
Section 4.1.15. Merger................................................................................... 5
Section 4.1.16. SBA Approval of Merger and Release of SBA Liens.......................................... 5
Section 4.1.17. UCC Searches............................................................................. 5
Section 4.1.18. Proceedings and Documents................................................................ 5
Section 4.2. Additional Conditions of Second Closing Date............................................. 5
Section 4.2.2. First Closing Condition.................................................................. 6
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 6
Section 5.1. Organization; Power and Authority........................................................ 6
Section 5.2. Authorization, etc....................................................................... 6
Section 5.3. Disclosure............................................................................... 6
Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates......................... 7
Section 5.5. Financial Statements..................................................................... 7
Section 5.6. Compliance with Laws, Other Instruments, etc............................................. 7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.7. Governmental Authorizations, etc......................................................... 8
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders................................ 8
Section 5.9. Taxes.................................................................................... 8
Section 5.10. Title to Property; Leases................................................................ 9
Section 5.11. Licenses, Permits, etc................................................................... 9
Section 5.12. Compliance with ERISA.................................................................... 9
Section 5.13. Private Offering by the Company.......................................................... 10
Section 5.14. Use of Proceeds; Margin Regulations...................................................... 10
Section 5.15. Existing Indebtedness; Future Liens...................................................... 10
Section 5.16. Foreign Assets Control Regulations, etc.................................................. 11
Section 5.17. Status under Certain Statutes............................................................ 11
Section 5.18. Environmental Matters.................................................................... 11
Section 5.19. Location of Offices, Books and Records................................................... 12
Section 5.20. SBIC..................................................................................... 12
Section 5.21. Investment Company....................................................................... 12
Section 5.22. Priority................................................................................. 12
Section 5.23. Advertising, Origination and Servicing Activities........................................ 12
Section 5.24. Activities............................................................................... 12
Section 5.25. Solvency................................................................................. 13
Section 5.26. Year 2000................................................................................ 13
SECTION 6. REPRESENTATIONS OF THE PURCHASER......................................................... 13
Section 6.1. Purchase for Investment.................................................................. 13
Section 6.2. Source of Funds.......................................................................... 13
SECTION 7. INFORMATION AS TO COMPANY................................................................ 15
Section 7.1. Financial and Business Information....................................................... 15
Section 7.2. Officer's Certificate.................................................................... 17
Section 7.3. Inspection............................................................................... 18
SECTION 8. PREPAYMENT OF THE NOTES.................................................................. 18
Section 8.1. Required Prepayments..................................................................... 18
Section 8.2. Optional Prepayments with Make-Whole Amount.............................................. 19
Section 8.3. Change in Control........................................................................ 19
Section 8.4. Allocation of Partial Prepayments........................................................ 21
Section 8.5. Maturity; Surrender, etc................................................................. 21
Section 8.6. Purchase of Notes........................................................................ 21
Section 8.7. Make-Whole Amount........................................................................ 21
SECTION 9. AFFIRMATIVE COVENANTS.................................................................... 23
Section 9.1. Compliance with Law...................................................................... 23
Section 9.2. Insurance................................................................................ 23
Section 9.3. Maintenance of Properties................................................................ 23
Section 9.4. Payment of Taxes and Claims.............................................................. 23
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 9.5. Corporate Existence, etc................................................................. 24
Section 9.6. Line of Business......................................................................... 24
Section 9.7. Further Assurances....................................................................... 24
Section 9.8. Maintenance of Security Interest......................................................... 24
Section 9.9. Required Percentage of Medallion Loans................................................... 24
Section 9.10. Covenant to Secure Notes Equally......................................................... 25
Section 9.11. Delivery of Termination Statements....................................................... 25
SECTION 10. NEGATIVE COVENANTS....................................................................... 25
Section 10.1. Transactions with Affiliates............................................................. 25
Section 10.2. Merger, Consolidation, Sale or Transfers Assets.......................................... 25
Section 10.3. Sale of Assets........................................................................... 26
Section 10.4. Minimum Tangible Net Worth............................................................... 26
Section 10.5. Maximum Liability Ratio.................................................................. 26
Section 10.6. Minimum Net Finance Assets............................................................... 26
Section 10.7. Minimum Net Income to Interest Expense Ratio............................................. 27
Section 10.8. Limitation on Loans and Investments...................................................... 27
Section 10.9. Restricted Payments...................................................................... 27
Section 10.10. Portfolio Purchases...................................................................... 27
Section 10.11. Amendments of Agreements................................................................. 28
Section 10.12. Capital Expenditures..................................................................... 28
SECTION 11. EVENTS OF DEFAULT........................................................................ 28
SECTION 12. REMEDIES ON DEFAULT, ETC................................................................. 31
Section 12.1. Acceleration............................................................................. 31
Section 12.2. Other Remedies........................................................................... 31
Section 12.3. Rescission............................................................................... 31
Section 12.4. No Waivers or Election of Remedies, Expenses, etc........................................ 32
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................................ 32
Section 13.1. Registration of Notes.................................................................... 32
Section 13.2. Transfer and Exchange of Notes........................................................... 32
Section 13.3. Replacement of Notes..................................................................... 33
SECTION 14. PAYMENTS ON NOTES........................................................................ 33
Section 14.1. Place of Payment......................................................................... 33
Section 14.2. Home Office Payment...................................................................... 33
SECTION 15. EXPENSES, ETC............................................................................ 34
Section 15.1. Transaction Expenses..................................................................... 34
Section 15.2. Survival................................................................................. 34
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............................. 34
SECTION 17. AMENDMENT AND WAIVER..................................................................... 35
Section 17.1. Requirements............................................................................. 35
Section 17.2. Solicitation of Holders of Notes......................................................... 35
Section 17.3. Binding Effect, etc...................................................................... 35
Section 17.4. Notes Held by Company, etc............................................................... 36
SECTION 18. NOTICES.................................................................................. 36
SECTION 19. REPRODUCTION OF DOCUMENTS................................................................ 36
SECTION 20. CONFIDENTIAL INFORMATION................................................................. 37
SECTION 21. SUBSTITUTION OF PURCHASER................................................................ 38
SECTION 22. MISCELLANEOUS............................................................................ 38
Section 22.1. Successors and Assigns................................................................... 38
Section 22.2. Payments Due on Non-Business Days........................................................ 38
Section 22.3. Severability............................................................................. 38
Section 22.4. Construction............................................................................. 38
Section 22.5. Counterparts............................................................................. 39
Section 22.6. Governing Law............................................................................ 39
Section 22.7. Additional Indebtedness.................................................................. 39
Signature......................................................................................................... 40
</TABLE>
-iv-
<PAGE>
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.1.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 5.19 -- Location of Offices, Books and Records
EXHIBIT 1(a) -- Form of 7.20% Senior Secured Note, Series A, due
June 1, 2004
EXHIBIT 1(b) -- Form of 7.20% Senior Secured Note, Series B, due
September 1, 2004
EXHIBIT 4.1.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.1.4(b) -- Form of Opinion of Special Counsel for the
Purchasers
EXHIBIT 4.10 -- Form of Company Security Agreement
EXHIBIT 4.12 -- Form of Intercreditor Agreement
-v-
<PAGE>
MEDALLION FUNDING CORP.
437 MADISON AVENUE
38TH FLOOR
NEW YORK, NEW YORK 10022
$22,500,000 7.20% Senior Secured Notes, Series A, due June 1, 2004
and
$22,500,000 7.20% Senior Secured Notes, Series B, due September 1, 2004
Dated as of June 1, 1999
To each of the Purchasers listed in
the attached Schedule A:
Ladies and Gentlemen:
Medallion Funding Corp., a New York corporation (the "Company"), agrees
with you as follows:
Section 1. Authorization of Notes; Security for Notes.
Section 1.1. Authorization of Notes. The Company will authorize the issue
and sale of (a) $22,500,000 aggregate principal amount of its 7.20% Senior
Secured Notes, Series A, due June 1, 2004 (the "Series A Notes") and (b)
$22,500,000 aggregate principal amount of its 7.20% Senior Secured Notes, Series
B, due September 1, 2004 (the "Series B Notes" and together with the Series A
Notes sometimes collectively referred to herein as the "Notes"). The term
"Notes" is to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined).
The Series A Notes and the Series B Notes shall be substantially in the forms
set out in Exhibit 1(a) and Exhibit 1(b), respectively, with such changes
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
Section 1.2. Security for Notes. The Notes will be entitled to the benefit
of the Security Documents. Reference is hereby made to the Security Documents
for a description of the Collateral described therein and the rights and
remedies of the holders of the Notes with respect thereto.
Section 2. Sale and Purchase of Notes.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the applicable
Closing provided for in Section 3,
<PAGE>
Notes in the principal amount specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof. Contemporaneously with
entering into this Agreement, the Company is entering into separate Note
Purchase Agreements (the "Other Agreements") identical with this Agreement with
each of the other purchasers named in Schedule A (the "Other Purchasers"),
providing for the sale at such Closing to each of the Other Purchasers of Notes
in the principal amount specified opposite its name in Schedule A. Your
obligation hereunder, and the obligations of the Other Purchasers under the
Other Agreements, are several and not joint obligations, and you shall have no
obligation under any Other Agreement and no liability to any Person for the
performance or nonperformance by any Other Purchaser thereunder.
Section 3. Closing.
The sale and purchase of the Series A Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, at 10:00 a.m., Chicago time, at a
closing (the "First Closing") on June 1, 1999 or on such other Business Day
thereafter on or prior to June 30, 1999 as may be agreed upon by the Company and
you and the Other Purchasers. The sale and purchase of the Series B Notes to be
purchased by you and the Other Purchasers shall occur at the offices of Chapman
and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, at 10:00 a.m.,
Chicago time, at a closing (the "Second Closing") on September 1, 1999 or on
such other Business Day thereafter on or prior to September 30, 1999, as may be
agreed upon by the Company and you and the Other Purchasers. The First Closing
and the Second Closing are hereinafter sometimes collectively referred to as the
"Closings" and each of such Closings is hereinafter sometimes referred to as a
"Closing". At each such Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $100,000 as you may request) dated the date of such
Closing and registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to account number 2189006536 at
Fleet Bank, N.A., 1187 Avenue of the Americas, New York, New York 10036 (ABA
No. 021200339). If at such Closing the Company shall fail to tender such Notes
to you as provided above in this Section 3, or any of the conditions specified
in Section 4 shall not have been fulfilled to your satisfaction, you shall, at
your election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights you may have by reason of such failure or
such nonfulfillment.
Section 4. Conditions to Closing.
Section 4.1. Your obligation to purchase and pay for the Notes to be sold
to you at the First Closing is subject to the fulfillment to your satisfaction,
prior to or at such Closing, of the following conditions:
Section 4.1.1. Representations and Warranties. The representations and
warranties of the Company in this Agreement shall be correct when made and at
the time of the First Closing.
Section 4.1.2. Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be
-2-
<PAGE>
performed or complied with by it prior to or at the First Closing and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 5.14) no Default or Event of Default
shall have occurred and be continuing. Neither the Company nor any Subsidiary
shall have entered into any transaction since the date of the Memorandum that
would have been prohibited by Section 10.1, 10.2, 10.3 or 10.8 hereof had such
Sections applied since such date.
Section 4.1.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the First Closing, certifying that the
conditions specified in Sections 4.1.1, 4.1.2 and 4.1.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you a
certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and the Agreements.
Section 4.1.4. Opinions of Counsel. You shall have received opinions in
form and substance satisfactory to you, dated the date of the applicable Closing
(a) from Willkie Farr & Gallagher, counsel for the Company, covering the matters
set forth in Exhibit 4.1.4(a) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such opinion to you)
and (b) from Chapman and Cutler, your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.1.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.
Section 4.1.5. Purchase Permitted By Applicable Law, etc. On the date of
the First Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (ii) not violate any applicable law or
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and (iii) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
Section 4.1.6. Sale of Other Notes. Contemporaneously with the First
Closing, the Company shall sell to the Other Purchasers, and the Other
Purchasers shall purchase the Notes to be purchased by them at the First Closing
as specified in Schedule A.
Section 4.1.7. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the First
Closing, the fees, charges and disbursements of your special counsel referred to
in Section 4.1.4 to the extent reflected in a
-3-
<PAGE>
statement of such counsel rendered to the Company at least one Business Day
prior to the First Closing.
Section 4.1.8. Private Placement Number. A Private Placement number issued
by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
Section 4.1.9. Changes in Corporate Structure. Except as specified in
Schedule 4.1.9, the Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 5.5.
Section 4.1.10. Security Documents. (a) On the date of the First Closing,
the Security Documents shall have been duly executed and delivered by the
parties thereto and shall be in full force and effect and you shall have
received true, correct and complete copies of each thereof.
(b) On or prior to the date of the First Closing the Security Documents
(and/or financing statements or similar notices thereof if and to the extent
permitted or required by applicable law) shall have been recorded or filed for
record in such public offices as may be deemed necessary or appropriate by you
or your special counsel in order to prefect the Liens and security interests
granted or conveyed thereby.
Section 4.1.11. Evidence of Insurance. You shall have received a
certificate dated the date of the First Closing executed by the independent
insurance broker of the Company certifying to the existence of the insurance
required hereunder and by the Security Documents and the payment of all premiums
due thereon.
Section 4.1.12. Intercreditor Agreement. On or prior to the date of the
First Closing, the Intercreditor Agreement shall be substantially in the form of
Exhibit 4.1.12 hereto, shall be in form and substance satisfactory to you and
your special counsel, shall have been duly executed and delivered by the parties
thereto, and you shall have received true, correct and completed copies thereof.
Section 4.1.13. Consents. On or prior to the date of the First Closing, any
consents or approvals required to be obtained from any holder or holders of any
outstanding Security or Indebtedness of the Company and any amendments or
agreements pursuant to which any Security or evidence of Indebtedness may have
been issued (including the amendment of the Bank Loan Agreement) which shall be
necessary to permit the consummation of the transactions contemplated hereby
shall have been obtained and all such consents or amendments shall be
satisfactory in form and substance to you and your special counsel.
Section 4.1.14. Funding Instructions. At least three Business Days prior to
the date of the applicable Closing, you shall have received written instructions
executed by a Responsible Officer of the Company directing the manner of the
payment of funds and setting forth (a) the name and address of the transferee
bank, (b) such transferee bank's ABA number, (c) the account name and
-4-
<PAGE>
number into which the purchase price for the Notes being purchased on the date
of such Closing is to be deposited and (d) the name and telephone number of the
account representative responsible for verifying receipt of such funds.
Section 4.1.15. Merger. Concurrently with the issuance of the Notes, the
Merger shall have occurred and be final and the Company shall be the surviving
corporation. Such Merger shall be upon terms and conditions satisfactory to you
and your special counsel and you shall have received all evidence thereof
satisfactory to you and your special counsel.
Section 4.1.16. SBA Approval of Merger and Release of SBA Liens.
Concurrently with the issuance of the Notes, the SBA shall have approved the
Merger and shall have released any Liens held by the SBA. Such approval (which
may be conditional) and release shall be in a satisfactory form to you and your
special counsel and you shall have received all evidence thereof satisfactory to
you and your special counsel.
Section 4.1.17. UCC Searches. You shall have received the results of a
recent search by a Person satisfactory to you of the Uniform Commercial Code
filings which may have been filed with respect to the property of the Company
and its Subsidiaries.
Section 4.1.18. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
Section 4.2. Additional Conditions of Second Closing Date. Your
obligation to purchase the Notes to be issued on the date of the Second Closing
shall be subject to the following further conditions precedent:
Section 4.2.1. Issuance of Series A Notes. The Company shall have issued
all of the Series A Notes which were scheduled to have been issued on the date
of the First Closing.
Section 4.2.2. First Closing Conditions. All of the closing conditions
set forth in Sections 4.1.1 through 4.1.9, 4.1.13, 4.1.14, and 4.1.18 shall have
been fulfilled or performed with respect to the date of the Second Closing.
Section 5. Representations and Warranties of the Company.
The Company represents and warrants to you that:
Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own
-5-
<PAGE>
or hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Notes and to perform the
provisions hereof and thereof.
Section 5.2. Authorization, etc. This Agreement and the Other Agreements
and the Notes have been duly authorized by all necessary corporate action on the
part of the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 5.3. Disclosure. The Company, through its agent, Fleet Corporate
Finance, has delivered to you and each Other Purchaser a copy of a Confidential
Information Memorandum, dated April, 1999 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. This Agreement, the Memorandum, the
documents, certificates or other writings delivered to you by or on behalf of
the Company in connection with the transactions contemplated hereby and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 31, 1998, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its Capital Stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
(b) All of the outstanding shares of Capital Stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
-6-
<PAGE>
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of Capital Stock or similar equity
interests of such Subsidiary.
Section 5.5. Financial Statements. The Company has delivered to each
Purchaser copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
Section 5.6. Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will not
(i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
Section 5.7. Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes except those that have been
obtained or UCC-1 filings filed with the offices of the Secretary of State of
the State of New York and the City Register of New York County, New York,
necessary to perfect the security interests contemplated by the Security
Documents.
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a)
Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings
pending or, to the knowledge
-7-
<PAGE>
of the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of
any agreement or instrument to which it is a party or by which it is bound, or
any order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
federal, state or other taxes for all fiscal periods are adequate.
Section 5.10. Title to Property; Leases. The Company and its Subsidiaries
have good and sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties reflected in the
most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 5.11. Licenses, Permits, etc. Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right owned by
any other Person; and
(c) to the best knowledge of the Company, there is no Material violation
by any Person of any right of the Company or any of its Subsidiaries with
respect to any patent, copyright,
-8-
<PAGE>
service mark, trademark, trade name or other right owned or used by the Company
or any of its Subsidiaries.
Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by more than $500,000 in the case of any
single Plan and by more than $1,000,000 in the aggregate for all Plans. The
terms "benefit liabilities" has the meaning specified in section 4001 of ERISA
and the terms "current value" and "present value" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and sale
of the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to (i) the accuracy of your representation in Section 6.2 as to
the sources of the funds used to pay the purchase price of the Notes to be
purchased by you and (ii) the assumption, made solely for the purpose of making
such representation, that Department of Labor Interpretive Bulletin 75-2 with
respect to prohibited transactions remains valid in the circumstances of the
transactions contemplated herein.
Section 5.13. Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar Securities for
sale to, or solicited any offer to
-9-
<PAGE>
buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than you, the Other Purchasers and not more than
20 other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its behalf
has taken, or will take, any action that would subject the issuance or sale of
the Notes to the registration requirements of section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply
the proceeds of the sale of the Notes to refinance SBA Debt and for general
corporate purposes. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any Securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 5% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 5% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.
Section 5.15. Existing Indebtedness; Future Liens. (a) Except as described
therein, Schedule 5.15 sets forth a complete and correct list of all outstanding
Indebtedness for borrowed money of the Company and its Subsidiaries as of March
31, 1999, since which date there has been no Material change in the amounts,
interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any Indebtedness of
the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted Lien.
Section 5.16. Foreign Assets Control Regulations, etc. Neither the sale of
the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
Section 5.17. Status under Certain Statutes. Neither the Company nor any
Subsidiary is subject to regulation under the Public Utility Holding Company Act
of 1935, as amended, the ICC Termination Act of 1995, as amended, or the Federal
Power Act, as amended.
-10-
<PAGE>
Section 5.18. Environmental Matters. Neither the Company nor any Subsidiary
has knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against the Company or any of
its Subsidiaries or any of their respective real properties now or formerly
owned, leased or operated by any of them or other assets, alleging any damage to
the environment or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to you in writing:
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation
of Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly
owned, leased or operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned, leased
or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case in
any manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
Section 5.19. Location of Offices, Books and Records. Schedule 5.19 annexed
hereto completely and accurately lists all places (i) at which the Company
maintains its books and records relating to, among other things, its Loans, (ii)
at which the Company has any places of business and (iii) at which the Company
has its chief executive office.
Section 5.20. SBIC. The Company is a qualified SBIC. The Company is in
material compliance with all conditions or requirements imposed by the SBA or
any other applicable Governmental Authority with respect to its status as an
SBIC including, without limitation, all conditions and requirements imposed
under the SBI Act and the SBA Regulations promulgated thereunder.
Section 5.21. Investment Company. Each of the Company and Medallion
Financial is an "investment company," as such term is defined in the 1940 Act.
The purchase of the Notes by you and the Other Purchasers, the application of
the proceeds and repayment thereof by the Company and the performance of the
transactions contemplated by this Agreement and the other Note Documents will
not violate any provision of said 1940 Act, or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
Section 5.22. Priority. Except as otherwise permitted hereunder, the
Collateral Agent, for the ratable benefit of the holders of the Notes, has a
valid and perfected first priority security
-11-
<PAGE>
interest (subject to the terms of the Intercreditor Agreement) in and to all
Collateral, enforceable against the Company and all third parties in all
relevant jurisdictions and securing the payment of the Notes and all other sums
payable under or in connection with the Note Documents.
Section 5.23. 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 the
Company 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 5.24. Activities. The only transactions engaged in by the Company
in the ordinary course of its business consist of: (i) the making and servicing
of Loans and Investments in compliance with the SBI Act and the SBA Regulations
promulgated thereunder; and (ii) transactions incidental to the foregoing.
Section 5.25. Solvency. The Company is Solvent, and will not, as a result
of the transactions contemplated hereby or by the Note Documents, become not
Solvent.
Section 5.26. Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the computer systems of the
Company and its Subsidiaries and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others, or to the extent
practicable and commercially reasonable, with which the systems of the Company
and its Subsidiaries interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by June 30, 1999, except where
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. The cost to the Company and its
Subsidiaries of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Company and its Subsidiaries (including
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or a Material Adverse Effect. Except for such reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Company and its Subsidiaries are and, with
ordinary course upgrading and maintenance and expansion, will continue for the
term of this Agreement to be, sufficient to permit the Company to conduct its
business without a Material Adverse Effect.
Section 6. Representations of the Purchaser.
Section 6.1. Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand that the Notes have not been registered under the Securities Act and
may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
-12-
<PAGE>
Section 6.2. Source of Funds. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) if you are an insurance company, the Source to be used by you
is an "insurance company general account" within the meaning of
Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 and
there is no "employee benefit plan" (within the meaning of section 3(3)
of ERISA or section 4975(e)(1) of the Code), treating as a single plan,
all plans maintained by the same employer or employee organization, with
respect to which the amount of the general account reserves and
liabilities for all contracts held by or on behalf of such plan, exceed
ten percent (10%) of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set
forth in the NAIC Annual Statement filed with your state of domicile; or
(b) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than
a separate account that is maintained solely in connection with your
fixed contractual obligations under which the amounts payable, or
credited, to such plan and to any participant or beneficiary of such plan
(including any annuitant) are not affected in any manner by the
investment performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE")
90-1 (issued January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Company in writing pursuant to this
paragraph (c), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or collective
investment fund; or
(d) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
-13-
<PAGE>
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in section 3 of ERISA.
Section 7. Information as to Company.
