<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC
OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission File Number: 000-22474
---------
AMERICAN BUSINESS FINANCIAL SERVICES, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 87-0418807
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Presidential Boulevard, Bala Cynwyd, PA 19004
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(610) 668-2440
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- ----
As of November 2, 1998, there were 3,523,406 shares of the registrant's Common
Stock issued and outstanding.
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL INFORMATION
Consolidated Balance Sheets as of September 30, 1998
and June 30, 1998...........................................2
Consolidated Statements of Income for the three months
ended September 30, 1998 and 1997...........................3
Consolidated Statements of Stockholders' Equity for the
three months ended September 30, 1998 and 1997..............4
Consolidated Statements of Cash Flows for the three
months ended September 30, 1998 and 1997....................5
Notes to Consolidated Financial Statements......................7
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations .................................12
Item 3. Quantitative and Qualitative Disclosures about Market
Risks .....................................................24
PART II OTHER INFORMATION..............................................25
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - FINANCIAL INFORMATION
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1998 1998
------------- ------------
(Unaudited) (Note)
<S> <C> <C>
Cash and cash equivalents $ 4,028,261 $ 4,485,759
Loan and lease receivables, net
Available for sale 83,149,986 62,381,973
Other 4,941,573 4,096,554
Interest only strips and other receivables 132,332,383 100,736,564
Prepaid expenses 3,152,531 2,572,182
Property and equipment net of accumulated
depreciation and amortization 8,846,519 7,784,663
Other assets 46,771,798 44,493,365
------------ ------------
Total assets $283,223,051 $226,551,060
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY' EQUITY
LIABILITIES
Subordinated debt and notes payable $184,423,952 $144,584,819
Accounts payable and accrued expenses 16,325,404 15,563,254
Deferred income taxes 10,870,434 10,863,538
Other liabilities 25,493,707 12,797,283
------------ ------------
Total liabilities 237,113,497 183,808,894
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001
Authorized 1,000,000 shares - -
Issued and outstanding - none
Common stock, par value $.001
Authorized 9,000,000 shares
Issued and outstanding 3,523,406 shares 3,523 3,523
Additional paid-in capital 23,255,957 23,255,957
Retained earnings 23,450,106 20,082,718
------------ ------------
46,709,586 43,342,198
Less: note receivable (600,032) (600,032)
------------ ------------
Total stockholders' equity 46,109,554 42,742,166
------------ ------------
Total liabilities and stockholders' equity $283,223,051 $226,551,060
============ ============
</TABLE>
Note: The balance sheet at June 30, 1998 has been derived from the audited
financial statements at that date.
See accompanying notes to consolidated financial statements.
2
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
September 30,
------------------------------
1998 1997
------------ -----------
REVENUES
Gain on sale of loans and leases $ 13,781,165 $ 8,521,389
Interest and fees 4,539,171 2,304,367
Servicing income 1,274,116 380,313
Other income 14,188 205
------------- ------------
19,608,640 11,206,274
------------- ------------
EXPENSES
Interest 4,802,908 1,859,801
Provision for credit losses 125,816 30,887
Employee related costs 1,213,060 850,699
Sales and marketing 5,358,058 2,324,503
General and administrative 2,926,617 1,365,331
------------- ------------
14,426,459 6,431,221
------------- ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,182,181 4,775,053
PROVISION FOR INCOME TAXES 1,761,942 1,623,518
------------- ------------
NET INCOME $ 3,420,239 $ 3,151,535
============= ============
NET INCOME PER SHARE
Basic $ .97 $ .90
============= ============
Diluted $ .94 $ .87
============= ============
Average Common Shares
Basic 3,523,406 3,503,166
Diluted 3,642,018 3,642,972
See accompanying notes to consolidated financial statements.
3
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30, 1998
Common Stock Additional Total
----------------------- Paid-In Retained Note Stockholders'
Shares Amount Capital Earnings Receivable Equity
------ ------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
July 1, 1998 3,523,406 $ 3,523 $ 23,255,957 $ 20,082,718 $ (600,032) $ 42,742,166
Cash dividends
($0.015 per share) (52,851) (52,851)
Net income 3,420,239 3,420,239
--------- -------- ------------ ------------- ---------- ------------
Balance at
September 30, 1998 3,523,406 $ 3,523 $ 23,255,957 $ 23,450,106 $ (600,032) $ 46,109,554
========= ======== ============ ============= ========== ============
Three months ended September 30, 1997
Common Stock Additional Total
----------------------- Paid-In Retained Note Stockholders'
Shares Amount Capital Earnings Receivable Equity
------ ------ ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
July 1, 1997 3,503,166 $ 3,503 $ 22,669,477 $ 8,839,080 $ (600,032) $ 30,912,028
Cash dividends
($0.015 per share) (52,547) (52,547)
Net income 3,151,535 3,151,535
--------- -------- ------------ ------------- ---------- ------------
Balance at
September 30, 1997 3,503,166 $ 3,503 $ 22,669,477 $11,938,068 $ (600,032) $34,011,016
========= ======== ============ ============= ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 3,420,239 $ 3,151,535
Adjustments to reconcile net income to net
cash provided by operating activities
Gain on sales of loans/leases (13,781,165) (10,909,361)
Amortization of origination fees and costs 31,214 168,446
Amortization of deferred servicing rights 784,312 211,487
Provision for credit losses 1,470,207 567,532
Accounts written off (153,059) (100,217)
Depreciation and amortization of property
and equipment 562,490 208,530
Amortization of financing and organization costs 348,479 150,312
Amortization of goodwill 339,559 -
Loans and leases originated (204,356,000) (50,411,255)
Proceeds from sale of loans and leases 169,627,139 59,721,676
Increase (decrease) in loans in process 12,696,424 (226,027)
Increase in accrued interest and fees on
loan and lease receivables (845,019) (376,206)
Decrease (Increase) in other receivables (5,692,191) (1,809,685)
Increase in prepaid expenses (580,349) (1,061,731)
Increase in accounts payable and accrued expenses 762,150 1,742,483
Increase in deferred income taxes 6,896 1,623,594
Other, net (1,316,663) 286,180
------------- -------------
Net cash (used in) provided by operating activities (25,290,955) 2,937,293
------------- -------------
Cash Flows From Investing Activities:
Leases originated for portfolio - (4,634,257)
Loan and lease payments received 2,296,856 1,796,920
Purchase of property and equipment (1,624,346) (935,691)
Decrease in securitization gain receivable - 368,314
Principal receipts on investments 238,690 120,962
Initial overcollateralization of loans (2,000,000) (2,000,000)
Purchase of investments (645,636) (17,000,000)
Sale of investments - 5,000,000
------------- -------------
Net cash provided by (used in) investing activities (1,734,436) (17,283,752)
------------- -------------
</TABLE>
(continued on following page)
5
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------------------------
1998 1997
---------------------- --------------------
<S> <C> <C>
Cash Flows From Financing Activities:
Financing costs incurred (1,834,007) (321,849)
Net borrowings on revolving lines of credit 24,211,816 -
Dividends paid (52,851) (52,547)
Principal payments on note payable, other (563,164) -
Proceeds from issuance of subordinated debentures 25,842,605 16,669,927
Principal payments on subordinated debentures (9,652,124) (3,030,976)
---------------------- --------------------
Net cash provided by financing activities 37,952,275 13,264,555
---------------------- --------------------
Net decrease in cash and cash equivalents (457,498) (1,081,904)
Cash and cash equivalents, beginning of period 4,485,759 5,013,936
---------------------- --------------------
Cash and cash equivalents, end of period $4,028,261 $ 3,932,032
====================== ====================
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 4,483,765 $ 1,449,428
====================== ====================
Income taxes $ 2,262,065 -
====================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. Basis Of Financial Statement Presentation
The accompanying consolidated financial statements are unaudited and
include the accounts of American Business Financial Services, Inc.
(ABFS) and its subsidiaries (all of which are wholly-owned),
collectively the "Company." All significant inter-company transactions
and balances have been eliminated.
Effective October 1, 1997, the Company acquired all of the issued and
outstanding stock of New Jersey Mortgage and Investment Corp.
("NJMIC"), a mortgage and leasing company based in Roseland, New
Jersey. The transaction was accounted for under the purchase method of
accounting. Accordingly, the results of operations of NJMIC have been
included with the Company since the date of acquisition.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly,
they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month
period ended September 30, 1998 are not necessarily indicative of
financial results that may be expected for the full year ended June 30,
1999. These unaudited consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1998.
The Statement of Financial Accounting Standard No. 130 "Reporting
Comprehensive Income" requires that all items that are required to be
recognized under accounting standards as comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company had no material
items which would be required to be reported in accordance with SFAS
No. 130 for the three month periods ended September 30, 1998 or 1997.
7
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
SEPTEMBER 30, 1998
1. Basis Of Financial Statement Presentation - continued
Recent Accounting Pronouncements
In June 1997 the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standard ("SFAS") No. 131
"Disclosures about Segments of an Enterprise and Related Information"
which is effective for financial statements issued for years beginning
after December 15, 1997. The pronouncement is not required to be
applied to interim periods in the initial year of its application. This
Statement established standards for the method that public entities
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating results in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographical areas and major customers.
The adoption of this standard is not expected to have a material effect
on the Company's financial reporting.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment (fair value hedge),(b) a hedge of the
exposure to variable cash flows of a forecasted transaction (cash flow
hedge),or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated
forecasted transaction. SFAS No. 133 is effective on a prospective
basis for all fiscal quarters of fiscal years beginning after June 15,
1999. The adoption of this standard is not expected to have a material
effect on the Company's financial condition or results of operations.
In October 1998, the FASB issued SFAS No. 134 "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise". The
Statement requires that after the securitization of a mortgage loan
held for sale, an entity classify the resulting mortgage-backed
security or other retained interest based on its ability and intent to
hold or sell those investments. The standard becomes effective for
fiscal quarters beginning after December 15, 1998. The adoption of this
standard is not expected to have a material effect on the Company's
financial condition or results of operations.
8
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
SEPTEMBER 30, 1998
2. Loan and Lease Receivables - Available for Sale
Loan and lease receivables available for sale which are held in the
Company's portfolio were as follows:
September 30, June 30,
1998 1998
-------------- -------------
Real estate secured loans $ 52,470,930 $ 47,971,399
Leases net of unearned income of
$4,331,668 and $2,670,954 21,704,797 11,401,104
Unamortized origination
costs and fees 10,076,317 4,087,636
------------ ------------
84,252,044 63,460,139
Less: allowance for credit losses on
loans and leases not sold 1,102,058 1,078,166
------------ ------------
$ 83,149,986 $ 62,381,973
============ ============
3. Interest Only Strips and Other Receivables
The interest only strips and other receivables balance at September 30,
1998 and June 30, 1998 was comprised of the following:
September 30, June 30,
1998 1998
-------------- ------------
Interest only and residual strips $115,918,561 $ 95,912,756
Receivables for sold loans 10,860,368 2,376,542
Advances to securitization trusts 3,876,198 738,407
Other receivables 1,677,256 1,708,859
------------- ------------
$ 132,332,383 $100,736,564
============= ============
9
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
SEPTEMBER 30, 1998
4. Subordinated Debt and Notes Payable
Subordinated debt and notes payable at September 30, 1998 and June 30,
1998 are summarized as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
-------------- ------------
<S> <C> <C>
Subordinated debt, due October 1998 through
September 2008, interest at rates ranging from
6.15% to 10.9%; subordinated to all of the
Company's senior indebtedness. $121,978,173 $105,651,694
Note payable, $150,000,000 revolving
line of credit expiring September 2000; interest
at rates ranging from LIBOR plus 1.375%
to LIBOR plus 2%; collateralized by
loan receivables. 34,458,521 25,720,478
Note payable, $20,000,000 revolving line of
credit expiring September 2000; interest at
prime less 1% or LIBOR plus 1.875% at the
Company's option; collateralized by
lease receivables. 12,514,983 -
Subordinated debt, due October 1998 through
May 2003; interest rates ranging from
9% to 11.26%; subordinated to all of the
Company's senior indebtedness. 6,643,856 6,529,854
Note payable, $100,000,000 revolving
line of credit expiring August 1999;
interest at LIBOR plus 1.25%, payable
monthly; collateralized by loan and
lease receivables. 3,489,525 530,735
Senior subordinated debt due
December 1998 through July 2002; interest
at 12% payable monthly; subordinated
to subsidiary's senior debt. 2,750,000 3,000,000
</TABLE>
10
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
SEPTEMBER 30, 1998
4. Subordinated Debt and Notes Payable - continued
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
--------------- ---------------
<S> <C> <C>
Note payable, due October 1998
through October 2000; interest at 8%,
payable monthly. 2,367,252 2,914,920
Other notes payable 221,642 237,138
------------ ------------
$184,423,952 $144,584,819
============ ============
</TABLE>
5. Reconciliation of Basic and Diluted Earnings Per Share
<TABLE>
<CAPTION>
Three months ended September 30, 1998
Average
Net Common Per-share
Income Shares Amount
------ ------- ---------
<S> <C> <C> <C>
Basic earnings per share $3,420,239 3,523,406 $0.97
=====
Effect of diluted securities -
stock options - 118,612
---------- --------- -----
Diluted earnings per share $3,420,239 3,642,018 $0.94
========== ========= =====
Three months ended September 30, 1997
Average
Net Common Per-share
Income Shares Amount
------ ------- ---------
Basic earnings per share $3,151,535 3,503,166 $0.90
=====
Effect of diluted securities -
stock options 139,806
---------- --------- -----
Diluted earnings per share $3,151,535 3,642,972 $0.87
========== ========= =====
</TABLE>
11
<PAGE>
PART 1. FINANCIAL INFORMATION - continued
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
Company's Consolidated Financial Statements and the accompanying notes thereto
included in Item 1. of this Quarterly Report, and the financial statements and
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in the Company's Annual Report on Form
10-KSB for the year ended June 30, 1998.
FORWARD LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q, the words or phrases
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "projected," or similar expressions are intended to identify
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including but not limited to changes in interest rates, the
Company's dependence on debt financing and securitizations to fund operations,
and fluctuations in operating results. Such factors, which are discussed in
Management's Discussions and Analysis of Financial Condition and Results of
Operations, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinion or statements expressed herein with respect to future periods. As a
result, the Company wishes to caution readers not to place undue reliance on any
such forward looking statements, which speak only as of the date made.
BALANCE SHEET INFORMATION
(in thousands, except per share)
Balance Sheet Data:
September 30, 1998 June 30, 1998
------------------ -------------
Cash and cash equivalents......... $ 4,028 $ 4,486
Loan and lease receivables, net
Available for sale.......... 83,150 62,382
Other....................... 4,941 4,097
Other receivables................. 132,332 100,737
Total assets...................... 283,223 226,551
Debt.............................. 184,424 144,585
Total liabilities................. 237,113 183,809
Total stockholders' equity........ 46,110 42,742
Book value per common share....... 13.09 12.13
12
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Total assets increased $56.6 million, or 25.0%, to $283.2 million at
September 30, 1998 from $226.6 million at June 30, 1998 due primarily to
increases in interest only strips and other receivables and loans and leases
available for sale. Interest only strips and other receivables, consisting
primarily of interest only and residual strips created in connection with the
Company's securitizations, increased $31.6 million, or 31.4%, to $132.3 million
at September 30, 1998 from $100.7 million at June 30, 1998 as the Company funded
$139.9 million of loans as part of a $200.0 million securitization during the
period ended September 30, 1998. The Company funded the remaining $60.1 million
of loans for the $200.0 million securitization in November 1998. Loans and
leases available for sale increased $20.7 million, or 33.2%, from $62.4 million
at June 30, 1998 to $83.1 million at September 30, 1998 due to increases in
loans originated during the period and the timing of the loan securitizations.
Loan and lease originations were $204.4 million for the three months ended
September 30, 1998.
Total liabilities increased $53.3 million, or 29.0%, to $237.1 million
at September 30, 1998 from $183.8 million at June 30, 1998, due primarily to
increases in subordinated debt and notes payable and other liabilities. The
$39.8 million increase in subordinated debt and notes payable at September 30,
1998 was primarily attributable to $16.3 million in net sales of the Company's
subordinated notes under the Investment Note Program during the first quarter of
fiscal 1999 and $24.2 million in additional borrowings under warehouse lines of
credit used to fund lending and leasing activities (see "LIQUIDITY AND CAPITAL
RESOURCES" beginning on page 21 for further detail). At September 30, 1998, the
Company had $136.6 million of subordinated debt outstanding.
The Company borrowed an additional $24.2 million under available
warehouse lines of credit, net of repayments, during the three month period. The
Company had $50.5 million outstanding on warehouse lines of credit at September
30, 1998. Other liabilities increased $12.7 million, or 99.2%, to $25.5 million
at September 30, 1998 from $12.8 million at June 30, 1998 due primarily to
growth in the Company's lending and leasing activities which resulted in
increases in liabilities for loans in process at September 30, 1998.
13
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
RESULTS OF OPERATIONS
Summary Financial Results
(in thousands, except per share data)
Three Months Ended
September 30,
---------------------
Percentage
1998 1997 Increase
---- ---- ----------
Total revenues............ $19,609 $11,206 75.0%
Total expenses............ $14,426 $6,431 124.3%
Net income................ $3,420 $3,152 8.5%
Return on average equity.. 30.21% 38.11%
Return on average assets.. 5.27% 10.84%
Net income per share
Basic................. $ .97 $ .90 7.8%
Diluted............... $ .94 $ .87 8.0%
During the three months ended September 30, 1998 (or "the first quarter
of fiscal 1999"), total revenues increased $8.4 million, or 75%, to $19.6
million and net income increased $0.3 million, or 8.5%, to $3.4 million as a
result of increases in loan and lease origination volume and the size of
securitzation transactions. Basic earnings per common share increased to $0.97
per share on weighted average common shares outstanding of 3,523,406 for the
three months ended September 30, 1998, compared to $0.90 per share on weighted
average common shares outstanding of 3,503,166 for the three months ended
September 30, 1997. Diluted earnings per common share increased to $0.94 per
share on weighted average common shares outstanding of 3,642,018, compared to
$0.87 per share on weighted average common shares outstanding of 3,642,972.
Since the Company's securitization strategy requires the Company to
build an inventory of loans over time, the Company may experience fluctuations
in operating results as a consequence of incurring costs and expenses in a
fiscal period prior to the fiscal period in which the securitization is
consummated. As such, the results of operations for a given period may not be
indicative of results for subsequent comparable periods. In addition, as a
result of the Company's securitization strategy, the Company may operate on a
negative operating cash flow basis which could negatively impact the Company's
results of operations during such periods.
The Company's growth strategy is dependent upon its ability to increase
its loan volume through both geographic expansion and growth in current markets.
The implementation of this strategy will depend in large part on a variety of
factors outside the control of the Company, including, but not limited to, the
Company's ability to obtain adequate financing on favorable terms and profitably
securitize its loans on a regular basis and continue to expand in the face of
increasing competition. The Company's failure with respect to any of these
factors could impair its ability to successfully implement its growth strategy,
which could adversely affect the Company's results of operations and financial
condition.
14
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Total Revenues. Total revenues increased $8.4 million, or 75.0%, to
$19.6 million for the first quarter of fiscal 1999 from $11.2 million for the
first quarter of fiscal 1998. The growth in total revenue was primarily the
result of increased gains on sales of loans and leases through securitizations
and higher interest income, fee income and servicing income.
Gain on Sale of Loans. Gain on sale of loans increased $5.3 million, or
62.4%, to $13.8 million for the first quarter of fiscal 1999 from $8.5 million
for the first quarter of fiscal 1998. The increase was the result of sales of
$13.6 million principal amount of loans secured by real estate and other
business assets ("Business Purpose Loans") and $126.3 million principal amount
of loans secured by real estate on single family residences ("Home Equity
Loans") and $13.5 million of small ticket and middle market leases ("Equipment
Leases") through securitizations in the first quarter of fiscal 1999. The
securitization in the first quarter of fiscal 1998 included $12.0 million of
Business Purpose Loans and $48.8 million of Home Equity Loans. The Company did
not participate in a securitization of Equipment Leases in the first quarter of
fiscal 1998. During the first quarter of fiscal 1999, the Company recognized a
gain of $13.7 million (representing the fair value of the interest only and
residual strips of $17.8 million less $4.1 million of costs associated with the
transaction) on the Company's initial funding of $139.9 million of loans sold
pursuant to a $200.0 million securitization. The remaining $60.1 million of
loans was in the form of a pre-funded account which the Company funded in the
second quarter of fiscal 1999.
The following schedule details loan originations during the three months ended
September 30, 1998 and 1997 (in thousands):
1998 1997
-------- --------
Business Purpose Loans $ 12,688 $ 10,415
Home Equity Loans, including first mortgages 167,012 (a) 84,678
Equipment Leases 24,656 14,943
-------- ---------
Total loans and leases originated $204,356 $ 110,036
======== =========
(a) Loan originations for the three months ended September 30, 1998
included $63 million for NJMIC, which was acquired on October 1, 1997.
Interest and Fee Income. For the first quarter of fiscal 1999, Interest
and fee income increased $2.2 million, or 95.7%, to $4.5 million from $2.3
million for the for the first quarter of fiscal 1998. Interest and fee income
consists of interest income earned on loans and leases while held in the
Company's portfolio, premiums earned on whole loans sold with servicing
released, and other ancillary fees earned in connection with loan and lease
originations while held in portfolio. The growth in interest and fee income for
the first quarter of fiscal 1999 resulted primarily from an increase in the
amount of loans and leases originated and retained in the Company's portfolio
prior to securitization.
15
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Interest income increased $0.6 million, or 35.3%, to $2.3 million for
the first quarter of fiscal 1999. Loans and leases in the portfolio averaged
$107.0 million for the first quarter of fiscal 1999, compared to $46.0 million
for the first quarter of fiscal 1998.
Fee income increased $1.6 million, or 267%, to $2.2 million for the
first quarter of fiscal 1999 from $0.6 million for the first quarter of fiscal
1998. The increase in fee income was due to increases in ancillary fees
collected in connection with increased originations and fees earned on the sale
of loans to third parties.
Servicing Income. Servicing income was $1.3 million for the first
quarter of fiscal 1999, an increase of $894 thousand, or 235%, from the first
quarter of fiscal 1998. This growth resulted from a $437 million increase in the
average total managed portfolio, (includes loans and leases available for sale
and loans and leases serviced) from an average of $196 million in the first
quarter of fiscal 1998, to an average of $633 million in the first quarter of
fiscal 1999.
Total Expenses. Total expenses increased $8.0 million, or 125.0%, to
$14.4 million for the first quarter of fiscal 1999, from $6.4 million for the
comparable quarter of the prior fiscal year. As described in more detail below,
this increase was a result of increased interest expense attributable to the
Company's issuance of subordinated debt and increases in the Company's
outstandings under credit lines to fund the growth in loan and lease
originations. Increases in other major expense categories resulted from the
Company's investment in personnel, systems and marketing programs to support the
Company's continuing growth and the acquisition of NJMIC.
Interest Expense. Interest expense increased $2.9 million, or 152.6%,
to $4.8 million for the three months ended September 30, 1998 from $1.9 million
for the three months ended September 30, 1997. The increase was primarily
attributable to increases in the amount of the Company's subordinated debt
outstanding, greater utilization of warehouse lines of credit to fund loan and
lease originations, and debt assumed in connection with the acquisition of
NJMIC. Average subordinated debt outstanding was $117.7 million during the three
months ended September 30, 1998 compared to $62.7 million during the three
months ended September 30, 1997. Average interest rates paid on the subordinated
debt increased to 9.34% from 9.29%. Average outstandings under warehouse lines
of credit were $94.3 million during the three months ended September 30, 1998,
compared to $14.2 million during the three months ended September 30, 1997.
Interest expense on the warehouse lines of credit for the three months ended
September 30, 1998 was $1.8 million, compared to $393 thousand for the three
months ended September 30, 1997.
16
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Provision for Credit Losses. The Company maintains an allowance for
credit losses based upon management's estimate of the expected collectibility of
loans and leases outstanding considering factors, including, but not limited to,
economic conditions and credit and collateral considerations. The allowance is
increased through the provision for credit losses. Although the Company
maintains its allowance for credit losses at the level it considers adequate to
provide for potential losses, there can be no assurances that actual losses will
not exceed the estimated amounts or that additional provisions will not be
required. The Company had an allowance for credit losses of $6.9 million at
September 30, 1998 as compared to $5.6 million at June 30, 1998 and $2.8 million
at September 30, 1997. The provision for credit losses on the total managed
portfolio for the first quarter of fiscal 1999 increased by $902 thousand, or
150.3% to $1.5 million (includes a $126 thousand provision related to the
Company's loans and leases for sale available and a $1.3 million provision
related to the Company's securitizations), from $568 thousand (includes a $31
thousand provision related to the Company's loans and leases for sale available
and a $537 thousand provision related to the Company's securitizations) for the
first quarter of fiscal 1998. The ratio of the allowance for credit losses to
total net loan and lease receivables serviced was 1.0% at September 30, 1998,
1.0% at June 30, 1998 and 1.0% at September 30, 1997.
The following table summarizes changes in the allowance for credit
losses for the three months ended September 30, 1998 (in thousands):
Portfolio Securitizations Total
--------- --------------- -----
Balance at June 30,1998........... $1,078 $4,516 $5,594
Provision for credit losses....... 126 1,344 1,470
Charge offs, net of recoveries.... (102) (51) (153)
------ ------ ------
Balance at September 30, 1998..... $1,102 $5,809 $6,911
====== ====== ======
Employee Related Costs. Employee related costs increased $362 thousand
or 42.7%, to $1.2 million for the first quarter of fiscal 1999 from $851
thousand for the first quarter of fiscal 1998. The increase was due to an
increase in the number of sales and support employees as a result of the
Company's growth in loan and lease originations and the increase in loans and
leases serviced. Management anticipates that these expenses will continue to
increase in the future as the Company's geographic expansion continues.
Sales and Marketing Expenses. Sales and marketing expenses increased
$3.1 million, or 134.8%, to $5.4 million for the first quarter of fiscal 1999
from $2.3 million for the first quarter of fiscal 1998. The increase was
primarily attributable to targeted television advertising related to Home Equity
Loans and advertising costs resulting from increased newspaper, direct mail and
radio advertising related to the Company's sales of subordinated debt and loan
products. Subject to market conditions, the Company plans to continue to expand
its service area throughout the United States. As a result, it is anticipated
that sales and marketing expenses will continue to increase in the future.
17
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
General and Administrative Expenses. General and administrative
expenses increased $1.5 million, or 107.1%, to $2.9 million for the first
quarter of fiscal 1999 from $1.4 million for the first quarter of fiscal 1998.
This increase was primarily attributable to increases in rent, telephone, office
expense, professional fees, goodwill amortization related to the NJMIC
acquisition and other expenses incurred as a result of previously discussed
increases in loan and lease originations and loans and leases serviced during
the three months ended September 30, 1998.
LOAN AND LEASE QUALITY
Total delinquencies (loans and leases with payments past due greater
than 30 days) were $21.1 million at September 30, 1998 as compared to $16.8
million at June 30, 1998 and $6.1 million at September 30, 1997. The Company's
loans and leases delinquent more than 30 days as a percentage of the total
managed portfolio (the "delinquency rate") was 2.97% at September 30, 1998 as
compared to 3.01% at June 30, 1998 and 2.86% at September 30, 1997. The increase
in the delinquency rate from September 30, 1997 was attributable to the
maturation of the Company's total managed portfolio, which was $709.7 million at
September 30, 1998, $559.4 million at June 30, 1998 and $214.4 million at
September 30, 1997.
18
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
The following table provides data concerning delinquency experience,
real estate owned ("REO") and loss experience for the Company's total managed
loan and lease portfolio (dollars in thousands):
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
-------------------------- -----------------------
Delinquency by Type Amount % Amount %
- ------------------- ------ --- ------ ---
<S> <C> <C> <C> <C>
Business Purpose Loans
Total portfolio serviced $111,877 $101,250
======== ========
Period of delinquency:
31-60 days $ 1,388 1.24 $ 1,236 1.22
61-90 days 1,181 1.06 928 .92
Over 90 days 4,457 3.98 3,562 3.52
-------- ---- -------- ----
Total Delinquencies $ 7,026 6.28 $ 5,726 5.66
======== ==== ======== ====
REO $ 1,187 $ 611
======== ========
Home Equity Loans
Total portfolio serviced $467,647 $349,685
======== ========
Period of delinquency:
31-60 Days $ 4,918 1.05 $ 3,726 1.08
61-90 Days 1,658 0.35 1,022 .29
Over 90 Days 4,883 1.04 3,541 1.02
-------- ---- -------- ----
Total Delinquencies $ 11,459 2.44 $ 8,289 2.39
======== ==== ======== ====
REO $ 853 $ 311
======== ========
Equipment Leases
Total portfolio serviced $130,141 $108,463
======== ========
Period of delinquency:
31-60 days $ 659 0.50 $ 1,000 .92
61-90 days 685 0.53 320 .30
Over 90 days 1,269 0.98 1,478 1.36
-------- ---- -------- ----
Total Delinquencies $ 2,613 2.01 $ 2,798 2.58
======== ==== ======== ====
Company Combined
Total Portfolios Serviced $709,665 $559,398
======== ========
Period of delinquency:
31-60 days $ 6,965 0.98 $ 5,962 1.07
61-90 days 3,525 0.50 2,270 .41
Over 90 days 10,608 1.49 8,581 1.53
-------- ---- -------- ----
Total Delinquencies $ 21,098 2.97 $ 16,813 3.01
======== ==== ======== ====
Total REO $ 2,040 $ 922
======== ========
Losses, net of recoveries,
experienced during the period $ 153 .09(a) $ 667 .12(a)
======== === ======== ===
Allowance for credit losses at end
of period $ 6,911 1.0 $ 5,594 1.0
======== === ======== ===
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
19
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
INTEREST RATE RISK MANAGEMENT
The Company's primary market risk exposure is interest rate risk.