Section 7.1. Financial and Business Information. The Company shall deliver
to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than
the last quarterly fiscal period of each such fiscal year), duplicate
copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income and retained earnings,
changes in shareholders' equity and cash flows of the Company and
its Subsidiaries for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail (which detail
shall include data as to non-accruals and related collateral, repossessions,
charge-offs and reconciliation allowance for losses), prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q, if any, prepared in
compliance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this Section
7.1(a);
(b) Annual Statements -- within 120 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
-14-
<PAGE>
(ii) consolidated statements of income and retained earnings,
changes in shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail (which detail shall include data as
to non-accruals and related collateral, repossessions, charge-offs and
reconciliation allowance for losses), prepared in accordance with GAAP, and
accompanied by
(A) an opinion thereon of Independent Public Accountants,
which opinion shall state that such financial statements present
fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and
cash flows and have been prepared in conformity with GAAP and SBA
Regulations, and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof,
provided that, as to a certificate prepared by the Independent
Public Accountants, such period, as it relates to the compliance
by the Company with the covenants contained in Sections 9 and 10
hereof shall apply to the fiscal period covered by their audit
(it being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not make such
an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K, if any, for such fiscal year
(together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's certificate described
in clause (B) above, shall be deemed to satisfy the requirements of this
Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to public Securities holders
generally, and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the
-15-
<PAGE>
Company or any Subsidiary with the Securities and Exchange Commission and
of all press releases and other statements made available generally by the
Company or any Subsidiary to the public concerning developments that are
Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(iii) any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the
-16-
<PAGE>
Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any such holder of Notes.
Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.4 through Section 10.7
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the Company
and its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
Section 7.3. Inspection. The Company shall permit the representatives of
each holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to discuss
the affairs, finances and accounts of the Company and its Subsidiaries with
the Company's officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) its Independent Public Accountants, and
(with the consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at
the expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and Independent Public
Accountants (and by this provision the Company authorizes said accountants
to discuss the affairs.
-17-
<PAGE>
finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested.
Section 8. Prepayment of the Notes.
Section 8.1. Required Prepayment. The Notes shall not be subject to required
prepayments except in connection with an acceleration of the Notes pursuant to
the provisions of Section 12.
Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may,
at its option, upon notice as provided below, prepay at any time all, or from
time to time any part of, the Notes of each series, in an amount not less than
$1,000,000 in the case of a partial prepayment, at 100% of the principal amount
so prepaid, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2 not less than
30 days and not more than 60 days prior to the date fixed for such prepayment.
Each such notice shall specify such date, the aggregate principal amount of the
Notes to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
Section 8.3. Change in Control. (a) Notice of Change in Control. The Company
will, within thirty (30) Business Days after any Responsible Officer has
knowledge of the occurrence of any Change in Control, give written notice of
such Change in Control to each holder of Notes unless notice in respect of such
Change in Control shall have been given pursuant to subparagraph (b) of this
Section 8.3. If a Change in Control has occurred, such notice shall contain and
constitute an offer to prepay Notes as described in subparagraph (c) of this
Section 8.3 and shall be accompanied by the certificate described in
subparagraph (g) of this Section 8.3.
(b) Condition to Company Action. The Company will not take any action
that consummates a Change in Control unless (i) at least thirty (30) days prior
to such action it shall have given to each holder of Notes written notice
containing and constituting an offer to prepay Notes as described in
subparagraph (c) of this Section 8.3, accompanied by the certificate described
in subparagraph (g) of this Section 8.3, and (ii) contemporaneously with such
action, it prepays all Notes required to be prepaid in accordance with this
Section 8.3.
(c) Offer to Prepay Notes. The offer to prepay Notes contemplated by
subparagraphs (a) and (b) of this Section 8.3 shall be an offer to prepay, in
accordance with and subject to this Section 8.3, all, but not less than all, the
Notes held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the "Proposed
Prepayment Date").
-18-
<PAGE>
If such Proposed Prepayment Date is in connection with an offer contemplated by
subparagraph (a) of this Section 8.3, such date shall be not less than thirty
(30) days and not more than forty-five (45) days after the date of such offer
(if the Proposed Prepayment Date shall not be specified in such offer, the
Proposed Prepayment Date shall be the thirtieth day after the date of such
offer).
(d) Acceptance; Rejection. A holder of Notes may accept the offer to
prepay made pursuant to this Section 8.3 by causing a notice of such acceptance
to be delivered to the Company at least fifteen (15) days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to respond to an offer to
prepay made pursuant to this Section 8.3 shall be deemed to constitute a
rejection of such offer by such holder.
(e) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.3 shall be at 100% of the principal amount of such Notes, together
with interest on such Notes accrued to the date of prepayment. On the Business
Day preceding the date of prepayment, the Company shall deliver to each holder
of Notes being prepaid a statement showing the amount due in connection with
such prepayment and setting forth the details of the computation of such amount.
The prepayment shall be made on the Proposed Prepayment Date except as provided
in subparagraph (f) of this Section 8.3.
(f) Deferral Pending Change in Control. The obligation of the Company to
prepay Notes pursuant to the offers required by subparagraph (b) and accepted in
accordance with subparagraph (d) of this Section 8.3 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control does
not occur on the Proposed Prepayment Date in respect thereof, the prepayment
shall be deferred until and shall be made on the date on which such Change in
Control occurs. The Company shall keep each holder of Notes reasonably and
timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this Section 8.3 in respect of such Change in Control shall be
deemed rescinded).
(g) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 8.3; (iii) the principal amount of each Note offered to be prepaid; (iv)
the interest that would be due on each Note offered to be prepaid, accrued to
the Proposed Prepayment Date; (v) that the conditions of this Section 8.3 have
been fulfilled; and (vi) in reasonable detail, the nature and date or proposed
date of the Change in Control.
(h) "Change in Control" Defined. "Change in Control" means any
of the following events or circumstances:
the failure, for any reason including, without limitation,
by reason of death, disability, incapacity, removal,
resignation or failure to be
-19-
<PAGE>
elected, of 50% or more members of Current Management to
hold, and actively discharge the duties customarily
associated with, offices held by any member of Current
Management as of the date of the First Closing.
(i) "Current Management" Defined. "Current Management" means Alvin
Murstein, Chairman and Director; Andrew M. Murstein, Senior Vice President and
Director; Michael J. Kowalsky, President; Marie Russo, Senior Vice President and
Secretary; Daniel F. Baker, Treasurer and Chief Financial Officer; Allen S.
Greene, Senior Executive Vice President and Chief Operating Officer; and Harvey
Goldman, Senior Vice President.
Section 8.4. Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes of each series, the principal amount of the Notes to be
prepaid shall be allocated among all of Notes of each series at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
Section 8.5. Maturity; Surrender, etc. In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 8.6. Purchase of Notes. The Company will not and will not permit
any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
Section 8.7. Make-Whole Amount. The term "Make-Whole Amount" means, with
respect to any Note, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the Called Principal
of such Note over the amount of such Called Principal, provided that the Make-
Whole Amount may in no event be less than zero. For the purposes of determining
the Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such
-20-
<PAGE>
Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to
the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "PX1" on the Bloomberg Financial Markets Services
Screen (or such other display as may replace PX1 on Bloomberg Financial
Markets Services Screen) for actively traded U.S. Treasury Securities
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
Securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
U.S. Treasury Security with the duration closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the duration closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has
-21-
<PAGE>
become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.
Section 9. Affirmative Covenants.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. The Company will, and will cause each of
its Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
those of the SBA and all Environmental Laws, and will obtain and maintain in
effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to 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 Company).
Section 9.2. Insurance. (a) The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
(b) The Company, from time to time upon request of the Collateral Agent or
any holder of Notes, promptly shall furnish or cause to be furnished to the
Collateral Agent and any such requesting holder of Notes evidence, in form and
substance satisfactory to the Collateral Agent and such holder of Notes (if
requested by a holder of Notes), of the maintenance of all insurance required by
this Section 9.2 to be maintained, including, but not limited to, such originals
or copies as the Collateral Agent or such holder of Notes may request of
policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments.
Section 9.3. Maintenance of Properties. The Company will, and will cause
each of its Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company will, and will cause
each of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge
-22-
<PAGE>
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
Section 9.5. Corporate Existence, etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Sections 10.2 and 10.3, the Company will at all times preserve and keep in full
force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Subsidiary) and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
Section 9.6. Line of Business. The Company will not, and will not permit
any of its Subsidiaries to, engage to any substantial extent in any business
other than the businesses in which the Company and its Subsidiaries are engaged
on the date of this Agreement as described in the Memorandum.
Section 9.7. Further Assurances. Upon the request of the Collateral Agent
or the Required Holders, the Company at its cost and expense shall duly execute
and deliver, or cause to be duly executed and delivered, to the Collateral Agent
and the holders of the Notes 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 Collateral Agent or the Required Holders to carry out more effectually
the provisions and purposes of this Agreement and the other Note Documents.
Section 9.8. Maintenance of Security Interest. The Company shall maintain
perfected, first priority security interests in the Collateral in favor of the
Collateral Agent in accordance with the terms of the Company Security Agreement,
subject only to Permitted Liens.
Section 9.9. Required Percentage of Medallion Loans. The Company shall
ensure that, for so long as any amounts are owed by it to the holders of the
Notes under the Note Documents, at all times at least 50% of the aggregate
principal amount of all Loans made by it and then outstanding shall be Eligible
Medallion Loans to Persons who have obtained such Loans for the purpose of
acquiring Medallion Rights for use primarily in New York City.
Section 9.10. Covenant to Secure Notes Equally. If the Company or any of
its Subsidiaries shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Permitted Liens, the
Company will make or cause to be made effective provision whereby the Notes will
be contemporaneously secured by such Lien
-23-
<PAGE>
equally and ratably with any and all other Senior Debt thereby secured pursuant
to instruments reasonably satisfactory to the Required Holders.
Section 9.11. Delivery of Termination Statements. Within 30 days after the
date of the First Closing the Company shall file all necessary UCC financing
statements in all offices to terminate any UCC financing statements on property
owned by Edwards Capital Corp. existing prior to the Merger.
Section 10. Negative Covenants.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into directly or indirectly any transaction
or Material group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering of
any service) with any Affiliate (other than the Company or another Subsidiary),
except in the ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 10.2. Merger, Consolidation, Sale or Transfers Assets. The Company
will not, and will not permit any of its Subsidiaries to, consolidate with or
merge with any other corporation or convey, transfer or lease substantially all
of its assets in a single transaction or series of transactions to any Person
(except that a Subsidiary of the Company may (x) consolidate with or merge with,
or convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to, the Company or another Wholly-Owned
Subsidiary of the Company and (y) convey, transfer or lease all of its assets in
compliance with the provisions of Section 10.3), provided that the foregoing
restriction does not apply to the consolidation or merger of the Company with,
or the conveyance, transfer or lease of substantially all of the assets of the
Company in a single transaction or series of transactions to, any Person so long
as:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case
may be (the "Successor Corporation"), shall be a solvent corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes its
assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement, the Notes and the other Note
Documents; and
(c) immediately after giving effect to such transaction no Default
or Event of Default would exist.
-24-
<PAGE>
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement, the Notes or the other Note
Documents.
Section 10.3. Sale of Assets. Except as permitted under Section 10.2, the
Company will not, and will not permit any of its Subsidiaries to, make any Asset
Disposition unless:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market Value at
least equal to that of the property exchanged and is in the best interest
of the Company or such Subsidiary; and
(b) immediately after giving effect to the Asset Disposition, no
Default or Event of Default would exist; and
(c) immediately after giving effect to the Asset Disposition, the
Disposition Value of all property that was the subject of any Asset
Disposition occurring (i) in the period of four fiscal quarters of the
Company then next ending would not exceed 10% of Consolidated Total Assets
as of the end of the then most recently ended fiscal quarter of the Company
and (ii) on or after the date of the First Closing to and including the
date of any such Asset Disposition would not exceed 25% of Consolidated
Total Assets as of the end of the then most recently ended fiscal quarter
of the Company.
If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application or a Property Reinvestment Application within 365 days after such
Transfer, then such Transfer, only for the purpose of determining compliance
with subsection (c) of this Section 10.3 as of a date on or after the Net
Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition.
Section 10.4. Minimum Tangible Net Worth. The Company will not suffer or
permit Tangible Net Worth of the Company and its Subsidiaries to be less than
$65,000,000.
Section 10.5. Maximum Liability Ratio. The Company will not suffer or permit
the ratio of Total Liabilities to Tangible Net Worth of the Company and its
Subsidiaries to be more than 4.5:1.0 at any time.
Section 10.6. Minimum Net Finance Assets. The Company will not suffer or
permit the ratio of Net Finance Assets to the sum of (i) Senior Debt plus (ii)
SBA Debt to be less than 1.15:1.0 at any time.
Section 10.7. Minimum Net Income to Interest Expense Ratio. The Company will
not suffer or permit the ratio, on a rolling four quarter basis, of (a) Net
Income plus Interest Expense to (b) Interest Expense to be less than 1.20:1.0.
Section 10.8. Limitation on Loans and Investments. The Company will not, and
will not permit any Subsidiary to, (a) make, or obligate itself to make, any
Loan or Investment that is not a Domestic Loan or a Domestic Investment;
-25-
<PAGE>
(b) make, or obligate itself to make, any Loan 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 Company's
Tangible Net Worth plus Subordinated Debt; or
(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
Company's Commercial Loan concentration in any given industry (determined in
accordance with the Standard Industrial Classification promulgated by the Office
of Management and Budget) would exceed in principal amount 25% of the Company's
total Loans outstanding.
Section 10.9. Restricted Payments. The Company will not, and will not
permit any Subsidiary to, make, or obligate itself to make, any Restricted
Payment.
Section 10.10. Portfolio Purchases. The Company will not, and will not
permit any Subsidiary to, 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 Company has provided the Collateral Agent and each of the
holders of the Notes with a pro forma certificate of the Chief Financial
Officer of the Company evidencing the Company's computation of compliance
with each of the financial ratios, tests or covenants specified in Sections
9.9, 10.4, 10.5, 10.6, 10.7, 10.8 and 10.12 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 to any other line of business; provided, that,
to the extent such Portfolio Purchase does not entirely involve loans
secured by New York City Taxicab Medallions, in addition to the foregoing,
(A) the aggregate outstanding principal balances of all loans included in
such Portfolio Purchase that are not secured by New York City Taxicab
Medallions, if any, shall not exceed $25,000,000 during any period of
twelve consecutive calendar months with respect to all such Portfolio
Purchases in the aggregate during such period and (B) such loans that are
not secured by New York City Taxicab Medallions may be purchased only from
a qualified SBIC.
-26-
<PAGE>
Section 10.11. Amendments of Agreements. The Company will not, and will not
permit any Subsidiary to, 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 Collateral Agent or any holder of Notes.
Section 10.12. Capital Expenditures. The Company will not, and will not
permit any Subsidiary to, expend or commit to expend for itself more than an
aggregate of $500,000 in any fiscal year for capital expenditures, for the
acquisition of Equipment or for leasehold improvements.
Section 11. Events of Default.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-
Whole Amount, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) (i) the Company defaults in the performance of or compliance
with any term contained in Section 7.1(d), 9.8, 10.4, 10.5, 10.6 or 10.7 or
(ii) less than 100% of the Series B Notes scheduled to be sold on the date
of the Second Closing shall have been sold on the date of the Second
Closing as a result of a failure of the Company to satisfy the applicable
closing conditions or (iii) if the Company defaults in the performance or
observance of, or a default shall occur under, any covenant, agreement or
provision of any other Note Document or in any other agreement, instrument
or document delivered to the Collateral Agent or the holders of the Notes
and such default shall not have been remedied within such grace or cure
period, if any, as may be provided therefor;
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving written notice of
such default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or in the
other Note Documents or in any writing furnished in connection with the
transactions contemplated
-27-
<PAGE>
hereby proves to have been false or incorrect in any material respect on
the date as of which made; or
(f) (i) the Company or any Material Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $1,000,000 beyond
any period of grace provided with respect thereto, or (ii) the Company or
any Material Subsidiary is in default in the performance of or compliance
with any term of any evidence of any Indebtedness in an aggregate
outstanding principal amount of at least $1,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Indebtedness
has become, or has been declared (or, other than in the case of
Indebtedness of the Company under the Bank Loan Agreement, one or more
Persons are entitled to declare such Indebtedness to be), due and payable
before its stated maturity or before its regularly scheduled dates of
payment, or (iii) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of the
holder of Indebtedness to convert such Indebtedness into equity interests),
(x) the Company or any Material Subsidiary has become obligated to purchase
or repay Indebtedness before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount of
at least $1,000,000 or (y) one or more Persons have the right to require
(or, in the case of the Banks, have required) the Company or any Material
Subsidiary to purchase or repay such Indebtedness; or
(g) the Company or any Material Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Material Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Material Subsidiaries, or any such petition
shall be filed against the Company or any of its Material Subsidiaries and
such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 are rendered against one or more of the
Company and its Material
-28-
<PAGE>
Subsidiaries and which judgments are not, within 45 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 45 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (iii) the aggregate "amount
of unfunded benefit liabilities" (within the meaning of section 4001(a)(18)
of ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $1,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase
the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect; or
(k) if there shall occur any change in the Collateral or in the
business of the Company, or its operation, conduct or prospects thereof,
that individually or in the aggregate, could have or result in a Material
Adverse Effect and the Collateral Agent has been directed to declare such
Event of Default by the Required Holders.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
Section 12. Remedies on Default, etc.
Section 12.1. Acceleration. (a) If an Event of Default with respect to the
Company described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 51% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event
-29-
<PAGE>
of Default may at any time, at its or their option, by notice or notices to the
Company, declare all the Notes held by it or them to be immediately due and
payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been declared
due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of
not less than 51% in principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, etc. No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any
-30-
<PAGE>
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
Section 13. Registration; Exchange; Substitution of Notes.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver within five (5) Business Days,
at the Company's expense (except as provided below), one or more new Notes (as
requested by the holder thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1(a) or 1(b), as the case may be. Each such
new Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $100,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $100,000. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee), shall
be deemed to have made the representation set forth in Section 6.2.
Section 13.3. Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a Note
with a minimum net worth of at least $50,000,000, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
-31-
<PAGE>
the Company at its own expense shall execute and deliver within five (5)
Business Days, in lieu thereof, a new Note, dated and bearing interest from the
date to which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
Section 14. Payments on Notes.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of the
Company in such jurisdiction. The Company may at any time, by notice to each
holder of a Note, change the place of payment of the Notes so long as such place
of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
Section 14.2. Home Office Payment. So long as you or your nominee shall be
the holder of any Note, and notwithstanding anything contained in Section 14.1
or in such Note to the contrary, the Company will pay all sums becoming due on
such Note for principal, Make-Whole Amount, if any, and interest by the method
and at the address specified for such purpose below your name in Schedule A, or
by such other method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
Section 15. Expenses, Etc.
Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of one special counsel and, if reasonably
required, local or other counsel) incurred by you and each Other Purchaser or
holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement or the
Notes (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note, and (b) the
costs and expenses, including financial advisors' fees, incurred in connection
with the
-32-
<PAGE>
insolvency or bankruptcy of the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses, if any, of
brokers and finders (other than those retained by you).
Section 15.2. Survival. The obligations of the Company under this Section
15 will survive the payment or transfer of any Note, the enforcement, amendment
or waiver of any provision of this Agreement or the Notes, and the termination
of this Agreement.
Section 16. Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
Section 17. Amendment and Waiver.
Section 17.1. Requirements. This Agreement and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used therein), will be effective as to you unless consented to by you
in writing, and (b) no such amendment or waiver may, without the written consent
of the holder of each Note of each series at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes of each series, (ii) change
the percentage of the principal amount of the Notes of each series the holders
of which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each
-33-
<PAGE>
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.
Section 17.3. Binding Effect, etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
Section 18. Notices.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
-34-
<PAGE>
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
Section 19. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
Section 20. Confidential Information.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
Affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any Security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be
-35-
<PAGE>
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
Section 21. Substitution of Purchaser.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
Section 22. Miscellaneous.
Section 22.1. Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of or
Make-Whole Amount or interest on any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
-36-
<PAGE>
Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 22.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 22.6. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
Section 22.7. Additional Indebtedness. Subject to the terms and provisions
hereof, the Company may, from time to time, issue and sell additional senior
secured promissory notes and may, in connection with the documentation thereof,
incorporate by reference various provisions of this Agreement. Such
incorporation by reference shall not modify, dilute or otherwise affect the
terms and provisions hereof including, without limitation, the priority of the
Notes and the percentage of the Notes required to approve an amendment or
effectuate a waiver under the provisions of Section 17 or the percentages of the
Notes required to accelerate the Notes or rescind such an acceleration under the
provisions of Section 12.
* * * * *
-37-
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
Medallion Funding Corp.
By: /s/ Andrew Murstein
-----------------------
Name: Andrew Murstein
Title: President
-38-
<PAGE>
The foregoing is hereby agreed
to as of the date thereof.
The Travelers Insurance Company
By: /s/ Bill Carnduff
-------------------------------
Name: Bill Carnduff
Title:
-39-
<PAGE>
The foregoing is hereby agreed
to as of the date thereof.
First Citicorp Life Insurance Company
By Travelers Asset Management International
Corporation
By: /s/ Bill Carnduff
-------------------------------
Name: Bill Carnduff
Title:
-40
<PAGE>
The foregoing is hereby agreed
to as of the date thereof.
Citicorp Life Insurance Company
By Travelers Asset Management International
Corporation
By: /s/ Bill Carnduff
----------------------------
Name: Bill Carnduff
Title:
-41-
<PAGE>
The foregoing is hereby agreed
to as of the date thereof.
United of Omaha Life Insurance Company
By: /s/ Edwin Garrison
------------------------------
Name: Edwin Garrison
Title:
-42-
<PAGE>
The foregoing is hereby agreed
to as of the date thereof.