Profitability is sensitive to the spread between the effective rate of interest
received on loans and leases available for sale or securitized and the interest
rates paid pursuant to the Company's credit facilities or the pass-through rate
for interests issued in connection with securitizations. Also, a substantial and
sustained increase in market interest rates could adversely affect the Company's
ability to originate and purchase loans.
Loans and Leases Available for Sale - The Company's gain on sale of
loans and leases may be negatively impacted to the extent it holds fixed-rate
mortgage loans or leases in its available for sale portfolio prior to
securitization. The adverse effect on the Company's gain may be the result of
increases in interest rates during the period the loans are held prior to
securitization or as a result of an increase in the rate required to be paid to
investors in connection with the securitization.
The Company implemented a hedging strategy in an attempt to mitigate
the effect of changes in interest rates on its fixed-rate mortgage loan and
lease portfolios between the date of origination and securitization. The nature
and quality of hedging transactions are determined by the Company's management
based on various factors, including market conditions and the expected volume of
mortgage loan and lease originations and purchases. The strategy used in the
first quarter of fiscal 1999 involved short sales of a combination of U.S.
Treasury securities with an average life, which closely matches the expected
average life of the loans to be securitized. The settlement date of the short
sale, as well as the buy back of the Treasury securities coincided with the
anticipated settlement date of the underlying securitization. At September 30,
1998, the Company had no outstanding short sales. During the three months ended
September 30, 1998, the Company incurred a loss of approximately $2.1 million on
short sales of securities which was recognized as an offset to the gain on sale
recorded on the sale of $139.9 million of loans pursuant to a $200.0 million
securitization during the period. The Company also prefunded loan originations
in connection with the $200.0 million securitization, which enabled the Company
to determine in the current period the rate to be received by the investors when
the $60.1 million of loans used to satisfy the prefund balance of the $200.0
million securitization was satisfied in November 1998.
In the future the Company intends to expand the types of financial
instruments it uses to hedge interest rate risk. Such instruments could include
interest rate swaps, financial futures and interest rate options.
The Company believes that it has implemented a cost-effective hedging
program to provide a level of protection against changes in market value of its
fixed-rate mortgage loans held for sale. However, an effective interest rate
risk management strategy is complex and no such strategy can completely insulate
the Company from interest rate changes. The nature and timing of hedging
transactions may impact the effectiveness of hedging strategies. Poorly designed
strategies or improperly executed transactions may increase rather than mitigate
risk. In addition, hedging involves transaction and other costs. Such costs
could increase as the period covered by the hedging protection increases. It is
expected that such loss would be offset by income realized from the
securitizations in that period or in future periods. As a result, the Company
may be prevented from effectively hedging its fixed-rate loans held for sale,
without reducing the Company's income in current periods due to the costs
associated with the Company's hedging activities.
20
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Interest Only Strips and Servicing Assets - A significant decline in market
interest rates could increase the level of loan prepayments, thereby decreasing
the size of the Company's loan servicing portfolio. To the extent that interest
only strips and servicing assets have been capitalized on the books of the
Company, higher than anticipated rates of loan prepayments could require the
Company to write down the value of such servicing rights and interest only
strips, adversely impacting earnings during the period of adjustment.
Anticipated prepayment rates used to value interest only strips and servicing
assets were as follows:
Business Purpose Loans.......................3% to 13%
Home Equity Loans............................2% to 24%
Subordinated Debt - The Company also experiences interest rate risk to the
extent that as of September 30, 1998 approximately $52 million of its
liabilities were comprised of subordinated debt with scheduled maturities of
greater than one year. To the extent that interest rates decrease in the future,
the rates paid on such liabilities could exceed the rates received on new loan
originations resulting in a decrease in the Company's spread.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires continual access to short and long-term
sources of debt financing. The Company's cash requirements include the funding
of loan originations, payment of interest expense, funding of
over-collaterization requirements in connection with its securitizations,
operating expenses and capital expenditures.
The Company continues to significantly rely on securitizations to
generate cash proceeds for the repayment of debt and to fund its ongoing
operations. As a result of the terms of the securitizations, the Company will
receive less cash flow from the portfolios of loans securitized than it would
otherwise receive absent securitizations. Additionally, pursuant to the terms of
the securitizations, the Company will act as the servicer of the loans and in
that capacity will be obligated to advance funds in certain circumstances which
may create greater demands on the Company's cash flow than either selling loans
or maintaining a portfolio of loans.
Subject to economic, market and interest rate conditions, the Company
intends to continue to implement additional securitizations of its loan and
lease portfolios. Any delay or impairment in the Company's ability to securitize
its loans, as a result of market conditions or otherwise, could adversely affect
the Company's results of operations.
To a limited extent, the Company intends to continue to augment the
interest and fee income it earns on its loan and lease portfolios by selling
loans either at the time of origination or from its portfolio to unrelated third
parties. These transactions also create additional liquid funds available for
lending activities.
The Company also relies on borrowings such as its subordinated debt and
warehouse credit facilities to fund its operations. At September 30, 1998, the
Company had a total of $131.4 million of subordinated debt outstanding,
including $9.4 million issued by NJMIC and available credit facilities totaling
$370 million, of which $50.5 million was drawn upon at such date.
Effective October 1, 1997, ABFS assumed $9.9 million of subordinated
debt previously issued by NJMIC. Of this amount, $9.4 million was outstanding at
September 30, 1998 and included maturity dates ranging from October 1998 to May
2003. In addition, during the three months ended September 30, 1998, ABFS sold
$16.3 million in principal amount of subordinated debt (including redemptions
and repurchases by investors) pursuant to a registered public offering with
maturities ranging between one day and ten years (the "Investment Note
Program"). As of September 30, 1998, the Company has approximately $122.0
million of subordinated outstanding under the Investment Note Program. Under a
shelf registration statement declared effective by the Securities and Exchange
Commission on October 20, 1998, the Company registered an additional $250.0
million of subordinated debt to be offered pursuant to the Investment Note
Program. The proceeds of such sales of subordinated debt will be used to fund
general operating and lending activities. The Company intends to meets its
obligation to repay such debt as it matures with income generated through its
lending activities. The utilization of funds for the repayment of such
obligations should not adversely affect the Company's operations.
The following is a description of the Company's warehouse and lines of
credit facilities which are utilized to fund the Company's origination of loans
and leases prior to securitization. All of these facilities are senior in right
of payment to the Company's subordinated debt.
21
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
The Company's subsidiaries have an aggregate $100.0 million Interim
Warehouse and Security Agreements with Prudential Securities Credit Corporation
to fund loan and lease originations. In May 1998, the aggregate amount that
could be advanced under these agreements was extended from $50.0 million to
$100.0 million. These agreements were also amended in August 1998 to extend the
term to August 31, 1999 with respect to advances for the funding of loan
originations and to March 31, 1999 with respect to lease originations. The
obligations under these agreements are guaranteed by the Company. Under these
agreements, the subsidiaries may obtain advances subject to certain conditions,
which extensions of credit bear interest at a specific margin over the LIBOR
rate. The obligations under these agreements are collateralized by pledged loans
and leases. At September 30, 1998, $3.5 million of these facilities were being
utilized.
In July 1997, the Company and certain of its subsidiaries obtained a
$110.0 million warehouse credit facility from a syndicate of banks led by Chase
Bank of Texas N.A. Under this warehouse facility, the Company may obtain
advances, subject to certain conditions, including sublimits based upon the type
of collateral securing the advance. Interest rates on the advances are based
upon 30-day LIBOR plus a margin. The Company's obligations under the facility
are collateralized by certain pledged loans and leases and other collateral
related there to. The facility also requires the Company to meet certain
financial ratios and contains restrictive covenants, including covenants
limiting loans to and transactions with affiliates, the issuance of additional
debt, and the types of investments that can be made by the Company and its
subsidiaries. In October 1998, the aggregate amount that could be advanced under
this credit facility was increased from $110.0 million to $150.0 million and the
term was extended two years so that such facility now expires on October 1,
2000. At September 30, 1998, $34.5 million of this facility was being utilized.
In September 1998 the Company's subsidiaries, American Business
Leasing, Inc. ("ABL") and Federal Leasing Corp., ("FLC") entered into a credit
agreement with First Union National Bank ("FUNB") pursuant to which FUNB
committed to extend $20.0 million of credit in the form of a warehouse line of
credit to such entities to enable them to fund eligible lease receivables. Under
the FUNB line of credit, ABL and FLC may obtain advances in increments of
$500,000 or greater, subject to certain conditions, which extensions of credit
shall bear interest at either the LIBOR rate plus 187.5 basis points or the
prime rate set by FUNB less 100 basis points at the borrower's option. Such
agreement has a term of two years unless accelerated upon an event of default as
described in such agreement. The obligation under the FUNB line of credit is
collateralized by pledged leases and other collateral related thereto. Such
obligation is also guaranteed by the Company and certain of its subsidiaries.
The FUNB line of credit requires ABL and FLC to meet certain financial and
delinquency ratios and contains restrictive covenants included but not limited
to the incurrence of additional debt, the retention of certain members of senior
management and Year 2000 compliance. At September 30, 1998, $12.5 million of
this line of credit was being utilized.
In October 1998, ABL and American Business Lease Funding Corporation
("ABLFC"), a wholly-owned subsidiary of ABL, entered into a $100.0 million
commercial paper conduit to finance equipment lease production underwritten by
First Union Capital Markets. The agreement allows for up to two sales of
equipment leases per month into the conduit. The agreement terminates on October
14, 1999 unless terminated earlier in the event of certain event of default
described therein. The cost of financing is the average interest rate on
commercial paper plus 65 basis points.
As of September 30, 1998, the Company had $125.5 million of
debt scheduled to mature during the twelve months ending September 30, 1999
which was comprised of maturing subordinated debt, warehouse lines of credit and
other debt incurred in connection with the acquisition of NJMIC. The Company
currently expects to refinance the maturing debt through extensions of maturing
debt or new debt financing and, if necessary, may retire the debt through cash
flow from operations and loan sales or securitizations. Despite the Company's
current use of securitizations to fund loan growth, the Company is also
dependent upon other borrowings to fund a portion of its operations. As a
result, the Company intends to continue to utilize debt financing to fund its
operations in the future.
Any failure to renew or obtain adequate finding under a warehouse
credit facility, or other borrowings, or any substantial reduction in the size
of or pricing in the markets for the Company's loans and leases, could have a
material adverse effect on the Company's results of operations and financial
condition. To the extent the Company is not successful in maintaining or
replacing existing financing, it would have to curtail its loan and lease
production activities or sell loan and lease production activities or sell loans
and leases rather than securitize them, thereby having a material adverse effect
on the Company's results of operations and financial condition.
The Company leases certain of its facilities under a five-year
operating lease expiring in January 2003 at a minimum annual rental of
approximately $700,000. The lease contains a renewal option for an additional
period at increased annual rental.
22
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Year 2000 Update
As discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-KSB for the year ended June 30, 1998, the Company established its Year
2000 Task Force to assess the Company's Year 2000 issues and to implement the
Company's Year 2000 compliance program. Such task force includes members of the
Company's Information Technology Department, Finance Department and certain
officers of the Company's operating subsidiaries. The Company has completed an
initial assessment of its core information technology systems and is continuing
the process of evaluating the remainder of its information technology systems as
well as non-information technology systems, which include the Company's
telecommunication systems, business machines and building and premises systems.
As part of the initial assessment the Company has established criteria for
prioritizing hardware replacement and systems testing.
The Company's core application systems are currently client/server
based and hosted by Intel servers and a Unisys mainframe. The Company is
currently in the process of replacing all core systems for business
functionality and growth reasons which are unrelated to the Year 2000 issue. The
Company commenced this replacement process in 1996 and currently anticipates
that it will be completed by the end of 1999. It is the Company's intention to
have all systems that will be developed or acquired as part of this replacement
process to be Year 2000 compliant.
Based upon the current status of the its Year 2000 compliance program,
the Company has targeted the end of 1999 for completion of the Year 2000
compliance program. However, no assurance can be given that the Company will
meet this time frame. As part of its Year 2000 compliance program, the Company
has hired a consultant to validate the Company's assessment of its Year 2000
issue and to assist the Company's internal Information Technology Department in
managing the Year 2000 compliance program. The Company currently estimates that
the costs directly associated with its Year 2000 compliance program will be
approximately $300,000. The funds necessary to complete the Year 2000 compliance
program will come from the Company's Information Technology operating budget.
Amounts expended for the Company's Year 2000 complaince program have not been
material as of September 30, 1998.
As part of its Year 2000 compliance program, the Company is continuing
to contact and survey vendors with whom the Company does a material amount of
business to determine whether these parties' systems (to the extent they relate
to the Company's business) are subject to Year 2000 issues. The failure of the
Company's vendors to convert their systems on a timely basis may have a material
adverse effect on the Company's operations.
The Company is in the process of developing a contingency plan that
will be used in the event that any of its hardware, software or other computer
systems, or those of its vendors are not Year 2000 compliant based on risks
identified as a result of the Company's assessment and testing.
23
<PAGE>
PART I FINANCIAL INFORMATION -- continued
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUSIDIARIES
Item 3. Quantitative and Qualitative Disclosure about Market Risk
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- INTEREST RATE RISK
MANAGEMENT" on page 20. Additional quantitative and
qualitative disclosures regarding market risk are contained in
the Company's Form 10-KSB for the fiscal year ended June 30,
1998.
24
<PAGE>
PART II. OTHER INFORMATION
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings
On October 23, 1997, a class action suit was filed on
the Superior Court of New Jersey at Docket No. L-12066-97
against New Jersey Mortgage Investment Company ("NJMIC") by
Alfred G. Roscoe on behalf of himself and others similarly
situated. Mr. Roscoe is seeking certification that the action
may be maintained as a class action as well as unspecified
compensatory damages and injunctive relief. In his complaint,
Mr. Roscoe alleges that NJMIC violated New Jersey's Mortgage
Financing on Real Estate Law, N.J.S.A. 46:10A-1 et seq. By
requiring him and other borrowers to pay or reimburse NJMIC
for attorneys' fees and costs in connection with loans made to
them by NJMIC. Mr. Roscoe further asserts that NJMIC's alleged
actions violated New Jersey's Consumer Fraud Act, N.J.S.A.
56:8-1, et seq. and constitute common law fraud and deceit.
Mr. Roscoe filed an appeal with the Superior Court. NJMIC
intends to vigorously defend the appeal filed by Mr. Roscoe.
Pursuant to the terms of the Agreement for Purchase
and Sale of Stock of NJMIC between the Company and the former
stockholders of NJMIC, such former stockholders are required
to indemnify the Company up to $16.0 million in connection
with any losses related to, caused by or arising from NJMIC's
failure to comply with applicable law to the extent such
losses exceed $100,000. Such former stockholders have agreed
to defend the Company in this suit.
Additionally from time to time, the Company is
involved as plaintiff or defendant in various legal
proceedings arising in the normal course of its business.
While the ultimate outcome of these various legal proceedings
cannot by predicted with certainty, it is the opinion of
management that the resolution of these legal actions should
not have a material effect on the Company's financial
position, results of operations or liquidity.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
25
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K :
(a) Exibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------------- -------------------------------------------------------------------------------------------
<S> <C>
10.1 $100.0 Million Receivables Purchase Agreement, dated September 30, 1998, among American
Business Lease Funding Corporation, American Business Leasing, Inc. and a syndicate of
financial institutions lead by First Union Capital Markets and First Union National Bank,
as liquidity agent.
10.2 $20.0 Million Credit Agreement, dated September 28, 1998, between American Business
Leasing, Inc., Federal Leasing Corp. and First Union National Bank.
10.3 Interim Warehouse and Security Agreement, dated August 3, 1998, among Prudential
Securities Credit Corporation, as lender, and Federal Leasing, Inc. and American Business
Leasing, Inc., as borrowers, and Amendments One and Two thereto.
10.4 Amended and Restated Credit Agreement, dated October 1, 1998, between American Business
Credit, Inc., HomeAmerican Credit, Inc., American Business Leasing, Inc., New Jersey Mortgage
and Investment Corp., as co-borrowers, American Business Financial Services, Inc., as parent
and Chase Bank of Texas.
27 Financial Data Schedule
</TABLE>
(b) Reports on form 8-K:
No reports on Form 8-K were filed during the quarter ended September
30, 1998.
26
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMERICAN BUSINESS FINANCIAL SERVICES, INC.
DATE: November 13, 1998 BY: /S/ Albert W. Mandia
------------------- -----------------------------------------
Albert W. Mandia
Chief Financial Officer and Executive Vice
President
27
<PAGE>
AMERICAN BUSINESS FINANCIAL SERVICES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------------- -------------------------------------------------------------------------------------------
<S> <C>
10.1 $100.0 Million Receivables Purchase Agreement, dated September 30, 1998, among American
Business Lease Funding Corporation, American Business Leasing, Inc. and a syndicate of
financial institutions lead by First Union Capital Markets and First Union National Bank,
as liquidity agent.
10.2 $20.0 Million Credit Agreement, dated September 28, 1998, between American Business
Leasing, Inc., Federal Leasing Corp. and First Union National Bank.
10.3 Interim Warehouse and Security Agreement, dated August 3, 1998, among Prudential
Securities Credit Corporation, as lender, and Federal Leasing, Inc. and American Business
Leasing, Inc., as borrowers, and Amendments One and Two thereto.
10.4 Amended and Restated Credit Agreement, dated October 1, 1998, between American Business
Credit, Inc., HomeAmerican Credit, Inc., American Business Leasing, Inc., New Jersey Mortgage
and Investment Corp., as co-borrowers, American Business Financial Services, Inc., as parent
and Chase Bank of Texas.
27 Financial Data Schedule
</TABLE>
28
<PAGE>
--------------
Execution Copy
--------------
================================================================================
U.S. $100,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of September 30, 1998
Among
AMERICAN BUSINESS LEASE FUNDING CORPORATION
as the Seller
AMERICAN BUSINESS LEASING, INC.
as the Servicer
the INVESTORS
named herein
VARIABLE FUNDING CAPITAL CORPORATION
as a Purchaser
FIRST UNION CAPITAL MARKETS, a division of
WHEAT FIRST SECURITIES, INC.
as the Deal Agent
FIRST UNION NATIONAL BANK
as the Liquidity Agent
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as the Collateral Custodian and Backup Servicer
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
SECTION 1.1 CERTAIN DEFINED TERMS..............................................1
SECTION 1.2 OTHER TERMS.......................................................27
SECTION 1.3 COMPUTATION OF TIME PERIODS.......................................27
ARTICLE II THE PURCHASE FACILITY.............................................27
SECTION 2.1 PURCHASES OF ASSET INTERESTS......................................27
SECTION 2.2 THE INITIAL PURCHASE, SUBSEQUENT PURCHASES
AND INCREMENTAL PURCHASES.........................................28
SECTION 2.3 REDUCTION OF THE PURCHASE LIMIT; REPURCHASE.......................28
SECTION 2.4 DETERMINATION OF YIELD............................................28
SECTION 2.5 [RESERVED]........................................................29
SECTION 2.6 DIVIDING OR COMBINING ASSET INTERESTS.............................29
SECTION 2.7 NON-LIQUIDATION SETTLEMENT PROCEDURES.............................29
SECTION 2.8 SETTLEMENT PROCEDURES FOLLOWING THE
COMMITMENT TERMINATION DATE.......................................30
SECTION 2.9 SETTLEMENT PROCEDURES FOLLOWING A TERMINATION DATE................32
SECTION 2.10 COLLECTIONS AND ALLOCATIONS......................................33
SECTION 2.11 PAYMENTS, COMPUTATIONS, ETC......................................33
SECTION 2.12 OPTIONAL REPURCHASE..............................................34
SECTION 2.13 FEES.............................................................34
SECTION 2.14 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY....................35
SECTION 2.15 TAXES............................................................36
SECTION 2.16 ASSIGNMENT OF THE PURCHASE AGREEMENT.............................39
SECTION 2.17 SUBSTITUTION OF CONTRACTS........................................39
ARTICLE III CONDITIONS OF PURCHASES..........................................40
SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL PURCHASE..........................40
SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND
REMITTANCES OF COLLECTIONS........................................41
SECTION 3.3 DELIVERY OF CONTRACT FILES........................................41
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................42
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER......................42
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING
TO THE AGREEMENT AND THE CONTRACTS................................46
SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING
TO THE PURCHASE LIMIT AND CAPITAL LIMIT...........................47
ARTICLE V GENERAL COVENANTS OF THE SELLER AND THE ORIGINATOR.................47
SECTION 5.1 GENERAL COVENANTS.................................................47
SECTION 5.2 COVENANTS OF SELLER...............................................48
SECTION 5.3 RELEASE OF LIEN ON EQUIPMENT......................................52
SECTION 5.4 OPERATIONS ON TRANCHE RATE LOCK DATE..............................52
SECTION 5.5 RETRANSFER OF INELIGIBLE CONTRACTS................................54
SECTION 5.6 RETRANSFER OF ASSETS..............................................54
SECTION 5.7 YEAR 2000 COMPATIBILITY...........................................55
SECTION 5.8 COVENANTS OF THE ORIGINATOR.......................................55
ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS.........................56
SECTION 6.1 APPOINTMENT AND ACCEPTANCE; DUTIES................................56
SECTION 6.2 COLLECTION OF PAYMENTS............................................59
SECTION 6.3 SERVICER ADVANCES.................................................60
i
<PAGE>
SECTION 6.4 REALIZATION UPON DEFAULTED CONTRACT...............................61
SECTION 6.5 MAINTENANCE OF INSURANCE POLICIES.................................61
SECTION 6.6 REPRESENTATIONS AND WARRANTIES OF SERVICER........................62
SECTION 6.7 REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER
AND COLLATERAL CUSTODIAN..........................................64
SECTION 6.8 COVENANTS OF SERVICER.............................................65
SECTION 6.9 COVENANTS OF BACKUP SERVICER AND COLLATERAL CUSTODIAN.............66
SECTION 6.10 [RESERVED].......................................................67
SECTION 6.11 [RESERVED].......................................................67
SECTION 6.12 PAYMENT OF CERTAIN EXPENSES BY SERVICER..........................67
SECTION 6.13 REPORTS..........................................................67
SECTION 6.14 ANNUAL STATEMENT AS TO COMPLIANCE................................68
SECTION 6.15 ANNUAL INDEPENDENT PUBLIC ACCOUNTANT'S SERVICING REPORTS.........68
SECTION 6.16 ADJUSTMENTS......................................................68
SECTION 6.17 MERGER OR CONSOLIDATION OF THE SERVICER..........................69
SECTION 6.18 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS...............69
SECTION 6.19 INDEMNIFICATION OF THE SELLER, THE BACKUP SERVICER, THE..........69
COLLATERAL CUSTODIAN, THE DEAL AGENT AND THE SECURED PARTIES.....69
SECTION 6.20 THE SERVICER NOT TO RESIGN.......................................70
SECTION 6.21 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION..................71
REGARDING THE CONTRACTS..........................................71
SECTION 6.22 BACKUP SERVICER..................................................71
SECTION 6.23 IDENTIFICATION OF RECORDS........................................74
SECTION 6.24 SERVICER DEFAULTS................................................74
SECTION 6.25 APPOINTMENT OF SUCCESSOR SERVICER................................75
SECTION 6.26 NOTIFICATION.....................................................77
SECTION 6.27 PROTECTION OF RIGHT, TITLE AND INTEREST TO ASSETS................77
SECTION 6.28 RELEASE OF CUSTODIAN'S CONTRACT FILES............................78
ARTICLE VII RESTRICTING EVENTS...............................................78
SECTION 7.1 [RESERVED]........................................................78
SECTION 7.2 RESTRICTING EVENTS................................................78
ARTICLE VIII INDEMNIFICATION.................................................80
SECTION 8.1 INDEMNITIES BY THE SELLER.........................................80
ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT............................83
SECTION 9.1 AUTHORIZATION AND ACTION..........................................83
SECTION 9.2 DELEGATION OF DUTIES..............................................83
SECTION 9.3 EXCULPATORY PROVISIONS............................................84
SECTION 9.4 RELIANCE..........................................................85
SECTION 9.5 NON-RELIANCE ON DEAL AGENT, LIQUIDITY AGENT
AND OTHER PURCHASERS..............................................85
SECTION 9.6 REIMBURSEMENT AND INDEMNIFICATION.................................86
SECTION 9.7 DEAL AGENT AND LIQUIDITY AGENT IN THEIR
INDIVIDUAL CAPACITIES.............................................86
SECTION 9.8 SUCCESSOR DEAL AGENT OR LIQUIDITY AGENT...........................86
ARTICLE X ASSIGNMENTS; PARTICIPATIONS........................................87
SECTION 10.1 ASSIGNMENTS AND PARTICIPATIONS...................................87
ARTICLE XI MISCELLANEOUS.....................................................90
SECTION 11.1 AMENDMENTS AND WAIVERS...........................................90
SECTION 11.2 NOTICES, ETC.....................................................91
SECTION 11.3 RATABLE PAYMENTS.................................................91
SECTION 11.4 NO WAIVER, RIGHTS AND REMEDIES...................................92
SECTION 11.5 BINDING EFFECT; BENEFIT OF AGREEMENT.............................92
SECTION 11.6 TERM OF THIS AGREEMENT...........................................92
SECTION 11.7 GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF OBJECTION TO VENUE.....................................92
ii
<PAGE>
SECTION 11.8 WAIVER OF JURY TRIAL.............................................93
SECTION 11.9 COSTS, EXPENSES AND TAXES........................................93
SECTION 11.10 NO PROCEEDINGS..................................................94
SECTION 11.11 RECOURSE AGAINST CERTAIN PARTIES................................94
SECTION 11.12 PROTECTION OF OWNERSHIP INTERESTS OF THE PURCHASERS;
INTENT OF PARTIES; SECURITY INTEREST............................95
SECTION 11.13 CONFIDENTIALITY.................................................96
SECTION 11.14 NOTICE OF BREACH OF REPRESENTATIONS AND WARRANTIES..............97
SECTION 11.15 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION............97
EXHIBITS
EXHIBIT A Form of Purchase Notice
EXHIBIT B Form of Lock-Box Notices
EXHIBIT C "Limited Purpose" provisions of Seller's Certificate
of Incorporation
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Servicer's Certificate
EXHIBIT G Form of Purchase Certificate
EXHIBIT H Form of Hedge Agreement (including Schedule and Confirmation)
EXHIBIT I Credit and Collection Policies
SCHEDULES
SCHEDULE I Conditions Precedent Documents
SCHEDULE II Lock-Box Banks and Lock-Box Accounts
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV Location of Custodian's Contract Files
SCHEDULE V Contract List
iii
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made as of
September 30, 1998, among:
(1) AMERICAN BUSINESS LEASE FUNDING CORPORATION, a Delaware
corporation, as seller (the "Seller");
(2) AMERICAN BUSINESS LEASING, INC., a Pennsylvania corporation, as
servicer (the "Servicer");
(3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation
("VFCC");
(5) FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST SECURITIES,
INC. ("FCM"), as deal agent (the "Deal Agent") and as documentation agent (the
"Documentation Agent");
(6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent (the
"Liquidity Agent"); and
(7) NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION ("Norwest") as
collateral custodian (the "Collateral Custodian") and as backup servicer (the
"Backup Servicer").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.1.
(b) As used in this Agreement and its exhibits and schedules, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
ABFS: American Business Financial Services, Inc., a Delaware corporation.
ABFS Residual: ABFS Residual Holding, Inc., a Delaware corporation.
ABL: American Business Leasing, Inc., a Pennsylvania corporation.
<PAGE>
ADCB: On any date of determination, the sum of the Discounted Contract Balance
of each Eligible Contract (excluding all Defaulted Contracts, Casualty Loss
Contracts, Early Termination Contracts and Contracts subject to a Warranty
Event) included in the Asset Pool as of the date of such determination.
Addition Date: With respect to any Additional Contracts, the date on which such
Additional Contracts become Pool Assets.
Additional Contracts: All Contracts that become Pool Assets after the Closing
Date.
Additional Cut Off Date: Each date on and after which Collections on an
Additional Contract are to be transferred to the Asset Pool.
Adjusted Eurodollar Rate: On any day, an interest rate per annum equal to the
quotient, expressed as a percentage and rounded upwards (if necessary), to the
nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate on such day by (ii)
the decimal equivalent of 100% minus the Eurodollar Reserve Percentage on such
day.
Administration Agreement: That certain Administration Agreement executed between
VFCC and FCM, as the same may be amended, supplemented, or otherwise modified
from time to time.
Adverse Claim: A lien, security interest, charge, encumbrance or other right or
claim of any Person.
Affected Party: As defined in Section 2.14(a).
Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.
Agent's Account: A special account (account number 01 41 96 47) in the name of
the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in the name
of VFCC maintained at Bankers Trust Company.