Companion Life Insurance Company
By __________________________________
Name:
Title:
By __________________________________
Name:
Title:
-43-
<PAGE>
INFORMATION RELATING TO PURCHASERS
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
The Travelers Insurance Company $10,000,000
One Tower Square Series A
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
The Travelers Insurance Company --
Consolidated Private Placement Account No. 910-2-587434
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
ABA #021000021
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: TRAL & CO
Taxpayer I.D. Number: 06-0566090
Schedule A
(to Note Purchase Agreement)
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
First Citicorp Life Insurance Company $1,000,000
c/o The Travelers Insurance Company Series A
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
First Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260529
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
First Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-3078429
A-2
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
Citicorp Life Insurance Company $1,000,000
c/o The Travelers Insurance Company Series A
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260370
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 43-0979556
A-3
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
United of Omaha Life Insurance Company $8,500,000
Mutual of Omaha Plaza Series A
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan Administration
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
for credit to: United of Omaha Life Insurance Company
Account #900-9000200
a/c: G07097
PPN: 58403# AA 5
Interest Amount:__________________________________
Principal Amount:_________________________________
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment, corporate actions and reorganization notifications to:
The Chase Manhattan Bank
4 New York Plaza-13th Floor
New York, New York 10004
Attention: Income Processing-J. Pipperato
a/c: G07097
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the Note Purchase Agreement) to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0322111
A-4
<PAGE>
Notes should be forwarded to:
The Chase Manhattan Bank
North America Insurance - 6th Floor
Attn: Christine Alonzo
3 Chase MetroTech Center
Brooklyn, New York 11245
A-5
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
Companion Life Insurance Company $1,500,000
c/o Mutual of Omaha Insurance Company Series A
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan Administration
Telefacsimile: (402) 351-2913
Confirmation: (402) 351-2583
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to: Companion Life Insurance Company Account #900-9000200
A/C: G07903
PPN: 58403# AA 5
Interest Amount:_______________________________
Principal Amount:______________________________
Notices
All notices of payment, on or in respect of the Notes and written confirmation
of each such payment, to:
The Chase Manhattan Bank
4 New York Plaza - 13/th/ Floor
New York, New York 10004
Attention: Income Processing
a/c: G07903
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the Note Purchase Agreement) to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
A-6
<PAGE>
Taxpayer I.D. Number: 13-1595128
Address for delivery of Notes:
The Chase Manhattan Bank
North America Insurance - 6/th/ Floor
Attn: Christine Alonzo
3 Chase Metrotech Center
Brooklyn, NY 11245
A-7
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
Citicorp Life Insurance Company $500,000
c/o The Travelers Insurance Company Series A
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series A, due June 1,
2004, PPN 58403# AA 5, principal, premium or interest") to:
Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260528
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 43-0979556
A-8
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
The Travelers Insurance Company $10,000,000
One Tower Square Series B
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
The Travelers Insurance Company --
Consolidated Private Placement Account No. 910-2-587434
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
ABA #021000021
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: TRAL & CO
Taxpayer I.D. Number: 06-0566090
A-9
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
First Citicorp Life Insurance Company $1,000,000
c/o The Travelers Insurance Company Series B
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
First Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260529
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
First Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-3078429
A-10
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
Citicorp Life Insurance Company $1,000,000
c/o The Travelers Insurance Company Series B
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260370
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 43-0979556
A-11
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
Citicorp Life Insurance Company $500,000
c/o The Travelers Insurance Company Series B
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Private Placements
Telecopy: (860) 954-5243
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
Citicorp Life Insurance Company
Concentration Account No. 36858201
For further credit to Account No. 260528
Citibank, N.A.
New York, New York
ABA #021000089
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed:
Citicorp Life Insurance Company
c/o The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group--Cashier
Telecopy: (860) 277-2299
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 43-0979556
A-12
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
United of Omaha Life Insurance Company $8,500,000
Mutual of Omaha Plaza Series B
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan Administration
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
for credit to: United of Omaha Life Insurance Company
Account #900-9000200
a/c: G07097
PPN: 58403# AA 5
Interest Amount:_________________________
Principal Amount:________________________
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment, corporate actions and reorganization notifications to:
The Chase Manhattan Bank
4 New York Plaza-13th Floor
New York, New York 10004
Attention: Income Processing-J. Pipperato
a/c: G07097
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the Note Purchase) to be addressed as
first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0322111
A-13
<PAGE>
Notes should be forwarded to:
The Chase Manhattan Bank
North America Insurance - 6th Floor
Attn: Christine Alonzo
3 Chase MetroTech Center
Brooklyn, New York 11245
A-14
<PAGE>
Principal Amount
and Series of Notes
Name and Address of Purchaser to be Purchased
COMPANION LIFE INSURANCE COMPANY $1,500,000
c/o Mutual of Omaha Insurance Company Series B
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan Administration
Telefacsimile:(402) 351-2913
Confirmation: (402) 351-2583
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Medallion Funding Corp., 7.20% Senior Secured Notes, Series B, due September 1,
2004, PPN 58403# AB 3, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to: Companion Life Insurance Company Account #900-9000200
A/C: G07903
PPN: 58403# AA 5
Interest Amount:_________________________
Principal Amount:________________________
Notices
All notices of payment, on or in respect of the Notes and written confirmation
of each such payment, to:
The Chase Manhattan Bank
4 New York Plaza - 13/th/ Floor
New York, New York 10004
Attention: Income Processing
a/c: G07903
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the Note Purchase Agreement) to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
A-15
<PAGE>
Taxpayer I.D. Number: 13-1595128
Address for delivery of Notes:
The Chase Manhattan Bank
North America Insurance - 6/th/ Floor
Attn: Christine Alonzo
3 Chase Metrotech Center
Brooklyn, NY 11245
A-16
<PAGE>
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting Securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Asset Disposition" means any Transfer except:
(a) any Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary so long as immediately before and immediately after the
consummation of any such Transfer and after giving effect thereto, no
Default or Event of Default exists; and
(b) any Transfer made in the ordinary course of business and
involving only property that is either (i) inventory held for sale or (ii)
equipment, fixtures, supplies or materials no longer required in the
operation of the business of the Company or any of its Subsidiaries or that
is obsolete.
"Bank Loan Agreement" means the Amended and Restated Loan Agreement dated
as of December 24, 1997, as amended to date and as it may be amended from time
to time as permitted hereunder, by and among the Company, the Lenders party
thereto, Fleet Bank, National Association ("Fleet"), as Swing Line Lender,
Administrative Agent and Collateral Agent (the "Agent"), The Bank of New York,
as Documentation Agent and Fleet as Arranger.
"Bank Loan Documents" shall mean and include Bank Loan Agreement and all
other "Loan Documents" as defined in the Bank Loan Agreement.
"Bank Security Documents" shall mean and include the "Borrower Security
Agreement" and the "Borrower Financing Statements" as such term is defined in
the Bank Loan Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York are required or authorized to be
closed.
Schedule B
(to Note Purchase Agreement)
<PAGE>
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Stock" with respect to any corporation, shall mean common stock,
Preferred Stock, and any and all shares or other equivalents (however
designated) of any other corporate stock, of such corporation.
"Change in Control" is defined in Section 8.3.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" shall mean and include the assets, property or interests in
property of whatever nature whatsoever, real, personal or mixed, tangible or
intangible, of the Company securing the Notes and all other property and
interests in personal property that shall, from time to time, secure the Notes.
"Collateral Agent" shall mean Fleet Bank, National Association, a national
banking association or any successor.
"Commercial Loan" shall mean any Loan that is secured in whole or in part
by Real Property, Inventory, Equipment and/or Receivables and that is not a
Medallion Loan.
"Commercial Paper" shall mean any and all commercial paper issued by the
Company from time to time pursuant to a Commercial Paper Dealer Agreement and a
Paying Agency Agreement.
"Commercial Paper Dealer Agreement" shall mean one or more commercial paper
dealer agreements between the Company and a dealer for the issuance and sale of
Commercial Paper by the Company, as the same shall be amended from time to time,
each as approved by the Collateral Agent and the Required Holders.
"Company" means Medallion Funding Corp., a New York corporation.
"Company Financing Statements" shall mean financing statements approved for
filing in accordance with the Uniform Commercial Code, and all other titles,
certificates, assignments and other documents, including, but not limited to,
the Mortgage Assignments, that the Collateral Agent or any holder of Notes may
require to perfect the security interests to be granted under the Company
Security Agreement.
"Company Security Agreement" shall mean the Security Agreement dated as of
June 1, 1999, between the Company and the Collateral Agent for the benefit of
the holders of the Notes,
B-2
<PAGE>
substantially in the form of Exhibit 4.10 hereto, as the same may be amended or
supplemented from time to time.
"Confidential Information" is defined in Section 20.
"Consolidated Total Assets" shall mean the total assets of the Company and
its Subsidiaries as determined in accordance with GAAP.
"CP Debt" shall mean all Indebtedness from the Company to the CP Holders
from time to time outstanding.
"CP Holders" shall mean the holders from time to time of outstanding
Commercial Paper issued by the Company.
"Current Management" is defined in Section 8.3.
"Debt Prepayment Application" means, with respect to any Transfer of
property, the application by the Company or its Subsidiaries of cash in an
amount equal to the Net Proceeds Amount with respect to such Transfer to pay
Senior Debt of the Company (other than Senior Debt owing to the Company, any of
its Subsidiaries or any Affiliate and Senior Debt in respect of any revolving
credit or similar credit facility providing the Company or any of its
Subsidiaries with the right to obtain loans or other extensions of credit from
time to time, except to the extent that in connection with such payment of
Senior Debt the availability of credit under such credit facility is permanently
reduced by an amount not less than the amount of such proceeds applied to the
payment of such Indebtedness), provided that in the course of making such
application the Company shall prepay each outstanding Note in accordance with
Section 8.2 in a principal amount which, when added to the Make-Whole Amount
applicable thereto, equals the Ratable Portion for such Note. As used in this
definition, "Ratable Portion" for any Note means an amount equal to the product
of (x) the Net Proceeds Amount being so applied to the payment of Indebtedness
multiplied by (y) a fraction the numerator of which is the outstanding principal
amount of such Note and the denominator of which is the aggregate principal
amount of Indebtedness of the Company and its Subsidiaries.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is the greater of (i) 9.20%
per annum above the rate of interest stated in clause (a) of the first paragraph
of the Notes or (ii) 2% over the rate of interest publicly announced by
Citibank, N.A. in New York, New York as its "base" or "prime" rate.
"Disposition Value" means, at any time, with respect to any property
(a) in the case of property that does not constitute Subsidiary
Stock, the book value thereof, valued at the time of such disposition in
good faith by the Company, and
B-3
<PAGE>
(b) in the case of property that constitutes Subsidiary Stock, an
amount equal to that percentage of book value of the assets of the
Subsidiary that issued such stock as is equal to the percentage that the
book value of such Subsidiary Stock represents of the book value of all of
the outstanding Capital Stock of such Subsidiary (assuming, in making such
calculations, that all Securities convertible into such Capital Stock are
so converted and giving full effect to all transactions that would occur or
be required in connection with such conversion) determined at the time of
the disposition thereof, in good faith by the Company.
"Dividends" shall mean, for the most recently completed four fiscal
quarters of the Company, 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.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Investment" shall mean an Investment in respect of a Person which
is a resident of the United States or a Person (other than a Governmental
Authority) organized or qualified under the laws of any state, excluding any
Domestic Investment that is a Portfolio Purchase.
"Domestic Loan" shall mean a Loan that is denominated and payable only in
Dollars, the Person in respect of which is a resident of the United States or a
Person (other than a Governmental Authority) organized or qualified under the
laws of any state.
"Edwards Debt" shall mean the outstanding amount which, once the Merger is
effective, shall be owed by the Company to the SBA under the following notes,
originally issued by Edwards Capital Corp., a Delaware corporation, to the SBA,
namely: two debentures dated September 23, 1992, in the original principal
amount of $3,500,000 and $6,050,000, respectively; a debenture dated June 29,
1994, in the original principal amount of $4,600,000; and a debenture dated
September 28, 1994, in the original principal amount of $5,100,000.
"Eligible Commercial Loan" shall mean any Commercial Loan that satisfies
the Eligibility Requirements and (a) that is secured by Eligible Real Estate,
Eligible Equipment, Eligible Inventory or Eligible Receivables and (b) that is
made to a Person that is an ongoing business concern.
"Eligible Equipment" shall mean Equipment in which a first priority
perfected security interest has been obtained by Company to secure the
obligations of such Person under a Loan by Company to such Person, or in the
case of such beneficial owner, to secure a Guaranty which shall have been made
by the such beneficial owner guaranteeing the Loan, and the same has been
assigned to the Collateral Agent, for the benefit of the holders of the Notes,
pursuant to the Company Security Agreement.
"Eligible Inventory" shall mean Inventory in which a first priority
perfected security interest has been obtained by Company to secure the
obligations of such Person under a Loan by Company to such Person, or in the
case of such beneficial owner, to secure a Guaranty which
B-4
<PAGE>
shall have been made by such beneficial owner guaranteeing the Loan, and the
same has been assigned to the Collateral Agent, for the benefit of the holders
of the Notes, pursuant to the Company Security Agreement.
"Eligible Loans" shall mean any Loan that constitutes or comprises either
an Eligible Medallion Loan or Eligible Commercial Loan or both.
"Eligible Medallion Loan" shall mean any Medallion Loan that satisfies the
Eligibility Requirements and that is secured by Medallion Rights.
"Eligible Real Estate" shall mean Real Property in which a mortgage
interest has been obtained (and continuously maintained) by the Company to
secure the obligations of such Person under a Loan by the Company 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.
"Eligible Receivables" shall mean Receivables (i) that are reasonably
determined in good faith to be eligible by Company, (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 Company to secure the obligations of such
Person under a Loan by Company 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 Collateral Agent,
for the benefit of the holders of the Notes, pursuant to the Company Security
Agreement.
"Eligibility Requirements" with respect to any Loan, shall mean the
following requirements:
(a) such Loan is made to, and is a recourse obligation of, the
Person to whom such Loan is made,
(b) such Loan is a Domestic Loan,
(c) such Loan is in compliance with the SBI Act and all SBA
Regulations promulgated thereunder and, after giving effect to such Loan,
the Company and its business and operations taken as a whole, is in
compliance with the SBI Act and all SBA Regulations promulgated thereunder,
(d) such Loan is pledged in accordance with Section 2.1 of the
Company Security Agreement,
(e) the representations, warranties and covenants contained in
Section 4.1 of the Company Security Agreement are true and correct, and
have been complied with, with respect to such Loan, and
(f) the Collateral Agent, on behalf of the holders of the Notes, has
a perfected, first priority security interest in such Loan.
B-5
<PAGE>
"Environmental Laws" means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"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" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).
"First Closing" is defined in Section 3.
"Funding SBA Debt" shall mean the outstanding amount owed by the Company to
the SBA under the following notes to the SBA: a debenture dated September 26,
1990, in the original principal amount of $510,000; a debenture dated December
19, 1990, in the original principal amount of $640,000; a debenture dated
September 23, 1992, in the original principal amount of $1,950,000; a debenture
dated June 29, 1994, in the original principal amount of $900,000; a debenture
dated March 29, 1995, in the original principal amount of $1,700,000 and a
debenture dated September 27, 1995, in the original principal amount of
$500,000.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means
(a) the government of
B-6
<PAGE>
(i) the United States of America or any state or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
B-7
<PAGE>
"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. LLP or
such other firm of independent certified public accountants of recognized
national standing selected by the Company and satisfactory to the Required
Holders.
"Institutional Investor" means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Intercreditor Agreement" shall mean that certain intercreditor agreement
entered into among (i) the Collateral Agent, (ii) the Agent, on behalf of the
Banks (as defined therein), the Swing Line Lender and the CP Holders, (iii) the
Banks, (iv) the holders of the Notes and (v) the Collateral Agent (as defined
therein), substantially in the form of Exhibit 4.12 hereto, and as such
agreement is amended from time to time, with the consent of the Collateral Agent
and the Required Holders.
"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 Capital Leases) by the Company or any of its
Subsidiaries during such period on Indebtedness of the Company or any of such
Subsidiaries (determined on a consolidated basis).
"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.
"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 any Loan or any capital
expenditures or any Portfolio Purchase.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other
B-8
<PAGE>
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"Loan" shall mean any loan or advance made in the ordinary course of
business by Company (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
Company, 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.
"Make-Whole Amount" is defined in Section 8.7.
"Material" means material in relation to the business, operations, affairs,
financial condition or assets of the Company and its Subsidiaries taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement, the Notes or the other Note
Documents, or (c) the validity or enforceability of this Agreement, the Notes or
the other Note Documents.
"Material Subsidiary" means at any time any Subsidiary whose assets
represent 1% or more of Consolidated Total Assets.
"Medallion" shall mean the metal plate which displays the license number of
a licensed Taxicab on the outside of the vehicle and which is issued by the New
York City Taxi and Limousine Commission, or by any other similar Governmental
Authority for a jurisdiction other than New York City charged with the authority
to issue licenses for the operation of Taxicabs.
"Medallion Financial" shall mean Medallion Financial Corporation, a
Delaware corporation.
"Medallion Loans" shall mean Loans secured in whole or in part by Medallion
Rights.
"Medallion Rights" shall mean all license, operating and/or subscription
rights to Taxicab Medallion(s), and all license, operating and/or subscription
rights evidenced by such Medallions, and all renewals thereof, in which a
perfected security interest has been obtained by the Company to secure the Loan
made by the Company to such Person, and assigned to the Collateral Agent, for
the benefit of the holders of the Notes, pursuant to the Company Security
Agreement.
"Memorandum" is defined in Section 5.3.
"Merger" shall mean the merger of Edwards Capital Corp., a Delaware
corporation and Transportation Capital Corp., a New York corporation with and
into the Company.
B-9
<PAGE>
"Mortgage Assignment" shall mean a Mortgage Assignment between the Company
and the Collateral Agent, in such form as the Collateral Agent shall determine
as is necessary or desirable under the law applicable to the property covered by
such Mortgage Assignment, delivered from time to time by the Company to the
Collateral Agent as contemplated by the definition of "Eligible Real Estate".
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA).
"Net Finance Assets" shall mean, as of any date of calculation, an amount
equal to the sum of:
(i) cash and Short Term Investments shown on the Company's balance
sheet as of such date, plus
(ii) the aggregate outstanding principal balances of, plus accrued
interest on, all Eligible Medallion Loans and Eligible Commercial Loans
shown on the Company's balance sheets as of the most recent fiscal quarter,
minus
(iii) the portion, if any, of the Loans and accrued interest
described in (ii) above that the Company, in its reasonable business
judgment deems to be uncollectible or subject to classification as non-
accruing and for which it has not made appropriate credits to the reserves
described in (ii) above, minus
(iv) intentionally omitted, minus
(v) the Eligible Loans and accrued interest described in (ii) above
which are more than 59 days past due, plus
(vi) 75% of the New York Medallion Loans and accrued interest
thereon which are 60 days past due (but are not more than 60 days past
due), plus
(vii) 65% of the New York Medallion Loans and accrued interest
thereon which are more than 60 days past due, but are not more than 90 days
past due, plus
(viii) 50% of the New York Medallion Loans which are more than 90
days past due, but are not more than 120 days past due, provided that the
amount in this subparagraph (viii) shall in no event or on any occasion
exceed 2% of the aggregate outstanding principal balances of New York
Medallion Loans.
provided, that, if all or any part of any Loan would be excluded under any of
the provisions set forth above, then the entire outstanding principal amount of,
plus accrued interest on, such Loan shall be excluded.
"Net Income" shall mean, for any period, the gross revenues of the Company,
less (i) all realized and unrealized gains and losses on investments, (ii) all
changes in loan loss reserve and
B-10
<PAGE>
(iii) all operating and nonoperating expenses (including, without limitation,
Interest Expense and all fees and commissions, however designated, payable for
management, administrative, or other services) of the Company for such period,
derived in the ordinary course of its business, including all charges of a
proper character (including current and deferred taxes on income, provision for
taxes on income, and current additions to loan loss and other reserves), all
determined on a basis consistent with prior years.
"Net Proceeds Amount" means, with respect to any Transfer of any property
by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time of the consummation of such
Transfer) received by such Person in respect of such Transfer, minus
(b) the sum of (i) all ordinary and reasonable out-of-pocket costs
and expenses actually incurred by such Person in connection with such
Transfer plus (ii) all amounts estimated by the Company in good faith that
are required to be paid as a dividend on or any distribution in respect of
any Capital Stock of the Company in order to avoid the imposition of income
taxes pursuant to the Code, or, for so long as the Company is a registered
investment company under the 1940 Act, the payment of such amounts as may
be required by the 1940 Act) in respect of such Transfer.
"New York Medallion Loans" shall mean any Eligible Medallion Loan that is
secured in whole or in part by Medallion Rights that relate to the operating of
taxicabs in the City of New York.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
"Note Documents" means this Agreement, the Other Agreements, the Notes, the
Security Documents and the Company Financing Statements and all other documents,
instruments, certificates and notices at any time delivered in connection with
the foregoing.
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"Paying Agency Agreement" shall mean one or more issuing and paying agency
agreements between the Company and a Paying Agent providing for the issuance of
Commercial Paper by the Company, as the same shall be amended from time to time,
each as approved by the Collateral Agent and the Required Holders in accordance
with the terms of this Agreement.
B-11
<PAGE>
"Paying Agent" shall mean one or more paying agents acting as paying agent
under a Paying Agency Agreement with the Company.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Debt" shall mean all Indebtedness owed to the holders of the
Notes, all Indebtedness of the Company owed to the Banks under the Bank Loan
Agreement, all Indebtedness of the Company owed to the CP Holders under the
Commercial Paper Agreement, all unsecured Indebtedness of the Company owed to
Permitted Lenders (other than the SBA Debt), all CP Debt and until September 1,
1999, the SBA Debt.
"Permitted Lenders" shall mean the Banks under the Bank Loan Agreement, the
SBA and the financial institutions approved from time to time by the Required
Holders, which approval shall not be unreasonably withheld.
"Permitted Liens" shall mean:
(a) (i) Liens created under the Company Security Agreement or other
Liens in favor of the Collateral Agent or the holders of the Notes, (ii)
Liens created under the Bank Security Documents, subject to the terms and
conditions of the Intercreditor Agreement and (iii) Liens securing
Additional Senior Obligations (as defined in the Intercreditor Agreement),
subject to the terms of the Intercreditor Agreement, so long as the
incurrence of such Additional Senior Obligations does not result in a
Default or Event of Default as a result of a breach of Section 10.6;
(b) Liens existing on property at the time acquired by the Company
after the date of the financial statements referred to in Section 5.5
hereof, provided that such Lien was not incurred, directly or indirectly,
in anticipation or contemplation of such acquisition;
(c) Liens constituting renewals, extensions or refundings of Liens
permitted by clause (b) above, provided that the principal amount of the
Indebtedness secured by any such new Lien does not exceed the principal
amount of the Indebtedness being renewed, extended or refunded at the time
of renewal, extension or refunding thereof and that such new Lien attaches
only to the same property theretofore subject to such earlier Lien;
(d) Liens securing taxes, assessments or governmental charges or
levies, or the claims or demands of materialmen, mechanics, carriers,
workmen, repairmen, warehousemen, landlords and other like Persons, not yet
delinquent or which are being actively contested in good faith by
appropriate proceedings and in respect of which adequate reserves in
conformity with GAAP have been provided on the books of the Company;
(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
B-12
<PAGE>
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 Company; 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.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Portfolio Purchase" shall mean any purchase or acquisition, whether for
cash, for stock, pursuant to financing 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), the Company having any
additional Loans.
"Preferred Stock" means any class of Capital Stock of a corporation that is
preferred over any other class of Capital Stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"Property Reinvestment Application" means, with respect to any Transfer of
property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to the acquisition by the Company or any Subsidiary of
operating assets of the Company or any Subsidiary to be used in the principal
business of such Person.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
B-13
<PAGE>
"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.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes, without regard to series, at the time outstanding
(exclusive of Notes then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"Restricted Investment" shall mean any Investment, to the extent it does
not constitute a Short Term Investment.
"Restricted Payment" shall mean, with respect to the Company, 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 Stock of the
Company (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
the Company 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 the
scheduled maturity of any Indebtedness ranked pari passu or subordinate in right
of payment to the Notes or of any Indebtedness having a maturity date subsequent
to the maturity of the Notes (other than Permitted Debt), (iii) the redemption,
repurchase, retirement or other acquisition of any Capital Stock of the Company
or of any warrants, rights or options to purchase or acquire any Capital Stock
of the Company, (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 10 hereof, and (vi) the payment of any principal of, or
interest on, or any other amounts due in respect of, any Subordinated Debt.
"Satisfactory Subordinated Debt" shall mean Subordinated Debt, excluding
any such Subordinated Debt owing to the SBA; provided, that no such Subordinated
Debt shall be deemed Satisfactory Subordinated Debt unless and until the
Collateral Agent has provided written notice to the Company 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,
B-14
<PAGE>
treaties and interpretations thereof by any Governmental Authority charged with
the administration or interpretation thereof.
"SBA Debt" shall mean the Edwards Debt, Funding SBA Debt and the TCC Debt.
"SBI Act" shall mean Title III of the Small Business Investment Act of
1958, as amended, 15 U.S.C. 681 et seq.
"SBIC" shall mean a small business investment company established under and
operating in compliance with the SBI Act and the SBA Regulations promulgated
thereunder.
"Second Closing" is defined in Section 3.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security" has the meaning set forth in section 2(1) of the Securities Act.
"Security Documents" means the Company Security Agreement, the Company
Financing Statements and any other instruments, documents, agreements referred
to herein or related hereto pursuant to which the Company or any of its
Subsidiaries agree to grant Liens in favor of the holders of the Notes.
"Senior Debt" shall mean all Indebtedness of the Company other than the SBA
Debt and Subordinated Debt.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"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 Ratings
Group 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.
"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 Company for borrowed
money that is subordinated to the Notes on terms that are, and pursuant to a
form of subordination that is, acceptable in form and substance to the Required
Holders.
B-15
<PAGE>
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Stock" means, with respect to any Person, the stock (or any
options or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.
"Swaps" means, with respect to any Person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
"Tangible Net Worth" shall mean the sum of capital surplus, earned surplus,
Capital Stock and Satisfactory Subordinated Debt minus deferred charges,
intangibles and treasury stock, 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.
"TCC Debt" shall mean the outstanding amount which, once the Merger is
effective, shall be owed by the Company to the SBA under a debenture dated as of
June 24, 1992, originally issued by Transportation Capital Corp., a New York
corporation, to the SBA in the original principal amount of $5,600,000.
"Total Liabilities" shall mean, as of any date of calculation, the
aggregate outstanding Indebtedness of the Company as of such date, determined on
an unconsolidated basis.
"Transfer" means, with respect to any Person, any transaction in which such
Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock. For purposes of determining the
application of the Net Proceeds Amount in respect of any Transfer, the Company
may designate any Transfer as one or more separate
B-16
<PAGE>
Transfers each yielding a separate Net Proceeds Amount. In any such case, (a)
the Disposition Value of any property subject to each such separate Transfer and
(b) the amount of Consolidated Total Assets attributable to any property subject
to each such separate Transfer shall be determined by ratably allocating the
aggregate Disposition Value of, and the aggregate Consolidated Total Assets
attributable to, all property subject to all such separate Transfers to each
such separate Transfer on a proportionate basis.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
Code as then in effect in that jurisdiction.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
B-17
<PAGE>
Schedule 4.1.9
Changes in Corporate Structure
The merger on June 1, 1999 of TCC and Edwards into the Company, with the
Company being the surviving corporation.
<PAGE>
Schedule 5.3
Disclosure Materials
None.
<PAGE>
Schedule 5.4
Subsidiaries of the Company and Ownership of Subsidiary Stock
(a)(i) Subsidiaries
Name of Subsidiary Jurisdiction of Percentage of Shares
Incorporation Owned by Company
F.A.P. Holding Corporation New York 100%
(a)(ii) Affiliates
1. Medallion Financial Corp., a Delaware corporation
2. Edwards Capital Corp. ("Edwards") (prior to the Merger)
3. Transportation Capital Corp. ("TCC") (prior to the Merger)
4. Business Lenders LLC ("BLL")
5. Medallion Taxi Media, Inc. ("Media")
6. Medallion Capital, Inc. ("Medallion")
7. Medallion Business Credit LLC ("MBC")
8. Capital Guardian Trust Company
(a)(iii) Directors and Senior Officers
Directors: Alvin Murstein
Andrew Murstein
Mario M. Cuomo
Stanley Kreitman
David L. Rudnick
Benjamin Ward
Frederick Hammer
<PAGE>
Executive
Officers: Alvin Murstein, Chief Executive Officer
Allen S. Greene, Senior Executive Vice President
and Chief Operating Officer
Andrew Murstein, Senior Vice President
Michael Kowalsky, President
Daniel F. Baker, Treasurer and Chief Financial Officer
Marie Russo, Senior Vice President and Secretary
Harvey Goldman, Senior Vice President
(d): Restrictions
None
<PAGE>
Schedule 5.5
Financial Statements
Audited consolidated balance sheets of the Company for the fiscal years
ended December 31, 1996, 1997 and 1998 and the related consolidated statements
of income, retained earnings and cash flow for the fiscal years ended on the
same dates.
<PAGE>
Schedule 5.8
Certain Litigation
None
<PAGE>
Schedule 5.11
Patents, Etc.
None
<PAGE>
Schedule 5.15
Existing Indebtedness for Borrowed Money
<TABLE>
<CAPTION>
Indebtedness Outstanding Principal Amount as at March 31, 1999
<S> <C>
Indebtedness under Bank Loan Agreement $ 48,250,000
CP Debt $129,270,810
SBA Debt $ 6,200,000
</TABLE>
<PAGE>
Schedule 5.19
Location of Offices, Books and Records
437 Madison Avenue
38th Floor
New York, New York 10022
<PAGE>
[Form of Series A Note]
Medallion Funding Corp.
7.20% Senior Secured Note, Series A, Due June 1, 2004
No. RA-[_] [Date]
$[____________] PPN 58403# AA 5
For Value Received, the undersigned, Medallion Funding Corp. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of New York, hereby promises to pay to [________________], or registered
assigns, the principal sum of [________________] Dollars on June 1, 2004, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 7.20% per annum from the date
hereof, payable semiannually, on the first day of June and December in each
year, commencing with the June or December next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.20% or (ii) 2% over the rate of interest publicly
announced by Citibank, N.A. from time to time in New York, New York as its
"base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Senior Secured Notes, Series A (herein
called the "Notes") issued, together with the Company's 7.20% Senior Secured
Notes, Series B, due September 1, 2004, pursuant to separate Note Purchase
Agreements, dated as of June 1, 1999, (as from time to time amended, the "Note
Purchase Agreements"), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this Note will
be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is secured by, and this Note and the holder hereof are also
entitled equally and ratably with the holders of all other Notes to the rights
and benefits provided pursuant to the terms and provisions of the Security
Documents (as such term is defined in the Note Purchase Agreements). Reference
is hereby made to each of the foregoing for a statement of the nature and extent
of the benefits afforded thereby and the rights of the holders in respect
thereof.
Exhibit 1(a)
(to Note Purchase Agreement)
<PAGE>
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
Medallion Funding Corp.
By
Its
E-1(a)-2
<PAGE>
[Form of Series B Note]
Medallion Funding Corp.
7.20% Senior Secured Note Due September 1, 2004
No. RB-[_] [Date]
$[_____________] PPN 58403# AB 3
For Value Received, the undersigned, Medallion Funding Corp. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of New York hereby promises to pay to [________________], or
registered assigns, the principal sum of [________________] Dollars on September
1, 2004, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.20% per annum from
the date hereof, first semiannually, on the first day of March and September in
each year, commencing with the March or September next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand, at a rate per annum from time to time equal
to the greater of (i) 9.20% or (ii) 2% over the rate of interest publicly
announced by Citibank, N.A. from time to time in New York, New York as its
"base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Senior Secured Notes, Series B (herein
called the "Notes") issued, together with the Company's 7.20% Senior Secured
Notes, Series A, due June 1, 2004, pursuant to separate Note Purchase
Agreements, dated as of June 1, 1999 (as from time to time amended, the "Note
Purchase Agreements"), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this Note will
be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is secured by, and this Note and the holder hereof are also
entitled equally and ratably with the holders of all other Notes to the rights
and benefits provided pursuant to the terms and provisions of the Security
Documents (as such term is defined in the Note Purchase Agreements). Reference
is hereby made to each of the foregoing for a statement of the nature and extent
of the benefits afforded thereby and the rights of the holders in respect
thereof.
Exhibit 1(b)
(to Note Purchase Agreement)
<PAGE>
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.
If an Event of Default, as defined in the note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
Medallion Funding Corp.
By
Its
E-1(b)-2
<PAGE>
Form of Opinion of
Special Counsel to the Company
[Final draft of opinion to be attached]
Exhibit 4.1.4(a)
(to Note Purchase Agreement)
<PAGE>
Description of Special Counsel's Closing Opinion
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.1.4(b) of the Note Purchase Agreements,
shall be dated the date of the applicable Closing and addressed to you and the
other Purchasers, shall be satisfactory in form and substance to you and the
other Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of New York, has the corporate power
and the corporate authority to execute and deliver the Note Purchase
Agreements and to issue the Notes.
2. Each Note Purchase Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding contract of the Company enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in
a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreements do not, under
existing law, require the registration of the Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state the opinion of Willkie
Farr & Gallagher is satisfactory in scope and form to Chapman and Cutler and
that, in their opinion, you and the other Purchasers are justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler
may rely solely upon an examination of the Certificate of Incorporation
certified by, and a certificate of good standing of the Company from, the
Department of State of the State of New York of the Company, the By-laws of the
Company and the Business Corporation Law of the State of New York. The opinion
of Chapman and Cutler is limited to the laws of the State of New York and the
Federal laws of the United States.
With respect to matters of fact upon which such opinion is based, Chapman
and Cutler may rely on appropriate certificates of public officials and officers
of the Company.
Exhibit 4.14(b)
(to Note Purchase Agreement)
<PAGE>
Form of Company Security Agreement
Exhibit 4.10
(to Note Purchase Agreement)
<PAGE>
Form of Intercreditor Agreement
Exhibit 4.12
(to Note Purchase Agreement)
<PAGE>
Exhibit 10.3
================================================================================
Security Agreement
between
Medallion Funding Corp., as debtor
and
Fleet Bank, N.A., as Collateral Agent
and secured party,
for the benefit of
The Travelers Insurance Company
First Citicorp Life Insurance Company
Citicorp Life Insurance Company
United of Omaha Life Insurance Company
Companion Life Insurance Company
________________________________
dated as of June 1, 1999
________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
This table of contents is not a part of the document
but is provided for ease of reference
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
ARTICLE I DEFINITIONS............................................................................. 2
Section 1.1. Defined Terms........................................................................... 2
Section 1.2. Accounting Terms........................................................................ 7
Section 1.3. Rules of Construction................................................................... 7
ARTICLE II CREATION OF SECURITY INTEREST........................................................... 8
Section 2.1. Grant of Security Interest to Collateral Agent.......................................... 8
Section 2.2. Perfection.............................................................................. 8
Section 2.3. Recording, Registering, Filing, Etc..................................................... 8
Section 2.4. Delivery of Documents................................................................... 9
Section 2.5. Further Assurances...................................................................... 10
Section 2.6. Appointment of Collateral Agent as Attorney-in-Fact..................................... 11
Section 2.7. Indemnity............................................................................... 12
Section 2.8. Company Remains Liable.................................................................. 12
Section 2.9. Collateral Agent May Perform............................................................ 13
Section 2.10. Collateral Agent's Duties............................................................... 13
ARTICLE III PRIORITY OF SECURITY INTERESTS.......................................................... 13
Section 3.1. Priority of Security Interests.......................................................... 13
ARTICLE IV COLLATERAL.............................................................................. 14
Section 4.1. Representations, Covenants and Warranties............................................... 14
Section 4.2. Collections............................................................................. 16
Section 4.3. Rights of Collateral Agent Regarding Collateral......................................... 16
ARTICLE V DEFAULT................................................................................. 17
Section 5.1. Events of Default....................................................................... 17
Section 5.2. Remedies................................................................................ 17
Section 5.3. Application of Proceeds................................................................. 20
Section 5.4. Waiver by Collateral Agent or Noteholders............................................... 21
ARTICLE VI THE COLLATERAL AGENT.................................................................... 21
Section 6.1. Certain Duties and Responsibilities of the Collateral
Agent................................................................................ 21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 6.2. Compensation of the Collateral Agent..................................................... 23
Section 6.3. Certain Rights of the Collateral Agent................................................... 23
Section 6.4. Showings Deemed Necessary by the Collateral Agent........................................ 25
Section 6.5. Status of Moneys Received................................................................ 25
Section 6.6. Resignation of the Collateral Agent...................................................... 25
Section 6.7. Removal of the Collateral Agent.......................................................... 26
Section 6.8. Appointment of Successor Collateral Agent................................................ 26
Section 6.9. Succession of Successor Collateral Agent................................................. 26
Section 6.10. Eligibility of the Collateral Agent...................................................... 27
Section 6.11. Successor Collateral Agent by Merger..................................................... 27
Section 6.12. Effective Resignation and Removal; Appointment of
Successor............................................................................. 27
Section 6.13. Controlled by Holders.................................................................... 28
Section 6.14. Indemnification.......................................................................... 28
ARTICLE VII MISCELLANEOUS............................................................................ 28
Section 7.1. Continuing Lien.......................................................................... 28
Section 7.2. Waivers by Company....................................................................... 29
Section 7.3. Parties.................................................................................. 29
Section 7.4. Governing Law............................................................................ 29
Section 7.5. Waiver of Jury Trial and Setoff.......................................................... 29
Section 7.6. Jurisdiction; Service of Process......................................................... 30
Section 7.7. Survival of Representations and Warranties............................................... 30
Section 7.8. Obligations Secured by Property Other Than
Collateral............................................................................ 30
Section 7.9. Successor Collateral Agent............................................................... 30
Section 7.10. Termination.............................................................................. 31
Section 7.11. Notices.................................................................................. 31
Section 7.12. Severability............................................................................. 31
Section 7.13. Counterparts............................................................................. 32
Signatures................................................................................................... 33
</TABLE>
-ii-
<PAGE>
Security Agreement
This Security Agreement, dated as of June 1, 1999, is between Medallion
Funding Corp., a New York corporation (the "Company"), and Fleet Bank, N.A., a
national banking association, as collateral agent (the "Collateral Agent") for
the holders of the Notes (as hereinafter defined) from time to time outstanding
pursuant to the Note Purchase Agreements (as hereinafter defined) (collectively,
the "Noteholders" and individually, a "Noteholder").
Recitals
Whereas, the Noteholders respectively have entered into the separate Note
Purchase Agreements each dated as of even date herewith, (as the same may be
amended or supplemented from time to time, the "Note Purchase Agreements"), with
the Company under and pursuant to which the Company proposes to issue and sell
to the Noteholders its (i) 7.20% Senior Secured Notes, Series A, due June 1,
2004 in the aggregate principal amount of $22,500,000 (the "Series A Notes") and
(ii) 7.20% Senior Secured Notes, Series B, due September 1, 2004 in the
aggregate principal amount of $22,500,000 (the "Series B Notes," and together
with the Series A Notes sometimes collectively herein referred to as the
"Notes").
Whereas, a condition precedent to the Noteholders' purchase of the Notes
under the Note Purchase Agreements is that the Company grant to the Collateral
Agent perfected security interests in all of the Collateral to secure the
payment and performance of all of the obligations of the Company owing to the
Collateral Agent and the Noteholders pursuant to the Note Purchase Agreement,
the Notes and other Note Documents;
Whereas, in partial satisfaction of the Company's obligation under Section
4 of the Note Purchase Agreements and otherwise as an inducement necessary to
the Noteholders' purchase of the Notes, the Company agrees to grant to the
Collateral Agent for the benefit of the Noteholders a security interest in the
Collateral pursuant to the terms set forth herein;
Whereas, the Company has granted liens on the Collateral pursuant to the
Bank Security Documents and the Agent (as defined in the definition of Bank
Security Documents in the Note Purchase Agreement) thereunder and the Collateral
Agent are parties to the Intercreditor Agreement;
Whereas, so long as such Intercreditor Agreement remains in effect, all the
terms of this Agreement are subject to the terms of the Intercreditor Agreement,
whether or not any provision of this Agreement shall expressly so state;
<PAGE>
Now, Therefore, in consideration of the willingness of the Noteholders to
enter into the Note Purchase Agreements and to agree, subject to the terms and
conditions thereof, to purchase the Notes of the Company pursuant thereto, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Collateral 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 Note Purchase Agreements and not otherwise
defined in this Agreement shall have the meanings ascribed to those terms in the
Note Purchase Agreements. In addition, as used herein, the following terms shall
have the following meanings:
"Accounts" shall have the meaning assigned to it in Section 9-106 of the
UCC.
"Books and Records" shall mean books, records, computer files and other
Information relating to any of the Collateral.
"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 the Company or in which the Company 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 the Company 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;
-2-
<PAGE>
(g) all General Intangibles;
(h) all Instruments;
(i) all Chattel Paper;
(j) all Equipment;
(k) all Inventory;
(l) all Investments;
(m) all Investment Property;
(n) all Accounts;
(o) all property and rights, including, but not limited to, items
described in clauses (b) through (n) hereof, repossessed, or otherwise
acquired in connection with any Loans or the exercise by the Company 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;
(p) all parts, accessions, accessories, goods, appurtenant or
related to any of the foregoing, replacement parts, trade names, choses in
action, now or hereafter affixed thereto, arising therefrom, used in
connection therewith, or related to the use, possession or operation
thereof;
(q) all cash and Short-Term Investments; and
(r) 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 the Company maintained with
the Collateral Agent and containing such reasonable terms as shall be agreed to
by the Collateral 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.
-3-
<PAGE>
"Depository Accounts" shall mean accounts of the Company containing any
deposits or other sums credited to the Company, 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.
"Independent Public Accountants" shall mean Arthur Andersen & Co. LLP or
such other firm of independent certified public accountants of recognized
national standing selected by the Company and satisfactory to the Required
Holders.
"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 Noteholder may request pursuant to the
Note Purchase Agreements.
"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 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.
-4-
<PAGE>
"Loan" shall mean any loan, advance or extension of credit made in the
ordinary course of business by the Company to or for the account of any client
or customer of the Company. Any loan, advance or extension of credit made at a
different point in time shall be deemed to be a separate and distinct Loan.
"Medallion" shall mean the metal plate which displays the license number of
a licensed Taxicab on the outside of the vehicle and which is issued by the New
York City Taxi and Limousine Commission or by any other Governmental Authority
for a jurisdiction other than New York City with the authority to issue licenses
for the operation of Taxicabs.
"Medallion Rights" 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.
"Note Documents" shall mean and collectively refer to the Note Documents
(as defined in the Note Purchase Agreements) 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 the Company and/or
delivered to the Collateral Agent or the Noteholders, with respect to this
Agreement, or the transactions contemplated by this Agreement.
"Obligations" shall mean any and all present and future indebtedness and
all performance obligations which may at any time be owing by the Company to the
Collateral Agent or any Noteholder, however arising, under the Note Purchase
Agreements, this Agreement or any other Note Document between the Collateral
Agent and/or any Noteholder and the Company in connection with any of the
foregoing or in connection with any Note Document, whether now in existence or
incurred hereafter, whether incurred directly or incurred by others and assumed
by the Company, whether secured by mortgage, pledge, or lien upon or security
interest in any property of the Company, 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 Company 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 the Company to any Noteholder for all balances
owing to any Noteholder under the Note Purchase Agreements or under any other
agreement or arrangement now or hereafter entered into between the Company and
the Collateral Agent or any Noteholder in connection therewith, and, solely in
connection with this Agreement or the Note Purchase Agreements, the following:
(i) indebtedness owing by the Company to the Collateral Agent or any Noteholder,
(ii) the liability of the Company to the Collateral Agent or any Noteholder as
maker or endorser of any promissory note or other
-5-
<PAGE>
instrument for the payment of money, and (iii) the liability of the Company to
the Collateral Agent or any Noteholder under any instrument of guaranty or
indemnity, or arising under any guarantee, endorsement, or undertaking which the
Collateral Agent or any Noteholder may make or issue to others for the account
of the Company. The Obligations shall also include interest, premium (if any),
Make-Whole Amount (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 Collateral Agent and the costs and
expenses of filing, perfecting, preserving, retaking, holding, and preparing any
of the Collateral for sale chargeable to the Company and due from the Company
under this Agreement, the Note Purchase Agreements or under any other agreement
or arrangement which may be now or hereafter entered into between the Company
and the Collateral Agent or the Noteholders.
"Other Agreements" shall mean collectively any of the Note Documents other
than this Agreement.
"Percentage of the Obligations" shall mean with respect to any Noteholder
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 such
Noteholder 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" is defined in the Note Purchase Agreements.
"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.
-6-
<PAGE>
"Short Term Investment" shall have the meaning given to such term in the
Note Purchase Agreements.
"Taxicab" shall mean a motor vehicle carrying passengers for hire, duly
licensed as a taxicab by the Taxi and Limousine Commission, or any other
Governmental Authority for a jurisdiction other than New York City, and
permitted to accept hails from passengers in the street.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
Code as then in effect in that jurisdiction.
"Underlying Collateral" shall mean all of the Company's rights with respect
to, or interest in, any and all present and future Medallion Rights, Equipment,
Real Property, machinery, future accounts, accounts receivable, receivables,
contracts, contract rights, general intangibles, books, desks, notes, bills,
drafts, acceptances, choses in action, chattel paper, instruments, documents and
other forms of obligations, and property, real, personal or mixed, tangible or
intangible, at any time owing to or owned by any Person to whom the Company 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. 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.
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.
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.
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.
-7-
<PAGE>
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 Collateral Agent. To induce the
Noteholders to purchase the Notes of the Company and, as security for any and
all Obligations of the Company, the Company hereby grants to the Collateral
Agent for the ratable benefit of the Noteholders a continuing lien on and
security interest in the Collateral, which shall be a first priority lien
subject only to Permitted Liens, and, in furtherance of such grant, the Company
hereby assigns for security all the Collateral to the Collateral Agent for the
ratable benefit of the Noteholders.
Section 2.2. Perfection. At any time or times after (i) a Default or an
Event of Default has occurred or (ii) any change in any existing law,
regulation, guideline, treaty or directive or condition or interpretation
thereof, including without limitation, any request, guideline or policy, whether
or not having the force of law (collectively, "Laws"), or the proposal by any
Governmental Authority, of a new Law, which, in the Collateral Agent's opinion,
adversely affects the validity, security or perfection of the security interests
and liens granted herein, the Company shall execute and deliver to the
Collateral Agent, at the Collateral 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 Collateral Agent reasonably may request, in form
satisfactory to the Collateral Agent, and shall take any and all other steps
reasonably requested by the Collateral 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 or (ii) any change in
any existing Law or the proposal by any Governmental Authority of a new Law
which, in the Collateral Agent's opinion, adversely affects the validity,
security or perfection of the security interests and liens granted herein, the
Company 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 Collateral
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
-8-
<PAGE>
maintain the security interests and liens created hereunder, as legal,
valid, and binding security interests and liens upon the Collateral;
(b) Furnish to the Collateral 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
Collateral 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 the Company 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 the
Company's title to same.