Aggregate Unpaids: At any time, an amount equal to the sum of all Yield (accrued
and to accrue), Capital and all other amounts owed hereunder, under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter delivered by the
Originator to the Deal Agent and the Purchasers at such time (whether due or
accrued).
Agreement: This Receivables Purchase Agreement, dated as of September 30, 1998,
as amended, modified, supplemented or restated from time to time.
2
<PAGE>
Asset: All right, title and interest of the transferring party in, to and under
any and all of the following:
(i) the Existing Contracts and Additional Contracts, and all monies
due or to become due in payment of such Contracts on and after the
related Cut Off Date, including but not limited to any Prepayment
Amounts, any payments in respect of a casualty or early termination, and
any Recoveries received with respect thereto, but excluding any Scheduled
Payments due prior to the related Cut Off Date, any Excluded Amounts and
any Equipment including all proceeds from any sale or other disposition
of such Equipment;
(ii) the Contract Files;
(iii) all payments made or to be made in the future with respect to
such Contracts or the Obligor thereunder and under any guarantee or
similar credit enhancement with respect to such Contracts;
(iv) all Insurance Proceeds with respect to each such Contract;
(v) all Related Security;
(vi) all Source Agreements and Source Agreement Rights to the
extent that they relate to any Contract and any Equipment covered by the
Contracts; and
(vii) other than as specifically excluded in clause (i) above, all
income and proceeds of the foregoing.
Asset Interest: At any time, an undivided variable percentage ownership interest
in all Assets. The undivided percentage interest of an Asset Interest shall
equal
C + R
-------
ADCB
where:
C = equals the Capital in respect of such Asset Interest.
R = equals the aggregate Reserves in respect of such Asset
Interest.
Asset Pool: At any time, all then outstanding Assets.
Assignment and Acceptance: An assignment and acceptance entered into by an
Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.
Backup Servicer: Norwest Bank Minnesota, National Association.
3
<PAGE>
Backup Servicer and Collateral Custodian Fee Letter: The letter dated as of the
Closing Date, among ABL, the Deal Agent, the Backup Servicer and Collateral
Custodian setting forth among other things the Backup Servicer Fee and the
Collateral Custodian Fee.
Backup Servicer Expenses: The reasonable out-of-pocket expenses to be paid to
the Backup Servicer under the Backup Servicer and Collateral Custodian Fee
Letter.
Backup Servicer Fee: The fee set forth as the "Backup Servicer Fee" in the
Backup Servicer and Collateral Custodian Fee Letter, dated as of the Closing
Date.
Backup Servicer Fee Rate: The rate per annum set forth as the "Backup Servicer
Fee Rate" in the Backup Servicer and Collateral Custodian Fee Letter, dated as
of the Closing Date.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to time
(Title 11 of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per annum equal to the
higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.0%.
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of ERISA in
respect of which the Seller or any ERISA Affiliate of the Seller is, or at any
time during the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA.
Breakage Costs: Any amount or amounts as shall compensate a Purchaser for any
loss, cost or expense incurred by such Purchaser (as reasonably determined by
such Purchaser) as a result of a prepayment by the Seller of Capital or Yield
pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a Sunday on which (a)
banks are not required or authorized to be closed in New York City,
Philadelphia, Pennsylvania, Minneapolis, Minnesota or Charlotte, North Carolina,
and (b) if the term "Business Day" is used in connection with the LIBOR Rate,
dealings in United States dollar deposits are carried on in the London interbank
market.
Capital: For each Asset Interest, the amount paid to the Seller for such Asset
Interest at the time of its purchase by the Purchaser pursuant to this
Agreement, reduced from time to time by Collections distributed on account of
such Capital pursuant to Sections 2.7, 2.8 or 2.9; provided, however, that such
Capital shall not be reduced by any distribution or any portion of Collections
if at any time such distribution is rescinded or must be returned for any
reason.
Capital Limit: At any time, an amount equal to: (i) ADCB minus (ii) the product
of ADCB and the Minimum Overcollateralization Percentage.
Casualty Loss: With respect to any item of Equipment, the loss, theft, damage
beyond commercially reasonable repair or governmental condemnation or seizure of
such item of Equipment.
4
<PAGE>
Casualty Loss Contract: Any Contract that is subject to a Casualty Loss.
Closing Date: October 15, 1998.
Code: The Internal Revenue Code of 1986, as amended.
Collateral Custodian: Norwest Bank Minnesota, National Association.
Collateral Custodian Expenses: The reasonable out-of-pocket expenses to be paid
to the Collateral Custodian under the Backup Servicer and Collateral Custodian
Fee Letter.
Collateral Custodian Fee Rate: The rate per annum set forth as the "Collateral
Custodian Fee" in the Backup Servicer and Collateral Custodian Fee Letter, dated
as of the Closing Date.
Collection Account: As defined in Section 6.2(f).
Collection Date: The date following the Termination Date on which the aggregate
outstanding Capital has been reduced to zero, the Purchasers have received all
Yield and other amounts due to the Purchasers in connection with this Agreement
each Hedge Transaction has been terminated and each Hedge Counterparty has
received all amounts owing to it under its respective Hedging Agreement and the
Deal Agent has received all amounts due to it in connection with this Agreement.
Collections: (a) All cash collections and other cash proceeds of any Asset,
including, without limitation, Scheduled Payments, Prepayments, Insurance
Proceeds and Recoveries, any Residual Proceeds, any payment due from the Obligor
of such Contract at the expiration or other termination of such Contract, any
payments in connection with a Warranty Event, all as related to amounts
attributable to the Contracts in the Asset Pool, but excluding any Excluded
Amounts, (b) any other funds received by the Seller or the Servicer with respect
to any Contract, and (c) all payments received pursuant to any Hedging Agreement
or Hedge Transaction.
Commercial Paper Notes: On any day, any short-term promissory notes issued by
VFCC with respect to financing its purchase of an Asset Interest hereunder.
Commitment: For each Investor, the commitment of such Investor to make purchases
from the Seller in an amount not to exceed the amount set forth opposite such
Investor's name on the signature pages of this Agreement, as such amount may be
modified in accordance with the terms hereof.
Commitment Termination Date: October 14, 1999 or such later date to which the
Commitment Termination Date may be extended (if extended) in the sole discretion
of VFCC and each Investor in accordance with the terms of Section 2.1(b).
Contract: Any lease of Equipment by the Originator or by a Source, in each case
as lessor, to an Obligor.
5
<PAGE>
Contract File: With respect to each Contract, (1) a certified copy of the master
Contract, if applicable, (2) the executed original counterpart of the Contract
that constitutes "chattel paper" or an "instrument" for purposes of Sections
9-105(1)(b), 9-105(1)(i) or 9-305 of the UCC, legended to reflect the security
interest of the Deal Agent, as agent for the Secured Parties, (3) an original
certificate, executed by an Obligor, evidencing delivery and acceptance of the
Equipment, (4) Obligor's corporate resolutions and secretary's certificate, if
required under the Credit and Collection Policy, (5) a guaranty, if any, (6)
copies of documentation relating to the purchase of the Equipment, (7) documents
evidencing or related to any Insurance Policy (such documents required to be
included therein only with respect to Equipment which had an Original Equipment
Cost of more than $100,000), (8) evidence of filing or copies of all UCC
financing statements filed with respect to the Equipment or the Contract in
accordance with the Filing Requirements, (9) a certified copy of the related
sale and assignment between the Source and the related Originator if applicable,
(10) copies of any additional Contract documents evidencing any changes or
modifications of a Contract by the Servicer in accordance with the terms of the
Servicing Agreement, and (11) reference to the applicable contract management
code on the Contract Management System and any other documents relating thereto
held by American Business Leasing, Inc., as Servicer.
Contract List: The contract list provided by the Seller to the Deal Agent and
the Collateral Custodian, in the form of Schedule V hereto.
Contract Management System: The computerized electronic contract management
system maintained by the Servicer for all Contracts and other agreements similar
to the Contracts, as the same may be modified from time to time.
Contribution Agreement: The Contribution Agreement, dated as of the date hereof
between the Originator and ABFS Residual, as amended, modified, supplemented or
restated from time to time.
Credit and Collection Policy: The written credit and collection policies of the
Originator and Servicer in effect on the date hereof, and attached hereto as
Exhibit I, as the same may be amended or supplemented from time to time in
accordance with Section 4.1(j).
Custodian's Contract File: With respect to each Contract, (1) a certified copy
of the master Contract, if applicable, (2) the executed original counterpart of
the Contract, (3) a certified copy of the certificate evidencing delivery and
acceptance of the Equipment, (4) documents evidencing or related to any
Insurance Policy (such documents required to be included therein only with
respect to Equipment which had an Original Equipment cost of more than $100,000)
and (5) evidence of filing or copies of all UCC financing statements filed with
respect to the Equipment or Contracts in accordance with the Filing
Requirements.
Cut Off Date: With respect to each Existing Contract, October 1, 1998, and with
respect to each Additional Contract, the related Additional Cut Off Date.
Dealer Fee: The fee set forth as the "Dealer Fee" in the Fee Letter.
6
<PAGE>
Dealer Fee Rate: The rate set forth as the "Dealer Fee Rate" in the Fee Letter.
Default Ratio: With respect to any Payment Date, twelve times the percentage
equivalent of a fraction, the numerator of which is equal to the Discounted
Contract Balances of all Contracts that become Defaulted Contracts during the
three (3) immediately preceding calendar months (regardless of whether a
Substitute Contract was provided therefor) less all Recoveries received during
the three (3) immediately preceding calendar months and the denominator of which
is equal to the ADCB of all Contracts as of the three (3) Determination Dates
immediately preceding such Payment Date.
Default Ratio Trigger Event: Unless waived by the Deal Agent (in its sole
discretion), any Payment Date on which the Default Ratio for such Payment Date
exceeds 2.75%.
Defaulted Contract: A Contract in the Asset Pool as to which (i) the Servicer
has determined or should have determined in accordance with its Credit and
Collection Policy that such Contract is not collectible, (ii) the Servicer has
elected not to make a Servicer Advance or for which the Servicer has determined
that a prior Servicer Advance is not recoverable, or (iii) the Obligor
thereunder is delinquent as to all or any part equal to more than 10% of more
than four Scheduled Payments; provided, however, if the Scheduled Payments with
respect to a Contract in the Asset Pool are due on a periodic basis less
frequently than monthly then in no event shall all or any part equal to more
than 10% of a Scheduled Payment be more than 120 days past its original due date
under the Contract.
Delinquency Ratio: With respect to any Payment Date, the percentage equivalent
of a fraction, the numerator of which is the Discounted Contract Balance of all
Contracts as to which all or any portion equal to more than 10% of a Scheduled
Payment remained unpaid for more than 60 days from its original due date under
the Contract determined as of the Determination Date immediately preceding such
Payment Date and the denominator of which is the ADCB as of such Determination
Date.
Delinquency Ratio Trigger Event: Unless waived by the Deal Agent (in its sole
discretion), any Payment Date on which the average Delinquency Ratios for such
Payment Date and the two immediately preceding Payment Dates exceeds 3.5%.
Delinquent Contract: A Contract in the Asset Pool as to which all or a portion
equal to more than 10% of any one or more Scheduled Payments is 30 days or more
past due.
Derivatives: Any exchange-traded or over-the-counter (i) forward, future,
option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depositary
instrument, depositary price, depositary index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
7
<PAGE>
Determination Date: The last Business Day of each calendar month.
Discount Rate: (a) with respect to each Contract in a Floating Rate Tranche,
prior to the conversion of such Floating Rate Tranche to a Fixed Rate Tranche, a
rate per annum equal to the rate set upon the commencement of such Floating Rate
Tranche by the Deal Agent with the approval of the Seller which in no event may
exceed the greater of (i) the Treasury Rate plus 2.25%, or (ii) the Adjusted
Eurodollar Rate plus 2.25% (such rate to include the Program Fee Rate, the
Dealer Fee Rate, the Servicing Fee Rate, the Backup Servicing Fee Rate), and (b)
with respect to each Contract in a Fixed Rate Tranche, a rate per annum equal to
the sum of (i) the applicable Hedge Rate for such Tranche as identified by the
Servicer pursuant to the provisions of Section 5.4(a), (ii) the Program Fee
Rate, (iii) the Dealer Fee Rate, (iv) the Servicing Fee Rate, and (v) the Backup
Servicing Fee Rate; provided, however, that upon the occurrence of a Tranche
Rate Lock Event with respect to any Tranche, any remaining Scheduled Payments
due under a Contract in such Tranche shall be rediscounted using the Discount
Rate applicable to Contracts in a Fixed Rate Tranche.
Discounted Contract Balance: With respect to any Contract, as of any date of
determination, the present value of all remaining Scheduled Payments becoming
due under such Contract after such date discounted monthly at the applicable
Discount Rate.
The "Discounted Contract Balance" for each Contract shall be calculated
assuming:
(a) all payments due in any Monthly Period as due on the last day
of the Monthly Period;
(b) payments are discounted on a monthly basis using a 30 day month
and a 360 day year; and
(c) all security deposits and drawings under letters of credit, if
any, issued in support of a Contract are applied to reduce Scheduled
Payments in inverse order of the due date thereof.
Early Termination Contracts: Any Contract that the Servicer has allowed the
related Obligor to terminate prior to the date on which the final Scheduled
Payment is due thereunder.
Eligible Assignee: (a) A Person whose short-term unsecured debt rating is at
least A-1 from S&P and P-1 from Moody's, or whose obligations under this
Agreement are guaranteed by a Person whose short-term rating is at least A-1
from S&P and P-1 from Moody's, or (b) such other Person satisfactory to VFCC,
the Deal Agent and each of the rating agencies rating the Commercial Paper Notes
and approved, in writing, by the Seller; provided, however, that no such
approval shall be required in the event any Investor is required by any rating
agency rating VFCC's commercial paper notes or by any regulatory agency to make
an assignment.
Eligible Contract: On any Determination Date, each Contract with respect to
which each of the following is true:
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(a) the information delivered under the Purchase Agreement with respect
to the Contract and the Equipment subject to the Contract is true and correct in
all material respects;
(b) immediately prior to the transfer hereunder of the Contract, the
Contract was owned by the Seller free and clear of any Adverse Claim;
(c) no Scheduled Payment related to the Contract is (i) more than 30
days delinquent, (ii) a payment as to which the Servicer has failed to make a
Servicer Advance, (iii) a payment as to which the related Equipment has been
repossessed or (iv) a payment as to which the related Equipment has been
charged-off in accordance with the Credit and Collection Policies of the
Servicer;
(d) the Contract is not a Defaulted Contract;
(e) such Contract complies with the Credit and Collection Policies of
the Originator and the Servicer and has not been rewritten, excluded or
otherwise modified, except in accordance with the Credit and Collection
Policies;
(f) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in all material respects in accordance with its terms
(except as may be limited by applicable Insolvency Laws and the availability of
equitable remedies);
(g) the Contract is not and does not provide for any rights of
rescission, setoff, counterclaim or defense and no such rights have been
asserted or threatened with respect to the Contract;
(h) the Contract, at the time it is sold to VFCC does not violate the
laws of the United States or any state in any manner which would create
liability for any Purchaser or which would materially and adversely affect the
enforceability or collectibility of such Contract;
(i) the Contract and any related Equipment have not been sold,
transferred, assigned or pledged by the Seller to any other Person and, with
respect to a Contract that is a "true lease," any Equipment related to such true
lease is owned by the Seller free and clear of any Liens of any third parties
(except for any Permitted Liens) and (ii) the Deal Agent, as agent for the
Secured Parties has a fully perfected Lien of the first priority in the Contract
and in any related Equipment;
(j) the Contract constitutes chattel paper, an account, an instrument
or a general intangible as defined under the UCC and if the Contract constitutes
"chattel paper" for purposes of the UCC, there is not more than one "secured
party's original" counterpart of the Contract;
(k) all filings necessary to evidence the conveyance or transfer to the
Deal Agent of the Contract and a first priority security interest in the related
Equipment have been made in all appropriate Jurisdictions;
(l) the Obligor is not the subject of bankruptcy or other insolvency
proceedings;
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(m) the Obligor's billing address is in the United States, and the
Contract is a U.S. dollar-denominated obligation;
(n) the Contract does not require the prior written consent of an
Obligor or contain any other restriction on the transfer or assignment of the
Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Initial Purchase Date, with respect to an Existing
Contract, or the Addition Date, with respect to an Additional Contract);
(o) the obligations of the related Obligor to the Seller under the
Contract are irrevocable, unconditional and non-cancelable (without the right to
set off for any reason and net of any maintenance or cost per copy charges);
(p) no adverse selection procedure was used in selecting the Contract
for the Asset Pool;
(q) the Obligor under the Contract is required to maintain casualty
insurance or to self-insure with respect to the related Equipment in accordance
with the Servicer's Credit and Collection Policies;
(r) the Contract is not a "consumer lease" as defined in Section
2A-103(l)(e) of the UCC;
(s) the Contract is not subject to any guarantee by the Servicer nor
has the Seller or the Originator established any specific credit reserve with
respect to the related Obligor;
(t) the Contract provides that (i) the Originator, the Seller or the
Servicer may accelerate all remaining Scheduled Payments if the Obligor is in
default under any of its obligations under such Contract and (ii) the Obligor
thereof may not elect to utilize its security deposit to offset any remaining
Scheduled Payment;
(u) the Obligor under the Contract is required to maintain the
Equipment in good working order, subject to reasonable wear and tear, and bear
all costs of operating the Equipment (including the payment of Taxes);
(v) no provision of such Contract provides for a Prepayment Amount less
than the amount calculated in accordance with the definition of Prepayment
Amount;
(w) the Contract has not been terminated as a result of a Casualty Loss
to the related Equipment or for any other reason;
(x) the Discounted Contract Balance of such Contract, when aggregated
with the Discounted Contract Balance of each other Contract having the same
Obligor, does not exceed the Portfolio Concentration Criteria;
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(y) the Discounted Contract Balance of such Contract does not include
the amount of any security deposit held by the Servicer or the Seller;
(z) such Contract provides that in the event of a Casualty Loss, the
Obligor is required to pay an amount not less than the present value of all
remaining Scheduled Payments discounted at the applicable Discount Rate plus any
past due amounts as of the date of determination;
(aa) the Obligor thereunder has represented to the Originator that such
Obligor has accepted the related Equipment and has had a reasonable opportunity
to inspect and test such Equipment and the Originator has not been notified of
any defects therein;
(bb) all payments in respect of a Contract will be made free and clear
of, and without deduction or withholding for or on account of, any Taxes, unless
such withholding or deduction is required by law;
(cc) except as otherwise noted in the Contract, such Contract provides
for Scheduled Payments to be made on a regular periodic basis and without any
balloon or lump sum payment;
(dd) the Obligor of such Contract is not an Affiliate of the Originator
or Servicer;
(ee) the Obligor thereunder is in possession of the Equipment related
to such Contract and the Obligor is the end-user of the Equipment and is not
sub-leasing such Equipment to any other sub-obligor;
(ff) any Equipment related to such Contract consisting of titled
vehicles shall be titled in the name of the Deal Agent, as agent for the Secured
Parties; and
(gg) the Source of such Contract is not Danco Leasing or any Affiliate
thereof.
Equipment: The tangible assets financed or leased, as applicable, by an Obligor
pursuant to a Contract, including software only.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
ERISA Affiliate: (a) Any corporation which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as the
Seller; (b) A trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Code) with the Seller or
(c) A member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.
Eurocurrency Liabilities: As defined in Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
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Eurodollar Disruption Event: The occurrence of any of the following: (a) a
determination by a Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of one or more of
the Reference Banks to furnish timely information for purposes of determining
the Adjusted Eurodollar Rate, (c) a determination by a Purchaser that the rate
at which deposits of United States dollars are being offered to such Purchaser
in the London interbank market does not accurately reflect the cost to such
Purchaser of making, funding or maintaining any Purchase or (d) the inability of
a Purchaser to obtain United States dollars in the London interbank market to
make, fund or maintain any Purchase.
Eurodollar Reserve Percentage: Of any Reference Bank for any period, for any
Capital means the percentage applicable during such period (or, if more than one
such percentage shall be so applicable, the daily average of such percentages
for those days in such period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for such Reference Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having
a term of one, two or three months, as applicable based upon the related LIBOR
Rate.
Excluded Amounts: (a) Any collections on deposit in the Collection Account or
otherwise received by the Servicer on or with respect to the Asset Pool, which
collections are attributable to any Taxes, fees or other charges imposed by any
Governmental Authority, (b) any collections representing reimbursements of
insurance premiums or payments for services that were not financed by the
Originator, (c) any collections with respect to Contracts retransferred or
substituted for with respect to a Warranty Event, or otherwise replaced by a
Substitute Contract, and (d) any late fees, insufficient funds charges,
inspection charges, collection fees, delinquency fees, repossession fees or UCC
fees, extension fees, documentation fees, maintenance fees, insurance fees, and
liquidation fees.
Existing Contracts: The Contracts purchased by the Seller under the Purchase
Agreement and owned by the Seller on the Initial Purchase Date.
Federal Funds Rate: For any period, a fluctuating interest rate per annum equal
for each day during such period to the weighted average of the federal funds
rates as quoted by First Union and confirmed in H.15 or any successor or
substitute publication selected by First Union (or, if such day is not a
Business Day, for the next preceding Business Day), or, if, for any reason, such
rate is not available on any day, the rate determined, in the sole opinion of
First Union, to be the rate at which federal funds are being offered for sale in
the national federal funds market at 9:00 A.M. Charlotte, North Carolina time.
Federal Leasing: Federal Leasing Corp., a New Jersey corporation.
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Fee Letter: The letter agreement, the Closing Date, among the Seller, the
Originator and the Deal Agent, setting forth, among other things, the
Structuring Fee, the Program Fee and the Dealer Fee.
Filing Requirements: (a) With respect to each Contract relating to Equipment
with an Original Equipment Cost of $25,000 or more, a UCC-1 financing statement
against the Equipment, naming the Obligor as debtor and related Originator as
secured party, and (b) with respect to each Contract relating to Equipment with
an Original Equipment Cost of $25,000 or more for which the related Source has
filed a UCC-1 financing statement naming the Obligor as debtor, a UCC-3
financing statement assigning the Source's lien on the Equipment to the related
Originator as secured party.
First Union: First Union National Bank, in its individual capacity, and its
successors or assigns.
Fixed Period: For any Payment Date the period beginning on, and including the
16th day of the immediately preceding calendar month (or, with respect to the
first Fixed Period, the Closing Date) and ending on, and including the 15th day
of the calendar month in which such Payment Date occurs.
Fixed Rate Contracts: All Contracts in a Fixed Rate Tranche.
Fixed Rate Tranche: Any one or more Contracts as to which a Tranche Rate Lock
Event has occurred and as to which the Servicer has identified a Hedging
Agreement.
Floating Rate Tranche: All Contracts as to which a Tranche Rate Lock Event has
not occurred.
GAAP: Generally accepted accounting principles as in effect from time to time
the United States.
Governmental Authority: With respect to any Person, any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
such Person.
H.15: Federal Reserve Board Statistical Release H.15.
Hedge Breakage Costs: For any Hedge Transaction, any amount payable by the
Seller for the early termination of that Hedge Transaction or any portion
thereof.
Hedge Counterparty: Any entity which (a) on the date of entering into any Hedge
Transaction (i) is an interest rate swap dealer that is either a Purchaser or an
Affiliate of a Purchaser, or has been approved in writing by the Deal Agent
(which approval shall not be unreasonably withheld), and (ii) has a long-term
unsecured debt rating of not less than "A" by S&P and not less than "A-2" by
Moody's ("Long-term Rating Requirement") and a short-term unsecured debt rating
of not less than "A-1" by S&P and not less than "P-1" by Moody's ("Short-term
Rating Requirement"), and (b) in a Hedging Agreement (i) consents to the
assignment of the Seller's rights under the Hedging Agreement to the Deal Agent
pursuant to Section 5.4(c) and (ii) agrees that in the event that Moody's or S&P
reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, or reduces its short-term unsecured debt rating below the
Short-term Rating Requirement, it shall transfer its rights and obligations
under each Hedging Transaction to another entity that meets the requirements of
clause (a) and (b) hereof and has entered into a Hedging Agreement with the
Seller on or prior to the date of such transfer.
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Hedge Notional Amount: For any Purchase, the aggregate notional amount in effect
on any day under all Hedge Transactions entered into pursuant to Section 5.4 for
that Purchase.
Hedge Rate: For any Contract to which a Purchase relates, the "Fixed Rate" of
the Hedge Transaction to be used in computing the Discount Rate of that
Contract.
Hedge Transaction: Each interest rate swap transaction between the Seller and a
Hedge Counterparty which is entered into pursuant to Section 5.4 and is governed
by a Hedging Agreement.
Hedging Agreement: Each agreement between the Seller and a Hedge Counterparty
which governs one or more Hedge Transactions entered into pursuant to Section
5.4, which agreement shall consist of a "Master Agreement" in a form published
by the International Swaps and Derivatives Association, Inc., together with a
"Schedule" thereto substantially in the form of Exhibit H hereto or such other
form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
Increased Costs: Any amounts required to be paid by the Seller to an Affected
Party pursuant to Section 2.14.
Incremental Purchase: Any Purchase that increases the aggregate outstanding
Capital hereunder.
Indebtedness: With respect to any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (e) all indebtedness, obligations or liabilities of that Person in respect
of Derivatives.
Indemnified Amounts: As defined in Section 8.1.
Indemnified Persons: As defined in Section 6.19.
Ineligible Contract: As defined in Section 5.5.
Initial Purchase Date: The Business Day that is two (2) Business Days after the
Closing Date.
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Insolvency Event: With respect to a specified Person, (a) the filing of a decree
or order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable Insolvency Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States of America and all
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.
Instrument: Any "instrument" (as defined in Article 9 of the UCC), other than an
instrument which constitutes part of chattel paper.
Insurance Policy: With respect to any Contract, an insurance policy covering
physical damage to or loss of the related Equipment.
Insurance Proceeds: Depending on the context, any amounts payable or any
payments made, to the Servicer under any Insurance Policy.
Investment: With respect to any Person, any direct or indirect loan, advance or
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
Assets pursuant to the Purchase Agreement and the Contribution Agreement and
excluding commission, travel and similar advances to officers, employees and
directors made in the ordinary course of business.
Issuer: VFCC and any other Purchaser whose principal business consists of
issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
Jurisdictions: Pennsylvania and New Jersey.
LIBOR Rate: For any day, or the preceding Business Day if such day is not a
Business Day, an interest rate per annum equal to the 30 day LIBOR rate
appearing on the Telerate Page 3750 as of 11:00 a.m. (London time) or, if no
such rate appears on such day, the average (rounded upward to the nearest
one-sixteenth (1/16) of one percent) per annum rate of interest determined by
First Union at its principal office in Charlotte, North Carolina (each such
determination, absent manifest error, to be conclusive and binding) as of such
day, to be the rate at which deposits in immediately available funds in U.S.
dollars are being, have been, or would be offered or quoted by First Union to
major banks in the interbank market for Eurodollar deposits at or about 11:00
A.M. (Charlotte, North Carolina time) on such day, for a term of one month and
in an amount approximately equal to the Capital to be funded at a rate based
upon the LIBOR Rate.
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Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge security
interest or encumbrance of any kind in respect of such Asset or (b) the interest
of a vendor or lessor under any conditional sale agreement, financing lease or
other title retention agreement relating to such Asset.
Liquidation Expenses: With respect to any Contract, the aggregate amount of all
out-of-pocket expenses reasonably incurred by the Servicer (including amounts
paid to any subservicer) and any reasonably allocated costs of internal counsel,
in each case in accordance with the Servicer's customary procedures in
connection with the repossession, refurbishing and disposition of any related
Equipment upon or after the expiration or earlier termination of such Contract
and other out-of-pocket costs related to the liquidation of any such Equipment,
including the attempted collection of any amount owing pursuant to such Contract
if it is a Defaulted Contract.
Liquidity Bank: Each liquidity bank that is from time to time a party to the
Liquidity Purchase Agreement dated as of September 30, 1998, among the
Purchaser, First Union, as liquidity agent, and each other liquidity bank a
party thereto.
Liquidity Purchase Agreement: The Liquidity Purchase Agreement, dated as of the
date hereof, between VFCC, as seller, the Investors, named therein, FCM, as deal
agent and documentation agent, FUNB, as liquidity agent.
Lock-Box: A post office box to which Collections are remitted for retrieval by a
Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.
Lock-Box Account: An account maintained for the purpose of receiving Collections
at a bank or other financial institution which has executed a Lock-Box Notice
for the purpose of receiving Collections.
Lock-Box Bank: Any of the banks or other financial institutions holding one or
more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B, among the
Seller, the Originator (if applicable) and a Lock-Box Bank.
Market Servicing Fee: As defined in Section 6.26.
Market Servicing Fee Differential: On any date of determination, an amount equal
to the positive difference between the Market Servicing Fee and the Servicing
Fee.
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Minimum Overcollateralization Percentage: Shall be: (A) 12%, or (B) after a term
securitization by the Seller or a special purpose subsidiary established by the
Seller (in the sole discretion of the Deal Agent), the greater of (i) 12%, or
(ii) the percentage equivalent of a fraction, the numerator of which is equal to
11 times the Discounted Contract Balances of all Contracts as to which all or a
portion of any one or more Scheduled Payment is 60 days or more past due as of
such date of determination and the denominator of which is the ADCB as of such
date of determination.
Monthly Period: As to any Determination Date, the calendar month ended on such
Determination Date.
Monthly Report: As defined in Section 6.13(a).
Moody's: Moody's Investors Service, Inc., and any successor thereto.
Multiemployer Plan: A "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding five years contributed to by the Seller or any ERISA Affiliate on
behalf of its employees.
Notice of Sale: A notice, substantially in the form of Exhibit A hereto,
delivered pursuant to Section 2.2 or 2.7(b).
Obligor: With respect to any Contract, the Person or Persons obligated to make
payments pursuant to a Contract, including any guarantor thereof. For purposes
of calculating any of the Portfolio Concentration Criteria, all Contracts in the
Asset Pool or to be transferred to the Asset Pool the Obligor of which is an
Affiliate of another Obligor shall be aggregated with all Contracts of such
other Obligor, for example, if Corporation A is an Affiliate of Corporation B;
and the aggregate Discounted Contract Balance of all of Corporation A's
Contracts in the Asset Pool constitutes 10% of the ADCB and the aggregate
Discounted Contract Balance of all of Corporation B's Contracts in the Asset
Pool constitutes 10% of the ADCB, the Obligor concentration for Corporation A
would be 20% and the Obligor concentration for Corporation B would be 20%.
Officer's Certificate: A certificate signed by any officer of the Seller or the
Servicer, as the case may be, and delivered to the Collateral Custodian.
Opinion of Counsel: A written opinion of counsel, who may be in-house counsel
for Seller or the Servicer and who shall be reasonably acceptable to the Deal
Agent.
Original Contract: Each Contract identified by account number and Outstanding
Balance as of the related Cut Off Date in the Contract List.
Original Equipment Cost: The amount paid for the Equipment to be leased pursuant
to a Contract by the Seller. The Original Equipment Cost includes only the cost
of the actual Equipment being leased, and not any boot collateral included
therewith.
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Originator: Individually and collectively, ABL and Federal Leasing.
Originator Assets: Any Asset that was transferred to the Seller by the
Originator.
Outstanding Balance: Of any Asset at any time, the then outstanding principal
balance thereof.
Overcollateralization: On any day, the positive difference between (i) the ADCB
on such day and (ii) the aggregate Capital on such day.
Overcollateralization Percentage: On any date of determination, the percentage
equivalent of a fraction, the numerator of which is equal to the ADCB on such
day minus the aggregate Capital outstanding on such day and the denominator of
which is equal to the ADCB on such day.
Payment Date: The 20th day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day, commencing on November 20, 1998.
Permitted Investments: Any one or more of the following types of investments:
(a) marketable obligations of the United States of America, the full
and timely payment of which are backed by the full faith and credit of the
United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
of America and which have a maturity of not more than 270 days from the date of
acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by Moody's; and,
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however that at the time such investment, or
the commitment to make such investment, is entered into, the short-term debt
rating of such depository institution or trust company shall be at least A-1 by
S&P and P-1 by Moody's.
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Permitted Liens: (a) shall mean, with respect to Contracts in the Asset Pool:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable, (ii) Liens in favor of
the Seller created pursuant to a Purchase Agreement and transferred to
the Asset Pool hereunder and (iii) Liens in favor of the Deal Agent as
agent for the Secured Parties created pursuant to this Agreement; and
(b) with respect to the related Equipment:
(i) materialmen's, warehousemen's and mechanics' liens and
other Liens arising by operation of law in the ordinary course of
business for sums not due, (ii) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable,
(iii) Liens in favor of the Seller and ABFS Residual created pursuant
to a Contribution Agreement and transferred to the Asset Pool hereunder
and (iv) Liens in favor of the Deal Agent as agent for the Secured
Parties created pursuant to this Agreement.
Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
Pledge and Security Agreement: The Pledge and Security Agreement, dated as of
the date hereof, between ABFS Residual and FCM.
Pool Asset: On any day any Asset in the Asset Pool.
Portfolio Concentration Criteria: The following concentration limitations at all
times measured on the basis of percentage of ADCB:
(a) the sum of the Discounted Contract Balances of Contracts relating
to any one individual Obligor is limited to the greater of (i) $450,000 and (ii)
1.5% of the ADCB on such day;
(b) the Contract has a remaining term to maturity of not greater than
60 months, provided, however, that up to 5% (by ADCB) may have a remaining term
to maturity of not greater than 84 months;
(c) the sum of the Discounted Contract Balances of the 25 Obligors with
the largest aggregate Discounted Contract Balances is limited to 15% of the
ADCB;
(d) the sum of the Discounted Contract Balances of Contracts whose
Obligors (including its Affiliates) located in any one state is limited to 10%
of the ADCB (with the exception of the state of California which is limited to
30% of the ADCB and the state of Florida which is limited to 15% of the ADCB);
(e) the sum of the Discounted Contract Balances of Contracts whose
Obligors are municipalities or other government related organizations is limited
to 1% of the ADCB;
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(f) the sum of the Discounted Contract Balances of Contracts the
payment terms of which are non-monthly is limited to 5% of the ADCB;
(g) no one Source (including its Affiliates) has originated more than
5% of the ADCB, except as consented to by the Deal Agent, and no more than 25%
of the ADCB will be originated by Sources;
(h) each Contract was either originated by an Originator or acquired by
an Originator from a Source;
(i) not more than 2% of the ADCB of the Contracts will represent
software only Contracts;
(j) as of any Cut Off Date, no Contract has a final Scheduled Payment
which is more than five times the amount of the regular Scheduled Payments on
such Contract;
(k) none of the Contracts relating to surveillance Equipment are
Contracts for which the related Originator is responsible for the provision of
maintenance services to or on behalf of the related Obligor; and
(l) the sum of the Discounted Contract Balances of Contracts whose
Obligors (including its Affiliates) are located in any territories of the United
States, governed by United States law, is limited to 1% of the ADCB;
(m) less than 1.5% of the Contracts by ADCB relate to Equipment which
is restaurant equipment;
(n) less than 0.5% of the Contracts by ADCB relate to Equipment which
is signs; and
(o) less than 5% of the Contracts by ADCB relate to Equipment which is
used equipment.
Prepaid Contract: Any Contract that has terminated or been prepaid in full prior
to its scheduled expiration date (including because of a Casualty Loss), other
than a Defaulted Contract.
Prepayment Amount: As specified in Section 6.2(b).
Prepayments: Any and all (i) partial and full prepayments on a Contract
(including, with respect to any Contract and any Monthly Period, any Scheduled
Payment or portion thereof which is due in a subsequent Monthly Period which the
Servicer has received, and expressly permitted the related Obligor to make, in
advance of its scheduled due date, and which will be applied to such Scheduled
Payment on such due date), (ii) cash proceeds or rents realized from the sale,
lease, re-lease or re-financing of Equipment under a Prepaid Contract, net of
Liquidation Expenses, and (iii) Recoveries.
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Prime Rate: The rate announced by First Union from time to time as its prime
rate in the United States, such rate to change as and when such designated rate
changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.
Program Fee: The fee set forth as the "Program Fee" in the Fee Letter.
Program Fee Rate: The rate set forth as the "Program Fee Rate" in the Fee
Letter.
Purchase: A purchase by a Purchaser of an undivided interest in the Assets from
the Seller pursuant to Article II, including without limitation, the remittance
by the Servicer to the Seller of Collections of Pool Assets pursuant to Section
2.7(b).
Purchase Agreement: The Purchase and Sale Agreement, dated as of the date
hereof, between the Originator and the Seller, as amended, modified,
supplemented or restated from time to time.
Purchase Certificate: Each certificate, in the form of Exhibit G, delivered on
the date of the Initial Purchase and on the date of each Incremental Purchase.
Purchase Date: The Initial Purchase Date, and as to any Incremental Purchase,
any Business Day that is (i) at least five (5) Business Days immediately
following the receipt by the Deal Agent of a written request by the Seller to
sell an Asset Interest, such notice to be in the form of Exhibit A hereto and to
conform to requirements of Section 3.2 hereof, and (ii) within two (2) Business
Days of the satisfaction of all the conditions set forth in this Agreement for
such Purchase, including but not limited to Sections 2.2 and 3.2.
Purchase Limit: At any time, $100,000,000, on or after the Termination Date, the
"Purchase Limit" shall mean the then aggregate outstanding Capital.
Purchasers: Collectively, VFCC and the Investors and any other Person that
agrees, pursuant to the pertinent Assignment and Acceptance, to purchase an
Asset Interest pursuant to this Agreement.
Qualified Institution: As defined in Section 6.2.
Rating Agency: Each of Standard & Poor's, Moody's and any other rating agency
that has been requested to issue a rating with respect to the Commercial Paper
Notes.
Records: All Contracts and other documents, books, records and other information
(including without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) maintained with
respect to Assets and the related Obligors which the Seller has itself
generated, in which the Seller has acquired an interest pursuant to the Purchase
Agreement or in which the Seller has otherwise obtained all interest.
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Recoveries: With respect to a Defaulted Contract, proceeds from the sale, lease,
re-lease or refinancing of the Equipment, proceeds of any related Insurance
Policy and any other recoveries with respect to such Defaulted Contract and the
related Equipment and related property, and other amounts representing late fees
and penalties net of Liquidation Expenses and amounts, if any, so received that
are required to be refunded to the Obligor on such Contract.
Reference Bank: Any bank which furnishes information for purposes of determining
the Adjusted Eurodollar Rate.
Register: As defined in Section 10.1(c).
Related Security: With respect to any Contract included as part of the Asset
Pool (i) all of the Seller's right, title and interest in and to the Contract or
other agreements that relate thereto (including each master lease to the extent
it relates to any Contract in the Asset Pool), (ii) all of the Seller's interest
in the Equipment related to such Contract, (iii) all of the Seller's right,
title and interest in all security interests or liens and property subject
thereto from time to time purporting to secure payment of such Contract,
including any security deposits and prepaid rent, (iv) all UCC financing
statements covering any collateral securing payment of such Contract, (v) all of
the Seller's right, title and interest in all guarantees and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Contract, and (vi) all of the Seller's rights or claims with
respect thereto under the Purchase and Sale Agreement. Related Security shall
not include any Excluded Amounts.
Replaced Contract: As defined in Section 2.17(a).
Reporting Date: The 18th day of the month or the first Business Day thereafter.
Required Investors: At a particular time, Investors with Commitments in excess
of 66 2/3 % of the Purchase Limit.
Required Reports: Collectively, the Monthly Report, the Servicer's Certificate
and the quarterly financial statement of the Servicer required to be delivered
to the Deal Agent pursuant to Section 6.13(c) hereof.
Requirements of Law: For any Person shall mean the certificate of incorporation
or articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
Reserve Percentage: For any day, a fraction, expressed as a percentage, the
numerator of which is the Minimum Overcollateralization Percentage and the
denominator of which is 100% minus the Minimum Overcollateralization Percentage.
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Reserves: As to any Asset Interest on any day, an amount equal to the Reserve
Percentage multiplied by the Capital of such Asset Interest as of the close of
business of the Deal Agent on such day.
Residual Proceeds: With respect to any Contract or any item of Equipment, the
net proceeds for the sale, re-lease or other disposition of the equipment upon
the expiration, or early termination, of the term of such Contract.
Responsible Officer: As to any Person, any officer of such Person with direct
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Restricting Event: As defined in Section 7.2.
Retransfer Date: As defined in Section 5.6.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
Scheduled Payments: On any Determination Date with respect to any Contract, each
monthly, quarterly, annual or seasonal rent or financing (whether principal or
principal and interest) payment scheduled to be made by the Obligor thereof
after such Determination Date under the terms of such Contract.
Secured Party: (i) Each Purchaser and (ii) each Hedge Counterparty that is
either a Purchaser or an Affiliate of a Purchaser if that Affiliate is a Hedge
Counterparty executes a counterpart of this Agreement agreeing to be bound by
the terms of this Agreement applicable to a Secured Party.
Seller: American Business Lease Funding Corporation, or any permitted successor
thereto.
Servicer: American Business Leasing, Inc. and its permitted successors and
assigns.
Servicer Advance: An advance of Scheduled Payments made by the Servicer pursuant
to Section 6.3.
Servicer Default: As specified in Section 6.24.
Servicer's Certificate: As defined in Section 6.13(b).
Servicing Fee: As specified in Section 2.13(a).
Servicing Fee Rate: A rate equal to 0.50% per annum.
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Solvent: As to any Person at any time, having a state of affairs such that all
of the following conditions are met: (a) the fair value of the property of such
Person is greater than the amount of such Person's liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy
Code; (b) the present fair salable value of the property of such Person in an
orderly liquidation of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.
Source: A third party from whom the Originator acquired the Contracts.
Source Agreement: An agreement between the Originator and a Source pursuant to
which the Originator acquired all right, title and interest of the Source in and
to a Contract and related Equipment.
Source Agreement Rights: Any and all rights of the Originator under the Source
Agreement with respect to such Source to the extent such Source Agreement
relates to any Contract and any Equipment covered by the Contracts.
Structuring Fee: The structuring fee agreed to between the Seller and the Deal
Agent in the Fee Letter.
Substitute Contract: On any day, an Eligible Contract which meets each of the
conditions for substitution set forth in Section 2.17.
Successor Servicer: As defined in Section 6.25(a).
Taxes: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any government or other taxing authority.
Termination Date: The earliest of (a) the date of termination of the Purchase
Limit pursuant to Section 2.3, (b) the date of the occurrence of a Restricting
Event pursuant to Section 7.2, (c) the date the Liquidity Purchase Agreement
shall cease to be in full force and effect, and (d) Commitment Termination Date.
Termination Notice: As defined in Section 6.24.
Tranche: The Floating Rate Tranche or any Fixed Rate Tranche, as the context may
require.
Tranche Rate Lock Date: The date that is no more than two (2) Business Days
after the occurrence of any Tranche Rate Lock Event.
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Tranche Rate Lock Event: The occurrence of any of the following events: (i) the
Adjusted Eurodollar Rate, as of any date of determination, plus 1.75% is greater
than or equal to the Discount Rate with respect to such Tranche, (ii) the three
year treasury rate plus 1.25% is greater than or equal to the Discount Rate with
respect to such Tranche, (iii) the designation of a date by the Seller provided
that the Deal Agent and Purchasers shall receive written notice at least two (2)
Business Days prior to the date designated by the Seller, or (iv) a Restricting
Event.
Transaction: As defined in Section 3.2.
Transaction Documents: This Agreement, the Purchase Agreement, the Contribution
Agreement, the Liquidity Purchase Agreement, the Pledge and Security Agreement
and any additional document the execution of which is necessary or incidental to
carrying out the terms of the foregoing documents.
Transition Costs: The reasonable costs and expenses incurred by the Backup
Servicer in transitioning to Servicer; provided, that in no event shall such
costs exceed $50,000 in the aggregate.
Treasury Rate: With respect to each Tranche, the interpolated treasury rate
based on the weighted average life of such Tranche. The treasury rates to be
used in the calculation shall be obtained from Bloomberg's "PX1" screen at 11:00
a.m. New York City time two (2) Business Days preceding such Purchase Date.
UCC: The Uniform Commercial Code as from time to time in effect in the specified
jurisdiction.
United States: The United States of America.
Unreimbursed Servicer Advances: At any time, the amount of all previous Servicer
Advances (or portions thereof) as to which the Servicer has not been reimbursed
as of such time pursuant to Section 2.7 and which the Servicer has determined in
its sole discretion will not be recoverable from Collections with respect to the
related Contract.
Warranty Event: As to any Pool Asset, the occurrence and continuance of a
material breach of any representation or warranty relating to such Contract.
Yield: For each Asset Interest for any Fixed Period, the sum of the products
(for each day during such Fixed Period) of:
YR x C x 1
---
360
where:
C = the Capital of such Asset Interest.
YR = the Yield Rate applicable on such day.
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provided, however that (i) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (ii) Yield shall not be considered paid by any distribution
if at any time such distribution is rescinded or must otherwise be returned for
any reason.
Yield Rate: With respect to any Fixed Period and for each Asset
Interest purchased by a Purchaser for each day during such period, a rate equal
to the daily Adjusted Eurodollar Rate; provided, however, the Yield Rate shall
be the Base Rate if the relevant Lender shall have notified the Deal Agent that
a Eurodollar Disruption Event has occurred.
Section 1.2 Other Terms.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
Section 1.3 Computation of Time Periods.
Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 Purchases of Asset Interests.
(a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date during the period from the date hereof to but not including
the Termination Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf of
the Investors, Asset Interests from time to time during the period from the date
hereof to but not including the Termination Date. Under no circumstances shall
any Purchaser make the initial Purchase or any Incremental Purchase if, after
giving effect to such Purchase or Incremental Purchase, the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit. Each Asset Interest purchased by any Purchaser hereunder is
subject to the interests of the Hedge Counterparties under Sections 2.7(a)(i),
2.8(a)(i) and 2.9 (b)(i) of this Agreement.
(b) The Seller may, within 60 days, but no later than 45 days, prior to
the then existing Commitment Termination Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Commitment
Termination Date for an additional period of 364 days. The Deal Agent will give
prompt notice to VFCC and each of the Investors of its receipt of such request
for extension of the Commitment Termination Date. VFCC and each Investor shall
make a determination, in their sole discretion and after a full credit review,
not less than 15 days prior to the then applicable Commitment Termination Date
as to whether or not it will agree to extend the Commitment Termination Date;
provided, however, that the failure of VFCC or any Investor to make a timely
response to the Seller's request for extension of the Commitment Termination
Date shall be deemed to constitute a refusal by VFCC or the Investor, as the
case may be, to extend the Commitment Termination Date. The Commitment
Termination Date shall only be extended upon the consent of both (i) VFCC and
(ii) 100% of the Investors.
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Section 2.2 The Initial Purchase, Subsequent Purchases and Incremental
Purchases.
(a) Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has occurred,
each of the Purchasers and the Deal Agent, in accordance with their respective
interests, shall assign and transfer to the Seller their respective remaining
interest in Asset Interests to the Seller free and clear of any Adverse Claim
resulting solely from an act or omission by a Purchaser or the Deal Agent, but
without any other representation or warranty, express or implied.
(b) The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit G hereto,
after receipt by the Purchaser of a Notice of Sale delivered by the Seller to
the Deal Agent (with a copy to the Collateral Custodian) at least five (5)
Business Days prior to such proposed Purchase Date and each such notice shall
specify (i) the aggregate amount of such initial Purchase or Incremental
Purchase which amount must satisfy the applicable minimum requirement set forth
in the following sentence and (ii) the date of such Purchase or Incremental
Purchase. The Seller may deliver up to two notices in a calendar month (or more
frequently subject to the prior written consent of the Deal Agent), and each
amount specified in any such notice must satisfy the following minimum
requirements, as applicable, as a condition to the related Purchase the initial
Purchase and each Incremental Purchase hereunder shall be in an amount equal to
$1,000,000 or an integral multiple of $1.00 in excess thereof. Following receipt
of such notice, the Deal Agent will consult with VFCC in order to assist VFCC in
determining whether or not to make the Purchase. If VFCC declines to make a
proposed Purchase, the initial Purchase or Incremental Purchase will be made by
the Investors. On the date of such Purchase or Incremental Purchase, as the case
may be, VFCC or each Investor shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day
funds, at such bank or other location reasonably designated by Seller in its
Notice of Sale given pursuant to this Section 2.2(b), an amount equal to (i) the
Capital of the Asset Interest related to such initial Purchase or Incremental
Purchase, as the case may be, in the case of a purchase by VFCC or (ii) such
Investor's pro rata share of the Capital related to such Asset Interest, in the
case of a Purchase by the Investors.
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Section 2.3 Reduction of the Purchase Limit; Repurchase.
The Seller may, upon at least five (5) Business Days' notice to the
Deal Agent, terminate in whole or reduce in part the portion of the Purchase
Limit that exceeds the sum of the aggregate Capital and Yield accrued and to
accrue thereon, and the Commitments of the Investors shall be reduced
proportionately; provided, however, that each partial reduction of the Purchase
Limit shall be in an aggregate amount equal to $1,000,000 or an integral
multiple thereof. Each notice of reduction or termination pursuant to this
Section 2.3 shall be irrevocable.
Section 2.4 Determination of Yield.
The Deal Agent shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Payment Date) to be paid on each Payment Date
for the Fixed Period and shall advise the Servicer thereof on the first Business
Day after the Fixed Period.
Section 2.5 [reserved].
Section 2.6 Dividing or Combining Asset Interests.
The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by such Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest of
such Purchaser with another portion of an Asset Interest of such Purchaser with
a Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of such Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.
Section 2.7 Non-Liquidation Settlement Procedures.
The provisions of this Section 2.7 shall apply during the term of this
Agreement prior to the occurrence of the Termination Date.
(a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds, and
(ii) a Servicer Advance if made pursuant to Section 6.3, the following amounts
in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
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(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in amount equal to any accrued
and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid by ABL, to the Backup
Servicer, in an amount equal to any accrued and unpaid Backup Servicing
Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid by ABL, to the Collateral
Custodian, in an amount equal to any accrued and unpaid Custodial Fee,
for the payment thereof;
(vii) SEVENTH, to the Deal Agent for the ratable payment to
each Purchaser, in an amount equal to any accrued and unpaid Program
Fee, Dealer Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in respect
thereof;
(ix) NINTH, to the extent not paid by ABL, to the Backup
Servicer and to the Collateral Custodian, and to any Successor
Servicer, as applicable, in an amount equal to any accrued and unpaid
Transition Costs, Backup Servicer Expenses, Collateral Custodian
Expenses, and Market Servicing Fee Differential, for the payment
thereof;
(x) TENTH, to the extent that funds are available, any
remaining amounts may be reinvested in Eligible Contracts; provided,
however, that if the aggregate Capital exceeds the lesser of (i) the
Capital Limit, or (ii) the Purchase Limit an amount equal to such
excess shall be paid to the Deal Agent to pay down Capital outstanding;
(xi) ELEVENTH, to the extent funds are available to satisfy
any unpaid Indemnified Amounts, amounts required to be paid by the
Seller pursuant to the indemnification provisions of Section 8.1 and
any other amounts due hereunder; and
(xii) TWELFTH, any remaining amount shall be distributed to
the Seller.
(b) Notwithstanding anything to the contrary contained in this Section
2.7 or any other provision in this Agreement, if on any Business Day prior to
the Termination Date the Overcollateralization Percentage is less than the
Minimum Overcollateralization Percentage then, prior to any reinvestment of
funds as set forth in item TENTH of Section 2.7(a) and in any event no later
than the close of business of the Deal Agent on the third succeeding Business
Day, a Notice of Sale shall be delivered by the Seller to the Deal Agent which
will result in an increase in the Overcollateralization Percentage to an amount
equal to the Minimum Overcollateralization Percentage.
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Section 2.8 Settlement Procedures Following The Commitment Termination
Date.
The provisions of this Section 2.8 shall apply during the term of this
Agreement after the occurrence of the Commitment Termination Date; provided that
no other Restricting Event has occurred:
(a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds, and
(ii) a Servicer Advance if made pursuant to Section 6.3, the following amounts
in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in amount equal to any accrued
and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid by ABL, to the Backup
Servicer, in an amount equal to any accrued and unpaid Backup Servicing
Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid by ABL, to the Collateral
Custodian, in an amount equal to any accrued and unpaid Custodial Fee,
for the payment thereof;
(vii) SEVENTH, to the Deal Agent for the ratable payment to
each Purchaser, in an amount equal to any accrued and unpaid Program
Fee, Dealer Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent for the ratable payment to
each Purchaser in reduction of aggregate Capital to an amount equal to
the lesser of (i) the Capital Limit or (ii) the Purchase Limit;
(ix) NINTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in respect
thereof;
(x) TENTH, to the extent not paid by ABL, to the Backup
Servicer, to the Collateral Custodian, and to any Successor Servicer,
as applicable, in an amount equal to any accrued and unpaid Transition
Costs, Backup Servicer Expenses, Collateral Custodian Expenses, and
Market Servicing Fee Differential, for the payment thereof;
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(xi) ELEVENTH, to the extent funds are available to satisfy
any unpaid Indemnified Amounts, amounts required to be paid by the
Seller pursuant to the indemnification provisions of Section 8.1 and
any other amounts due hereunder; and
(xii) TWELFTH, any remaining amount shall be distributed to
the Seller
Section 2.9 Settlement Procedures Following a Termination Date.
The provisions of this Section 2.9 shall apply during the term of this
Agreement after the occurrence of the Termination Date:
(a) [reserved].
(b) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent available funds and (ii)
a Servicer Advance if made or required pursuant to Section 6.3, the following
amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any accrued and
unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any accrued and
unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid by ABL, to the Backup Servicer,
in an amount equal to any accrued and unpaid Backup Servicing Fee, for
the payment thereof;
(vi) SIXTH, to the extent not paid by ABL, to the Collateral
Custodian, in an amount equal to any accrued and unpaid Custodial Fee,
for the payment thereof;
(vii) SEVENTH, to the Deal Agent, in an amount equal to any accrued
and unpaid Program Fee, Dealer Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid Increased
Costs and/or Taxes, for payment to the Purchasers in respect thereof;
(ix) NINTH, to the extent not paid by ABL, to the Backup Servicer,
to the Collateral Custodian, and to any Successor Servicer, as
applicable, in an amount equal to any accrued and unpaid Transition
Costs, Backup Servicer Expenses, Collateral Custodian Expenses, and
Market Servicing Fee Differential, for the payment thereof;
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(x) TENTH, to the Deal Agent for payment to the Purchasers in
reduction of aggregate Capital;
(xi) ELEVENTH, to the extent funds are available to satisfy any
unpaid Indemnified Amounts required to be paid by the Seller pursuant
to the indemnification provisions of Section 8.1, and any other amounts
due hereunder; and
(xii) TWELFTH, upon reduction of the Capital to zero and the
payment in full of the Aggregate Unpaids, any remaining amount shall be
distributed to the Seller.
(c) If at any time on or after the occurrence of a Restricting Event,
the Deal Agent or the Seller determines that as of the close of business on the
day immediately preceding the Termination Date the outstanding amount of Capital
exceeded the lesser of (i) the Purchase Limit, or (ii) the Capital Limit, then
the Seller shall immediately remit to the Deal Agent, for the benefit of the
Purchasers, a payment (to be applied by the Deal Agent to outstanding Capital
allocated to Monthly Periods selected by the Deal Agent, in its reasonable
discretion) in such amount as may be necessary to reduce the amount of Capital
to the lesser of (i) the Purchase Limit, or (ii) the Capital Limit as of the
close of business on the date immediately preceding the Restricting Event.
Section 2.10 Collections and Allocations.
(a) Collections. The Servicer shall transfer, or cause to be
transferred, all Collections on deposit in the form of available funds in the
Lock Box Account to the Collection Account by the close of business on Tuesday
and Thursday during each calendar week in which such Collections are received in
the Lock Box Account. The Servicer shall promptly (but in no event later than
two Business Days after the receipt thereof) deposit all Collections received
directly by it in the Collection Account. The Servicer shall make such deposits
or payments on the date indicated by wire transfer, in immediately available
funds.
(b) Initial Deposits. On the Initial Purchase Date and on each Addition
Date thereafter, the Servicer will deposit (in immediately available funds) into
the Collection Account all Collections received after the applicable Cut Off
Date and through and including the Initial Purchase Date or Addition Date, as
the case may be, in respect of Contracts being transferred to the Asset Pool on
such date.
(c) Excluded Amounts. The Servicer may withdraw from the Collection
Account any Collections constituting Excluded Amounts if the Servicer has, prior
to such withdrawal, delivered to the Deal Agent a report setting forth the
calculation of such Excluded Amounts in a format reasonably satisfactory to the
Deal Agent.
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Section 2.11 Payments, Computations, Etc.
(a) Unless otherwise expressly provided herein, all amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be paid or deposited
in accordance with the terms hereof no later than 11:00 A.M. (Charlotte, North
Carolina time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due hereunder at 1% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall be
retained by the Deal Agent except to the extent that such failure to make a
timely payment or deposit has continued beyond the date for distribution by the
Deal Agent of such overdue amount to the Secured Parties, in which case such
interest accruing after such date shall be for the account of, and distributed
by the Deal Agent to the Secured Parties. All computations of interest and all
computations of Yield and other fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of Yield, interest or any fee payable hereunder, as the
case may be.
(c) If any Purchase or Incremental Purchase requested by the Seller and
approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify such Purchaser against any reasonable loss, cost or expense
incurred by such Purchaser, including, without limitation, any loss cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Purchaser to fund or maintain such Purchase or
Incremental Purchase, as the case may be, during such Monthly Period.
Section 2.12 Optional Repurchase.
At any time following the Termination Date when the ADCB is less than
ten percent of the ADCB as of the Termination Date, the Servicer may notify the
Deal Agent in writing of its intent to purchase all remaining Assets in the
Asset Pool, provided that all Hedge Transactions have been terminated. On the
Payment Date next succeeding any such notice, the Servicer shall purchase all
such Assets for a price equal to the sum of (i) the Aggregate Unpaids, and (ii)
all accrued and unpaid Backup Servicing Fees, Collateral Custodial Fees,
Increased Costs, Taxes, Hedge Breaking Costs, Breakage Costs and any other
amounts payable by the Seller hereunder or under or with respect to any Hedging
Agreement, and the proceeds of such purchase will be deposited into the
Collection Account and paid in accordance with Section 2.9(b).