Section 2.4. Delivery of Documents. As promptly as practicable after the
date hereof (but in no event later than 10 Business Days after the date hereof),
the Company shall deliver to the Collateral Agent all instruments evidencing all
Loans (collectively, the "Collateral Notes") of the Company then outstanding. In
addition, each time the Company shall make a new Loan, the Company shall
immediately deliver to the Collateral Agent the Collateral Note evidencing such
Loan. The Collateral Agent shall keep all Collateral Notes at its principal
office in New York City in a vault or other place of similar security. The
Collateral Agent acknowledges and agrees that it shall hold such Collateral
Notes delivered to it for the benefit of the Noteholders. The Company 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
Collateral Agent, the Collateral Notes; provided, however, that (i) the Company
and/or its authorized agent shall have given the Collateral Agent at least 24
hours prior notice, or such other notice as may be required by applicable
provisions of the Investment Company Act of 1940, as amended, before seeking
access to the Collateral Notes and (ii) the Collateral 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.
Upon the Collateral Agent's request, the Company shall immediately deliver
to the Collateral Agent or its designee, at the Company's expense, copies of all
documents, chattel paper, security agreements, guarantees and other writings
evidencing any Loan or its related Underlying Collateral.
At any time on or after a Default or Event of Default, upon the Collateral
Agent's request, the Company shall immediately deliver to the Collateral Agent
or its designee all documents, instruments, chattel paper, security agreements,
guarantees and other writings so requested by the Collateral Agent evidencing
any Collateral of the Company, such
-9-
<PAGE>
documents, instruments, chattel paper, security agreements, guarantees and other
writings to be held as Collateral under the terms of this Agreement.
The Collateral Agent shall have no obligation to inspect or examine any of
the Collateral Notes or other documents delivered to it by the Company
hereunder, and shall be entitled to assume, and shall be fully protected in
assuming, without inspection or examination, that the Company has complied in
full with its delivery obligations hereunder.
Section 2.5. Further Assurances. 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 Collateral
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 the Company elsewhere under this
Agreement, the Company shall do all other things and sign and deliver all other
documents and instruments reasonably requested by the Collateral Agent to
perfect, protect, maintain and enforce the security interests and liens of the
Collateral 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 the Company and the Collateral Agent,
including, without limitation, the Note Documents. Such acts shall include but
not be limited to the marking of the Company's Books and Records, the chattel
paper and instruments to show the Collateral Agent's security interests and
liens and the filing of financing, renewal and/or continuation statements under
the UCC or other documents evidencing the Collateral 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 Collateral 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), the Company authorizes the Collateral Agent to
execute alone any financing, renewal and/or continuation statement or any other
document or instrument which the Collateral 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 Note Documents and authorizes
the Collateral Agent to sign the Company's name on the same. Upon payment in
full by the Company of all the Obligations in accordance with the terms thereof,
the security interests and liens granted by the Company hereunder shall
terminate, except that if, at any time, all or part of the payment of the
monetary Obligations theretofore made by the Company or any other Person is
rescinded or otherwise must be returned by the Collateral Agent or any
Noteholder for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Company or such other Person),
the security interests and liens granted hereunder or under any other present or
future agreement between the Company and the Collateral Agent, and all rights of
the Collateral 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 the Company shall sign and deliver
to the Collateral
-10-
<PAGE>
Agent all documents and things necessary to perfect all terminated liens subject
to the intervening liens, if any, granted by the Company to any Person.
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.
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 Collateral Agent, the
Company 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 Collateral Agent assignments, in form and substance satisfactory to the
Collateral Agent, by which such mortgagee or landlord waives its rights, if any,
to the Collateral.
Section 2.6. Appointment of Collateral Agent as Attorney-in-Fact. Upon the
occurrence of any of the events specified in subclause (i) of Section 2.5(a),
the Company does hereby irrevocably make, constitute and appoint the Collateral
Agent and any of its officers, employees or agents as the true and lawful
attorneys of the Company with power to:
(a) sign the name of the Company on any financing statement,
renewal financing statement, notice or other similar document that in the
Collateral 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 the Company's name or
in the name of the Collateral Agent, all checks, notes, drafts and other
instruments relating to any Collateral, including receiving, opening and
properly disposing of all mail addressed to the Company 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 Collateral Agent may designate;
(c) sign the Company's name on any notices to any of the Company's
clients or customers; and
(d) upon the occurrence and during the continuance of an Event of
Default, take or bring at the Company's cost, in the Company's name or in
the name of the Collateral Agent, all steps, actions and suits deemed by
the Collateral 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
-11-
<PAGE>
in connection with any Loans, to make allowances and adjustments with
respect thereto, to secure credit in the name of the Collateral 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 Collateral 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 Collateral Agent's and the
Noteholders' other rights and remedies under the Note Documents, the Company
will hold the Noteholders and the Collateral Agent harmless from and indemnify
the Noteholders and the Collateral Agent or other designee of the Collateral
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 Note Documents or the enforcement of the rights of the Collateral
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. Company Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Company 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 Collateral Agent or
the Noteholders of any rights under this Agreement or any of the other Note
Documents shall not release the Company from any of its duties or obligations
under the contracts and agreements included in the Collateral, and (iii) neither
the Collateral Agent nor the Noteholders 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 Note Documents nor shall the Collateral Agent or
any Noteholder be obligated to perform any of the obligations or duties of the
Company thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
-12-
<PAGE>
Section 2.9. Collateral Agent May Perform. If the Company fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Company, together with
interest thereon at the Default Rate set forth in the Note Purchase Agreements,
and until so paid shall be deemed part of the Obligations.
Section 2.10. Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest and the interests
of the Noteholders 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
Collateral 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. The Company warrants,
represents and covenants to the Collateral Agent and the Noteholders 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 Collateral Agent hereunder
constitute and will constitute at all times a valid and perfected security
interest vested in the Collateral Agent in and upon the Collateral. The Company
further warrants, represents and covenants that the Collateral 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. The Company shall not grant (without the prior
written approval of the Collateral Agent and the Required Holders) a security
interest in or permit a lien or encumbrance upon any of the Collateral to anyone
except the Collateral Agent for the benefit of the Noteholders as long as any of
the Obligations remain unpaid, except for the Permitted Liens.
Article IV
Collateral
Section 4.1. Representations, Covenants and Warranties. The Company hereby
makes the following representations, warranties and covenants to the Collateral
Agent and the Noteholders, which shall survive the execution and delivery of the
Note 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 Note is issued by the
Company:
-13-
<PAGE>
The Company 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 Collateral Agent and the Noteholders granted herein,
of indefeasible title to all of the Collateral, except for that portion of the
Company's rights and/or obligations under any Loan in which the Company has
granted a participation to any Person only to the extent permitted in the Bank
Loan Agreement;
To the best of the Company'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 Collateral Agent and the Noteholders,
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;
With respect to each outstanding and future Loan, the Collateral Agent and
the Noteholders may rely on all statements or representations made by the
Company on or with respect to such Loans delivered hereunder or under the Note
Purchase Agreements, and, unless otherwise indicated in writing by the Company,
each outstanding Loan is, and each future Loan will be, genuine and in all
respects what it purports to be, and, to the Company's knowledge, there are no,
and, at the time of creation of each Loan there will not be any, to the
Company's knowledge, facts, events or occurrences that would in any way
materially impair the validity or enforcement thereof;
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 the Company were and will continue to be
made properly and in a timely manner;
The original amount and unpaid balance of each Loan shown on the Company's
books and records and on any statement or schedule delivered to the Collateral
Agent are and will be true and correct, and the unpaid balance is and will be
the amount actually owing to the Company;
-14-
<PAGE>
If requested by the Required Holders at any time or from time to time, the
Company shall cause a Lien search against each Person to whom a Loan has been
made satisfactory to the Collateral Agent, to be performed and delivered
directly to the Collateral Agent, which Lien search shall indicate the absence
of any Liens against such Person or the property of the Person on which the
Company has a Lien, other than Liens in favor of the Company which have been
assigned to the Collateral Agent or the Noteholders or Liens in favor of the
Collateral Agent or the Noteholders and other than Permitted Liens;
The Company 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 the Company has indicated on and has had
evidenced by, or will indicate or have evidenced by, in the case of future
Loans, the Company's files related to the Loans;
Each security agreement, UCC filing, title retention instrument, and other
document and instrument, if any, which is security for the Loans contains, or
will contain, in the case of future Loans, a correct and sufficient description
of the Underlying Collateral covered thereby and each lien or security interest
which secures any outstanding Loan is, or any future Loan will be, valid;
To the best knowledge of the Company, except as disclosed to the Collateral
Agent and the Noteholders, any and all policies of insurance related to the
property securing any obligation of a Person to whom the Company 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 the Company and such Person or guarantor;
The Company 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 Collateral
Agent and the Noteholders; and
The transactions contemplated herein, including the granting of security
interests herein and the enforcement by the Collateral Agent and the Noteholders
of their 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 Obligors of such Loans.
Section 4.2. Collections. Subject to the provisions of this Agreement, the
Intercreditor Agreement, and the other Note Documents, the Company 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
-15-
<PAGE>
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.
With respect to each of the Collections: the Company shall collect all
Collections, receive all payments thereon and immediately deposit the proceeds
thereof into a Depository Account. The Company may withdraw funds from such
account to use in the ordinary course of its business.
Section 4.3. Rights of Collateral Agent Regarding Collateral. Upon the
occurrence and during the continuance of an Event of Default, and subject to the
provisions of the Intercreditor Agreement, the Collateral Agent shall have the
right to, and upon the direction of the Required Holders shall, at any time and
from time to time thereafter, without notice to the Company, (a) notify, and
upon the direction of the Collateral Agent to the Company, the Company will
notify, (i) all Persons to whom the Company has made Loans that the Collateral
Agent has a security interest in such Collateral and direct all such Persons to
make payments to the Collateral Agent or its designee, and to such banks and
accounts (which may be the Collateral Account) as designated by the Collateral
Agent or such designee, of all sums owing by them to the Company, and (ii) all
banks in which the Company has any Depository Accounts of the occurrence of an
Event of Default and direct all such Noteholders to transfer into the Collateral
Account, or to such other account at such bank as shall be designated by the
Collateral Agent or its designee, all amounts on deposit from time to time in
the related Depository Accounts; (b) settle, compromise, sell, assign, extend or
renew any debt owing by any Persons to whom the Company has made a Loan; (c)
sell or assign such Collateral upon such terms as the Collateral Agent may deem
advisable; and (d) discharge and release in the name of the Company and the
Collateral Agent any such debt. Any and all disbursements for costs and expenses
incurred or paid by the Collateral Agent with respect to the enforcement,
collection or protection of its interest in the Collateral, or against the
Company, whether by suit or otherwise, notification of Persons to whom the
Company 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 the Company to observe, perform or comply with any
of the terms, provisions, conditions or covenants, or, in any material
respect, any
-16-
<PAGE>
warranties or representations, contained in this Agreement other than in
Section 4.1 hereof;
(b) failure of the Company 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 the Company;
(c) the occurrence of an Event of Default under the Note Purchase
Agreements; or
(d) any of the Note Documents shall cease to be in full force and
effect.
Section 5.2. Remedies. Upon the occurrence of any Event of Default, the
Collateral 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 Collateral Agent shall
have the right without further notice to the Company to, and upon the direction
of the Required Noteholders 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 and in the
Intercreditor Agreement, 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 the Company or the Collateral 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 Collateral Agent's
sole option and discretion and the Collateral Agent and any Noteholder 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. The Company agrees that the giving of ten days notice by the Collateral
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
the Company 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 Collateral Agent in accordance with Section 5.3 hereof, and the
Company shall remain liable to the Collateral Agent and the Noteholders for any
deficiency, together with interest thereon at the Default Rate provided in the
Note Purchase Agreements with respect to the Obligations, and the cost
-17-
<PAGE>
and expenses of collection of such deficiency, including (to the extent
permitted by law), without limitation, reasonable attorneys' fees actually
incurred, expenses and disbursements.
If at any time or times hereafter the Collateral 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 Collateral Agent in any pending or threatened
litigation with respect to the affairs of the Company in any way relating to any
of the Collateral or to the Obligations or to enforce any rights of the
Collateral Agent or any Noteholder or liabilities of the Company, any Person to
whom the Company has made a Loan, or any Person which may be obligated to the
Collateral Agent or such Noteholder by virtue of this Agreement or any Other
Agreement, instrument or document now or hereafter delivered to the Collateral
Agent or any Noteholder by or for the benefit of the Company, 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.
Upon the occurrence of an Event of Default, the Collateral Agent shall have
the right to require the Company to assemble all Collateral not already in the
Collateral Agent's possession and make it reasonably available to the Collateral
Agent at one or more places to be designated by the Collateral 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 the Company without cost or
charge to the Collateral Agent, and to use the same, together with materials,
supplies, books and records of the Company for the purpose of collecting such
Collateral or liquidating such Collateral (plus any Collateral already in the
Collateral Agent's possession), whether by foreclosure, auction or otherwise.
In addition, the Collateral Agent may remove from such premises such Collateral,
and any records with respect thereto, to the premises of the Collateral Agent or
any Custodian for such time as the Collateral Agent may desire, in order to
effectively collect or liquidate such Collateral.
Upon the occurrence of an Event of Default, the Collateral Agent shall have
the right to, and upon the direction of the Required Holders shall, require the
Company to establish and maintain a lockbox service (which may be the Collateral
Account) with such bank or banks as may be acceptable to the Collateral Agent.
In the event the Company (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, the Company agrees with the Collateral Agent as follows:
-18-
<PAGE>
The Company shall hold all such items of payment in trust for the
Collateral Agent and the Noteholders and as the property of Collateral
Agent and the Noteholders, separate from the funds of the Company, and the
Company shall immediately forward, or cause to be forwarded, the same to
the lockbox service for application to the Notes;
(a) The Company shall forward to the Collateral Agent, on a daily
basis, deposit slips related to all such items of payment received by the
Company and, if requested by the Collateral 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 Collateral Agent;
(b) All such items of payment shall be the sole and exclusive
property of the Collateral Agent for the benefit of the Noteholders
immediately upon the earlier of receipt of such items by the Collateral
Agent or the receipt of such items by the Company;
(c) The lockbox service shall be subject to the sole control of the
Collateral Agent and the Collateral 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 Collateral Agent may,
and upon the direction of the Required Holders shall, release to the
Company all or any part of such items of payment; and
(d) The Collateral 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. 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 Collateral 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 Collateral Agent and
its agents and counsel and all expenses, liabilities, advances incurred or
made by the Collateral Agent in connection therewith, and any other
unreimbursed expenses for which the Collateral Agent is to be reimbursed
under this Agreement;
second, with respect to all Collateral, 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
-19-
<PAGE>
third, after indefeasible payment in full of all Obligations, to
payment to the Company or its successors and assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
The Collateral Agent may make distributions hereunder in cash or in kind,
but such distributions to the Noteholders shall in all events be made pro rata
on the basis of the respective Percentage of the Obligations. Distributions
made under clause "second" above may also be made in a combination of cash or
property, but distributions to the Noteholders shall be made pro rata on the
basis of the respective Percentage of the Obligations. Distributions made under
clauses "first" and "third" may also be made in a combination of cash or
property. Any deficiency remaining, after application of such cash or cash
proceeds to the Obligations, shall continue to be Obligations for which the
Company remains liable.
In making the determinations and allocations required by this Section 5.3,
the Collateral Agent may rely upon information supplied by the Noteholders as to
the amounts of the Obligations held by them, and the Collateral Agent shall have
no liability to any of the Noteholders for actions taken in reliance upon such
information. All distributions made by the Collateral Agent pursuant to this
Section 5.3 shall be final, and the Collateral Agent shall have no duty to
inquire as to the application by the Noteholders of any amount distributed to
them. However, if at any time the Collateral 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 Collateral 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 Noteholders
receive the distributions to which they would have been entitled if such mistake
of fact had not been made.
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 Collateral Agent shall
nonetheless apply the proceeds for the benefit of the Noteholders, in the
proportion and subject to the priorities of Section 5.3(a). To the extent that
the Collateral Agent distributes proceeds collected with respect to one
Obligation to or on behalf of the holder of another Obligation or a Noteholder
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.
-20-
<PAGE>
Section 5.4. Waiver by Collateral Agent or Noteholders. The Collateral
Agent's or any Noteholder's failure at any time or times hereafter to require
strict performance by the Company 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 Collateral Agent or any
Noteholder 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 Collateral Agent or any Noteholder, or their respective
agents, officers or employees except by an instrument in writing signed by an
officer of the Collateral Agent or such Noteholder and directed to the Company
specifying such waiver.
ARTICLE VI
THE COLLATERAL AGENT
Section 6.1. Certain Duties and Responsibilities of the Collateral Agent.
(a) Except during the continuance of an Event of Default of which the
Collateral Agent has knowledge:
(i) The Collateral Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Collateral Agent; and
(ii) In the absence of bad faith on its part, the Collateral Agent
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Collateral Agent believed by it to be genuine and
to have been signed by a proper person and otherwise conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Collateral Agent, the Collateral Agent shall be under a
duty to examine the same to determine whether or not they conform, as to
matters of form, to the requirements of this Agreement, as appropriate.
(b) In case an Event of Default has occurred and is continuing to the
knowledge of the Collateral Agent, the Collateral Agent shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise as consistent with sound banking practice.
-21-
<PAGE>
(c) No provision of this Agreement shall be construed to relieve the
Collateral Agent from liability for its own negligent action, its own grossly
negligent failure to act, or its own grossly willful misconduct, except that:
(i) This subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) The Collateral Agent shall not be liable for any error of
judgment made in good faith by an officer of the Collateral Agent unless it
shall be proved that the Collateral Agent was grossly negligent in
ascertaining the pertinent facts; and
(iii) The Collateral Agent shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the direction
of the Required Holders.
(d) No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if the Collateral Agent shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to the Collateral Agent.
(e) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Collateral Agent shall be subject to the provisions of this
Section.
Section 6.2. Compensation of the Collateral Agent. The Collateral Agent
shall be entitled to reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered, and to reimbursement for all reasonable expenses,
disbursements and advances incurred or made by the Collateral Agent, in and
about the administration of the trusts herein provided for and in and about
foreclosure, enforcement or other protection of this Agreement or the Lien and
security interest hereof or thereof (including reasonable compensation and
expenses and disbursements of its counsel and of all Persons not regularly in
their employ). The Company agrees to pay such compensation for services of the
Collateral Agent and to reimburse the Collateral Agent for such expenses,
disbursements and advances. The Company agrees to indemnify and save harmless
the Collateral Agent from and against all loss, liability and expense incurred
in good faith and without negligence on its part in the exercise or performance
of any rights, remedies or duties under this Agreement.
-22-
<PAGE>
Section 6.3. Certain Rights of the Collateral Agent. (a) The Collateral
Agent shall not be responsible for any recitals herein (except recitals made by
the Collateral Agent on its own behalf) or for insuring or inspecting the
Collateral or for paying or discharging any tax, assessment, governmental charge
or lien affecting the Collateral (except for taxes, assessments, governmental
charges or liens affecting the Collateral which result from claims against the
Collateral Agent not related to the Collateral or the administration thereof) or
for the recording, filing or refiling of this Agreement, or of any supplement or
further security agreement or trust deed, nor shall the Collateral Agent be
bound to ascertain or inquire as to the performance or observance of any
covenant, condition or agreement contained herein, or in the Note Purchase
Agreements, and the Collateral Agent shall be deemed to have knowledge of any
default in the performance or observance of any covenant, conditions or
agreements only upon receipt of written notice thereof from one of the
Noteholders; provided, however, that upon receipt by the Collateral Agent of
such written notice from a Noteholder, the Collateral Agent shall promptly
notify all other Noteholders of such notice and the default referred to therein,
by prepaid, registered or certified mail, addressed to them at their addresses
set forth in Schedule A to the Note Purchase Agreements.
(b) The Collateral Agent makes no representation or warranty as to the
validity, sufficiency or enforceability of this Agreement, the Notes, the Note
Purchase Agreements or any instrument included in the Collateral, or as to the
value, title, condition, fitness for use of, or otherwise with respect to the
Collateral. The Collateral Agent shall not be accountable to anyone for the use
or application of any of the Notes or the proceeds thereof or for the use or
application of any property or the proceeds thereof which shall be released from
the security interest hereof in accordance with the provisions of this
Agreement.
(c) The Collateral Agent may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by the Collateral Agent to be genuine and to have
been signed or presented by the proper party or parties.
(d) Any request, direction or authorization by the Company shall be
sufficiently evidenced by an Officer's Certificate, delivered to the Collateral
Agent and the Noteholders.
(e) Whenever in the administration of the trusts herein provided for the
Collateral Agent shall deem it necessary or desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by an
Officer's Certificate delivered to the Collateral
-23-
<PAGE>
Agent and the Noteholders, and such certificate shall be full warrant to the
Collateral Agent or any other Person for any action taken, suffered or omitted
on the faith thereof, but in its discretion the Collateral Agent may accept, in
lieu thereof, other evidence of such fact or matter or may require such further
or additional evidence as it may deem reasonable.
(f) The Collateral Agent may consult with counsel, appraisers, engineers,
accountants and other skilled persons to be selected by the Collateral Agent,
and the written advice of any thereof shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by the
Collateral Agent hereunder in good faith and in reliance thereon.
(g) The Collateral Agent shall be under no obligation to take any action
to protect, preserve or enforce any rights or interests in the Collateral or to
take any action towards the execution or enforcement of the trusts hereunder or
otherwise hereunder, whether on the Collateral Agent's own motion or on the
request of any other person, which in the opinion of the Collateral Agent may
involve loss, liability or expense, unless the Company or one or more
Noteholders outstanding shall offer and furnish reasonable security or indemnity
against loss, liability and expense to the Collateral Agent.
(h) The Collateral Agent shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement.
(i) The Collateral Agent shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, unless requested in writing to do so by the
Required Holders.
(j) The provisions of paragraphs (c) to (i), inclusive, of this Section
6.3 shall be subject to the provisions of Section 6.1 hereof.
Section 6.4. Showings Deemed Necessary by the Collateral Agent.
Notwithstanding anything elsewhere in this Agreement, the Collateral Agent shall
have the right, but shall not be required, to demand in respect of withdrawal of
any cash, the release of any property, the subjection of any after-acquired
property to this Agreement, or any other action whatsoever within the purview
hereof, any showings, certificates, opinions, appraisals or other information by
the Collateral Agent deemed reasonably necessary or appropriate in addition to
the matters by the terms hereof required as a condition precedent to such
action.
-24-
<PAGE>
Section 6.5. Status of Moneys Received. All moneys received by the
Collateral Agent shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, but need not be segregated
in any manner from any other moneys, except to the extent required by law, and
may be deposited by the Collateral Agent under such general conditions as may be
prescribed by law in the Collateral Agent's general banking department, and the
Collateral Agent shall be under no liability for interest on any moneys received
by it hereunder. The Collateral Agent and any affiliated corporation may become
the owner of any Note secured hereby and be interested in any financial
transaction with the Company or any affiliated corporation, all with the same
rights which it would have if not the Collateral Agent.
Section 6.6. Resignation of the Collateral Agent. The Collateral Agent
may resign and be discharged from the trusts created hereby by delivering notice
thereof, by certified or registered mail, postage prepaid, to the Company and
all Noteholders, specifying a date (not earlier than 60 days after the date of
such notice) when such resignation shall take effect. Such resignation shall
take effect on the day specified in such notice, unless previously a successor
Collateral Agent shall have been appointed as provided in Section 6.8 hereof, in
which event such resignation shall take effect immediately upon the appointment
of such successor Collateral Agent.