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Section 2.13 Fees.
(a) The Servicer shall be entitled to receive a fee (the "Servicing
Fee"), monthly in arrears in accordance with Section 2.7(a), 2.8(a) or 2.9(b),
as applicable, which fee shall be equal to the quotient of (a) the product of
(i) the Servicing Fee Rate and (ii) ADCB for the immediately preceding
Determination Date, and (b) 12.
(b) The Seller shall pay to the Deal Agent from the Collection Account
on each Payment Date, monthly in arrears, the Program Fee in accordance with
Section 2.7(a), 2.8(a) or 2.9(b) as applicable.
(c) The Seller shall pay to the Deal Agent from the Collection Account
on each Payment Date, monthly in arrears, the Dealer Fee in accordance with
Section 2.7(a), 2.8(a) or 2.9(b) as applicable.
(d) The Backup Servicer shall be entitled to receive the Backup
Servicing Fee in accordance with Section 2.7(a), 2.8(a) or 2.9(b) as applicable.
(e) The Collateral Custodian shall be entitled to receive the Custodial
Fee in accordance with Section 2.7(a), 2.8(a) or 2.9(b), as applicable.
(f) The Seller shall pay to the Deal Agent, on or prior to the Initial
Purchase Date, the Structuring Fee in immediately available funds.
Section 2.14 Increased Costs; Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by a
Purchaser or any Affiliate thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (A) shall subject an
Affected Party to any Tax (except for Taxes based on the overall net income or
net worth of such Affected Party), duty or other charge with respect to an Asset
Interest, or any right to make Purchases hereunder, or on any payment made
hereunder or (B) shall impose, modify or deem applicable any reserve requirement
(including, without limitation, any reserve requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve requirement,
if any, included in the determination of Yield), special deposit or similar
requirement against assets of, deposits with or for the amount of, or credit
extended by, any Affected Party or (C) shall impose any other condition
affecting an Asset Interest or a Purchaser's rights hereunder, the result of
which is to increase the cost to any Affected Party or to reduce the amount of
any sum received or receivable by an Affected Party under this Agreement, then
within ten (10) Business Days after demand by such Affected Party (which demand
shall be accompanied by a statement setting forth the basis for such demand),
the Seller shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such additional or increased
cost incurred or such reduction suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be material,
then from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
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(c) If as a result of any event or circumstance similar to those
described in clauses (a) or (b) of this section, any Affected Party is required
to compensate a bank or other financial institution providing liquidity support,
credit enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of Purchases hereunder, then
within ten days after demand by such Affected Party, the Seller shall pay to
such Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts paid by it.
(d) In determining any amount provided for in this section, the
Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this section shall submit to the Seller a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.
(e) If a Purchaser shall notify the Deal Agent that a Eurodollar
Disruption Event as described in clause (a) of the definition of "Eurodollar
Disruption Event" has occurred, the Deal Agent shall in turn so notify the
Seller, whereupon all Capital in respect of which Yield accrues at the Adjusted
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Base Rate.
(f) Notwithstanding anything to the contrary contained in this Section
2.14, an Affected Party shall provide the Seller with prompt notice of such
Affected Party becoming subject to any additional or increased cost incurred or
reduction suffered by it as described in this Section 2.14; provided, however,
the failure of such Affected Party to provide the Seller with such prompt notice
shall not relieve the Seller of its obligation to indemnify such Affected Party
hereunder.
Section 2.15 Taxes.
(a) All payments made by an Obligor in respect of a Contract and all
payments made by the Seller or the Servicer under this Agreement will be made
free and clear of and without deduction or withholding for or on account of any
Taxes, unless such withholding or deduction is required by law. In such event,
the Obligor, Seller, or Servicer (as the case may be) shall pay to the
appropriate taxing authority any such Taxes required to be deducted or withheld
and the amount payable to each Purchaser or the Deal Agent (as the case may be)
will be increased (such increase, the "Additional Amount") such that every net
payment made under this Agreement after deduction or withholding for or on
account of any Taxes (including, without limitation, any Taxes on such increase)
is not less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on a Purchaser or the Deal Agent, respectively, with
respect to payments required to be made by the Seller or Servicer under this
Agreement, by a taxing jurisdiction in which such Purchaser or Deal Agent is
organized, conducts business or is required to pay taxes as of the Closing Date
(as the case may be). If a Purchaser or the Deal Agent pays any Taxes in respect
of which the Seller is obligated to pay Additional Amounts under this Section
2.14(a), the Seller shall promptly reimburse such Purchaser or Deal Agent in
full.
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(b) The Seller will indemnify each Purchaser and the Deal Agent for the
full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, the
Purchaser or the Deal Agent, as appropriate, shall provide the Seller with a
copy of whatever notice it receives in connection with any such Taxes, and shall
give the Seller a reasonable opportunity to challenge in good faith the payment
of such Taxes provided that the Seller provides reasonable assurance
satisfactory to the Purchaser or the Deal Agent, as appropriate, that such
challenged Taxes will be paid upon the resolution of the Seller's challenge and
indemnifies the Purchaser or the Deal Agent for the full amount of such Taxes;
provided, further, however, the failure of the Purchaser or the Deal Agent, as
appropriate, to provide the Seller with notice of such Taxes shall not relieve
the Seller of its obligation to indemnify the Purchaser or the Deal Agent, as
appropriate, hereunder. The Purchaser or the Deal Agent, as appropriate, making
a demand for indemnity payment shall provide the Seller, at its address set
forth under its name on the signature pages hereof, with a certificate from the
relevant taxing authority or from a responsible officer of such Purchaser or the
Deal Agent stating or otherwise evidencing that response such Purchaser or the
Deal Agent has made payment of such Taxes and will provide a copy of or extract
from documentation, if available, furnished by such taxing authority evidencing
assertion or payment of such Taxes. This indemnification shall be made within
ten (10) Business Days from the date the Purchaser or the Deal Agent (as the
case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth under
its name on the signature pages hereof, appropriate evidence of payment thereof.
(d) If a Purchaser is not created or organized under the laws of the
United States or a political subdivision thereof, such Purchaser shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
the Seller with a copy to the Deal Agent (i) within 15 days after the date
hereof, or, if later, the date on which such Purchaser becomes a Purchaser
hereof two (or such other number as may from time to time be prescribed by
applicable laws or regulations) duly completed copies of IRS Form 4224, Form W-8
or Form 1001 (or any successor forms or other certificates or statements which
may be required from time to time by the relevant United States taxing
authorities or applicable laws or regulations), as appropriate, to permit the
Seller to make payments hereunder for the account of such Purchaser, as the case
may be, without deduction or withholding of United States federal income or
similar Taxes and (ii) upon the obsolescence of or after the occurrence of any
event requiring a change in, any form or certificate previously delivered
pursuant to this Section 2.14(d), copies (in such numbers as may from time to
time be prescribed by applicable laws or regulations) of such additional,
amended or successor forms, certificates or statements as may be required under
applicable laws or regulations to permit the Seller to make payments hereunder
for the account of such Purchaser, without deduction or withholding of United
States federal income or similar Taxes.
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(e) For any period with respect to which a Purchaser or the Deal Agent
has failed to provide the Seller with the appropriate form, certificate or
statement described in clause (d) of this section (other than if such failure is
due to a change in law occurring after the date of this Agreement), the Deal
Agent or such Purchaser, as the case may be, shall not be entitled to
indemnification under clauses (a) or (b) of this section with respect to any
Taxes.
(f) Within 30 days of the written request the Servicer on behalf of the
Seller therefor, the Deal Agent and the Purchasers, as appropriate, shall
execute and deliver to the Seller such certificates, forms or other documents
which can be furnished consistent with the facts and which are reasonably
necessary to assist the Seller in applying for refunds of Taxes remitted
hereunder; provided, however, that the Deal Agent and the Purchasers shall not
be required to deliver such certificates forms or other documents if it is
determined that the deliverance of such certificate, form or other document
would have a material adverse affect on the Deal Agent or any Purchaser and
provided further, however, that the Seller shall reimburse the Deal Agent or any
such Purchaser for any reasonable expenses incurred in the delivery of such
certificate, form or other document.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Purchasers
in connection with this Agreement or the funding or maintenance of Purchases
hereunder, the Purchasers are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Purchasers, the Seller
shall pay to the Purchasers such additional amount or amounts as may be
necessary to reimburse the Purchasers for any amounts paid by them.
(h) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the Seller contained in this
section shall survive the termination of this Agreement.
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Section 2.16 Assignment of the Purchase Agreement.
The Seller hereby represents, warrants and confirms to the Deal Agent
that the Seller has assigned to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Seller's right and title to and interest
in the Purchase Agreement. The Seller confirms that following a Restricting
Event the Deal Agent shall have the sole right to enforce the Seller's rights
and remedies under the Purchase Agreement for the benefit of the Secured
Parties, but without any obligation on the part of the Deal Agent, the
Purchasers or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Purchase Agreement. The Seller further
confirms and agrees that such assignment to the Deal Agent shall terminate upon
the Collection Date; provided, however, that the rights of the Deal Agent and
the Secured Parties pursuant to such assignment with respect to rights and
remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Purchase Agreement, which rights and remedies survive the termination of the
Purchase Agreement, shall be continuing and shall survive any termination of
such assignment.
Section 2.17 Substitution of Contracts.
On any day prior to the occurrence of a Restricting Event, the Seller
may, subject to the conditions set forth in this Section 2.17, replace any
Contract subject to a Warranty Event or in respect of which the Obligor
thereunder has requested the rewriting and/or restructuring of such Contract
with one or more other Contracts (each, a "Substitute Contract"), provided that
no such replacement shall occur unless each of the following conditions is
satisfied as of the date of such replacement and substitution:
(a) the Seller has previously recommended to the Deal Agent (with a
copy to the Collateral Custodian) in writing that the Contract to be replaced
should be replaced (each a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
substitution;
(c) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of the (i) Purchase Limit and
(ii) the Capital Limit;
(d) after giving effect to any such substitution the ADCB (at the
applicable Discount Rate) attributable to Substitute Contracts in the Asset Pool
does not exceed ten (10%) percent of the ADCB of the Contracts (at the
applicable Discount Rate) as of the initial Purchase Date after giving effect to
any Purchase on such Date;
(e) the aggregate Discounted Contract Balance (at the applicable
Discount Rate) of such Substitute Contracts shall be equal to or greater than
the aggregate Discounted Contract Balances (at the applicable Discount Rate as
of the date of the inclusion of such Contract in the Asset Pool) of Contracts
being replaced;
(f) such Substitute Contracts, at the time of substitution by the
Seller, shall have approximately the same weighted average life as the Replaced
Contracts;
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(g) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct as of the date of substitution of
any such Substitute Contract;
(h) the substitution of any Substitute Contract does not cause a
Restricting Event to occur; and
(i) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
In addition, the Seller shall deliver to the Collateral Custodian the
related Custodian's Contract File as required by Section 3.3. In connection with
any such substitution, the Deal Agent as agent for the Secured Parties shall,
automatically and without further action, be deemed to transfer to the Seller,
free and clear of any Lien created pursuant to this Agreement, all of the right,
title and interest of the Deal Agent as agent for the Secured Parties in, to and
under such Replaced Contract, and the Deal Agent as agent for the Secured
Parties shall be deemed to represent and warrant that it has the corporate
authority and has taken all necessary corporate action to accomplish such
transfer, including execution of any UCC-3 termination statements or other UCC
filings that might be required in connection with the transfer to the Seller of
such Replaced Contract, but without any other representation and warranty,
express or implied. Any right of the Deal Agent as agent for the Secured Parties
to substitute any Contract in the Asset Pool pursuant to this Section 2.17 shall
be in addition to, and without limitation of, any other rights and remedies that
the Deal Agent as agent for the Secured Parties or any Secured Party may have to
require the Seller or the Servicer, as applicable, to substitute for, or accept
retransfer of, any Contract pursuant to the terms of this Agreement.
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase.
The initial Purchase hereunder is subject to the condition precedent
that the Deal Agent shall have received on or before the date of such Purchase
the items listed in Schedule I, each (unless otherwise indicated) dated such
date, in form and substance satisfactory to the Deal Agent and the Purchasers.
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Section 3.2 Conditions Precedent to All Purchases and Remittances of
Collections.
Each Purchase (including the initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller pursuant
to Section 2.7(b) and each Incremental Purchase (each, a "Transaction") shall be
subject to the further conditions precedent that (a) with respect to any
Purchase (including the initial Purchase) or Incremental Purchase, the Servicer
shall have delivered to the Deal Agent, on or prior to the date of such Purchase
or Incremental Purchase in form and substance satisfactory to the Deal Agent,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit G), and
(iii) a Certificate of Assignment (Exhibit A to the Purchase and Sale Agreement)
including Schedule I, thereto dated at least 5 days prior to the date of such
Purchase (other than the initial Purchase, in which case such items shall be
dated at least 5 days prior to the date of such initial Purchase) or Incremental
Purchase and containing such additional information as may be reasonably
requested by the Deal Agent; (b) on the date of such Transaction the following
statements shall be true and the Seller shall be deemed to have certified that:
(i) The representations and warranties contained in Sections
4.1 and 4.2 are true and correct on and as of such day as though made
on and as of such date;
(ii) No event has occurred and is continuing, or would result
from such Transaction which constitutes a Restricting Event;
(iii) On and as of such day, after giving effect to such
Transaction, the outstanding Capital does not exceed the lesser of (x)
the Purchase Limit, or (y) the Capital Limit;
(iv) On and as of such day, the Seller and the Servicer each
has performed all of the agreements contained in this Agreement to be
performed by such person at or prior to such day; and
(v) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase, remittance of Collections or Incremental Purchase by the
Purchaser in accordance with the provisions hereof; and
(c) on the date of such Transaction, the Deal Agent shall have received
such other approvals, opinions or documents as the Deal Agent may reasonably
require.
Section 3.3 Delivery of Contract Files.
As a condition subsequent to each Purchase or substitution of
Substitute Contracts made hereunder, the Seller shall deliver to the Collateral
Custodian, within 10 calendar days after such Purchase or substitution, the
Custodian's Contract Files.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is (a) a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (b) has full corporate power, authority and legal right to
own or lease its properties and conduct its business as such properties are
presently owned or leased and such business is presently conducted, (c) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or conduct of
its business requires such qualification and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
(b) Due Authorization. The Seller has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement and
each other Transaction Document to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and each other Transaction Document to which it is a party.
(c) Due Execution. This Agreement has been, and each other Transaction
Document to which the Seller is a party will be, duly executed and delivered on
behalf of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and each
other Transaction Document to which the Seller is a party, the performance by
the Seller of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with or result in
any breach of any of the material terms and provisions of, and will not
constitute (with or without notice or lapse of time or both) a default under,
any indenture, contract, agreement, mortgage, deed of trust, or other instrument
to which the Seller is a party or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and each
other Transaction Document to which the Seller is a party, the performance of
the transactions contemplated hereby and thereby and the fulfillment of the
terms hereof and thereof will not conflict with or violate, any Requirements of
Law or contractual obligation applicable to the Seller and will not result in,
or require the creation or imposition of any Lien on any of its properties or
revenues pursuant to any such Requirement of Law or contractual obligation,
except as may be provided herein.
(f) No Proceedings. There are no proceedings, litigation or
investigations pending or, to the knowledge of the Seller, threatened by or
against the Seller or against any of its properties or revenues, before any
court, regulatory body, administrative agency, arbitrator, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any other Transaction Document to which the Seller is a party, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement any other Transaction Document to which the Seller is a party or (iii)
seeking any determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would have a Material Adverse
Effect.
(g) All Consents Required. All approvals, authorizations, consents,
orders, notices to, filings with, or other actions of any Person or of any
Governmental Authority required in connection with the execution, delivery and
performance, validity or enforceability of this Agreement or any other
Transaction Document to which the Seller is a party have been obtained.
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(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under this Agreement and/or the Purchase
Agreement do not and will not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policy. No procedures
believed by the Seller to be materially adverse to the interests of VFCC or the
Purchasers were utilized by the Seller in identifying and/or selecting the
Contracts in the Asset Pool. In addition, each Contract shall have been
underwritten in accordance with and satisfy the standards of any Credit and
Collection Policy which has been established by the Seller or the Originator and
is then in effect. Such Credit and Collection Policy or procedure may be amended
from time to time in the Seller's or the Originator's normal course of business
provided that the Seller shall not materially change such credit and collection
policy or procedure without the prior written consent of the Deal Agent.
(k) Taxes. The Seller has filed or caused to be filed all Tax returns
which, to its knowledge, are required to be filed by it. The Seller has paid or
made adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any amount of Tax the validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in accordance with generally accepted accounting
principles have been provided on the books of the Seller), and no Tax lien has
been filed and, to the Seller's knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. This Agreement constitutes, and each other
Transaction Document when executed and delivered will constitute, the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with their respective terms, except as such enforceability may be
limited by Insolvency Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase or Incremental
Purchase will be used by the Seller to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
(n) No Liens. Each Asset, together with the Contract related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse Claim
except as provided herein, and upon each Purchase, remittance of Collections or
Incremental Purchase, the relevant Secured Party shall acquire (subject to
recordation where necessary) a valid and perfected first priority undivided
ownership interest in each Asset then existing or thereafter arising and
Collections with respect thereto, free and clear of any Adverse Claim except as
provided hereunder. No effective financing statement or other instrument similar
in effect covering any Asset or Collections with respect thereto shall at any
time be on file in any recording office except such as may be filed in favor of
the Deal Agent relating to this Agreement.
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(o) Reports Accurate. No Monthly Report (if prepared by the Seller, or
to the extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Deal Agent or a Purchaser in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Deal Agent or such Purchaser, as the case may be, at such time) as of the date
so furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(p) Location of Offices. The principal place of business and chief
executive office of the Seller and the office where the Seller keeps all the
Records are located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other requirements
specified in Section 5.2(m) shall have been satisfied).
(q) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule II (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).
(r) Tradenames. Except as described in Schedule III, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(s) Purchase Agreement. The Purchase Agreement is the only agreement
pursuant to which the Seller purchases Assets.
(t) Value Given. The Seller shall have given reasonably equivalent
value to the Originator in consideration for the transfer to the Seller of the
Assets under the Purchase Agreement, no such transfer shall have been made for
or on account of an antecedent debt owed by the Originator to the Seller, and no
such transfer is or may be voidable or subject to avoidance under any section of
the Bankruptcy Code; no event or circumstance has occurred that would constitute
a Restricting Event pursuant to Section 7.2.
(u) Special Purpose Entity. The Certificate of Incorporation of the
Seller includes substantially the provisions set forth on Exhibit C hereto, and
the Originator has confirmed in writing to the Seller that, so long as the
Seller is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Seller to file a voluntary petition under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the Seller
and the Originator is aware that in light of the circumstances described in the
preceding sentence and other relevant facts, the filing of a voluntary petition
under the Bankruptcy Code for the purpose of making the assets of the Seller
available to satisfy claims of the creditors of the Originator would not result
in making such assets available to satisfy such creditors under the Bankruptcy
Code.
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(v) Accounting. The Seller accounts for the transfers to it from the
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Assets and transfers of Asset Interests as sales of such Asset
Interests in its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein.
(w) Separate Entity. The Seller is operated as an entity with assets
and liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Secured Parties are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate of the Originator.
(x) Security Interest. Except for Permitted Liens, the Seller has
granted a security interest (as defined in the UCC) to the Deal Agent, as agent
for the Secured Parties, in the Assets and Collections in the Asset Pool, which
is enforceable in accordance with applicable law upon execution and delivery of
this Agreement. Upon the filing of UCC-1 financing statements naming the Deal
Agent as secured party and the Seller as debtor, the Deal Agent, as agent for
the Secured Parties, shall have a first priority perfected security interest in
the Assets and Collections (except for any Permitted Liens). All filings
(including, without limitation, such UCC filings) as are necessary in any
Jurisdiction to perfect the interest of the Deal Agent as agent for the Secured
Parties, in the Assets and Collections have been (or prior to the applicable
Purchase will be) made.
(y) Investments. The Seller does not own or hold directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.
(z) Business. Since its incorporation, the Seller has conducted no
business other than the purchase and receipt of Contracts and related assets
from the Originator under the Purchase Agreement, the sale of Contracts under
this Agreement and such other activities as are incidental to the foregoing.
(aa) Investment Company Act. The Seller is not an "investment company"
or a company "controlled" by an "investment" company within the meaning of the
Investment Company Act of 1940, as amended.
(bb) Accuracy of Representations and Warranties. Each representation or
warranty by the Seller contained herein or in any certificate or other document
furnished by the Seller pursuant hereto or in connection herewith is true and
correct in all material respects.
The representations and warranties set forth in this section shall
survive the transfer of the Assets to the Deal Agent as agent for the Secured
Parties. Upon discovery by the Seller, the Servicer, any Secured Party, the
Liquidity Agent or the Deal Agent of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
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Section 4.2 Representations and Warranties of Seller Relating to the
Agreement and the Contracts.
The Seller hereby represents and warrants to the Deal Agent, each
Secured Party, the Liquidity Agent and each Investor that, as of the Initial
Purchase Date and as of each Addition Date:
(a) Binding, Obligation, Valid Transfer and Security Interest.
(i) This Agreement and the Purchase Agreement each constitute
legal, valid and binding obligations of the Seller, enforceable against
the Seller in accordance with its terms, except as such enforceability
may be limited by Insolvency Laws and except as such enforceability may
be limited by general principles of equity (whether considered in a
suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer to
the Deal Agent as agent for the Secured Parties of all right, title and
interest of the Seller in, to and under all Assets in the Asset Pool to
the extent of the Asset Interest, and such transfer will be free and
clear of any Lien of any Person claiming through or under the Seller or
its Affiliates, except for Permitted Liens, or (B) a grant of a
security interest in all Assets in the Asset Pool to the Deal Agent as
agent for the Secured Parties.
(b) Eligibility of Contracts. As of the Initial Purchase Date, (i)
Schedule I to this Agreement and the information contained in the Purchase
Certificate delivered pursuant to Section 2.2(b) is an accurate and complete
listing in all material respects of all the Existing Contracts in the Asset Pool
as of the Initial Purchase Date and the information contained therein with
respect to the identity of such Contracts and the amounts owing thereunder is
true and correct in all material respects as of the related Cut Off Date, (ii)
each such Contract is an Eligible Contract, (iii) each such Contract and the
related Equipment is free and clear of any Lien of any Person (other than
Permitted Liens) and in compliance with all Requirements of Law applicable to
the Seller and (iv) with respect to each such Contract, all consents, licenses,
approvals or authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or given by the Seller
in connection with the transfer of an interest in such Contract and the related
Equipment to the Deal Agent as agent for the Secured Parties have been duly
obtained, effected or given and are in full force and effect. On each Addition
Date on which Additional Contracts are added by the Seller to the Asset Pool,
the Seller shall be deemed to represent and warrant that (i) such Additional
Contract referenced on the related Purchase Certificate delivered pursuant to
Section 2.2(b) hereof is an Eligible Contract, (ii) each such Additional
Contract and the related Equipment is free and clear of any Lien of any Person
(other than Permitted Liens) and in compliance with all Requirements of Law
applicable to Seller and/or the Originator, (iii) with respect to each such
Additional Contract, all consents, licenses, approvals, authorizations,
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the addition of
such Contract and the related Equipment to the Asset Pool have been duly
obtained, effected or given and are in full force and effect and (iv) the
representations and warranties set forth in Section 4.2(a) are true and correct
with respect to each Contract transferred on such day as if made on such day.
(c) Survival of Representations and Warranties. The representations and
warranties set forth in this Section 4.2 shall survive the transfer of an
interest in the respective Contracts and related Equipment, or interests
therein, to the Deal Agent as agent for the Secured Parties.
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Section 4.3 Representations and Warranties of the Seller Relating to
the Purchase Limit and Capital Limit.
The Seller is hereby deemed to represent and warrant that on each day
prior to the Termination Date, the amount of Capital outstanding on such day
shall not exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER AND THE ORIGINATOR
Section 5.1 General Covenants.
Until the date on which all Aggregate Unpaids have been indefeasibly
paid in full, the Seller hereby covenants that:
(a) Compliance with Laws, Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
Section 5.2 Covenants of Seller.
The Seller hereby covenants that:
(a) Contracts Not to be Evidenced by Instruments. The Seller will take
no action to cause any Contract which is not, as of the Closing Date or the
related Addition Date, as the case may be, evidenced by an Instrument, to be so
evidenced except in connection with the enforcement or collection of such
Contract.
(b) Security Interests. The Seller will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Contract in the Asset Pool or related Equipment, whether now
existing or hereafter transferred hereunder, or any interest therein, and the
Seller will not sell, pledge, assign or suffer to exist any Lien on its
interest, if any, hereunder. The Seller will promptly notify the Deal Agent of
the existence of any Lien on any Contract in the Asset Pool or related Equipment
and the Seller shall defend the right, title and interest of the Deal Agent as
agent for the Secured Parties in, to and under the Contracts in the Asset Pool
and the related Equipment, against all claims of third parties, provided,
however, that nothing in this section 5.2(b) shall prevent or be deemed to
prohibit the Seller from suffering to exist Permitted Liens upon any of the
Contracts in the Asset Pool or any related Equipment.
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(c) Delivery of Collections. The Seller agrees to pay to the Servicer
promptly (but in no event later than two Business Days after receipt) all
Collections received by Seller in respect of the Contracts in the Asset Pool.
(d) Compliance with the Law. Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to Seller, the
Contracts and the Equipment.
(e) Activities of Seller. The Seller shall not engage in any business
or activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
incidental to the transactions contemplated and authorized by this Agreement or
the Purchase Agreement.
(f) Indebtedness. The Seller shall not create, incur, assume or suffer
to exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement or under any Hedging Agreement required by Section
5.4(b), or (ii) liabilities incident to the maintenance of its corporate
existence in good standing.
(g) Guarantees. The Seller shall not become or remain liable, directly
or indirectly, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise.
(h) Investments. The Seller shall not make or suffer to exist any loans
or advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Contracts pursuant to the
Purchase Agreement, or for investments in Permitted Investments in accordance
with the terms of this Agreement.
(i) Merger; Sales. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, except as provided for in this Agreement.
(j) Distributions. The Seller shall not declare or pay, directly or
indirectly, any dividend or make any other distribution (whether in cash or
other property) with respect to the profits, assets or capital of the Seller or
any Person's interest therein, or purchase, redeem or otherwise acquire for
value any of its capital stock now or hereafter outstanding, except that so long
as no Restricting Event has occurred and is continuing and no Restricting Event
would occur as a result thereof or after giving effect thereto and the Seller
would continue to be Solvent as a result thereof and after giving effect
thereto, the Seller may declare and pay cash or stock dividends on its capital
stock.
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(k) Agreements. The Seller shall not become a party to, or permit any
of its properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents, or
amend or modify the provisions of its Certificate of Incorporation without the
consent of the Deal Agent or issue any power of attorney except to the Deal
Agent or the Servicer.
(l) Separate Corporate Existence. The Seller shall:
(i) Maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions. The funds
of the Seller will not be diverted to any other Person or for other
than corporate uses of the Seller.
(ii) Ensure that, to the extent that it shares the same officers or
other employees as any of its stockholders or Affiliates, the salaries
of and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and each
such entity shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) Ensure that, to the extent that it jointly contracts with any
of its stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs incurred in
so doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that the
Seller contracts or does business with vendors or service providers
when the goods and services provided are partially for the benefit of
any other Person, the costs incurred in so doing shall be fairly
allocated to or among such entities for whose benefit the goods and
services are provided, and each such entity shall bear its fair share
of such costs. All material transactions between Seller and any of its
Affiliates shall be only on an arm's length basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its
Affiliates. To the extent that Seller and any of its stockholders or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such
entity shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its Certificate
of Incorporation and observe all necessary, appropriate and customary
corporate formalities, including, but not limited to, holding all
regular and special stockholders, and directors' meetings appropriate
to authorize all corporate action, keeping separate and accurate
minutes of its meetings, passing all resolutions or consents necessary
to authorize actions taken or to be taken, and maintaining accurate and
separate books, records and accounts, including, but not limited to,
payroll and intercompany transaction accounts.
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(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "non-substantive consolidation" opinion of
Blank Rome Comisky & McCauley LLP delivered on the Closing Date, upon
which the conclusions expressed therein are based.
(m) Location of Seller, Records; Instruments. The Seller (x) shall not
move outside the State of Pennsylvania, the location of its chief executive
office, without 30 days' prior written notice to the Deal Agent and (y) shall
not move, or consent to the Collateral Custodian or Servicer moving, the
Contract Files from the possession of the Collateral Custodian thereof on the
Initial Purchase Date, without 30 days' prior written notice to the Deal Agent
and (z) will promptly take all actions required of each relevant jurisdiction in
order to continue the first priority perfected security interest of the Deal
Agent as agent for the Secured Parties in all Assets in the Asset Pool. The
Seller will give the Deal Agent prompt notice of a change within the State of
Delaware of the location of its chief executive office.
(n) Accounting of Purchases. Other than for federal, state and local
income tax purposes, the Seller will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as the sale, or absolute assignment, of Assets by the Seller
to a Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Originator
Assets by the Originator to the Seller, as the case may be.