Section 6.7. Removal of the Collateral Agent. The Collateral Agent may be
removed at any time as Collateral Agent hereunder, for or without cause, by an
instrument or instruments in writing executed by the holders of a majority in
aggregate principal amount of the Notes at the time outstanding and delivered to
the Collateral Agent with a copy to the Company, specifying the removal and the
date when it shall take effect.
Section 6.8. Appointment of Successor Collateral Agent. In case at any
time the Collateral Agent shall resign or be removed or become incapable of
acting hereunder, a successor Collateral Agent may be appointed by the Required
Holders, by an instrument or instruments in writing executed by such holders and
filed with such successor Collateral Agent. Until a successor Collateral Agent
shall be so appointed by the Noteholders, the Company shall appoint a successor
Collateral Agent to fill such vacancy, by an instrument in writing executed by
the Company and delivered to the successor Collateral Agent. If all or
substantially all of the Collateral shall be in the possession of one or more
receivers, trustees, liquidators or assignees for the benefit of creditors, then
such receivers, trustees, custodians, liquidators or assignees may, by an
instrument in writing delivered to the successor Collateral Agent, appoint a
successor Collateral Agent. Promptly after any such appointment, the Company, or
any such receivers, trustees, custodians, liquidators or assignees, as the case
may be, shall give notice thereof by certified or registered mail, postage
prepaid, to each Noteholder and, if appropriate, the Company. Any successor
Collateral Agent so appointed by the Company, or such receivers, trustees,
custodians, liquidators or assignees shall immediately and without further act
be superseded by a
-25-
<PAGE>
successor Collateral Agent appointed by the holders of a majority in aggregate
principal amount of the Notes then outstanding. If a successor Collateral Agent
shall not be appointed pursuant to this Section within six months after a
vacancy shall have occurred in the office of Collateral Agent, any Noteholder or
such retiring Collateral Agent (unless the retiring Collateral Agent is being
removed) may apply to any court of competent jurisdiction to appoint a successor
Collateral Agent, and such court may thereupon, after such notice, if any, as it
may consider proper, appoint a successor Collateral Agent.
Section 6.9. Succession of Successor Collateral Agent. Any successor
Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
the Company and the predecessor Collateral Agent an instrument accepting such
appointment hereunder, and thereupon such successor Collateral Agent, without
any further act, deed, conveyance or transfer, shall become vested with the
title to the Collateral, and with all the rights, powers, trusts, duties and
obligations of the predecessor Collateral Agent in the trust hereunder, with
like effect as if originally named as Collateral Agent herein. Upon the request
of any such successor Collateral Agent, however, the Company and the predecessor
Collateral Agent shall execute and deliver such instruments of conveyance and
further assurance and do such other things as may reasonably be required for
more fully and certainly vesting and confirming in such successor Collateral
Agent the title to the Collateral and all such rights, powers, trusts, duties
and obligations of the predecessor Collateral Agent hereunder, and the
predecessor Collateral Agent shall also assign and deliver to the successor
Collateral Agent any property subject to this Agreement which may then be in its
possession. Any Collateral Agent which has resigned or been removed shall
nevertheless retain any security interest in the Collateral afforded to it by
Section 6.2 hereof.
Section 6.10. Eligibility of the Collateral Agent. The Collateral Agent
shall be a state or national bank or trust company in good standing, organized
under the laws of the United States of America or of the State of New York,
having senior unsecured debt rated "A" or better by Standard & Poor's Ratings
Group, or by Moody's Investors Service, Inc. and having a capital, surplus and
undivided profits aggregating at least $100,000,000, if there be such a bank or
trust company willing and able to accept such trust upon reasonable and
customary terms. If there is no such bank or trust company willing and able to
accept such trust in accordance with the immediately preceding sentence of this
Section 6.10, the Collateral Agent shall have its principal office in any state
within the United States approved by the holders of at least 51% in aggregate
principal amount of the Notes at the time outstanding. In case the Collateral
Agent shall cease to be eligible in accordance with the provisions of this
Section, the Collateral Agent shall resign immediately in the manner and with
the effect specified in Section 6.6 hereof.
Section 6.11. Successor Collateral Agent by Merger. Any corporation into
which the Collateral Agent may be merged or with which it may be consolidated,
or any
-26-
<PAGE>
corporation resulting from any merger or consolidation to which the Collateral
Agent shall be a party, or any state or national bank or trust company in any
manner succeeding to the corporate trust business of the Collateral Agent as a
whole or substantially as a whole, if eligible as provided in Section 6.10
hereof, shall be the successor of the Collateral Agent hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything to the contrary contained herein notwithstanding.
Section 6.12. Effective Resignation and Removal; Appointment of Successor.
This Section 6 notwithstanding, no resignation or removal of the Collateral
Agent and no appointment of a successor Collateral Agent pursuant to this
Section shall become effective until the acceptance of appointment by the
successor Collateral Agent.
Section 6.13. Controlled by Holders. In furtherance of the provisions of
Section 4.3 hereof, it is acknowledged and agreed that the Required Holders of
Notes which have been accelerated pursuant to the Note Purchase Agreements, or
any agent appointed by such holders, shall have the right to direct the actions
of the Collateral Agent hereunder or to exercise any right or remedy provided in
this Agreement to the Collateral Agent and shall have the further right to take
any action or grant any approval or consent to be taken or granted by the
Collateral Agent hereunder and to act in the place of the Collateral Agent. If
and so long as no Notes have been declared due and payable prior to the
expressed maturity date thereof, the Required Holders shall have the right to
direct the actions of the Collateral Agent hereunder and to exercise any right
or remedy provided in this Agreement to the Collateral Agent and shall have the
further right to take any action or grant any approval or consent to be taken or
granted by the Collateral Agent hereunder and to act in the place of the
Collateral Agent.
Section 6.14. Indemnification. The Noteholders agree to indemnify the
Collateral Agent in its capacity as such (to the extent not reimbursed by the
Company and without limiting the obligation of the Company to do so), ratably,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, out-of-pocket expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Collateral Agent in any way relating to or
arising out of this Agreement or the other Note Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Collateral
Agent under or in connection with any of the foregoing; provided that no
Purchaser 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 Collateral Agent's bad
faith, gross negligence or willful misconduct. The agreements in this Section
6.14 shall survive the payment of the Notes and all other amounts payable
hereunder and under the Note Purchase Agreements and the termination of this
Agreement.
-27-
<PAGE>
Article VII
MIscellaneous
Section 7.1. Continuing Lien. This Agreement secures all present and
future Obligations of the Company. There is included within the term
"Collateral," as used herein, all other property and all interests therein of
any kind hereafter acquired by the Company, meeting or falling within the
general description of the Collateral set forth herein and also the proceeds and
products thereof.
Section 7.2. Waivers by Company. The Company irrevocably waives the right
to direct the application of any and all payments which may be received by the
Collateral Agent during the continuance of an Event of Default, and the Company
does hereby irrevocably agree that, during the continuance of an Event of
Default, the Collateral Agent shall have the continuing exclusive right to apply
and reapply any and all such payments received in such manner as the Collateral
Agent may deem advisable, notwithstanding any entry upon any of its books and
records.
The Company also waives any and all notices of demand, notice or protest
that the Company 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 Collateral Agent or the
Noteholders on which the Company may in any way be liable, notice of nonpayment
at maturity of any and all Loans, and notice of any action taken by the
Collateral Agent or the Noteholders unless expressly required by this Agreement.
Section 7.3. 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 7.4. 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 7.5. Waiver of Jury Trial and Setoff. Each of the Company and the
Collateral 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
-28-
<PAGE>
DISPUTE, HOWSOEVER ARISING, BETWEEN THE COMPANY AND ANY OF THE NOTEHOLDERS OR
THE COLLATERAL AGENT, BETWEEN ANY NOTEHOLDERS, AND BETWEEN THE COLLATERAL AGENT
AND ANY NOTEHOLDERS, AND THE COMPANY 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 7.6. Jurisdiction; Service of Process. The Company 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
Noteholder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
Section 7.7. Survival of Representations and Warranties. All
representations and warranties of the Company and all terms, provisions,
conditions and agreements to be performed by the Company contained in this
Agreement and in the other Note 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 7.8. 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 Collateral Agent shall have the right to, and upon the direction of the
Required Holders shall, proceed against such other property, guarantee or
endorsement upon the occurrence and during the continuance of an Event of
Default, and the Collateral Agent shall have the right, with the consent of the
Required Holders, to determine which rights, security, liens, security interests
or remedies the Collateral 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 Collateral Agent's
rights or any of the Noteholder's rights under the Obligations, this Agreement
or any Other Agreements.
Section 7.9. Successor Collateral Agent. In the event a successor
collateral agent is appointed pursuant to the provisions of Article VI hereof,
such successor collateral agent shall succeed to the rights, powers and duties
of the Collateral Agent hereunder, and the term "Collateral Agent" shall mean
such successor agent effective upon its appointment, and the former Collateral
Agent's rights, powers and duties as Collateral
-29-
<PAGE>
Agent shall be terminated, without any other or further act or deed on the part
of such former Collateral Agent or any of the parties to the Note Purchase
Agreements or any holders of the Notes. Such former Collateral 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 7.10. 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 Note Purchase Agreements. No waiver by the Collateral Agent or any
Noteholder or any other holder of the 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
Noteholder of a Note(s) or any portion thereof, such Noteholder may assign or
transfer its rights and interest under this Agreement in whole or in part to the
purchaser or purchasers of the Note(s), whereupon such purchaser or purchasers
will become vested with all of the powers, rights and responsibilities of such
Noteholder hereunder, and such Noteholder 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. The Company may
not assign this Agreement without the express written consent of the Collateral
Agent and the Noteholders.
Section 7.11. Notices. All notices, requests, consents, demands or other
communications provided for herein shall be deemed to have been given (unless
otherwise required by the specific provisions hereof in respect of any matter)
when delivered personally or when deposited in the United States mail,
registered or certified, postage prepaid, addressed as follows:
If to the Company: Medallion Funding Corp.
437 Madison Avenue
38th Floor
New York, New York 10022
Attention: Chief Financial Officer
-30-
<PAGE>
If to the Collateral Agent: Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Attention: Fred Meagher
If to any Noteholders: to such Noteholder's address
set forth in Schedule A to the
Note Purchase Agreements
Section 7.12. 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 7.13. 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.
-31-
<PAGE>
In Witness Whereof, this Agreement has been executed as of the day and year
first above written by the duly authorized officers of the parties hereto.
Medallion Funding Corp.
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
Fleet Bank, N.A.,
as Collateral Agent
By:________________________________________
Name:___________________________________
Title:__________________________________
-32-
<PAGE>
EXHIBIT 10.4
SECURITY AGREEMENT
between
MEDALLION BUSINESS CREDIT, LLC, 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 AMENDED AND RESTATED LOAN AGREEMENT, DATED AS OF JUNE 29, 1999,
AMONG MEDALLION FINANCIAL CORP.,
MEDALLION BUSINESS CREDIT, LLC,
THE BANKS SIGNATORY THERETO, THE SWING LINE LENDER
AND FLEET BANK, N.A., AS ARRANGER AND AGENT
______________________________
dated as of June 29, 1999
______________________________
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of June 29, 1999, is between MEDALLION
BUSINESS CREDIT, LLC, a Delaware limited liability company ("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 an Amended and Restated
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
<PAGE>
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.
"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 Receivables;
- - - -2-
<PAGE>
(p) all property and rights, including, but not limited to, items
described in clauses (b) through (o) hereof, repossessed, or otherwise acquired
in connection with any Loans or the exercise by Borrower of any rights of a
secured party under or with respect to any of the Loans or this Agreement or
arising out of the sale or disposition of any Loans, any other Collateral, or in
connection with the sale of any repossessed property;
(q) 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,
- - - -3-
<PAGE>
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 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 Rights" 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
- - - -4-
<PAGE>
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 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.
- - - -5-
<PAGE>
"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 New York City Taxi and Limousine Commission,
or any other Governmental Authority for a jurisdiction other than New York City,
and permitted to accept hails from passengers in the street.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial
---
Code as then in effect in that jurisdiction.
"Underlying Collateral" shall mean all of Borrower's rights with respect
---------------------
to, or interest in, any and all present and future Medallion Rights, Equipment,
Real Property, machinery, Inventory, Receivables, Accounts, future accounts,
accounts receivable, contracts, contract rights, general intangibles, books,
desks, notes, bills, drafts, acceptances, choses in action, chattel paper,
instruments, documents and other forms of obligations, and property, real,
personal or mixed, tangible or intangible, at any time owing to or owned by any
Person to whom Borrower has made a Loan, or any guarantor of such Person.
SECTION 1.2. Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP.
SECTION 1.3. Rules of Construction. (a) Words of the masculine gender
shall mean and include correlative words of the feminine 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
----------
- - - -6-
<PAGE>
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
thereof 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 (except for the
Permitted Liens) 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, 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
(i) after a Default or an Event of Default has occurred, (ii) after any change
in any existing Law
- - - -7-
<PAGE>
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) when the Agent reasonably deems it
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, registration
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 carry out fully 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
----------------
any 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 (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
- - - -8-
<PAGE>
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, 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
- - - -9-
<PAGE>
all Obligations shall be reinstated as to monetary Obligations which were
satisfied by the payment to be rescinded or returned, all as though such payment
had not been made, and Borrower shall sign and deliver to the Agent all
documents and things necessary to 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 financing statement 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 Borrower's 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.
- - - -10-
<PAGE>
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 harmless 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. 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
- - - -11-
<PAGE>
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
ARTICLE III
PRIORITY OF SECURITY INTERESTS
SECTION 3.1. Priority of Security Interests. Borrower warrants and
represents to the Agent and the Banks that, as to those assets for which
perfection may be accomplished by filing or by possession under the UCC, the
security interests granted to the Agent hereunder constitute and will constitute
at all times a valid and perfected security interest vested in the Agent in and
upon the Collateral. Borrower further warrants and represents that the Agent's
security interests in the Collateral are not and hereinafter shall not become
subordinate or junior to the security interests, liens or claims of any other
Person, firm or corporation, including the United States or any department,
agency or instrumentality thereof, or any state, county or local governmental
agency, except for the Permitted Liens. Borrower shall not grant (without the
prior written approval of the Agent) a security interest in or permit a lien or
encumbrance upon any of the Collateral to anyone except the Agent as long as any
of the Obligations remain unpaid, except for the Permitted Liens.
ARTICLE IV
COLLATERAL
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
- - - -12-
<PAGE>
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) in compliance in all
material respects with, and the form and content of each document related to all
outstanding and future Loans, the security related thereto, and the transactions
from which they 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 to make which 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;
(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
- - - -13-
<PAGE>
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 secures 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 to, and upon the direction of the Required Banks shall, at any time and
from time to time thereafter, without notice to Borrower, (a) 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.
- - - -14-
<PAGE>
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 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
- - - -15-
<PAGE>
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 Loans, Borrower
agrees with the Agent as follows:
(i) Borrower shall hold all such items of payment in trust for the
Agent and the Banks and as the property of Agent and the Banks, separate
from the funds of Borrower, and Borrower shall immediately forward, or
cause to be forwarded, the same to the lockbox service for application to
the Revolving Credit Loans or Term Loans;
- - - -16-
<PAGE>
(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.
- - - -17-
<PAGE>
Any deficiency remaining, after application of such cash or cash proceeds to the
Obligations, shall continue to be Obligations for which Borrower remains liable.
(b) In making the determinations and allocations required by this Section
5.3, the Agent may rely upon information supplied by the Banks as to the amounts
of the Obligations held by them, and the Agent shall have no liability to any of
the Banks for actions taken in reliance upon such information. All
distributions made by the Agent pursuant to this Section 5.3 shall be final, and
the Agent shall have no duty to inquire as to the application by the Banks of
any amount distributed to them. However, if at any time the Agent determines
that an allocation was based upon a mistake of fact (including without
limitation, mistakes based on an assumption that principal or interest or any
other amount has been paid by payments that are subsequently recovered from the
recipient thereof through the operation of any bankruptcy, reorganization,
insolvency or other laws or otherwise), the Agent may in its discretion, but
shall not, subject to Section 5.3(c), be obligated to, adjust subsequent
allocations and distributions hereunder so that, on a cumulative basis, the
Banks 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
- - - -18-
<PAGE>
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.
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,
- - - -19-
<PAGE>
COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE
OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SETOFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
SECTION 6.6. Jurisdiction; Service of Process. Borrower hereby
irrevocably consents to the Jurisdiction of the Courts of the State of New York,
County of New York and of any Federal Court located in the Southern District of
New York, and agrees that venue in each of such Courts is proper in connection
with any action or proceeding arising out of or relating to this Agreement, the
Other Agreements, or any document or instrument delivered pursuant to this
Agreement or the Other Agreements. Nothing herein shall affect the right of any
Bank to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Borrower in any other jurisdiction.
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 Banks' 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.
- - - -20-
<PAGE>
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.
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.
- - - -21-
<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 BUSINESS CREDIT, LLC
By:/s/ Alvin Murstein
________________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
________________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
FLEET BANK, N.A.,
as Agent
By:________________________________
Name
Title:
- - - -22-
<PAGE>
EXHIBIT 10.5
Intercreditor Agreement
This Intercreditor Agreement (as amended, supplemented or otherwise
modified from time to time, this "Agreement"), dated as of June 1, 1999, among
(a) Fleet Bank, N.A. ("Fleet"), acting in its capacity as agent (in such
capacity, the "Bank Agent") for and on behalf of the various financial
institutions (collectively, the "Banks") which are, or may from time to time
hereafter become, parties to the Loan Agreement, (b) the Banks, (c) the Senior
Noteholders (as hereinafter defined), (d) Fleet, acting as collateral agent to
the Senior Noteholders (the "Senior Note Collateral Agent") and (e) Fleet,
acting in its individual capacity for purposes of clause (a) of Section 6 and
otherwise in its capacity as intercreditor collateral agent for the Senior
Creditors (together with its successors and assigns, the "Collateral Agent").
Witnesseth:
Whereas, Medallion Funding Corp. (the "Borrower"), as the borrower,
the Banks, the Bank Agent and The Bank of New York as documentation agent have
entered into an Amended and Restated Loan Agreement dated as of December 24,
1997, as amended as of February 5, 1998, December 11, 1998 and June 1, 1999
(said agreement, as it may hereafter be amended, supplemented, restated or
otherwise modified from time to time, being the "Loan Agreement"); and
Whereas, the Borrower also issues commercial paper from time to time,
and has secured its obligations to the Banks and to the holders of its
commercial paper and the paying agent for such holders under and pursuant to an
Amended and Restated Security Agreement dated as of December 24, 1997, between
the Borrower and the Bank Agent (said agreement, as previously amended and as it
may hereafter be amended, supplemented or otherwise modified from time to time,
being the "Bank Security Agreement"); and
Whereas, pursuant to the separate and several Note Purchase
Agreements, each dated as of June 1, 1999 (as each of such agreements may be
amended, supplemented or otherwise modified from time to time, collectively, the
"Note Purchase Agreements"), between the Borrower and the Purchasers of the
Senior Notes named therein (such Purchasers, together with all subsequent
holders of the Senior Notes collectively referred to herein as the "Senior
Noteholders"), the Senior Noteholders are, concurrently with the execution and
delivery of this Agreement, purchasing the Senior Notes from the Borrower;
Whereas, in connection with the agreements made among the parties
hereto relating to the making by the Banks of Loans under the Loan Agreement and
the issuance by the Borrower and the purchase by the Senior Noteholders of the
Senior Notes under the Note Purchase Agreements, the Banks and the Senior
Noteholders desire to establish among themselves their relative rights, remedies
and priorities with respect to the Collateral;
Now, Therefore, the parties hereto hereby agree as follows:
<PAGE>
Section 1. Definitions.
(a) Defined Terms. The following terms when used in this Agreement,
including its preamble and recitals, shall, except where the context otherwise
requires, have the following meanings (such meanings to be equally applicable to
the singular and plural forms thereof):
"Additional Senior Agreements" means all agreements pursuant to which any
Additional Senior Obligations shall be issued.
"Additional Senior Creditors" means all holders of any Additional Senior
Obligations who shall have executed and delivered an Addendum hereto in the form
of Exhibit A attached hereto.
"Additional Senior Obligations" means all obligations, other than the Loan
Agreement Obligations and the Senior Note Obligations, in respect of other
secured indebtedness of the Borrower for borrowed money or evidenced by notes,
bonds, debentures or similar evidences of indebtedness of the Borrower, which in
each case is not expressly subordinate to any other indebtedness of the
Borrower, which is held by an Additional Senior Creditor and which is permitted
pursuant to Section 21 hereof.
"Agreement" is defined in the preamble.
"Banks" is defined in the preamble and shall in any event include any
assignee, successor, transferee or refinancing or refunding party of any person
that is a party to the Loan Agreement and all other assignees, transferees or
participants which from and after the date hereof become parties to the Loan
Agreement.
"Borrower" is defined in the first recital.
"Collateral" means, collectively, "Collateral" as that term is defined in
each of the Security Documents and all other collateral or security granted by
the Borrower or any subsidiary or affiliate thereof (including, without
limitation, all mortgaged property conveyed under any instrument of conveyance
of an interest in real property, whether or not specifically defined as
"Mortgaged Property") to secure Loan Agreement Obligations, CP Debt, Senior Note
Obligations and/or Additional Senior Obligations.
"Collateral Agent" is defined in the preamble.
"Commercial Paper" means any and all commercial paper issued by the
Borrower from time to time pursuant to a Commercial Paper Dealer Agreement and a
Paying Agency Agreement.
"Commercial Paper Dealer Agreement" means one or more commercial paper
dealer agreements between the Borrower and a dealer for the issuance and sale of
Commercial Paper by the Borrower, as the same shall be amended from time to
time, each as approved in accordance with the Loan Agreement.
-2-
<PAGE>
"CP Debt" means all indebtedness from the Borrower to the CP Holders from
time to time outstanding.
"CP Debt Payment Event of Default" means that the CP Debt shall not have
been paid when due and ten Business Days shall have elapsed from the date on
which the Paying Agent gave written notice to the Bank Agent to such effect, in
accordance with the Bank Security Agreement.
"CP Holders" means the holders from time to time of outstanding Commercial
Paper issued by the Borrower.
"Financing Documents" means the collective reference to this Agreement, the
Loan Documents, the Note Documents and the Additional Senior Agreements.
"Loan Agreement" is defined in the first recital.
"Loan Agreement Obligations" means the principal of and interest on the
Notes, all fees, breakage costs and all other obligations owing by the Borrower
under the Loan Documents.
"Loan Documents" is defined in the Loan Agreement.
"Loans" means the collective reference to the Revolving Credit Loans, the
Swingline Loans and the Term Loan as such terms are defined in the Loan
Agreement.
"Make-Whole Amount" is defined in the Note Purchase Agreements.
"Note Purchase Agreements" is defined in the third recital.
"Note Documents" is defined in the Note Purchase Agreements.
"Notes" is defined in the Loan Agreement.
"Paying Agency Agreement" means one or more issuing and paying agency
agreements between the Borrower and one or more paying agents acting as paying
agent thereunder providing for the issuance of Commercial Paper by the Borrower,
as the same shall be amended from time to time, each approved in accordance with
the terms of the Loan Agreement.