(o) ERISA Matters. (i) The Seller has (A) fully complied in all
material respects with all provisions of ERISA and any all other laws, rules,
and regulations applicable to Benefit Plans and (B) timely filed and distributed
all reports, descriptions and notices required by ERISA, the Code or any state
or federal law or any ruling or regulation of any state or federal
administrative agency with respect to any Benefit Plan; and (ii) the Seller will
not (A) engage or permit any ERISA Affiliate to engage in any prohibited
transaction for which an exemption is not available or has not previously been
obtained from the United States Department of Labor; (B) permit to exist any
accumulated funding deficiency (whether or not waived), as defined in Section
302(a) of ERISA and Section 412(a) of the Code, or funding deficiency with
respect to any Benefit Plan other than a Multiemployer Plan; (C) fail to make
any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate may
be required to make under the agreement relating to such Multiemployer Plan or
any law pertaining thereto; (D) terminate any Benefit Plan so as to result in
any liability; or (E) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.
(p) Originator Assets. With respect to each Asset acquired by the
Seller, the Seller will (i) acquire such Asset pursuant to and in accordance
with the terms of the Purchase Agreement, (ii) take all action necessary to
perfect, protect and more fully evidence the Seller's ownership of such Asset,
including, without limitation, (A) filing and maintaining, effective financing
statements (Form UCC-1) against the Originator in all necessary or appropriate
filing offices, and filing continuation statements, amendments or assignments
with respect thereto in such filing offices in accordance with the Filing
Requirements and (B) executing or causing to be executed such other instruments
or notices as may be necessary or appropriate and (iii) take all additional
action that the Deal Agent may reasonably request to perfect, protect and more
fully evidence the respective interests of the parties to this Agreement in the
Assets and interest therein represented by the Asset Interest.
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(q) Transactions with Affiliates. The Seller will not enter into, or be
a party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by the Transaction Documents, and (ii)
other transactions (including, without limitation, the lease of office space or
computer equipment or software by the Seller to or from an Affiliate) (A) in the
ordinary course of business, (B) pursuant to the reasonable requirements of the
Seller's business, (C) upon fair and reasonable terms that are no less favorable
to the Seller than could be obtained in a comparable arm's-length transaction
with a Person not an Affiliate of the Seller, and (D) not inconsistent with the
factual assumptions set forth in the opinion letters issued by Blank Rome
Comisky & McCauley LLP and delivered to the Deal Agent as a condition to the
initial Purchase as such assumptions may be modified in any subsequent opinion
letters delivered to the Deal Agent hereunder pursuant to Section 3.2(c) or
otherwise. It is understood that any compensation arrangement for officers shall
be permitted under clause (ii)(A) through (C) above if such arrangement has been
expressly approved by the board of directors of the Seller.
(r) Change in the Purchase Agreement. The Seller will not amend,
modify, waive or terminate any terms or conditions of the Purchase Agreement,
without the prior written consent of Deal Agent.
(s) Amendment to Certificate of Incorporation. Notwithstanding anything
to the contrary contained herein, the Seller will not amend, modify or otherwise
make any change to its Certificate of Incorporation which would delete or
otherwise nullify or circumvent the provisions set forth on Exhibit C hereto.
(t) Credit and Collection Policy. The Seller shall not cause or permit
any changes to be made to the Credit and Collection Policy in any manner that
would materially and adversely affect the collectibility of the Contracts sold
hereunder without the prior written consent of the Deal Agent, which consent
shall not be unreasonably withheld.
Section 5.3 Release of Lien on Equipment.
At the same time as (i) any Contract in the Asset Pool expires by its
terms and all amounts in respect thereof other than Excluded Amounts have been
paid by the related Obligor and deposited in the Collection Account or (ii) any
Contract becomes a Prepaid Contract and all amounts in respect thereof have been
paid by the related Obligor and deposited in the Collection Account, the Deal
Agent as agent for the Purchasers will, to the extent requested by the Servicer,
release its interest in such Contract; provided, however, that such release will
not constitute a release of their respective interests in the Equipment or the
proceeds of such Contract or Equipment. In connection with any sale of such
Equipment on or after the occurrence of (i) or (ii) above, the Deal Agent as
agent for the Purchasers will after the deposit by the Servicer of the proceeds
of such sale into the Collection Account, at the sole expense of the Servicer,
execute and deliver to the Servicer any assignments, bills of sale, termination
statements and any other releases and instruments as the Servicer may reasonably
request in order to effect the release and transfer of such Equipment; provided
that the Deal Agent as agent for the Purchasers will make no representation or
warranty, express or implied, with respect to any such Equipment in connection
with such sale or transfer and assignment. Nothing in this section shall
diminish the Servicer's obligations pursuant to Section 6.1(c) with respect to
the proceeds of any such sale.
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Section 5.4 Operations on Tranche Rate Lock Date.
(a) On each Tranche Rate Lock Date, the Servicer shall determine, if a
Fixed Rate Tranche or Tranches exist prior to such Tranche Rate Lock Date,
whether (i) the Contracts that became Fixed Rate Contracts on such Tranche Rate
Lock Date ("Current Fixed Rate Contracts") shall be identified to a separate new
Fixed Rate Tranche (a "New Fixed Rate Tranche"), or (ii) if the Current Fixed
Rate Contracts shall be combined with one or more of the previously existing
Fixed Rate Tranches into a single new Fixed Rate Tranche (a "Combined Fixed Rate
Tranche"). On any Tranche Rate Lock Date on which a New Fixed Rate Tranche or a
Combined Fixed Rate Tranche is established, the Servicer shall identify a
Hedging Agreement to such Tranche and shall recalculate the ADCB by discounting
the Fixed Rate Contracts identified to such Tranche at the applicable Discount
Rate (giving effect to Hedge Rate for the Hedging Agreement identified to such
Tranche).
(b) On or prior to each Tranche Rate Lock Date, in accordance with the
provisions of Section 5.4(a), the Seller shall enter into one or more Hedge
Transactions, provided that each such Hedge Transaction shall:
(i) be entered into with a Hedge Counterparty and governed by a
Hedging Agreement;
(ii) have a schedule of monthly payment periods the first of which
commences during the next Fixed Period following the Tranche Rate Lock
Date of the Tranche or Tranches and the last of which ends on the last
Scheduled Payment due to occur under the Fixed Rate Contracts in such
Tranche;
(iii) have an amortizing notional amount such that the Hedge
Notional Amount in effect during any monthly payment period shall be
equal to at least ninety percent (90%) of the Capital outstanding of
all Fixed Rate Contracts in such Tranche or Tranches on such Tranche
Rate Lock Date; and
(iv) provide for two series of monthly payments to be netted
against each other, one such series being payments to be made by the
Seller to a Hedge Counterparty (solely on a net basis) by reference to
a fixed rate to be used in computing the Discount Rate for that Tranche
or Tranches, and the other such series being payments to be made by the
Hedge Counterparty to the Deal Agent (solely on a net basis) by
reference to the USD-LIBOR-LIBO Rate, as defined in the 1991 ISDA
Definitions for a 30-day maturity as in effect on the first day of each
monthly period, the net amount of which shall be paid into the
Collection Account (if payable by the Hedge Counterparty) or from the
Collection Account to the extent funds are available under Section
2.7(a), 2.8(a) and 2.9(b) of this Agreement (if payable by the Seller);
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(c) As additional security hereunder, Seller hereby assigns to the Deal
Agent, as agent for the Secured Parties, all right, title and interest of Seller
in each Hedging Agreement, each Hedge Transaction, and all present and future
amounts payable by a Hedge Counterparty to Seller under or in connection with
the respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("Hedge Collateral"), and grants a security interest to the Deal
Agent, as agent for the Secured Parties, in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Deal Agent, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Seller's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations under Section 5.4(b) hereof. Nothing herein shall have the effect of
releasing the Seller from any of its obligations under any Hedging Agreement or
any Hedge Transaction, nor be construed as requiring the consent of the Deal
Agent or any Secured Party for the performance by Seller of any such
obligations.
(d) On any Tranche Rate Lock Date, the Discounted Contract Balances of
each Fixed Rate Contract identified to the New Fixed Rate Tranche or Combined
Fixed Rate Tranche shall be recalculated using the Discount Rate applicable on
such Tranche Rate Lock Date. To the extent that either (i) the
Overcollateralization is less than the Minimum Overcollateralization Percentage
or (ii) the aggregate Capital exceeds the Capital Limit, the Seller shall cure
such deficiency within one (1) Business Day. To the extent that the aggregate
Capital is less than the Capital Limit then the Seller may request an
Incremental Purchase pursuant to the provisions of Section 2.2 of this
Agreement.
Section 5.5 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Contract in the Asset Pool (each such Contract, an
"Ineligible Contract"), no later than the earlier of (i) knowledge by the Seller
of such Contract becoming an Ineligible Contract and (ii) receipt by the Seller
from the Deal Agent or Servicer of written notice thereof, the Seller shall
either (a) accept the retransfer of each such Ineligible Contract and any
related Equipment selected by the Servicer as to which such breach related, and
the Deal Agent as agent for the Purchasers shall convey to the Seller, without
recourse, representation or warranty, all of its right, title and interest in
such Ineligible Contract; or (b) subject to the satisfaction of the conditions
in Section 2.17, substitute for such Ineligible Contract a Substitute Contract.
In any of the foregoing instances, the Seller shall accept the retransfer of
each such Ineligible Contract, and the ADCB shall be reduced by the Discounted
Contract Balance (calculated using the applicable Discount Rate as of the most
recent Determination Date) of each such Ineligible Contract and, if applicable,
increased by the Discounted Contract Balance of each such Substitute Contract.
On and after the date of retransfer, the Ineligible Contract so retransferred
shall not be included in the Asset Pool and, as applicable, the Substitute
Contract shall be included in the Asset Pool. In consideration of such
retransfer, without substitution, the Seller shall, on the date of retransfer of
such Ineligible Contract, make a deposit to the Collection Account (for
allocation pursuant to Section 2.7 , 2.8 or 2.9, as applicable) in immediately
available funds in an amount equal to the Discounted Contract Balance of such
Ineligible Contract (calculated using the applicable Discount Rate as of the
most recent Determination Date). Upon each retransfer to the Seller of such
Ineligible Contract, the Deal Agent, as agent for the Purchasers, shall
automatically and without further action be deemed to transfer, assign and
set-over to the Seller, without recourse, representation or warranty, all the
right, title and interest of the Deal Agent, as agent for the Purchasers, in, to
and under such Ineligible Contract and all monies due or to become due with
respect thereto, the related Equipment and all proceeds of such Ineligible
Contract and Recoveries and Insurance Proceeds relating thereto and all rights
to security for any such Ineligible Contract, and all proceeds and products of
the foregoing. The Deal Agent, as agent for the Purchasers, shall, at the sole
expense of the Servicer execute such documents and instruments of transfer as
may be prepared by the Servicer on behalf of the Seller and take other such
actions as shall reasonably be requested by the Seller to effect the transfer of
such Ineligible Contract pursuant to this subsection.
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Section 5.6 Retransfer of Assets.
In the event of a breach of any representation or warranty set forth in
Section 4.2 hereof which breach has a material adverse affect on the rights of
the Secured Parties or the Deal Agent, as agent of the Secured Parties, or on
the ability of the Seller to perform its obligations hereunder, by notice then
given in writing to the Seller, the Deal Agent may direct the Seller to accept
the retransfer of all of the Assets, in which case the Seller shall be obligated
to accept retransfer of such Assets on a Payment Date specified by the Seller
(such date, the "Retransfer Date") and to terminate all Hedge Transactions prior
to the Retransfer Date. The Seller shall deposit on the Retransfer Date an
amount equal to the deposit amount provided below for such Assets in the
Collection Account for distribution to the Secured Parties in accordance with
Section Section 2.7(a), 2.8(a) or 2.9(b), as applicable. The deposit amount (the
"Retransfer Amount") for such retransfer will be equal to the (A) sum of (i) the
Aggregate Unpaids, and (ii) all Hedge Breakage Costs and any other amounts
payable by Seller under or with respect to any Hedging Agreement minus (B) the
amount, if any, available in the Collection Account on such Payment Date. On the
Retransfer Date, provided that full Retransfer Amount has been deposited into
the Collection Account, the Assets shall be transferred to the Seller; and the
Deal Agent as agent for the Secured Parties shall, at the sole expense of the
Servicer, execute and deliver such instruments of transfer, in each case without
recourse, representation or warranty, as shall be prepared and reasonably
requested by the Servicer on behalf of the Seller to vest in the Seller, or its
designee or assignee, all right, title and interest of the Deal Agent as agent
for the Secured Parties in, to and under the Assets. If the Deal Agent gives a
notice directing the Seller to accept such a retransfer as provided above, the
obligation of Seller to accept a retransfer pursuant to this Section 5.6 shall
constitute the sole remedy respecting a breach of the representations and
warranties contained in Section 4.2 available to the Secured Parties and the
Deal Agent on behalf of the Secured Parties.
Section 5.7 Year 2000 Compatibility.
The Seller shall take all action necessary to assure that, prior to
January 1, 2000, the Seller's computer system (if it owns and maintains its own
system) is able to operate and effectively process data including dates on and
after January 1, 2000. At the request of the Deal Agent or the Backup Servicer,
the Seller shall provide assurance reasonably acceptable to the Deal Agent or
the Backup Servicer of the Seller's Year 2000 Compatibility. The Seller shall
provide to the Deal Agent and the Backup Servicer, on or before June 30, 1999,
an officer's certificate certifying its computer system is year 2000 compatible.
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Section 5.8 Covenants of the Originator.
The Originator hereby covenants that:
(a) The Originator will not amend, modify, waive or terminate any terms
or provisions of the Contribution Agreement, without the prior written consent
of the Deal Agent.
(b) Backup Servicer and Collateral Custodian Fee Letter. The Originator
will not amend, modify, waive or terminate any terms or provisions of the Backup
Servicer or Collateral Custodian Fee Letter without the prior written consent of
the Deal Agent.
ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer and Collateral Custodian. ABL is
hereby appointed as Servicer pursuant to this Agreement. ABL accepts the
appointment and agrees to act as the Servicer pursuant to this Agreement.
Norwest is hereby appointed as Collateral Custodian pursuant to this Agreement.
Norwest accepts the appointment and agrees to act as the Collateral Custodian
pursuant to this Agreement.
(b) General Duties. The Servicer will manage, service, administer,
collect and enforce the Assets in the Asset Pool on behalf of the Purchasers
(the "Servicing Duties") and will have full power and authority to do any and
all things in connection with the performance of the Servicing Duties which it
deems necessary or desirable provided, however, nothing it does may contravene
the provisions of this Agreement. The Servicer will perform the Servicing Duties
with reasonable care, using that degree of skill and attention that a prudent
person engaging in such activities would exercise, but in any event shall not
act with less care than the Servicer exercises with respect to all comparable
contracts that it services for itself or others. The Servicing Duties will
include, without limitation, collection and posting of all payments, responding
to inquiries of Obligors regarding the Assets in the Asset Pool, investigating
delinquencies and making Servicer Advances, remitting payments to the Deal Agent
in a timely manner, furnishing monthly, quarterly and annual statements with
respect to collections and payments in accordance with the provisions of this
Agreement, and using its best efforts to maintain the perfected first priority
security interest of the Deal Agent as agent for the Secured Parties in the
Assets. The Servicer will follow customary standards, policies, and procedures
and will have full power and authority, acting alone, to do any and all things
in connection with the performance of the Servicing Duties that it deems
necessary or desirable. If the Servicer commences a legal proceeding to enforce
a Defaulted Contract or commences or participates in a legal proceeding
(including a bankruptcy proceeding) relating to or involving an Asset in the
Asset Pool, the Deal Agent as agent for the Secured Parties will be deemed to
have automatically assigned the related Contract to the Servicer for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Secured Parties, pursuant to
this Section 6.1(b), to execute and deliver, on behalf of itself and the Deal
Agent as agent for the Secured Parties, any and all instruments of satisfaction
or cancellation, or partial or full release or discharge, and all other notices,
demands, claims, complaints, responses, affidavits or other documents or
instruments in connection with any such proceedings. If in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce a Contract on
the ground that it is not a real party in interest or a holder entitled to
enforce the Contract, then the Deal Agent will, at the Servicer's expense and
direction, take steps on behalf of the Deal Agent as agent for the Secured
Parties to enforce the Contract, including bringing suit in the name of the Deal
Agent as agent for the Secured Parties.
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(c) Disposition Upon Termination of Contract. Upon the termination of a
Contract included in the Asset Pool as a result of a default by the Obligor
thereunder the Servicer will use commercially reasonable efforts to dispose of
any related Equipment. Without limiting the generality of the foregoing, the
Servicer may dispose of any such Equipment by purchasing such Equipment or by
selling such Equipment to any of its Affiliates for a purchase price equal to
the fair market value thereof, any such sale to be evidenced by a certificate of
a Responsible Officer of the Servicer delivered to the Deal Agent setting forth
the Contract, the Equipment, the sale price of the Equipment and certifying that
such sale price is the fair market value of such Equipment.
(d) Further Assurances. The Deal Agent will, at the sole expense of the
Servicer, furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and retain
custody of the Custodian's Contract Files delivered by the Seller pursuant to
Section 3.3 hereof in accordance with the terms and conditions of this
Agreement, all for the benefit of the Secured Parties and subject to the Lien
thereon in favor of the Deal Agent as agent for the Secured Parties. Within five
Business Days of its receipt of any Custodian's Contract File, the Collateral
Custodian shall review the related Contract to verify that such Contract has
been executed and has no missing or mutilated pages and to confirm (in reliance
on the related contract number and Lessee name) that such Contract is referenced
on the related list of Contracts. In order to facilitate the foregoing review by
the Collateral Custodian, in connection with each delivery of Custodian's
Contract Files hereunder to the Collateral Custodian, the Servicer shall provide
to the Collateral Custodian an electronic file (in EXCEL or a comparable format)
that contains the related list of Contracts or which otherwise contains the
Contract number and the name of the Lessee with respect to each related
Contract. If, at the conclusion of such review, the Collateral Custodian shall
determine that such Contract is not executed or in proper form on its face, or
that it is not referenced on such list of Contracts, the Collateral Custodian
shall within two (2) Business Days notify the Seller and the Deal Agent of such
determination by providing a written report to such Persons setting forth, with
particularity, the lack of execution of such Contract, that such Contract has
missing or mutilated pages, or the fact that such Contract was not referenced on
the related list of Contracts. In addition, unless instructed otherwise in
writing by the Seller or the Deal Agent within 10 days of the Collateral
Custodian's delivery of such report, the Collateral Custodian shall return any
Contract File not referenced on such list of Contracts to the Seller. Other than
the foregoing, the Collateral Custodian shall not have any responsibility for
reviewing any Custodian's Contract File.
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In taking and retaining custody of the Custodian's Contract Files, the
Collateral Custodian shall be deemed to be acting as the agent of the Deal Agent
as agent for the Secured Parties, provided, however, that the Collateral
Custodian makes no representations as to the existence, perfection or priority
of any Lien on the Custodian's Contract Files or the instruments therein, and
provided, further, that the Collateral Custodian's duties as agent shall be
limited to those expressly contemplated herein. All Custodian's Contract Files
shall be kept in fireproof vaults or cabinets at the locations specified on
Schedule IV attached hereto, or at such other office as shall be specified to
the Deal Agent by the Collateral Custodian in a written notice delivered at
least 45 days prior to such change. All Custodian's Contract Files shall be
placed together in a separate file cabinet with an appropriate identifying label
and maintained in such a manner so as to permit retrieval and access. All
Custodian's Contract Files shall be clearly segregated from any other documents
or instruments maintained by the Collateral Custodian. The Collateral Custodian
shall clearly indicate that such Custodian's Contract Files are the sole
property of the Seller and that the Seller has granted an interest therein to
the Deal Agent on behalf of the Secured Parties. In performing its duties, the
Collateral Custodian shall use the same degree of care and attention as it
employs with respect to similar Contracts which it holds as Collateral
Custodian.
(f) Concerning the Collateral Custodian.
(i) The Collateral Custodian may conclusively rely on and shall be
fully protected in acting upon any certificate, instrument, opinion,
notice, letter, telegram or other document delivered to it and which in
good faith it reasonably believes to be genuine and which has been
signed by the proper party or parties. The Collateral Custodian may
rely conclusively on and shall be fully protected by in acting upon (A)
the written instructions of any designated officer of the Deal Agent or
(B) the verbal instructions of the Deal Agent.
(ii) The Collateral Custodian may consult counsel satisfactory to
it and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable to the Seller,
the Deal Agent or any other Purchaser for any error of judgment, or for
any act done or step taken or omitted by it, in good faith, or for any
mistakes of fact or law, or for anything which it may do or refrain
from doing in connection herewith except in the case of its willful
misconduct or grossly negligent performance or omission.
(iv) The Collateral Custodian makes no warranty or representation
and shall have no responsibility (except as expressly set forth in this
Agreement) as to the content, enforceability, completeness, validity,
sufficiency, value, genuineness, ownership or transferability of the
Contracts, and will not be required to and will not make any
representations as to the validity or value (except as expressly set
forth in this Agreement) of any of the Contracts. The Collateral
Custodian shall not be obligated to take any legal action hereunder
which might in its judgment involve any expense or liability unless it
has been furnished with an indemnity reasonably satisfactory to it.
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(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or
obligations shall be implied in this Agreement against the Collateral
Custodian.
(vi) The Collateral Custodian shall not be required to expend or
risk its own funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the Collateral
Custodian is not guaranteeing performance of or assuming any liability
for the obligations of the other parties hereto or any parties to the
Contracts.
(g) Resignation or Termination of Collateral Custodian. The Collateral
Custodian may resign at any time by providing not less than 120 days prior
written notice to the Deal Agent, the Liquidity Agent, the Servicer, the Seller
and the Originator. In addition, the Collateral Custodian may be removed without
cause by the Deal Agent by notice then given in writing to the Servicer, the
Seller, and the Collateral Custodian. In the event of any such resignation or
removal, the Collateral Custodian may be replaced by (i) the Servicer, acting
with the consent of the Deal Agent, or (ii) if no such replacement is appointed,
within 30 days following such removal or resignation, by the Deal Agent.
Section 6.2 Collection of Payments.
(a) Collection Efforts, Modification of Contracts. The Servicer will
make reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts in the Asset Pool as and when the same become due,
and will follow those collection procedures which it follows with respect to all
comparable Contracts that it services for itself or others. The Servicer may not
waive, modify or otherwise vary any provision of a Contract; except that the
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing any Contract in the
Asset Pool.
(b) Prepaid Contract. The Servicer may not permit a Contract in the
Asset Pool to become a Prepaid Contract (which shall not include a Contract that
becomes a Prepaid Contract due to a Casualty Loss), unless (x) the Servicer
provides an Additional Contract or (y) such prepayment will not result in the
Collection Account receiving an amount (the "Prepayment Amount") less than the
sum of (A) (i) the product of 88% and the Discounted Contract Balance as of the
most recent Determination Date plus (ii) one month's interest at the applicable
rate under such Prepaid Contract, (B) any outstanding Servicer Advances thereon
(and to the extent not included therein any accrued and unpaid interest) and (C)
all Hedge Breakage Costs owing to the relevant Hedge Counterparty for any
termination of one or more Hedge Transactions, in whole or in part, as required
by the terms of any Hedging Agreement as the result of any such Contract
becoming a Prepaid Contract. After a Restricting Event has occurred, the
Servicer may not permit a Contract in the Asset Pool to become a Prepaid
Contract (which shall not include a Contract that becomes a Prepaid Contract due
to a Casualty Loss), unless the Servicer collects an amount equal to the sum of
(A) the Discounted Contract Balance on the date of such prepayment calculated
using the applicable Discount Rate in effect on the date of payment, (B) any
outstanding Servicer Advances thereon (and to the extent not included therein
any accrued and unpaid interest) and (C) all Hedge Breakage Costs owing to the
relevant Hedge Counterparty for any termination of one or more Hedge
Transactions, in whole or in part, as required by the terms of any Hedging
Agreement as the result of any such Contract becoming a Prepaid Contract.
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(c) Acceleration. The Servicer shall accelerate the maturity of all or
any Scheduled Payments under any Contract in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the lapse
of any applicable grace period) promptly after such Contract becomes a Defaulted
Contract.
(d) Taxes and other Amounts. To the extent provided for in any Contract
in the Asset Pool, the Servicer will use its best efforts to collect all
payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Contracts or the Equipment and remit such amounts to
the appropriate Governmental Authority or insurer on or prior to the date such
payments are due.
(e) Payments to Lock-Box Account. On or before the Initial Purchase
Date with respect to the Existing Contracts and on or before the relevant
Addition Date, with respect to Additional Contracts, the Servicer shall have
instructed all Obligors to make all payments in respect of the Contracts in the
Asset Pool to a Lock-Box or directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause
to be established, on or before the Initial Purchase Date, and maintained in the
name of the Deal Agent as agent for the Secured Parties, with an office or
branch of a depository institution or trust company organized under the laws of
the United States of America or any one of the States thereof or the District of
Columbia (or any domestic branch of a foreign bank) a segregated corporate trust
account (the "Collection Account"); provided, however, that at all times such
depository institution or trust company shall be a depository institution
organized under the laws of the United States of America or any one of the
States thereof or the District of Columbia (or any domestic branch of a foreign
bank), (i) (A) which has either (1) a long-term unsecured debt rating of A- or
better by S&P and A-3 or better by Moody's or (2) a short-term unsecured debt
rating or certificate of deposit rating of A-1 or better by S&P or P-1 or better
by Moody's, (B) the parent corporation of which has either (1) a long-term
unsecured debt rating of A- or better by S&P and A-3 or better by Moody's or (2)
a short-term unsecured debt rating or certificate of deposit rating of A-1 or
better by S&P and P-1 or better by Moody's or (C) is otherwise acceptable to the
Deal Agent and (ii) whose deposits are insured by the Federal Deposit Insurance
Corporation (any such depository institution or trust company, a "Qualified
Institution").
(g) Remittances. The Servicer is hereby authorized and directed to
allocate and deposit all Collections in accordance with Section 2.10 hereof and
will apply such Collections as set forth in Section 2.7, 2.8 or 2.9, as
applicable.
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Section 6.3 Servicer Advances.
For each Monthly Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Contract in
the Asset Pool during such Monthly Period was not received prior to the end of
such Monthly Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield of any Asset Interest the Monthly Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either case, any such advance, a "Servicer Advance").
Notwithstanding the preceding sentence, (i) the Servicer shall be required to
make a Servicer Advance with respect to any Contract if, and only if, the
Servicer determines (such determination to be conclusive and binding) in good
faith that such Servicer Advance will ultimately be recoverable from future
collections on, or the liquidation of, the Asset Pool and payments by one or
more Hedge Counterparties under one or more Hedging Agreements, (ii) the
Servicer's obligation to make a Servicer Advance for any Contract shall cease on
the day such Contract becomes a Defaulted Contract or is charged-off pursuant to
the Servicer's Credit and Collection Policies and (iii) any successor Servicer,
including the Backup Servicer, will not be obligated to make any Servicer
Advances. The Servicer will deposit any Servicer Advances into the Collection
Account on or prior to 11:00 a.m. (Charlotte, North Carolina time) on the
related Payment Date, in immediately available funds.
Section 6.4 Realization Upon Defaulted Contract.
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Equipment relating to a Defaulted
Contract in the Asset Pool and will act as sales and processing agent for
Equipment which it repossesses. The Servicer will follow such other practices
and procedures as it deems necessary or advisable and as are customary and usual
in its servicing of contracts and other actions by the Servicer in order to
realize upon such Equipment, which practices and procedures may include
reasonable efforts to enforce all obligations of Obligors and repossessing and
selling such Equipment at public or private sale in circumstances other than
those described in the preceding sentence. Without limiting the generality of
the foregoing, the Servicer may sell any such Equipment to the Servicer or its
Affiliates for a purchase price equal to the then fair market value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Contract, the Equipment,
the sale price of the Equipment and certifying that such sale price is the fair
market value of such Equipment. In any case in which any such Equipment has
suffered damage, the Servicer will not expend funds in connection with any
repair or toward the repossession of such Equipment unless it reasonably
determines that such repair and/or repossession will increase the Recoveries by
an amount greater than the amount of such expenses. The Servicer will remit to
the Collection Account the Recoveries received in connection with the sale or
disposition of Equipment relating to a Defaulted Contract.
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Section 6.5 Maintenance of Insurance Policies.
The Servicer will use commercially reasonable best efforts to ensure
that each Obligor maintains an Insurance Policy with respect to the related
Equipment in an amount at least equal to the sum of the Discounted Contract
Balance of the related Contract and shall ensure that each such Insurance Policy
names the Servicer as loss payee and as an insured thereunder; provided that the
Servicer, in accordance with its Credit and Collection Policy, may allow
Obligors to self-insure. Additionally, the Servicer will require that each
Obligor maintain property damage liability insurance during the term of each
Contract in amounts and against risks customarily insured against by the Obligor
on equipment owned by it. If an Obligor fails to maintain property damage
insurance, the Servicer may, but shall not be required to, purchase and maintain
such insurance on behalf of, and at the expense of, the Obligor. In connection
with its activities as Servicer, the Servicer agrees to present, on behalf of
the Deal Agent as agent for the Secured Parties, claims to the insurer under
each Insurance Policy and any such liability policy, and to settle, adjust and
compromise such claims, in each case, consistent with the terms of each
Contract. The Servicer's Insurance Policies with respect to the related
Equipment will insure against liability for personal injury and property damage
relating to such Equipment. The Servicer hereby disclaims any and all rights,
title or interest in or to the proceeds of any Insurance Policy with respect to
any Contract or Equipment in the Asset Pool including any Insurance Policy it is
named as loss payee with respect to, and agrees that it has no equitable,
beneficial or other interest in the Insurance Policies other than being named as
loss payee; provided, however, nothing herein shall limit or otherwise affect
the rights of ABL, in its individual capacity and not as the Servicer, with
respect to the Insurance Policies and any proceeds thereof. The Servicer
acknowledges that with respect to the Insurance Policies and any proceeds
thereof that it is acting solely in the capacity as agent for the Deal Agent, as
agent for the Secured Parties.