"Pro Rata Share" of each Senior Creditor means, as at any time of
determination, a ratio (a) the numerator of which is the aggregate amount of
Senior Obligations owing to such Senior Creditor that is comprised of (i) in the
case of a Senior Creditor that is a Bank, the outstanding principal and accrued
interest with respect to such Bank's Notes and (ii) in the case of a Senior
Creditor that is a Senior Noteholder, the outstanding principal and accrued
interest with respect to such Senior Noteholders' Senior Notes and (iii) in the
case of CP Holder, such CP Holder's CP Debt, and (iv) in the case of an
Additional Senior Creditor, the outstanding principal and accrued interest with
respect to such Additional Senior Creditor's Additional Senior Obligations
(excluding, for the purposes of any determination under clause (i), clause (ii),
clause (iii) and clause (iv) of this clause (a), any fees, expenses,
indemnities, premiums, Make-Whole Amounts or
-3-
<PAGE>
other Loan Agreement Obligations, Senior Note Obligations, obligations in
respect of CP Debt or Additional Senior Obligations regardless of how
characterized, as the case may be) and (b) the denominator of which is the
aggregate outstanding amount of principal and accrued interest with respect to
all the Senior Obligations (excluding, for the purposes of any determination
under this clause (b), fees, expenses, indemnities, premiums, Make-Whole Amounts
and other Loan Agreement Obligations, Senior Note Obligations and obligations in
respect of the CP Debt and Additional Senior Obligations regardless of how
characterized, as the case may be).
"Purchaser" is defined in Section 1.1 of the Note Purchase Agreements.
"Required Additional Creditors" shall mean such percentage of Additional
Senior Creditors as are required to amend such Additional Senior Creditors'
Additional Senior Agreements.
"Required Banks" is defined in the Loan Agreement.
"Required Noteholders" is defined in the Note Purchase Agreement.
"Required Senior Creditors" means the Required Noteholders, the Required
Banks, the Bank Agent on behalf of the CP Holders and each group of Required
Additional Creditors; provided, however, that (i) for the purposes of Sections 3
and 6, if and so long as the Borrower is in default in respect of principal or
interest due and owing to one class of Senior Creditors and such class wishes to
pursue its remedies under the Security Documents to which it is a party and
either (a) no default exists with respect to any other class of Senior Creditors
or (b) such defaults as exist with respect to any other class of Senior
Creditors are non-payment defaults and each such other class does not wish to
exercise remedies under the Security Documents to which it is a party, "Required
Senior Creditors" shall mean the Required Banks if the Banks and the CP Holders
are the class with respect to which a payment default exists, the Required
Noteholders, if the Senior Noteholders are the class with respect to which a
payment default exists, or the Required Additional Creditors, if the Additional
Senior Creditors are the class with respect to which a payment default exists,
as the case may be, and (ii) at any time during which the Collateral Agent has
knowledge that a Triggering Event has occurred and is continuing, "Required
Senior Creditors" shall mean the holders of at least 51% in aggregate principal
amount of the Senior Obligations.
"Security Documents" means the collective reference to all security
agreements, mortgages, pledge agreements, concentration account agreements and
leasehold mortgages and each other security or collateral document that may from
time to time be delivered to the Collateral Agent in connection herewith or
therewith or in connection with, or to secure any obligations of any obligor
under, any Financing Document.
"Senior Creditors" means, collectively, the Banks, the Senior Noteholders,
the Bank Agent on behalf of the CP Holders and all Additional Senior Creditors.
-4-
<PAGE>
"Senior Note Obligations" means the principal of and interest on the Senior
Notes and all other obligations (including, without limitation, fees, premiums
and the Make-Whole Amount, if any) owing by the obligors under the Note
Documents.
"Senior Noteholders" is defined in the third recital.
"Senior Notes" means "Notes" as that term is defined in the Note Purchase
Agreements.
"Senior Obligations" means, collectively, the Loan Agreement Obligations,
the Senior Note Obligations, the CP Debt and all Additional Senior Obligations.
"Triggering Event" shall mean (i) any payment default described in Sections
11(a) or (b) of the Note Purchase Agreements and Section 9.1(a) of the Loan
Agreement and a CP Debt Payment Event of Default and a payment default under
each Additional Senior Obligation, (ii) any bankruptcy default by the Company
under Sections 11(g) or (h) of the Note Purchase Agreements and a bankruptcy
default under Section 9.1(h) or (i) of the Loan Agreement and a similar default
under each Additional Senior Obligation or (iii) any other default which results
in the acceleration of the Senior Notes under the Note Purchase Agreements and
the acceleration of the Loans or the Notes under the Loan Agreement,
acceleration of the CP Debt and acceleration of each other Additional Senior
Obligation.
(b) Use of Certain Defined Terms. For the purposes of this Agreement, and
without limiting the right of the Company to enter into amendments or
modifications of the Note Purchase Agreements or the Loan Agreement to the
extent permitted by the Financing Documents, references herein to the Note
Purchase Agreements and the Loan Agreement shall mean the Note Purchase
Agreements and the Loan Agreement as of the date hereof without giving effect to
any subsequent amendment or modification (except as agreed to by the Required
Senior Creditors).
Section 2. Limitation of Rights of Senior Creditors.
Each of the Senior Note Collateral Agent and each of the Senior
Noteholders, hereby for itself (and its successors and assigns) severally agrees
that such individual Senior Noteholder shall have no right to foreclose upon
(either pursuant to the Security Documents or otherwise) or exercise any other
material rights or remedies in respect of the Collateral (including, without
limitation thereof, any Collateral consisting of current assets (including
proceeds thereof) of the Borrower or of any other obligor of Senior Obligations)
in a manner inconsistent with, or otherwise contrary to the terms of, this
Agreement. Each of the Bank Agent (on behalf of itself and the CP Holders) and
the Banks (on behalf of themselves and their respective successors and assigns)
severally agrees that neither the Bank Agent nor any individual Bank shall have
the right to foreclose upon (either pursuant to the Security Documents or
otherwise) or exercise any other material rights or remedies in respect of the
Collateral (including, without limitation thereof, any Collateral consisting of
current assets (including proceeds thereof) of the Borrower or of any other
obligor of Senior Obligations) in a manner inconsistent with, or otherwise
contrary to the terms of, this Agreement. Each Additional Senior Creditor,
hereby for itself (and its successors and assigns) severally agrees that such
individual Additional Senior Creditor shall have no right to foreclose upon
(either pursuant to the Security Documents or otherwise) or exercise any other
-5-
<PAGE>
material rights or remedies in respect of the Collateral (including, without
limitation thereof, any Collateral consisting of current assets (including
proceeds thereof) of the Borrower or of any other obligor of Senior Obligations)
in a manner inconsistent with, or otherwise contrary to the terms of, this
Agreement.
The Senior Creditors, the Bank Agent, the Senior Note Collateral Agent and
the Collateral Agent acknowledge and agree that the liens of the Security
Documents secure, on a pari passu basis, all of the Senior Obligations, without
preference or priority to the Banks, the CP Holders, the Senior Noteholders or
the Additional Senior Creditors, regardless of (i) the failure of any party to
make proper and timely filings or recordations, (ii) the place or timing of any
filing or recordation, (iii) the timing or amount of any disbursement or advance
under the Loan Agreement, the Note Purchase Agreements or any Additional Senior
Agreement or (iv) any other reason.
The Banks agree that they shall not, without prior notice to the Senior
Noteholders and without the prior written consent of the Required Noteholders,
amend or revise the Credit Agreement in any manner that would (i) decrease the
required Minimum Asset Coverage (as defined in the Loan Agreement as in effect
on the date hereof) below 1.15, or (ii) modify any required payment dates so as
to reduce the average life of the Loans. The Noteholders agree that they shall
not, without prior written notice to the Senior Creditors and without the prior
written consent of the Required Banks, amend or revise any Note Purchase
Agreements in any manner that would increase the principal amount of or the rate
of interest on, the Senior Notes, increase the Make-Whole Amount, increase the
dollar limitation set forth in Section 10.2 of the Note Purchase Agreements,
decrease the ratio set forth in Section 10.3 of the Note Purchase Agreements,
increase the ratio set forth in Sections 10.4 or 10.5 of the Note Purchase
Agreements or modify any required payment dates so as to reduce the average life
of the Senior Notes.
Section 3. Direction of Action.
The Collateral Agent shall, subject to Section 6, make such demands and
give such notices under the Security Documents as the Required Senior Creditors
may direct in writing, and shall take such actions to enforce the Security
Documents and to foreclose upon, collect, sell, transfer, substitute or
otherwise dispose of all or any portion of the Collateral as may be directed in
writing by the Required Senior Creditors. All such written directions shall be
binding upon the Bank Agent and each Senior Creditor for all purposes and the
Collateral Agent shall not take any action (including any foreclosure action)
unless directed in writing to do so by the Required Senior Creditors. No Senior
Creditor shall have any right to exercise, individually, any material rights or
remedies under the Security Documents, it being understood and agreed that all
of such rights and remedies shall be exercised solely by and through the
Collateral Agent pursuant to the terms and provisions hereof. If the Required
Senior Creditors shall direct in writing the Collateral Agent to foreclose upon,
collect, sell, transfer, substitute or otherwise dispose of all or any part of
the Collateral, the Collateral Agent shall do so as provided in and pursuant to
any of the Security Documents.
-6-
<PAGE>
Nothing set forth in this Section 3, however, shall be construed to qualify
or otherwise limit the right of any Senior Creditor to declare such Senior
Creditor's Senior Obligations to be due and payable in accordance with the Loan
Agreement or the Note Purchase Agreements, as the case may be, or to make demand
in respect of any guarantee of any Senior Obligations, provided that no such
Senior Creditor shall be entitled to exercise any right or remedy with respect
to the Collateral or pursuant to the Security Documents except in accordance
with the provisions of this Agreement.
Section 4. Release or Substitution of Collateral.
The Collateral Agent is hereby authorized, at any time and from time to
time, to release or substitute any portion of the Collateral or terminate the
lien on the Collateral granted pursuant to the Security Documents (i) in the
ordinary course in the manner contemplated by the Financing Documents, or (ii)
in accordance with the Financing Documents, provided that if such release,
substitution or termination would cause a default under Section 7.3 of the Loan
Agreement but not under Section 10.6 of the Note Purchase Agreements, with the
consent of all Banks, provided, further if such release would cause a default
under Section 10.6 of the Note Purchase Agreements, with the consent of the
Banks and the Required Noteholders and (iii) in accordance with and upon receipt
of instructions from the Required Senior Creditors, provided that (a) the
Collateral Agent is not authorized to release Collateral so long as there is a
default under Section 10.6 of the Note Purchase Agreements or under Section 7.3
of the Loan Agreement and (b) the Collateral Agent is not authorized to release
all or substantially all of the Collateral or terminate the lien on all or
substantially all of the Collateral unless the Collateral Agent has received
instruction from all Senior Creditors. The Collateral Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions of the Required Senior Creditors (or all Senior
Creditors, if specifically required by the terms of this Agreement) and such
instructions and any action or refraining from action pursuant thereto shall be
binding upon all Senior Creditors and their successors and assigns. Any such
release or substitution of the Collateral will automatically and without the
requirement of the giving of any notice or the taking of any action release all
liens on such Collateral and any transferee of such Collateral shall take such
Collateral free and clear of all such liens. The Collateral Agent and the
Senior Creditors agree that such release or substitution in accordance with the
immediately preceding sentence shall be binding and conclusive upon them and
their successors and assigns and hereby waive all rights and claims with respect
to any such release or substitution; provided, however, that the Collateral
Agent and the Senior Creditors shall have a continuing security interest in any
proceeds from the release or substitution of any of the Collateral and shall be
entitled to receive such proceeds in accordance with Section 5.
Section 5. Application of Proceeds.
(a) Upon (x) the receipt of any proceeds or awards arising from any
condemnation or eminent domain proceedings concerning the Collateral, (y) the
receipt of any insurance proceeds arising from damage to the Collateral by fire
or any other casualty which are not used for restoration of the Collateral in
accordance with the terms of the Security Document governing same or (z) the
exercise of any rights and remedies by the Collateral Agent under the Security
Documents, any and all proceeds from the sale, foreclosure or other disposition
of Collateral
-7-
<PAGE>
pursuant thereto shall, promptly following their receipt by the Collateral
Agent, be applied and distributed by the Collateral Agent as follows:
(i) First, to the payment of all costs, expenses, liabilities
and advances made or incurred by the Collateral Agent (in its capacity as
Collateral Agent and not as Bank Agent or a Bank) in connection with such
proceedings, adjustments, sale, foreclosure or other disposition and in
performing its duties hereunder, including compensation payable to the
Collateral Agent and the costs, expenses and compensation of agents and
legal counsel (appointed, in each case, with the written consent of the
Required Senior Creditors) to the Collateral Agent;
(ii) Second, to the extent proceeds remain after payment in full
of those items specified in clause (i) above, to the payment of Senior
Obligations consisting of principal and interest (excluding default-rate
interest), to be allocated among each Senior Creditor (according to the Pro
Rata Share of each such Senior Creditor) until all such Senior Obligations
are paid in full;
(iii) Third, to the extent any proceeds remain after payment in
full of those items specified in clauses (i) and (ii) above, to the payment
of the remaining Senior Obligations, to be allocated among each Senior
Creditor (on a pro rata basis based on the unpaid amount of such remaining
Senior Obligations) until all remaining Senior Obligations are paid in
full; and
(iv) Fourth, to the extent any proceeds remain after payment in
full of those items specified in clauses (i), (ii) and (iii) above, such
proceeds shall be paid to or at the direction of the Borrower or as a court
of competent jurisdiction shall direct.
(b) Payment by the Collateral Agent to the Banks in respect of the Loan
Agreement Obligations shall be made to the Bank Agent for distribution to the
Banks in accordance with the Loan Agreement. Payments by the Collateral Agent
to the Senior Noteholders shall be made in accordance with the terms of the Note
Purchase Agreements. Payments by the Collateral Agent to the CP Holders in
respect of the CP Debt shall be made to the Bank Agent for distribution to the
CP Holders. Payments by the Collateral Agent to any Additional Senior Creditor
shall be made in accordance with written instructions from such Additional
Senior Creditor.
(c) The Bank Agent (on its own behalf and on behalf of the CP Holders),
the Senior Note Collateral Agent, each Bank, each Senior Noteholder signatory
hereto, and each Additional Senior Creditor hereby agrees that (i) if at any
time it shall receive the proceeds of any Collateral, or shall apply any
balances, credits, deposits, accounts or monies with or on deposit with such
Bank Agent, Senior Note Collateral Agent, Bank, Senior Noteholder or Additional
Senior Creditor, through the exercise of any right of set-off, banker's lien,
counterclaim or other similar right, whether pursuant to Section 10.9 of the
Loan Agreement or otherwise, (other than through application by the Collateral
Agent in accordance with clauses (a) and (b) of this Section 5), it shall
promptly turn the same over to the Collateral Agent for application in
accordance with said clauses (a) and (b) and (ii) it will not take or cause to
be taken any action, including, without limitation, the commencement of any
legal or equitable proceedings, the purpose of which is to
-8-
<PAGE>
give such Bank Agent, Bank, Senior Noteholder, any CP Holder or Additional
Senior Creditor any preference or priority against the other parties hereto with
respect to the Collateral.
Section 6. Concerning the Collateral Agent.
(a) The Bank Agent (on its own behalf and on behalf of the CP Holders),
the Banks, the Senior Note Collateral Agent and each Senior Noteholder signatory
hereto, on its own behalf and on behalf of each subsequent holder of the Notes
and the Senior Notes and each Additional Senior Creditor, authorizes the
Collateral Agent to act on its and each such holder's behalf under this
Agreement and under the Security Documents pursuant to the provisions hereof and
thereof. The Collateral Agent accepts its appointment as collateral agent
hereunder and, subject to clause (b) below, agrees to act in accordance with the
terms hereof and the directions from time to time given to it by the Required
Senior Creditors as contemplated hereby.
(b) The Collateral Agent shall not take any action, or prosecute or be
required to defend any suit with respect to this Agreement or the Security
Documents, (A) except as specified in a direction from the Required Senior
Creditors and (B) unless it shall have received a written or other assurance,
reasonably satisfactory to it, from the Senior Creditors joining in such
direction as to its indemnification from and against any and all liabilities,
obligations, losses, damages, penalties, judgments, suits, costs, expenses,
charges or disbursements (not including for this purpose, however, any amounts
in respect of fees or other remuneration for its services in so acting as
Collateral Agent) of any kind or nature whatsoever which may at any time be
imposed on, incurred by or asserted against the Collateral Agent in any way
relating to or arising out of actions taken by it in accordance with such
direction. The Senior Creditors agree to indemnify the Collateral Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their commitments (which, in the case of a Senior
Noteholder, shall be the unpaid principal amount of its Senior Notes), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment of the Notes and the Senior Notes) be imposed on, incurred
by or asserted against the Collateral Agent in any way relating to or arising
out of this Agreement, the Security Documents, or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Collateral Agent, as the case may
be, under or in connection with any of the foregoing; provided that no Senior
Creditor 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 Collateral Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of all Senior Obligations.
(c) Neither the Collateral Agent nor any of its directors, officers,
employees, or agents
(i) shall be liable to any Senior Creditor for any action taken
or omitted to be taken by it under this Agreement or the Security Documents
or in connection therewith, except for its own willful misconduct or gross
negligence,
-9-
<PAGE>
(ii) shall be responsible for any recitals or representations or
warranties in this Agreement or the Security Documents, or for the
effectiveness, enforceability, validity, or due execution of this Agreement
or the Security Documents, including the liens purportedly created by the
Security Documents, or
(iii) shall be obligated to make any inquiry with respect to the
performance by the Borrower or any of its subsidiaries of its obligations
hereunder or thereunder.
The Collateral Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement, or writing
which it believes to be genuine and to have been presented by a proper person.
Except as is expressly set forth herein, the Collateral Agent shall have no duty
or responsibility to, or be considered in a fiduciary relationship with, any
Senior Creditor and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Collateral Agent. The Collateral Agent may deem and treat the payee
of any Senior Note as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer shall have been filed with the Collateral
Agent.
(d) The Collateral Agent may (i) be removed upon at least 30 days' prior
notice to the Collateral Agent provided or consented to by the Required Senior
Creditors or (ii) resign upon at least 30 days' prior notice to the Senior
Creditors, in each such case subject to the acceptance and appointment of a
successor Collateral Agent approved by the Required Senior Creditors. If the
Collateral Agent shall resign and the Required Senior Creditors have not
appointed within 30 days after their receipt of the notice of resignation a
successor Collateral Agent, the resigning Collateral Agent may, without the
consent of the Required Senior Creditors, appoint a successor Collateral Agent.
The Collateral Agent agrees to cooperate with the Senior Creditors in locating
and appointing a successor Collateral Agent following its removal or
resignation. Any successor Collateral Agent, whether appointed by the Required
Senior Creditors or the resigning Collateral Agent, shall be a nationally
recognized commercial banking institution or trust institution organized in the
United States of America (or any state thereof) or a U.S. branch or agency of a
foreign commercial banking institution if such successor Collateral Agent is a
holder of a Note, and having in each case a combined capital and surplus and
undivided profits of not less than $500,000,000. A removal of or a resignation
of the Collateral Agent and the appointment of a successor Collateral Agent
shall become effective upon receipt of acceptance by the successor Collateral
Agent of its appointment by the Required Senior Creditors or resigning
Collateral Agent, as the case may be. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall thereupon become the Collateral Agent hereunder and under the
Security Documents and shall be entitled to receive from the retiring Collateral
Agent such documents of transfer and assignment as such successor Collateral
Agent may reasonably request, and the retiring Collateral Agent shall be
discharged from its duties and obligations under this Agreement and the Security
Documents.
(e) The parties hereto waive any conflict resulting from Fleet acting as
(i) the Senior Note Collateral Agent under the Note Documents to which it is a
party, (ii) the Bank Agent under the Loan Documents to which it is a party and
(iii) the Collateral Agent under this Intercreditor Agreement.
-10-
<PAGE>
Section 7. [Reserved].
Section 8. Representations and Warranties.
(a) Neither the Collateral Agent, the Bank Agent, the Senior Note
Collateral Agent nor any Senior Creditor makes any representation or warranty to
any other party hereto with respect to the effectiveness, enforceability,
validity or due execution of the Security Documents or as to any of the
Collateral.
(b) Each Senior Creditor represents, warrants and covenants that it has
not and will not have or accept any security, collateral or other credit
enhancement from the Borrower or any subsidiary or affiliate thereof with
respect to any of the Senior Obligations without making adequate provision to
cause such security, collateral or credit enhancement to be subject to the terms
and provisions hereof.
Section 9. Notices.
All notices, requests and other communications (including directions and
instructions by the Senior Creditors to the Collateral Agent) provided for
hereunder shall be in writing and personally delivered, mailed or telecopied
(all telecopier notices promptly to be confirmed by mail or courier notice) or
delivered,
(a) if to the Bank Agent, at its address or telecopier number
specified in the Loan Agreement,
(b) if to the Collateral Agent or the Senior Note Collateral Agent,
at its address or telecopier number specified on the signature page hereof,
or at such other address or telecopier number as it may designate by notice
as herein provided to the Bank Agent and the holders of the Senior Notes,
(c) if to any Senior Noteholder, at the address or telecopier number
provided for in Schedule A to the Note Purchase Agreements, and
(d) if to any Additional Senior Creditor, at its address (or to the
telecopier or telex number) specified in the Additional Senior Agreement
between it and the Borrower.
All such notices and communications shall be effective when received. Each
Senior Creditor which shall make any change in its notice information shall
promptly furnish the Collateral Agent with such correct notice information.
Upon becoming a Senior Noteholder, such Senior Noteholder shall promptly deliver
in writing to the Collateral Agent the notice information described above. In
the absence of such notice from a Senior Noteholder the Collateral Agent shall
be entitled to rely upon a certificate of the Borrower as to such matters.
-11-
<PAGE>
Section 10. Benefit of Agreement; Obligations Several; Execution by the Agent.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Bank Agent, each Bank, each Senior Noteholder, each
Additional Senior Creditor, the Collateral Agent and their respective successors
and assigns, and is not for the benefit of any third party beneficiary. The
obligations of each party under this Agreement are several and not joint, it
being expressly agreed that no party shall be liable for the failure of any
other party to perform its obligations hereunder. The Bank Agent hereby
confirms that it has been authorized to enter into this Agreement on behalf of
the Banks pursuant to the Loan Agreement.
Section 11. Counterparts.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
Section 12. Effectiveness.
This Agreement shall become effective when copies hereof executed by the
Collateral Agent, the Bank Agent, the Banks and the Senior Noteholders shall
have been delivered to the Collateral Agent.
Section 13. Headings Descriptive.
The headings of the several sections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provisions of this Agreement.
Section 14. Amendment or Waiver.
This Agreement may be amended, supplemented, amended and restated,
otherwise modified, waived, discharged or terminated only with the written
consent of the Collateral Agent, the Bank Agent and the Senior Creditors.
Section 15. Inconsistent Provisions.