Section 6.6 Representations and Warranties of Servicer.
The Servicer represents and warrants to the Deal Agent, as agent for
the Secured Parties, the Secured Parties, the Collateral Custodian and Backup
Servicer that, as of the Closing Date and on each Addition Date, insofar as any
of the following affects the Servicer's ability to perform its obligations
pursuant to this Agreement or any Transaction Document to which it is a party in
any material respect:
(a) Organization and Good Standing. The Servicer is (a) a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, (b) has full corporate power, authority and legal
right to own or lease its properties and conduct its business as such properties
are presently owned or leased and such business is presently conducted, (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or conduct
of its business requires such qualification and (d) is in compliance with all
Requirements of Law, except to the extent that the failure to comply therewith
would not cause a Material Adverse Effect or materially and adversely affect the
performance of the Servicer's obligations under this Agreement and each other
Transaction Document to which it is a party.
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(b) Due Authorization. The Servicer has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement and
each other Transaction Document to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and each other Transaction Document to which it is a party.
(c) Due Execution. This Agreement has been, and each other Transaction
Document to which the Servicer is a party will be, duly executed and delivered
on behalf of the Servicer.
(d) No Conflict. The execution and delivery of this Agreement and each
other Transaction Document to which the Servicer is a party, the performance by
the Servicer of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with or result in
any breach of any of the material terms and provisions of, and will not
constitute (with or without notice or lapse of time or both) a default under,
any indenture, contract, agreement, mortgage, deed of trust, or other instrument
to which the Servicer is a party or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and each
other Transaction Document to which the Servicer is a party, the performance of
the transactions contemplated hereby and thereby and the fulfillment of the
terms hereof and thereof will not conflict with or violate in any material
respect, any Requirements of Law or contractual obligation applicable to the
Servicer and will not result in, or require the creation or imposition of any
Lien on any of its properties or revenues pursuant to any such Requirement of
Law or contractual obligation.
(f) No Proceedings. There are no proceedings, litigation or
investigations pending or, to the knowledge of the Servicer, threatened by or
against the Servicer or against any of its properties or revenues, before any
court, regulatory body, administrative agency, arbitrator, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any other Transaction Document to which the Servicer is a party, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document to which the Servicer is a party or
(iii) seeking any determination or ruling that could reasonably be expected to
be adversely determined, and if adversely determined, would materially and
adversely affect the performance of the Servicer's obligations under this
Agreement or any other Transaction Document or the rights and remedies of the
agents, Purchasers or Investors hereunder.
(g) All Consents Required. All approvals, authorizations, consents,
orders, notices to, filings with, or other actions of any Person or of any
Governmental Authority required in connection with the execution and delivery
and performance, validity or enforceability of this Agreement or any other
Transaction Document have been obtained.
(h) Agreements Enforceable. This Agreement constitutes, and each other
Transaction Document to which it is a party when executed and delivered will
constitute, the legal, valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
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(i) Accuracy of Representations and Warranties. Each representation or
warranty by the Servicer contained herein or in any certificate or other
document furnished by the Servicer pursuant hereto or in connection herewith is
true and correct in all material respects.
(j) Reports Accurate. No Servicer Certificate, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by the Servicer to the Deal Agent or a Purchaser in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
such Purchaser, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of fact
or omits or shall omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
Section 6.7 Representations and Warranties of Backup Servicer and
Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Seller, the Servicer, and the Deal Agent, as agent for the
Secured Parties, and the Secured Parties that, as of the Closing Date and on
each Addition Date, insofar as any of the following affects the Backup
Servicer's or the Collateral Custodian's, as the case may be, ability to perform
its obligations pursuant to this Agreement in any material respect:
(a) Organization and Good Standing. Norwest is (a) a national banking
association duly organized, validly existing and in good standing under the laws
of the United States, (b) has full corporate power, authority and legal right to
own or lease its properties and conduct its business as such properties are
presently owned or leased and such business is presently conducted, and (c) is
in compliance with all Requirements of Law, except to the extent that the
failure to comply therewith would not materially and adversely affect Norwest's
performance of its obligations under this Agreement or any other Transaction
Document to which it is a party.
(b) Power and Authority. Each of the Backup Servicer and the Collateral
Custodian has the corporate power and authority, and the legal right to make,
deliver and perform this Agreement and each has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement.
(c) Due Execution. This Agreement has been duly executed and delivered
on behalf of each of the Backup Servicer and the Collateral Custodian.
(d) No Violation. The transactions contemplated by, and the fulfillment
of the terms of, this Agreement by the Backup Servicer and the Collateral
Custodian will not (i) conflict with, result in any breach of any of the terms
or provisions of, or constitute a default under, any term of any agreement,
indenture, mortgage, deed of trust or other instrument to which the Backup
Servicer or the Collateral Custodian is a party or by which it or any of its
property is bound, (ii) result in or require the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument or other Requirements of
Law, or (iii) violate any Requirements of Law applicable to Norwest or any of
its properties.
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(e) No Consent. No consent, approval, authorization, order, notice,
registration, filing, qualification, license or permit (collectively, the
"Consents") of or with any Governmental Authority is required to be obtained by
or with respect to the Backup Servicer or the Collateral Custodian in order for
the Backup Servicer or the Collateral Custodian, as the case may be, to enter
into this Agreement or perform its obligations hereunder, except such consents,
approvals, authorizations, registrations and qualifications as have been
obtained.
(f) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of Norwest, enforceable against the Backup Servicer and the
Collateral Custodian in accordance with its terms, except as such enforceability
may be limited by applicable Insolvency Laws and except as such enforceability
may be limited by general principles of equity (whether considered in a suit at
law or in equity).
(g) No Proceedings. There are no proceedings, litigation, or
investigations pending or, to the best of its knowledge, threatened, against the
Backup Servicer or the Collateral Custodian or against any of their respective
properties, before any Governmental Authority (i) asserting the invalidity of
this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any determination
or ruling that could reasonably be expected to be adversely determined, and if
adversely determined would materially and adversely affect the performance by
the Backup Servicer or the Collateral Custodian of its obligations under, this
Agreement or any other Transaction Document or the rights and remedies of the
agents, Purchasers or Investors hereunder.
Section 6.8 Covenants of Servicer.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply in all material
respects with all laws and regulations of any Governmental Authority applicable
to the Servicer or the Contracts in the Asset Pool and related Equipment and
Custodian's Contract Files or any part thereof.
(b) Obligations with Respect to Contracts; Modifications. The Servicer
will duly fulfill and comply with all obligations on the part of the Seller to
be fulfilled or complied with under or in connection with each Contract in the
Asset Pool and will do nothing to impair the rights of the Deal Agent as agent
for the Secured Parties or of the Secured Parties in, to and under the Assets in
the Asset Pool. The Servicer will perform such obligations under the Contracts
in the Asset Pool and will not change or modify the Contracts.
(c) Preservation of Security Interest. The Servicer will execute and
file such financing and continuation statements and any other documents which
may be required by any law or regulation of any Governmental Authority to
preserve and protect fully the interest of the Deal Agent as agent for the
Secured Parties in, to and under the Assets.
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(d) No Bankruptcy Petition. Prior to the date that is one year and one
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, the Servicer will not institute against the
Seller or VFCC, or join any other Person in instituting against the Seller or
VFCC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.8(d) will survive the termination
of this Agreement.
(e) Year 2000 Compatibility. The Servicer shall take all action
necessary to assure that, prior to January 1, 2000, the Servicer's Contract
Management System is able to operate and effectively process data including
dates on and after January 1, 2000. At the request of the Deal Agent or the
Backup Servicer, the Servicer shall provide assurance reasonably acceptable to
the Deal Agent or the Backup Servicer of the Servicer's Year 2000 Compatibility.
The Servicer shall provide to the Deal Agent and Backup Servicer, on or before
June 30, 1999, an officer's certificate certifying that its Contract Management
System is year 2000 compatible.
Section 6.9 Covenants of Backup Servicer and Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian hereby
covenants that:
(a) Custodian's Contract Files. The Collateral Custodian will not
dispose of any documents constituting the Custodian's Contract Files in any
manner which is inconsistent with the performance of its obligations as the
Collateral Custodian pursuant to this Agreement and will not dispose of any
Contract except as contemplated by this Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the Collateral
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.
(c) No Bankruptcy Petition. Prior to the date that is one year and one
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or VFCC, or join any other Person in
instituting against the Seller or VFCC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 6.9(c) will survive the termination of this Agreement.
(d) Location of Contract Files. The Custodian's Contract Files shall
remain at all times in the possession of the Collateral Custodian at the address
set forth herein unless notice of a different address is given in accordance
with the terms hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The
Backup Servicer and Collateral Custodian will not make any changes to the fees
set forth in the Backup Servicer and Collateral Custodian Fee Letter without the
prior written approval of the Deal Agent.
(f) Year 2000 Compatibility. The Backup Servicer and Collateral
Custodian shall take all action necessary to assure that, prior to January 1,
2000, the Backup Servicer and Collateral Custodian's computer system is able to
operate and effectively process data including dates on and after January 1,
2000. At the request of the Deal Agent, the Backup Servicer and Collateral
Custodian shall provide assurance reasonably acceptable to the Deal Agent of the
Backup Servicer and Collateral Custodian's Year 2000 Compatibility.
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Section 6.10 [Reserved].
Section 6.11 [Reserved].
Section 6.12 Payment of Certain Expenses by Servicer.
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses
incurred as a result of activities contemplated by Section 6.4. The Servicer
will be required to pay all reasonable fees and expenses owing to any bank or
trust company in connection with the maintenance of the Collection Account and
the Lock-Box Account. The Servicer shall be required to pay such expenses for
its own account and shall not be entitled to any payment therefor other than the
Servicing Fee.
Section 6.13 Reports.
(a) Monthly Report. With respect to each Determination Date and the
related Monthly Period, the Servicer will provide to the Seller, the Deal Agent
and the Backup Servicer, on the related Reporting Date, a monthly statement (a
"Monthly Report"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit E.
(b) Servicer's Certificate. Together with each Monthly Report, the
Servicer shall submit to the Purchaser a certificate (a "Servicer's
Certificate"), signed by a Responsible Officer of the Servicer and substantially
in the form of Exhibit F.
(c) Financial Statements. The Servicer will submit to the Purchaser and
the Backup Servicer, within 75 days of the end of each of its fiscal quarters,
commencing September 30, 1998 unaudited financial statements (including an
analysis of delinquencies and losses for each fiscal quarter) as of the end of
each such fiscal quarter. The Servicer will submit to the Purchaser, within 120
days of the end of each of its fiscal years, commencing June 30, 1998 audited
financial statements (including an analysis of delinquencies and losses for each
fiscal year describing the causes thereof and sufficient to determine whether a
Restricting Event has occurred or is reasonably likely to occur and otherwise
reasonably satisfactory to the Deal Agent) as of the end of each such fiscal
year.
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Section 6.14 Annual Statement as to Compliance.
The Servicer will provide to the Deal Agent and the Backup Servicer, on
or prior to April 30 of each year, commencing April 30, 1999, an annual report
signed by a Responsible Officer of the Servicer certifying that (a) a review of
the activities of the Servicer, and the Servicer's performance pursuant to this
Agreement, for the period ending on the last day of the immediately preceding
fiscal year has been made under such Person's supervision and (b) the Servicer
has performed or has caused to be performed in all material respects all of its
obligations under this Agreement throughout such year and no Servicer Default
has occurred and is continuing (or if a Servicer Default has so occurred and is
continuing, specifying each such event, the nature and status thereof and the
steps necessary to remedy such event, and, if a Servicer Default occurred during
such year and no notice thereof has been given to the Deal Agent, specifying
such Servicer Default and the steps taken to remedy such event).
Section 6.15 Annual Independent Public Accountant's Servicing Reports.
The Servicer will cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish to the Deal Agent and the Backup Servicer, on or prior to April 30 of
each year, commencing April 30, 1999, (i) a report relating to the previous
fiscal year to the effect that (A) such firm has reviewed certain documents and
records relating to the servicing of the Contracts in the Asset Pool, and (B)
based on such examination, such firm is of the opinion that the Monthly Reports
for such year were prepared in compliance with this Agreement, except for such
exceptions as it believes to be immaterial and such other exceptions as will be
set forth in such firm's report and (ii) a report covering the preceding fiscal
year to the effect that such accountants have applied certain agreed-upon
procedures to certain documents and records relating to the servicing of
Contracts under this Agreement, compared the information contained in the
Servicer's Certificates delivered during the period covered by such report with
such documents and records and that no matters came to the attention of such
accountants that caused them to believe that such servicing was not conducted in
compliance with this Article VI of this Agreement, except for such exceptions as
such accountants shall believe to be immaterial and such other exceptions as
shall be set forth in such statement. In the event such firm requires the Backup
Servicer to agree to the procedures performed by such firm, the Servicer shall
direct the Backup Servicer in writing to so agree; it being understood and
agreed that the Backup Servicer will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Backup Servicer
makes no independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
Section 6.16 Adjustments.
If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Contract in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.
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Section 6.17 Merger or Consolidation of the Servicer.
The Servicer shall not consolidate with or merge into any other Person
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless the Servicer is the surviving entity and unless:
(i) the Servicer has delivered to the Deal Agent and the
Backup Servicer an Officer's Certificate and an Opinion of Counsel each
stating that any consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 6.17 and that all
conditions precedent herein provided for relating to such transaction
have been complied with and, in the case of the Opinion of Counsel,
that such supplemental agreement is legal, valid and binding with
respect to the Servicer and such other matters as the Deal Agent may
reasonably request;
(ii) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to the Deal Agent; and
(iii) after giving effect thereto, no Restricting Event or
event which with notice or lapse of time would constitute a Payout
Event shall have occurred.
Section 6.18 Limitation on Liability of the Servicer and Others.
Except as expressly provided herein, neither the Servicer nor any of
the directors or officers or employees or agents of the Servicer shall be under
any liability to the Deal Agent, the Secured Parties or any other Person for any
action taken or for refraining from the taking of any action pursuant to this
Agreement whether arising from express or implied duties under this Agreement;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of its willful misconduct hereunder. The Servicer may
conclusively rely on and shall be fully protected in acting upon (A) the written
instructions of any designated officer of the Deal Agent or (B) the verbal
instructions of the Deal Agent.
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Section 6.19 Indemnification of the Seller, the Backup Servicer, the
Collateral Custodian, the Deal Agent and the Secured
Parties.
The Servicer shall indemnify and hold harmless the Seller, the Backup
Servicer, the Collateral Custodian, the Deal Agent, the Liquidity Agent and each
Secured Party and their respective officers, directors, employees and agents
(collectively, the "Indemnified Persons") from and against any loss, liability,
expense, damage or injury suffered or sustained by any Indemnified Person by
reason of any acts or omissions of the Servicer, including, but not limited to
any judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, but excluding allocations of overhead expenses of
any such Indemnified Party or other non-monetary damages of any such Indemnified
Party. Notwithstanding the foregoing, the Servicer shall not indemnify an
Indemnified Person if such loss, liability, expense, damage or injury results or
arises (i) as a result of fraud, gross negligence or breach of fiduciary duty by
such Indemnified Person; and (ii) under any federal, state or local income or
franchise taxes or any other Tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by the Seller, the Backup Servicer, the
Collateral Custodian, the Deal Agent, the Liquidity Agent or the Secured Parties
in connection herewith to any taxing authority. Notwithstanding the foregoing,
the Servicer shall not indemnify the Collateral Custodian and the Backup
Servicer for any damages or injury arising from such party losing any Contract.
The provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. If the Servicer has made any
indemnity payment pursuant to this Section 6.19 and such payment fully
indemnified the recipient thereof and the recipient thereafter collects any
payments from others in respect of such Indemnified Amounts, the recipient shall
repay to the Servicer an amount equal to the amount it has collected from others
in respect of such indemnified amounts.
If for any reason the indemnification provided above in this Section
6.19 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and Servicer on the
other hand but also the relative fault of such Indemnified Person as well as any
other relevant equitable considerations.
The parties hereto agree that the provisions of this Section 6.19 shall
not be interpreted to provide recourse to the Seller against loss by reason of
the bankruptcy or insolvency (or other credit condition) of, or default by, the
related Obligor or third party Obligor on, any Pool Asset.
Any indemnification pursuant to this Section shall not be payable from
the Assets.
The obligations of the Servicer under this Section 6.19 shall survive
the resignation or removal of the Deal Agent, the Liquidity Agent, the Backup
Servicer or the Collateral Custodian and the termination of this Agreement.
Section 6.20 The Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon the Servicer's determination that (i) the performance
of its duties hereunder is or becomes impermissible under applicable law and
(ii) there is no reasonable action which the Servicer could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) above by an Opinion of Counsel to such effect delivered to the
Deal Agent and the Backup Servicer. No such resignation shall become effective
until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 6.25.
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Section 6.21 Access to Certain Documentation and Information Regarding
the Contracts.
The Collateral Custodian shall provide to the Deal Agent access to the
Custodian's Contract Files and all other documentation regarding the Contracts
in the Asset Pool and the related Equipment in such cases where the Deal Agent
is required in connection with the enforcement of the rights or interests of the
Secured Parties, or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (i) upon two
business days prior written request, (ii) during normal business hours and (iii)
subject to the Servicer's and Collateral Custodian's normal security and
confidentiality procedures. Prior to the Closing Date and quarterly thereafter
at the discretion of the Deal Agent, the Deal Agent may review the Servicer's
collection and administration of the Contracts in order to assess compliance by
the Servicer with the Servicer's Credit and Collection Policies, as well as with
this Agreement and may conduct an audit of the Contracts and Custodian's
Contract Files in conjunction with such a review, such access being afforded
without charge but only (i) upon two (2) Business Days prior written request,
(ii) during normal business hours and (iii) subject to the Servicer's and
Collateral Custodian's normal security and confidentiality procedures. Such
review shall be reasonable in scope and shall be completed in a reasonable
period of time. The first such audit and one quarterly audit per year may be
conducted by an independent auditor retained by the Deal Agent. The Seller shall
be obligated to pay all expenses related to such independent auditor and
reimburse the Deal Agent for any out-of-pocket expenses related to any audit
conducted pursuant to this Section 6.21.
Section 6.22 Backup Servicer.
(a) On or before the date on which the initial Purchase occurs, until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Secured Parties, the following
duties and obligations:
(i) On or before the Initial Purchase Date, the Backup
Servicer shall accept from the Servicer delivery of the information
required to be set forth in the Monthly Reports in hard copy and in an
electronic format acceptable to the Servicer and the Backup Servicer.
(ii) Not later than 12:00 noon New York time two Business Days
prior to each Reporting Date, the Backup Servicer shall accept delivery
of tape from the Servicer, which shall include but not be limited to
the following information: the name, number and name of the related
Lessee for each Contract, the collection status, the contract status,
the principal balance, and the ADCB as of the related Determination
Date, the Scheduled Payments for each Contract, the Discount Rate for
each Contract, the maturity date for each Contract and any other
information set forth in the Monthly Report (the "Tape").
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The Servicer shall provide the Tape on each Reporting Date as described
above. If the Servicer fails to provide the Tape to the Backup Servicer by the
time set forth in clause (ii) above, the Backup Servicer shall have the greater
of (i) two (2) Business Days, or (ii) such other period of time provided herein,
to perform the review set forth in clause (b)(i) below.
(b) Prior to each Payment Date, and until the receipt by the Servicer
of a Termination Notice, the Backup Servicer shall perform, on behalf of the
Secured Parties and the Deal Agent, the following duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer
shall review the Monthly Report to ensure that it is complete on its
face and that the following items in such Monthly Report have been
accurately calculated, if applicable, and reported: (A) the ADCB, (B)
the average ADCB, (C) the Discounted Contract Balances of the Contracts
that are 30-60 days past due, (D) the Discounted Contract Balances of
the Contracts that are 61-90 days past due, (E) the Discounted Contract
Balances of the Contracts that are 90+ days past due, (F) the
Discounted Contract Balances of the Contracts that are Defaulted
Contracts, (G) the Delinquency Ratio and (H) the Default Ratio. The
Backup Servicer shall notify the Deal Agent and the Servicer of any
disagreements with the Monthly Report based on such review not later
than the Business Day preceding such Payment Date to such Persons.
(ii) If the Servicer disagrees with the report provided under
paragraph (i) above by the Backup Servicer or if the Servicer or any
subservicer has not reconciled such discrepancy, the Backup Servicer
agrees to confer with the Servicer to resolve such disagreement on or
prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Deal Agent of
the resolution thereof. The Servicer hereby agrees to cooperate, at its
own expense, with the Backup Servicer in reconciling any discrepancies
herein. If within 20 days after the delivery of the report provided
under paragraph (i) above by the Backup Servicer, such discrepancy is
not resolved, the Backup Servicer shall promptly notify the Deal Agent
of the continued existence of such discrepancy. Following receipt of
such notice by the Deal Agent, the Servicer shall deliver to the Deal
Agent, the Secured Parties, and the Backup Servicer no later than the
related Payment Date a certificate describing the nature and amount of
such discrepancies and the actions the Servicer proposes to take with
respect thereto.
With respect to the foregoing, the Backup Servicer, in the performance
of its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the
Servicer in accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect to
the Contracts or otherwise shall pass to and be vested in the Backup Servicer,
subject to and in accordance with the provisions of Section 6.25, as long as the
Backup Servicer is not prohibited by an applicable provision of law from
fulfilling the same, as evidenced by an Opinion of Counsel.
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(d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations hereunder,
the Backup Servicer shall be entitled to receive the Backup Servicing Fee in
respect of each Monthly Period (or portion thereof) until the first to occur of
the date on which the Backup Servicer becomes a Successor Servicer, resigns or
is removed as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may resign at any time by providing not less
than 120 days prior written notice to the Deal Agent, the Liquidity Agent, the
Servicer, the Seller and the Originator. In addition, the Backup Servicer may be
removed without cause by the Deal Agent by notice then given in writing to the
Servicer, the Seller and the Backup Servicer. In the event of any such
resignation or removal, the Backup Servicer may be replaced by (i) the Servicer,
acting with the consent of the Deal Agent or (ii) if no such replacement is
appointed within 30 days following such removal or resignation, by the Deal
Agent.
(g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the parties hereto that the Backup Servicer will be
responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting on the routine and ordinary day-to-day operations
for and on behalf of the Backup Servicer. Neither the Backup Servicer nor any of
its officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses which result from the gross
negligence or willful misconduct of it or them or the failure to perform
materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer tape, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Seller, Secured Parties, Deal Agent,
Liquidity Agent, Collateral Custodian and Backup Servicer, shall look only to
the Servicer to perform such obligations. The Backup Servicer and the Collateral
Custodian shall have no responsibility and shall not be in default hereunder or
incur any liability for any failure, error, malfunction or any delay in carrying
out any of their respective duties under this Agreement if such failure or delay
results from the Backup Servicer acting in accordance with information prepared
or supplied by a Person other than the Backup Servicer or the failure of any
such other Person to prepare or provide such information. The Backup Servicer
shall have no responsibility, shall not be in default and shall incur no
liability for (i) any act or failure to act of any third party, including the
Servicer (ii) any inaccuracy or omission in a notice or communication received
by the Backup Servicer from any third party, (iii) the invalidity or
unenforceability of any Asset or Contract under applicable law, (iv) the breach
or inaccuracy of any representation or warranty made with respect to any Asset,
Contract or any item of Equipment, or (v) the acts or omissions of any successor
Backup Servicer.
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Section 6.23 Identification of Records.
The Servicer shall clearly and unambiguously identify each Contract in
the Asset Pool and the related Equipment in its computer or other records to
reflect that such Contracts and Equipment have been transferred to and are owned
by the Seller and that an interest therein has been transferred by the Seller
pursuant to this Agreement.
Section 6.24 Servicer Defaults.
If any one of the following events (a "Servicer Default") shall occur
and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Deal Agent as required by this
Agreement including, without limitation, while ABL is Servicer, any payment
required to be made under the Backup Servicer and Collateral Custodian Fee
Letter, or to deliver any required Monthly Report or other Required Reports
hereunder on or before the date occurring two Business Days after the date such
payment, transfer, deposit, instruction of notice or report is required to be
made or given, as the case may be, under the terms of this Agreement;
(b) any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in this Agreement or the Purchase Agreement which has a material adverse
effect on the Secured Parties, which continues unremedied for a period of 30
days after the first to occur of (i) the date on which written notice of such
failure requiring the same to be remedied shall have been given to the Servicer
by the Deal Agent and (ii) the date on which the Servicer becomes aware thereof;
(c) any representation, warranty or certification made by the Servicer
in this Agreement or in any certificate delivered pursuant to this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the Secured Parties and which continues to be unremedied for a period
of 30 days after the first to occur of (i) the date on which written notice of
such incorrectness requiring the same to be remedied shall have been given to
the Servicer by the Deal Agent and (ii) the date on which the Servicer becomes
aware thereof;
(d) an Insolvency Event shall occur with respect to the Servicer or
ABFS;
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(e) any material delegation of the Servicer's duties which is not
permitted by Section 7.2;
(f) any financial or Asset information reasonably requested by the Deal
Agent or the Purchaser as provided herein is not reasonably provided as
requested;
(g) the rendering against the Servicer or ABFS of a final judgment,
decree or order for the payment of money in excess of U.S. $1,000,000 and the
continuance of such judgment, decree or order unsatisfied and in effect for any
period of 61 consecutive days without a stay of execution;
(h) the failure of the Servicer or ABFS to make any payment due with
respect to aggregate recourse debt or other obligations with an aggregate
principal amount exceeding U.S. $1,000,000 or the occurrence of any event or
condition which would permit acceleration of such recourse debt or other
obligations if such event or condition has not been waived;
(i) any change in the control of the Servicer or ABFS which takes the
form of either a merger or consolidation in which the Servicer or ABFS, as the
case may be, is not the surviving entity;
(j) ABFS shall fail to have a GAAP net worth (excluding goodwill) of at
least $20,000,000; or
(k) (i) the average Delinquency Ratio for any Payment Date and the two
immediately preceding Payment Dates exceeds 4.0%, or (ii) the average Default
Ratio for any Payment Date exceeds 3.5%.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Deal Agent, by written notice to the
Servicer (with a copy to the Backup Servicer) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement.
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Section 6.25 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.24, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent. The
Deal Agent may at the time described in the immediately preceding sentence in
its sole discretion, appoint the Backup Servicer as the Servicer hereunder, and
the Backup Servicer shall on such date assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Backup Servicer; provided, however, that the
Successor Servicer shall not (i) be responsible or liable for any past actions
or omissions of the outgoing Servicer or (ii) be obligated to make Servicer
Advances. In the event that the Deal Agent does not so appoint the Backup
Servicer, there is no Backup Servicer or the Backup Servicer is unwilling or
unable to assume such obligations on such date, the Deal Agent shall as promptly
as possible appoint a successor servicer (the Backup Servicer or any such other
successor, the "Successor Servicer"), and such Successor Servicer shall accept
its appointment by a written assumption in a form acceptable to the Deal Agent.
If the Deal Agent within 60 days of receipt of a Termination Notice is unable to
obtain any bids from Eligible Servicers and the Servicer delivers an Officer's
Certificate to the effect that it cannot in good faith cure the Servicer Default
which gave rise to a transfer of servicing, then the Deal Agent shall offer the
Seller the right to accept retransfer of all the Assets and the Seller may
accept re-transfer of all the Assets, provided, however, that if the long-term
unsecured debt obligations of the Seller are not rated at the time of such
purchase at least investment grade by each rating agency providing a rating in
respect of such long-term unsecured debt obligations, no such re-transfer shall
occur unless the Seller shall deliver an Opinion of Counsel reasonably
acceptable to the Deal Agent that such re-transfer would not constitute a
fraudulent conveyance of the Seller. The amount to be paid and deposited in
respect of such re-transfer shall be equal to the sum of the Capital outstanding
plus all Yield that has accrued thereon and that will accrue thereon. In the
event that a Successor Servicer has not been appointed and has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Deal
Agent shall petition a court of competent Jurisdiction to appoint any
established financial institution having a net worth of not less than U.S.
$50,000,000 and whose regular business includes the servicing of Contracts as
the Successor Servicer hereunder.
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(b) Upon its appointment, the Backup Servicer (subject to Section
6.25(a)) or the Successor Servicer, as applicable, shall be the successor in all
respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Backup Servicer or the Successor Servicer, as applicable.
(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Seller and, without limitation,
the Seller is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The
Servicer agrees to cooperate with the Seller in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing on the
Contracts in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to
serve as the Servicer hereunder pursuant to the foregoing provisions of this
Section 6.25, the Backup Servicer will promptly begin the transition to its role
as Servicer.