If any provision of this Agreement shall be inconsistent with, or contrary
to, any provision in any Financing Document or any document entered into in
connection therewith, the provision in this Agreement shall be controlling and
shall supersede such inconsistent provision to the extent necessary to give full
effect to all provisions contained in this Agreement.
Section 16. Governing Law.
This Agreement and the Rights and Obligations of the Parties hereunder
shall be construed in Accordance with and be Governed by the Law of the State of
New York. This Agreement Constitutes the Entire Understanding among the Parties
-12-
<PAGE>
hereto with Respect to the Subject Matter hereof and Supersedes Any Prior
Agreements, Written or Oral, with Respect Thereto.
Section 17. Waiver of Jury Trial.
Each Party hereto hereby waives its right to a trial by jury in respect of
any litigation based hereon, or arising out of, under, or in connection with,
this Agreement. Each Party herein acknowledges and agrees that it has received
full and sufficient consideration for this provision and that this provision is
a material inducement for the Agent and the Banks entering into the Loan
Agreement and the Senior Noteholders entering into the Note Purchase Agreements.
Section 18. Forum Selection and Consent to Jurisdiction.
Any Litigation based hereon, or arising out of, under, or in connection
with, this Agreement may be brought and maintained in the Courts of the State of
New York or in the United States District Court for the Southern District of New
York. Each Party herein expressly and irrevocably submits to the Non-Exclusive
Personal Jurisdiction of the Courts of the State of New York and of the United
States District Court for the Southern District of New York. Each Party hereto
further irrevocably consents to the service of process by registered mail,
postage prepaid, or by personal service within or without the State of New York.
Each Party hereto hereby expressly and irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter may have to the
laying of venue of any such litigation brought in any such Court referred to
Above and any claim that any such litigation has been brought in an inconvenient
forum. To the extent that any Party herein has or hereafter may require 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 or otherwise) with respect to itself or its property, such Party
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement.
Section 19. Notification of Default.
The Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Triggering Event or any default under any document, agreement
or instrument evidencing or governing any Senior Obligations unless the
Collateral Agent shall have actual knowledge thereof or shall have received
notice from any Senior Creditor holding a Senior Obligation with respect to
which such Triggering Event or default exists, describing such event and stating
that such notice is a "Notice of Triggering Event" or "Notice of Default," as
the case may be.
If the Collateral Agent has been notified in writing by a party to any
Financing Document that a default or an event of default has occurred under such
Financing Document, or that such Financing Document has been amended, the
Collateral Agent shall notify the Bank Agent and each Senior Creditor of such
determination. The Bank Agent or any Senior Creditor which receives written
notice from the Borrower or any other obligor of Senior Obligations that a
-13-
<PAGE>
Triggering Event or a default or an event of default has occurred under a
Financing Document, or has actual knowledge of a Triggering Event or a default
or event of default under a Financing Document or an amendment or modification
thereof, shall deliver to the Collateral Agent a copy of such notice from the
Borrower or any other obligor of Senior Obligations or a written statement as to
the existence of such Triggering Event or a default or event of default or such
amendment or modification. Failure to do so, however, does not constitute a
waiver of any default or event of default by the Senior Creditors and shall not
affect the relative rights among Senior Creditors. Upon receipt of such copy or
such notice, the Collateral Agent shall promptly (and in any event no later than
three business days after receipt of such notice) notify the Bank Agent and each
Senior Creditor of such Triggering Event, default or event of default or such
amendment or modification.
Section 20. Continuation of Certain Agreements.
It is specifically acknowledged and agreed that the termination and/or
expiration of the Loan Agreement shall not, in and of itself, constitute any
termination, expiration or release of any of the Security Documents or
provisions of the Loan Agreement which relate to the Senior Notes, which
Security Documents and other provisions of the Loan Agreement shall remain in
full force and effect until all Senior Obligations have been fully and
indefeasibly paid and performed.
It is specifically acknowledged and agreed that the termination and/or
expiration of the Note Purchase Agreements shall not, in and of itself,
constitute any termination, expiration or release of any of the Security
Documents or provisions of the Note Purchase Agreements which relate to the
Banks' Loans, which Security Documents and other provisions of the Note Purchase
Agreements shall remain in full force and effect until all Senior Obligations
have been fully and indefeasibly paid and performed.
Section 21. Execution of Addendums to this Agreement.
The Bank, each Senior Creditor and each Additional Senior Creditor hereby
authorize the Collateral Agent to execute and deliver an Addendum hereto
substantially in the form of Exhibit A hereto (including such conforming changes
as are reasonably required by the Required Senior Creditors) with each
Additional Senior Creditor; provided, that the Borrower shall have delivered a
certificate to the Collateral Agent, dated the date of any proposed Addendum, to
the effect that (a) immediately prior to the execution and delivery of such
Addendum no Default or Event of Default (as defined in the Note Purchase
Agreements) exists under the Note Purchase Agreements, no Event of Default (as
defined in the Credit Agreement) or event or condition which, with the passage
of time or giving of notice, or both, could become an Event of Default under the
Credit Agreement exists under the Credit Agreement and no event of default or
event or condition which, with the passage of time or giving of notice, or both,
could become an event of default under any Additional Senior Agreement exists
under any Additional Senior Agreement, and (b) immediately after the execution
thereof, no Default or Event or Default (as defined in the Note Purchase
Agreements) shall exist under the Note Purchase Agreements, no Event of Default
(as defined in the Credit Agreement) or event or condition which, with the
passage of time or giving of notice, or both, could become an Event of Default
under the Credit Agreement shall exist under the Credit Agreement, and no event
of default or event or condition which, with the
-14-
<PAGE>
passage of time or giving of notice, or both, could become an event of default
under any Additional Senior Agreement, shall exist under any Additional Senior
Agreement.
Section 22. Conflict with Other Agreements.
As long as this Intercreditor Agreement shall be in effect, the provisions
of the Security Documents relating to the exercise by the Collateral Agent, the
Bank Agent, the Senior Note Collateral Agent or any of the Senior Creditors of
rights thereunder and the application of proceeds of Collateral, shall be
subject to the provisions of this Intercreditor Agreement. In the event of any
inconsistency between the provisions of any such Security Documents and this
Intercreditor Agreement, the provisions of the Intercreditor Agreement shall
prevail.
-15-
<PAGE>
In Witness Whereof, the Collateral Agent, the Bank Agent, the Banks, and
the Senior Noteholders named below have caused this Agreement to be duly
executed, and the Borrower has acknowledged and consented to this Agreement, as
of the day and year first above written.
Fleet Bank, N.A., as Collateral Agent
By: /s/ Fred Meagher
------------------------
Name: Fred Meagher
Title:
Notice Address: 1185 Avenue of the Americas
New York, NY 10036
Telecopier No.: 212-819-6207
Attention: Fred Meagher
Fleet Bank, N.A., as Bank Agent and Senior
Note Collateral Agent
By: /s/ Fred Meagher
-------------------------
Name: Fred Meagher
Title:
-16-
<PAGE>
Fleet Bank, National Association, as Swing
Line Lender and as one of the Banks
By: /s/ Fred Meagher
------------------------------
Title: Vice President
The Bank of New York
By: /s/ Scott Silverstein
------------------------------
Title:
BankBoston, N.A.
By: /s/ Jeff Millman
------------------------------
Title:
Harris Trust and Savings Bank
By: /s/ Mike Houlihan
------------------------------
Title:
Bank Tokyo-Mitsubishi Trust Company
By: /s/ Josephine Savistano
------------------------------
Title:
-17-
<PAGE>
Israel Discount Bank of New York
By: /s/ Bob Fainelli
-----------------------------
Title
By:
-----------------------------
Title
European American Bank
By: /s/ Dennis Nochowitz
-----------------------------
Title:
Bank Leumi USA
By: /s/ Paul Tine
-----------------------------
Title:
The Chase Manhattan Bank
By: /s/ Bill Saya
-----------------------------
Title
-18-
<PAGE>
The Travelers Insurance Company
By: /s/ Bill Carnduff
----------------------------
Name:
Title:
First Citicorp Life Insurance Company
By Travelers Asset Management International
Corporation
By: /s/ Bill Carnduff
----------------------------
Name:
Title:
Citicorp Life Insurance Company
By Travelers Asset Management International
Corporation
By: /s/ Bill Carnduff
----------------------------
Name:
Title:
-19-
<PAGE>
United of Omaha Life Insurance Company
By: /s/ Edwin Garrison
------------------------------
Name:
Title:
Companion Life Insurance Company
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
-20-
<PAGE>
The undersigned hereby consents to the execution of the foregoing Agreement
by the parties thereto and acknowledges (a) the terms of the foregoing
Agreement, (b) that the foregoing Agreement is for the sole benefit of the
Senior Creditors and that it has no rights or benefits under such Agreement, and
(c) that the provisions/*/ of the foregoing Agreement may be waived, amended or
modified without its consent.
Medallion Funding Corp.
By: /s/ Andrew Murstein
---------------------------
Its President
__________________
/*/ (except provisions permitting the Company to incur Additional Senior
Obligations in compliance with the terms hereof and of the Loan Documents and
Note Documents)
-21-
<PAGE>
ADDENDUM TO INTERCREDITOR AGREEMENT
Addendum dated as of [date of Additional Senior Agreement] between [name of
Additional Senior Creditor] and Fleet Bank, N.A., ("Fleet") as Collateral Agent
under the Intercreditor Agreement dated as of June 1, 1999 entered into among
Fleet Bank, N.A. (the "Bank"), in its individual capacity and as Collateral
Agent, the Banks (as defined therein), the Senior Noteholders (as defined
therein), Fleet as Senior Note Collateral Agent (as defined therein) and all
Additional Senior Creditors thereto (the "Intercreditor Agreement").
RECITALS:
Whereas, [name of Additional Senior Creditor] ("Name of Additional Senior
Creditor]") has entered into a [name of Additional Senior Agreement] with the
Borrower, dated as of [date of Additional Senior Agreement] (the "Agreement");
Now, Therefore, the Collateral Agent and [name of Additional Senior
Creditor] agrees as follows:
1. [Name of Additional Senior Creditor] hereby consents to and
agrees to be bound by all of the terms and conditions of the Intercreditor
Agreement.
2. [Name of Additional Senior Creditor] is hereby designated an
"Additional Secured Creditor" and the Agreement is hereby designated an
"Additional Senior Agreement", each as defined in the Intercreditor
Agreement, such designation to be effective as of [date of issuance of
Additional Senior Debt].
3. Any notices required to be delivered to [Name of Additional
Senior Creditor] shall be in writing, delivered or mailed prepaid by
registered or certified mail or overnight air courier, or by facsimile
communication at the address set forth below, or such address as [name of
Additional Senior Creditor] may designate to the other parties to the
Intercreditor Agreement:
[Notice Address of Additional Senior Creditor]
In Witness Whereof, the [name of Additional Senior Creditor] has caused
this Addendum to be duly executed and delivered as of the day and year first
above written.
EXHIBIT A
(to Intercreditor Agreement)
<PAGE>
[Name of Additional Senior Creditor]
By:
-------------------------------
Its
Fleet Bank, N.A., as Collateral Agent
By: /s/ Fred Meagher
-------------------------------
Its
A-2
<PAGE>
Medallion Funding Corp. hereby acknowledges and consents to the foregoing
Addendum to Intercreditor Agreement.
Medallion Funding Corp.
By: /s/ Andrew Murstein
----------------------------
Its President
A-3
<PAGE>
EXHIBIT 10.6
SWING LINE NOTE
$5,000,000.00 No. SL
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (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 Amended and Restated Loan
Agreement, dated as of June 29, 1999, as amended, among the Borrower, Medallion
Financial Corp., 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
<PAGE>
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.
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 BANK 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 BUSINESS CREDIT, LLC,
a Delaware limited liability company
By: /s/ Andrew Murstein
----------------------------
Name: Andrew Murstein
Title: President
By:
----------------------------
Name:
Title:
-2-
<PAGE>
Grid Schedule for Swing Line Note
Attached to and made part of the Swing Line Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of Fleet Bank, National
Association (the "Bank")
pursuant to the Amended and Restated Loan Agreement, dated as of June 29, 1999
among Medallion Financial Corporation, Medallion Business Credit, LLC, the banks
that from time to time are signatories
thereto and Fleet Bank, National Association, as Arranger, Swing Line Lender and
Agent
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------
Unpaid
Principal
Amount of Balance Name of
Principal Negotiated Interest Principal Paid (Balance Person Making
Date Amount Rate Period or Prepaid Continued) Notation
<S> <C> <C> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.7
REVOLVING CREDIT NOTE
$20,000,000.00 No. 1
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (the "Borrower"), hereby unconditionally
promises to pay on the date of Maturity, as defined in the Loan Agreement
(hereinafter referred to) or on such earlier date as may be required under the
Loan Agreement, to the order of FLEET BANK, 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) TWENTY MILLION DOLLARS ($20,000,000.00) and (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank
to the Borrower pursuant to the Amended and Restated Loan Agreement, dated as of
June 29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of Fleet Bank, National
Association (the "Bank") pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.8
REVOLVING CREDIT NOTE
$15,000,000.00 No. 2
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (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 BANKBOSTON, N.A. (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) FIFTEEN MILLION DOLLARS ($15,000,000.00) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to the Amended and Restated Loan Agreement, dated as of June
29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of BankBoston, N.A. (the "Bank")
pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.9
REVOLVING CREDIT NOTE
$10,000,000.00 No. 3
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (the "Borrower"), hereby unconditionally
promises to pay on the date of Maturity, as defined in the Loan Agreement
(hereinafter referred to) or on such earlier date as may be required under the
Loan Agreement, to the order of THE BANK, OF NEW YORK (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) TEN MILLION DOLLARS ($10,000,000.00) and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Bank to the Borrower
pursuant to the Amended and Restated Loan Agreement, dated as of June 29, 1999,
as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of The Bank of New York (the
"Bank") pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.10
REVOLVING CREDIT NOTE
$10,000,000.00 No. 4
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (the "Borrower"), hereby unconditionally
promises to pay on the date of Maturity, as defined in the Loan Agreement
(hereinafter referred to) or on such earlier date as may be required under the
Loan Agreement, to the order of EUROPEAN AMERICAN BANK (the "Bank") at the
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) TEN MILLION DOLLARS ($10,000,000.00) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to the Amended and Restated Loan Agreement, dated as of June
29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29,
1999, by Medallion Business Credit, LLC to the order of European American
Bank (the "Bank") pursuant to the Amended and Restated Loan Agreement,
dated as of June 29, 1999 among Medallion Financial Corp., Medallion
Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
EXHIBIT 10.11
REVOLVING CREDIT NOTE
$10,000,000.00 No. 5
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (the "Borrower"), hereby unconditionally
promises to pay on the date of Maturity, as defined in the Loan Agreement
(hereinafter referred to) or on such earlier date as may be required under the
Loan Agreement, to the order of ISRAEL DISCOUNT BANK OF NEW YORK (the "Bank") at
the 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) TEN MILLION DOLLARS ($10,000,000.00) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to the Amended and Restated Loan Agreement, dated as of June
29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of Israel Discount Bank of New
York (the "Bank") pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.12
REVOLVING CREDIT NOTE
$5,000,000.00 No. 6
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS
CREDIT, LLC, a Delaware limited liability company (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 BANK LEUMI USA (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 DOLLARS ($5,000,000.00) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrower pursuant to the Amended and Restated Loan Agreement, dated as of June
29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
this Revolving Credit Note required under the Loan Agreement. Reference is
herein made to the Loan Agreement for the rights of the holder to accelerate the
unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest
and notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally,
but only by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING
CREDIT NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A
TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND
CROSS-CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM
COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made partof the Revolving Credit Note,dated June
29, 1999, by Medallion Business Credit, LLC to the order of Bank
Leumi USA (the "Bank") pursuant to the Amended and Restated Loan
Agreement, dated as of June 29, 1999 among Medallion Financial
Corp., Medallion Business Credit, LLC, the banks that from time to
time are signatories thereto and Fleet Bank, N.A., as Arranger,
Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
EXHIBIT 10.13
REVOLVING CREDIT NOTE
$10,000,000.00 No. 7
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS
CREDIT, LLC, a Delaware limited liability company (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 CHASE MANHATTAN BANK (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) TEN MILLION DOLLARS ($10,000,000.00) and (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank
to the Borrower pursuant to the Amended and Restated Loan Agreement, dated as of
June 29, 1999, as amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest
and notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally,
but only by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING
CREDIT NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A
TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND
CROSS-CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM
COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Business Credit, LLC to the order of The Chase Manhattan Bank
(the "Bank") pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Name of Loan Type Unpaid
Principal (LIBO Rate Loan or Interest Period Amount of Principal
Person Making Prime Rate Loan) and Interest Rate Principal Paid Balance
Date Amount (Borrowed or (LIBO Rate or Prepaid or (Balance
Notation Converted to) Loans only) Converted Continued)
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.14
REVOLVING CREDIT NOTE
$10,000,000.00 No. 8
June 29, 1999
FOR VALUE RECEIVED, the undersigned, MEDALLION BUSINESS CREDIT, LLC, a
Delaware limited liability company (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 HSBC BANK USA (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) TEN MILLION DOLLARS ($10,000,000.00) and (b) the aggregate unpaid principal
amount of all Revolving Credit Loans made by the Bank to the Borrower pursuant
to the Amended and Restated Loan Agreement, dated as of June 29, 1999, as
amended, among the Borrower, Medallion Financial Corp., 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
<PAGE>
this Revolving Credit Note required under the Loan Agreement. Reference is
herein made to the Loan Agreement for the rights of the holder to accelerate the
unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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 BUSINESS CREDIT, LLC
a Delaware limited liability company
By:/s/ Alvin Murstein
______________________________
Name: Alvin Murstein
Title: Chief Executive Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29,
1999, by Medallion Business Credit, LLC to the order of HSBC Bank USA (the
"Bank") pursuant to the Amended and Restated Loan Agreement, dated as of
June 29, 1999 among Medallion Financial Corp., Medallion Business Credit,
LLC, the banks that from time to time are signatories thereto and Fleet
Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
EXHIBIT 10.15
REVOLVING CREDIT NOTE
$10,000,000.00 No. 9
June 29, 1999
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 CITIZENS BANK OF MASSACHUSETTS (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)
TEN MILLION DOLLARS ($10,000,000.00) and (b) the aggregate unpaid principal
amount of all Revolving Credit Loans made by the Bank to the Borrower pursuant
to the Amended and Restated Loan Agreement, dated as of June 29, 1999, as
amended, among the Borrower, Medallion Business Credit, LLC, 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
<PAGE>
or in part, as provided therein. The Borrower shall make when due any and all
payments and prepayments on this Revolving Credit Note required under the Loan
Agreement. Reference is herein made to the Loan Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity.
Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally, but only
by an agreement in writing signed by the party to be charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING CREDIT
NOTE, THE BORROWER WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL
BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-
CLAIMS AGAINST THE BANK (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD
NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF
BORROWER AND INURE TO THE BENEFIT OF THE BANK 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:/s/ Allen S. Greene
______________________________
Name: Allen S. Greene
Title: Chief Operating Officer
By:/s/ Daniel F. Baker
______________________________
Name: Daniel F. Baker
Title: Treasurer and Chief Financial Officer
-2-
<PAGE>
Grid Schedule for Revolving Credit Note
Attached to and made part of the Revolving Credit Note, dated June 29, 1999,
by Medallion Financial Corp. to the order of Citizens Bank of Massachusetts (the
"Bank") pursuant to
the Amended and Restated Loan Agreement, dated as of June 29, 1999 among
Medallion Financial Corp.,
Medallion Business Credit, LLC, the banks that from time to time are signatories
thereto and Fleet Bank, N.A., as Arranger, Swing Line Lender and Agent
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------------------
Loan Type Unpaid
(LIBO Rate Loan or Interest Period Amount of Principal
Prime Rate Loan) and Interest Rate Principal Paid Balance Name of
Principal (Borrowed or (LIBO Rate or Prepaid or (Balance Person Making
Date Amount Converted to) Loans only) Converted Continued) Notation
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<INVESTMENTS-AT-COST> 0 0
<INVESTMENTS-AT-VALUE> 429,638,234 384,063,972
<RECEIVABLES> 12,236,272 15,500,593
<ASSETS-OTHER> 2,901,407 3,229,568
<OTHER-ITEMS-ASSETS> 20,531,704 19,431,109
<TOTAL-ASSETS> 465,307,617 422,225,242
<PAYABLE-FOR-SECURITIES> 0 0
<SENIOR-LONG-TERM-DEBT> 52,310,000 41,590,000
<OTHER-ITEMS-LIABILITIES> 259,084,031 232,420,712
<TOTAL-LIABILITIES> 311,394,031 274,010,712
<SENIOR-EQUITY> 140,191 140,138
<PAID-IN-CAPITAL-COMMON> 141,412,014 141,376,068
<SHARES-COMMON-STOCK> 14,019,133 14,013,768
<SHARES-COMMON-PRIOR> 14,013,768 13,908,916
<ACCUMULATED-NII-CURRENT> 12,361,381 6,698,324
<OVERDISTRIBUTION-NII> 0 0
<ACCUMULATED-NET-GAINS> 0 0
<OVERDISTRIBUTION-GAINS> 0 0
<ACCUM-APPREC-OR-DEPREC> 0 0
<NET-ASSETS> 153,913,586 148,214,530
<DIVIDEND-INCOME> 0 0
<INTEREST-INCOME> 10,834,867 8,884,496
<OTHER-INCOME> 1,515,330 1,138,670
<EXPENSES-NET> 9,038,897 8,109,270
<NET-INVESTMENT-INCOME> 3,300,443 1,856,230
<REALIZED-GAINS-CURRENT> (168,988) 1,003,339
<APPREC-INCREASE-CURRENT> 1,985,691 50,000
<NET-CHANGE-FROM-OPS> 5,106,289 2,967,235
<EQUALIZATION> 0 0
<DISTRIBUTIONS-OF-INCOME> 0 0
<DISTRIBUTIONS-OF-GAINS> 0 0
<DISTRIBUTIONS-OTHER> 0 0
<NUMBER-OF-SHARES-SOLD> 0 0
<NUMBER-OF-SHARES-REDEEMED> 0 0
<SHARES-REINVESTED> 0 0
<NET-CHANGE-IN-ASSETS> 0 0
<ACCUMULATED-NII-PRIOR> 6,698,324 5,530,771
<ACCUMULATED-GAINS-PRIOR> 0 0
<OVERDISTRIB-NII-PRIOR> 0 0
<OVERDIST-NET-GAINS-PRIOR> 0 0
<GROSS-ADVISORY-FEES> 0 0
<INTEREST-EXPENSE> 4,562,823 3,875,831
<GROSS-EXPENSE> 9,038,897 8,109,270
<AVERAGE-NET-ASSETS> 0 0
<PER-SHARE-NAV-BEGIN> 10.92 10.48
<PER-SHARE-NII> 0 0
<PER-SHARE-GAIN-APPREC> 0 0
<PER-SHARE-DIVIDEND> 0 0
<PER-SHARE-DISTRIBUTIONS> 0 0
<RETURNS-OF-CAPITAL> 0 0
<PER-SHARE-NAV-END> 0 0
<EXPENSE-RATIO> 0 0
</TABLE>