(e) The Backup Servicer shall be entitled to receive its reasonable
costs incurred in transitioning to Servicer.
Section 6.26 Market Servicing Fee.
Notwithstanding anything to the contrary herein, in the event that a
successor Servicer is appointed Servicer, the Servicing Fee shall equal the
market rate for comparable servicing duties to be fixed upon the date of such
appointment by such successor Servicer and the Trustee with the consent of the
Deal Agent; in the event that the Backup Servicer becomes the successor
Servicer, the Backup Servicer shall solicit three bids, with a copy to the Deal
Agent, from not less than three entities experienced in the servicing of
contracts similar to the Contracts and that are not Affiliates of the Backup
Servicer, the Servicer or the Seller, and the Servicing Fee shall be equal to
the average of the fees proposed as determined by the Backup Servicer and with
the consent of the Deal Agent (the "Market Servicing Fee").
Section 6.27 Notification.
Upon the Servicer becoming aware of the occurrence of any Servicer
Default, the Servicer shall promptly give written notice thereof to the Deal
Agent and the Backup Servicer.
Section 6.28 Protection of Right, Title and Interest to Assets.
(a) The Servicer shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the right, title and interest of the Deal Agent as
agent for the Secured Parties and of the Secured Parties to the Assets to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the Deal
Agent as agent for the Secured Parties hereunder to all property comprising the
Assets, excluding those documents delivered to the Collateral Custodian to be
included as part of the Custodian's Contract File. The Servicer shall deliver to
the Deal Agent file-stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available following
such recording, registration or filing. The Seller shall cooperate fully with
the Servicer in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this
subsection 6.28(a).
(b) The Servicer will give the Deal Agent at least 30 days' prior
written notice of any relocation of any office from which it services Contracts
in the Asset Pool or keeps the Custodian's Contract Files or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC or any other applicable law governing the perfection of
interests in property would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the security interest of the Deal Agent
as agent for the Secured Parties in the Contracts in the Asset Pool and the
proceeds thereof. The Servicer will at all times maintain each office from which
it services Contracts in the Asset Pool within the United States of America.
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Section 6.29 Release of Custodian's Contract Files.
The Seller may, with the prior written consent of the Deal Agent (such
consent not to be unreasonably withheld), require that the Collateral Custodian
release each Custodian's Contract File (a) delivered to the Collateral Custodian
in error, (b) for which a Substitute Contract has been substituted in accordance
with Section 2.16, (c) as to which the lien on the related Equipment has been so
released pursuant to Section 5.3, (d) which has been retransferred to the Seller
pursuant to Section 5.5 or 5.6, or (e) which is required to be redelivered to
the Seller in connection with the termination of this Agreement, in each case by
submitting to the Collateral Custodian and the Deal Agent a written request in
the form of Exhibit H hereto (signed by both the Seller and the Deal Agent)
specifying the Contracts to be so released and reciting that the conditions to
such release have been met (and specifying the section or sections of this
Agreement being relied upon for such release). The Collateral Custodian shall
upon its receipt of each such request for release executed by the Seller and the
Deal Agent promptly, but in any event within 5 Business Days, release the
Custodian's Contract Files so requested to the Seller.
ARTICLE VII
RESTRICTING EVENTS
Section 7.1 [Reserved].
Section 7.2 Restricting Events.
If any of the following events ("Restricting Events") shall occur:
(a) as of any Payment Date, a Servicer Default occurs and is
continuing;
(b) as of any Payment Date, a Default Ratio Trigger Event exists;
(c) as of any Payment Date, a Delinquency Ratio Trigger Event exists;
(d) the passage of 60 days following receipt by the Purchaser of a
written notification of the Seller's intent to terminate the revolving period;
(e) the Seller shall become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "40 Act"), or the
arrangements contemplated by this Agreement shall require registration as an
"investment company" within the meaning of the 40 Act;
(f) the Seller is not in compliance with the Portfolio Concentration
Criteria, and such noncompliance is not cured by the next Payment Date;
(g) the Seller does not continue to maintain a first priority perfected
security interest in the Assets in favor of the Deal Agent, as agent for the
Secured Parties;
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(h) there has been any occurrence which, in the judgment of the Deal
Agent, would have a material adverse effect on (i) the assets, liabilities,
financial condition, business or operations of the Originator, the Seller or the
Servicer, or (ii) the ability of the Originator, the Seller or the Servicer to
meet its obligations under the Transaction Documents;
(i) (i) failure on the part of the Originator or the Seller to make any
payment or deposit required by the terms of this Agreement, the Purchase
Agreement or the Contribution Agreement on the day such payment or deposit is
required to be made; or
(ii) failure on the part of the Originator or the Seller to observe
or perform any of its covenants or agreements set forth in this Agreement, the
Purchase Agreement or the Contribution Agreement, which failure has a material
adverse effect on the interests of the Deal Agent, any Secured Party, the
Liquidity Agent or any Investor and which continues unremedied for a period of
30 days or more after written notice to the Originator or the Seller as the case
may be;
(j) any representation or warranty made by the Originator or the Seller
in this Agreement, the Purchase Agreement or the Contribution Agreement or any
information required to be given pursuant to this Agreement, the Purchase
Agreement or the Contribution Agreement shall prove to have been incorrect in
any material respect when made or delivered and which continues to be incorrect
in any material respect for a period of 30 days after written notice or actual
knowledge thereof;
(k) the Seller defaults under any other agreement with respect to any
Indebtedness;
(l) the occurrence of an Insolvency Event relating to the Originator or
the Seller;
(m) the Termination Date shall have occurred;
(n) the aggregate Capital outstanding exceeds the Capital Limit and the
Seller does not, within three (3) Business Days deliver a Notice of Sale to the
Deal Agent which would cure such deficiency;
(o) any law, treaty, rule or regulation applicable to any Purchaser
shall have been enacted, amended or rescinded and, in the sole discretion of the
related Purchaser, such enactment, amendment or rescindment, as the case may be,
shall have a material adverse effect on any such Purchaser under the Transaction
Documents;
(p) a regulatory, tax or accounting body has ordered that the
activities of the Seller or any Affiliate of the Seller, contemplated hereby be
terminated or, as a result of any other event or circumstance, the activities of
the Seller contemplated hereby may reasonably be expected to cause the Seller or
any of its respective Affiliates to suffer materially adverse regulatory,
accounting or tax consequences; or
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(q) on any day, the aggregate Hedge Notional Amount in effect for that
day under all Hedge Transactions is less than 90% of the Capital outstanding of
all Fixed Rate Contacts on that day, and the Seller does not cure such
deficiency within one (1) Business Day;
(r) any term or provision in the Purchase Agreement, Contribution
Agreement or the Backup Servicer and Collateral Custodian Fee Letter is amended,
modified, waived or terminated without the prior written consent of the Deal
Agent.
then, and in any such event, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
occurrence, the Deal Agent and the Purchasers shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Seller.
Without limiting any other rights which the Deal Agent, the Backup
Servicer, the Collateral Custodian, the Liquidity Agent, the Secured Parties or
any of their respective Affiliates may have hereunder or under applicable law,
the Seller hereby agrees to indemnify the Deal Agent, the Backup Servicer, the
Collateral Custodian, the Liquidity Agent, the Secured Parties, and each of
their respective Affiliates and officers, directors, employees and agents
thereof from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by, but excluding allocations
of overhead expenses of any such Indemnified Party or other non-monetary damages
of any such Indemnified Party any of them arising out of or as a result of this
Agreement or the ownership of the Asset Interest or in respect of any Asset or
any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from negligence or willful misconduct on the part of the Deal Agent,
the Backup Servicer, the Collateral Custodian, the Liquidity Agent, such Secured
Parties or such Affiliate and (b) recourse (except with respect to payment and
performance of obligations provided for in this Agreement) for Defaulted
Contracts. If the Seller has made any indemnity payment pursuant to this Section
8.1 and such payment fully indemnified the recipient thereof and the recipient
thereafter collects any payments from others in respect of such Indemnified
Amounts then, the recipient shall repay to the Seller an amount equal to the
amount it has collected from others in respect of such indemnified amounts.
Without limiting the foregoing, the Seller shall indemnify the Deal Agent, the
Backup Servicer, the Collateral Custodian, the Liquidity Agent, the Secured
Parties and each of their respective Affiliates and officers, directors,
employees and agents thereof for Indemnified Amounts relating to or resulting
from:
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(i) any Purchased Asset treated as or represented by the Seller to
be an Eligible Contract which is not at the applicable time an Eligible
Contract;
(ii) reliance on any representation or warranty made or deemed made
by the Seller, the Servicer (if the Originator or one of its
Affiliates) or any of their respective officers under this Agreement or
any Transaction Document and the transactions contemplated hereby and
thereby, which shall have been false or incorrect in any material
respect when made or deemed made or delivered;
(iii) the failure by the Seller or the Servicer (if the Originator
or one of its Affiliates) to comply with any term, provision or
covenant contained in this Agreement or any agreement executed in
connection with this Agreement, or with any applicable law, rule or
regulation with respect to any Asset, the related Contract, or the
nonconformity of any Asset, the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the relevant
Purchaser or to transfer to such Purchaser, an undivided ownership
interest in the Assets, together with all Collections, free and clear
of any Adverse Claim whether existing at the time of any Purchase or at
any time thereafter;
(v) the failure to maintain, as of the close of business on each
Business Day prior to the Termination Date, an amount of Capital
outstanding which is less than or equal to the lesser of (x) the
Purchase Limit on such Business Day, or (y) the Capital Limit on such
Business Day;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Assets which are, or are purported to be, Pool Assets, whether at
the time of any Purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Asset which is, or is purported to be, a Purchased Asset
(including, without limitation, a defense based on such Asset or the
related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or services
related to such Asset or the furnishing or failure to furnish such
merchandise or services;
(viii) any failure of the Seller or the Servicer (if the Originator
or one of its Affiliates) to perform its duties or obligations in
accordance with the provisions of this Agreement or any failure by the
Originator, the Seller or any Affiliate thereof to perform its
respective duties under the Contracts;
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(ix) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with merchandise or services which
are the subject of any Asset or Contract;
(x) the failure by Seller to pay when due any Taxes for which the
Seller is liable, including without limitation, sales, excise or
personal property taxes payable in connection with the Pool Assets;
(xi) any repayment by the Deal Agent, the Liquidity Agent or a
Secured Party of any amount previously distributed in reduction of
Capital or payment of Yield or any other amount due hereunder or under
any Hedging Agreement, in each case which amount the Deal Agent, the
Liquidity Agent or a Secured Party believes in good faith is required
to be repaid;
(xii) the commingling of Collections of Pool Assets at any time
with other funds;
(xiii) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of Purchases or reinvestments or the
ownership of the Asset Interest or in respect of any Asset or Contract;
(xiv) any failure by the Seller to give reasonably equivalent value
to the Originator in consideration for the transfer by the Originator
to the Seller of any Assets or any attempt by any Person to void or
otherwise avoid any such transfer under any statutory provision or
common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code; or
(xv) the failure of the Seller, the Originator or any of their
respective agents or representatives to remit to the Servicer or the
Deal Agent, Collections of Pool Assets remitted to the Seller or any
such agent or representative.
Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller solely pursuant to the provisions of Sections 2.7, 2.8 or
2.9 hereof as the case may be.
If for any reason the indemnification provided above in this Section
8.1 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and the Seller on
the other hand but also the relative fault of such Indemnified Person as well as
any other relevant equitable considerations.
The parties hereto agree that the provisions of Section 8.1 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Pool Asset.
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ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
Section 9.1 Authorization and Action.
(a) Each Secured Party hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent for the Secured Parties and does not assume nor shall be deemed
to have assumed any obligation or relationship of trust or agency with or for
the Seller or any of its successors or assigns. The Deal Agent shall not be
required to take any action which exposes the Deal Agent to personal liability
or which is contrary to this Agreement or applicable law. The appointment and
authority of the Deal Agent hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
(b) Each Investor hereby designates and appoints FUNB as Liquidity
Agent hereunder, and authorizes the Liquidity Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the
Liquidity Agent by the terms of this Agreement together with such powers as are
reasonably incidental thereto. The Liquidity Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Liquidity Agent shall
not be required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.
Section 9.2 Delegation of Duties.
(a) The Deal Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Deal Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(b) The Liquidity Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Liquidity Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
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Section 9.3 Exculpatory Provisions.
(a) Neither the Deal Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Seller to perform its
obligations hereunder, or for the satisfaction of any condition specified in
Article III. The Deal Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or performance of any of
the agreements or covenants contained in, or conditions of, this Agreement, or
to inspect the properties, books or records of the Seller. The Deal Agent shall
not be deemed to have knowledge of any Restricting Event unless the Deal Agent
has received notice from the Seller or a Secured Party.
(b) Neither the Liquidity Agent nor any of its directors, officers,
agents or employees shall be (i) liable for any action lawfully taken or omitted
to be taken by it or them under or in connection with this Agreement (except for
its, their or such Person's own gross negligence or willful misconduct or, in
the case of the Liquidity Agent, the breach of its obligations expressly set
forth in this Agreement), or (ii) responsible in any manner to the Deal Agent or
any of the Secured Parties for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of the
Seller to perform its obligations hereunder, or for the satisfaction of any
condition specified in Article III. The Liquidity Agent shall not be under any
obligation to the Deal Agent or any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Seller. The Liquidity Agent shall not be deemed to have knowledge
of any Restricting Event unless the Liquidity Agent has received notice from the
Seller, the Deal Agent or a Secured Party.
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Section 9.4 Reliance.
(a) The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or communication 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 the Seller), independent accountants and other
experts selected by the Deal Agent. The Deal Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other document furnished in connection herewith unless it shall first receive
such advice or concurrence of VFCC or the Required Investors or all of the
Secured Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Secured Parties, provided that unless and
until the Deal Agent shall have received such advice, the Deal Agent may take or
refrain from taking any action, as the Deal Agent shall deem advisable and in
the best interests of the Secured Parties. The Deal Agent shall in all cases be
fully protected in acting, or in refraining from acting, in accordance with a
request of VFCC or the Required Investors or all of the Secured Parties, as
applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Secured Parties.
(b) The Liquidity Agent shall in all cases be entitled to rely, and
shall be fully protected in relying, upon any 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 the Seller), independent accountants
and other experts selected by the Liquidity Agent. The Liquidity Agent shall in
all cases be fully justified in failing or refusing to take any action under
this Agreement or any other document furnished in connection herewith unless it
shall first receive such advice or concurrence of Required Investors as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Investors, provided that unless and until the Liquidity Agent shall have
received such advice, the Liquidity Agent may take or refrain from taking any
action, as the Liquidity Agent shall deem advisable and in the best interests of
the Investors. The Liquidity Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Investors and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Investors.
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Other
Purchasers.
Each Secured Party expressly acknowledges that neither the Deal Agent,
the Liquidity Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the Deal
Agent or the Liquidity Agent. Each Secured Party represents and warrants to the
Deal Agent and to the Liquidity Agent that it has and will, independently and
without reliance upon the Deal Agent, the Liquidity Agent or any other Secured
Party and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of the
Seller and made its own decision to enter into this Agreement or Hedging
Agreement, as the case may be.
Section 9.6 Reimbursement and Indemnification.
The Investors agree to reimburse and indemnify VFCC, the Deal Agent,
the Liquidity Agent and each of their respective officers, directors, employees,
representatives and agents ratably according to their pro rata shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which VFCC,
the Liquidity Agent, acting in its capacity as Liquidity Agent, or the Deal
Agent, acting in its capacity as Deal Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity
Agent, acting in its capacity as Liquidity Agent, or the Deal Agent, in its
capacity as Deal Agent and acting on behalf of the Secured Parties, in
connection with the administration and enforcement of this Agreement.
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Section 9.7 Deal Agent and Liquidity Agent in their Individual
Capacities.
The Deal Agent, the Liquidity Agent and each of their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Seller or any Affiliate of the Seller as though the
Deal Agent or the Liquidity Agent, as the case may be, were not the Deal Agent
or the Liquidity Agent, as the case may be, hereunder. With respect to the
acquisition of Asset Interests pursuant to this Agreement, the Deal Agent, the
Liquidity Agent and each of their respective Affiliates shall have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Deal Agent or the Liquidity Agent, as the case
may be, and the terms "Investor," "Purchaser," "Investors" and "Purchasers"
shall include the Deal Agent or the Liquidity Agent, as the case may be, in its
individual capacity.
Section 9.8 Successor Deal Agent or Liquidity Agent.
(a) The Deal Agent may, upon 5 days' notice to the Seller and the
Secured Parties, and the Deal Agent will, upon the direction of all of the
Secured Parties (other than the Deal Agent, in its individual capacity) resign
as Deal Agent. If the Deal Agent shall resign, then the Required Investors
during such 5-day period shall appoint from among the Secured Parties a
successor agent. If for any reason no successor Deal Agent is appointed by the
Required Investors during such 5-day period, then effective upon the expiration
of such 5-day period, the Second Parties shall perform all of the duties of the
Deal Agent hereunder and the Seller shall make all payments in respect of the
Aggregate Unpaids or under any fee letter delivered by the Originator to the
Deal Agent and the Secured Parties directly to the applicable Secured Party and
for all purposes shall deal directly with the Secured Party. After any retiring
Deal Agent's resignation hereunder as Deal Agent, the provisions of this Article
VIII and Article IX shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Deal Agent under this Agreement.
(b) The Liquidity Agent may, upon 5 days' notice to the Seller, the
Deal Agent and the Investors, and the Liquidity Agent will, upon the direction
of all of the Investors (other than the Liquidity Agent, in its individual
capacity) resign as Liquidity Agent. If the Liquidity Agent shall resign, then
the Required Investors during such 5-day period shall appoint from among the
Investors a successor Liquidity Agent. If for any reason no successor Liquidity
Agent is appointed by the Required Investors during such 5-day period, then
effective upon the expiration of such 5-day period, the Investors shall perform
all of the duties of the Liquidity Agent hereunder and all payments in respect
of the Aggregate Unpaids. After any retiring Liquidity Agent's resignation
hereunder as Liquidity Agent, the provisions of this Article VIII and Article IX
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Liquidity Agent under this Agreement.
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ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1 Assignments and Participations.
(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal
Agent, the Liquidity Agent and S&P and Moody's, assign to one or more banks or
other entities all or a portion of its rights and obligations under this
Agreement; provided, however, that (i) each such assignment shall be of a
constant, and not a varying percentage of all of the assigning Investor's rights
and obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Investor being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than the lesser of (A) $15,000,000 or an integral
multiple of $1,000,000 in excess of that amount and (B) the full amount of the
assigning Investor's Commitment, (iii) each such assignment shall be to an
Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Deal Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 or such lesser amount as shall be approved by the Deal Agent, (v) the
parties to each such assignment shall have agreed to reimburse the Deal Agent,
the Liquidity Agent and VFCC for all fees, costs and expenses (including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for each of the Deal Agent, the Liquidity Agent and VFCC) incurred by the Deal
Agent, the Liquidity Agent and VFCC, respectively, in connection with such
assignment and (vi) there shall be no increased costs, expenses or taxes
incurred by the Deal Agent, the Liquidity Agent or VFCC upon such assignment or
participation, and provided further that upon the effective date of such
assignment the provisions of Section 3.03(f) of the Administration Agreement
shall be satisfied. Upon such execution, delivery and acceptance by the Deal
Agent and the Liquidity Agent and the recording by the Deal Agent, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be the date of acceptance thereof by the Deal Agent and the
Liquidity Agent, unless a later date is specified therein, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of an Investor hereunder and (ii)
the Investor assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Investor's rights and obligations under
this Agreement, such Investor shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Investor assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.
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(c) The Deal Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Investors and the
Commitment of, and the Capital of, each Asset interest owned by each investor
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and VFCC, the
Seller and the Investors may treat each Person whose name is recorded in the
Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.
(d) Subject to the provisions of Section 10.1(a), upon its receipt of
an Assignment and Acceptance executed by an assigning Investor and an assignee,
the Deal Agent and the Liquidity Agent shall each, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit D
hereto, accept such Assignment and Acceptance, and the Deal Agent shall then (i)
record the information contained therein in the Register and (ii) give prompt
notice thereof to VFCC.
(e) Each Investor may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
each Asset Interest owned by it); provided, however, that (i) such Investor's
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Investor shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Deal Agent and the other Investors shall continue to deal solely
and directly with such Investor in connection with such Investor's rights and
obligations under this Agreement, and provided further that the Deal Agent shall
have confirmed that upon the effective date of such participation the provisions
of Section 3.03(f) of the Administration Agreement shall be satisfied.
Notwithstanding anything herein to the contrary, each participant shall have the
rights of an Investor (including any right to receive payment) under Sections
2.12 and 2.13; provided, however, that no participant shall be entitled to
receive payment under either such Section in excess of the amount that would
have been payable under such Section by the Seller to the Investor granting its
participation had such participation not been granted, and no Investor granting
a participation shall be entitled to receive payment under either such Section
in an amount which exceeds the sum of (i) the amount to which such Investor is
entitled under such Section with respect to any portion of any Asset Interest
owned by such Investor which is not subject to any participation plus (ii) the
aggregate amount to which its participants are entitled under such Sections with
respect to the amounts of their respective participations. With respect to any
participation described in this Section 10.1, the participant's rights as set
forth in the agreement between such participant and the applicable Investor to
agree to or to restrict such Investor's ability to agree to any modification,
waiver or release of any of the terms of this Agreement or to exercise or
refrain from exercising any powers or rights which such Investor may have under
or in respect of this Agreement shall be limited to the right to consent to any
of the matters set forth in Section 11.1 of this Agreement.
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(f) Each Investor may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Seller or VFCC furnished to such
Investor by or on behalf of the Seller or VFCC.
(g) In the event (i) an Investor ceases to qualify as an Eligible
Assignee, or (ii) an Investor makes demand for compensation pursuant to Section
2.12 or Section 2.13, VFCC may, and, upon the direction of the Seller and prior
to the occurrence of a Restricting Event, shall, in any such case,
notwithstanding any provision to the contrary herein, replace such Investor with
an Eligible Assignee by giving three Business Days' prior written notice to such
Investor. In the event of the replacement of an Investor, such Investor agrees
(i) to assign all of its rights and obligations hereunder to an Eligible
Assignee selected by VFCC upon payment to such Investor of the amount of such
Investor's Asset Interests together with any accrued and unpaid Yield thereon,
all accrued and unpaid commitment fees owing to such Investor and all other
amounts owing to such Investor hereunder and (ii) to execute and deliver an
Assignment and Acceptance and such other documents evidencing such assignment as
shall be necessary or reasonably requested by VFCC or the Deal Agent. In the
event that any Investor ceases to qualify as an Eligible Assignee, such affected
Investor agrees (1) to give the Deal Agent, the Seller and VFCC prompt written
notice thereof and (2) subject to the following proviso, to reimburse the Deal
Agent, the Liquidity Agent, the Seller, VFCC and the relevant assignee for all
fees, costs and expenses (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for each of the Deal Agent, the Liquidity
Agent, the Seller and VFCC and such assignee) incurred by the Deal Agent, the
Liquidity Agent, the Seller, VFCC and such assignee, respectively, in connection
with any assignment made pursuant to this Section 10.1(g) by such affected
Investor; provided, however, that such affected Investor's liability for such
costs, fees and expenses shall be limited to the amount of any up-front fees
paid to such affected Investor at the time that it became a party to this
Agreement.
(h) Nothing herein shall prohibit any Investor from pledging or
assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or collateral
assignment may be made without compliance with Section 10.1(a) or Section
10.1(b).
(i) In the event any Investor causes increased costs, expenses or taxes
to be incurred by the Deal Agent, Liquidity Agreement or VFCC in connection with
the assignment or participation of such Investor's rights and obligations under
this Agreement to an Eligible Assignee then such Investor agrees that it will
make reasonable efforts to assign such increased costs, expenses or taxes to
such Eligible Assignee in accordance with the provisions of this Agreement.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
(a) Except as provided in this Section 11.1, no amendment, waiver or
other modification of any provision of this Agreement shall be effective without
the written agreement of the Seller, the Servicer, the Deal Agent and the
Required Investors; provided, however, that no such amendment, waiver or
modification affecting the rights or obligations of any Hedge Counterparty, the
Backup Servicer or the Collateral Custodian shall be effective as against that
Hedge Counterparty, the Backup Servicer and/or the Collateral Custodian, as the
case may be, without the written agreement of such Persons. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No amendment, waiver or other modification of this Agreement shall:
(i) without the consent of each affected Purchaser, (A) extend the
Commitment Termination Date or the date of any payment or deposit of
Collections by the Seller or the Servicer, (B) reduce the rate or
extend the time of payment of Yield (or any component thereof), (C)
reduce any fee payable to the Deal Agent for the benefit of the
Purchasers, (D) except pursuant to Article X hereof, change the amount
of the Capital of any Purchaser, an Investor's pro rata share or an
Investor's Commitment, (E) amend, modify or waive any provision of the
definition of Required Investors or this Section 11.1(b), (F) consent
to or permit the assignment or transfer by the Seller of any of its
rights and obligations under this Agreement or (G) amend or modify any
defined term (or any defined term used directly or indirectly in such
defined term) used in clauses (A) through (E) above in a manner which
would circumvent the intention of the restrictions set forth in such
clauses; or
(ii) without the written consent of the Deal Agent, amend, modify
or waive any provision of this Agreement if the effect thereof is to
affect the rights or duties of such Agent.
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(c) Notwithstanding the foregoing provisions of this Section 11.1,
without the consent of the Investors, the Deal Agent may, with the consent of
the Seller amend this Agreement solely to add additional Persons as Investors
hereunder. Any modification or waiver shall apply to each of the Purchasers
equally and shall be binding upon the Seller, the Purchasers and the Deal Agent.
Section 11.2 Notices, Etc.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or specified in such party's Assignment and Acceptance or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mail, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answer back, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article 11 shall not be effective until
received with respect to any notice sent by mail or telex.
Section 11.3 Ratable Payments.
If any Secured Party, whether by setoff or otherwise, has payment made
to it with respect to any portion of the Aggregate Unpaids owing to such Secured
Party (other than payments received pursuant to Section 8.1 in a greater
proportion than that received by any other Secured Party), such Secured Party
agrees, promptly upon demand, to purchase for cash without recourse or warranty
a portion of the Aggregate Unpaids held by the other Secured Parties so that
after such purchase each Secured Party will hold its ratable proportion of the
Aggregate Unpaids; provided, however, that if all or any portion of such excess
amount is thereafter recovered from such Secured Party, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
Section 11.4 No Waiver, Rights and Remedies.
No failure on the part of the Deal Agent, the Collateral Custodian, the
Backup Servicer or a Secured Party to exercise, and no delay in exercising, any
right or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right. The rights and
remedies herein provided are cumulative and not exclusive of any rights and
remedies provided by law.
Section 11.5 Binding Effect; Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Backup Servicer, the Collateral Custodian, the
Secured Parties and their respective successors and permitted assigns and, in
addition, the provisions of 2.7(a)(i), 2.8(a)(i) and 2.9(b)(i) shall inure to
the benefit of each Hedge Counterparty, whether or not that Hedge Counterparty
is a Secured Party.
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Section 11.6 Term of this Agreement.
This Agreement, including, without limitation, the Seller's obligation
to observe its covenants set forth in Article V, and the Servicer's obligation
to observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Article VIII and Article IX and the
provisions of Section 11.9 and Section 11.10 shall be continuing and shall
survive any termination of this Agreement.
Section 11.7 Governing Law; Consent to Jurisdiction; Waiver of
Objection to Venue.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE SECURED PARTIES, THE SELLER, THE
LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK AND THE
EASTERN DISTRICT OF PENNSYLVANIA. EACH OF THE PARTIES HERETO AND EACH SECURED
PARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 11.8 Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES,
THE SELLER AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 11.9 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted to the Deal
Agent, the Liquidity Agent, the Backup Servicer, the Collateral Custodian, the
Secured Parties and its or their Affiliates and officers, directors, employees
and agents thereof under Article VIII hereof, the Seller agrees to pay on demand
all costs and expenses of the Deal Agent, the Liquidity Agent, the Backup
Servicer, the Collateral Custodian and the Secured Parties incurred in
connection with the preparation, execution, delivery, administration (including
periodic auditing), amendment or modification of, or any waiver or consent
issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith (excluding any Hedging Agreement),
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian and the Secured Parties with respect thereto and with
respect to advising the Deal Agent, the Liquidity Agent, the Backup Servicer,
the Collateral Custodian and the Secured Parties as to their respective rights
and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith (excluding any Hedging Agreement), and all
costs and expenses, if any (including reasonable counsel fees and expenses),
incurred by the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian or the Secured Parties in connection with the enforcement
of this Agreement and the other documents to be delivered hereunder or in
connection herewith (including any Hedging Agreement).
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(b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Agreement, the other documents
to be delivered hereunder or any agreement or other document providing liquidity
support, credit enhancement or other similar support to the Purchaser in
connection with this Agreement or the funding or maintenance of Purchases
hereunder.
(c) The Seller shall pay on demand all other costs, expenses and Taxes
(excluding privilege, net worth, or income taxes) incurred by any Issuer or any
shareholder of such Issuer ("Other Costs"), including, without limitation, all
costs and expenses incurred by the Deal Agent in connection with periodic audits
of the Seller's or the Servicer's books and records and the cost of rating such
Issuer's commercial paper with respect to financing its purchase of Asset
Interests hereunder by independent financial rating agencies.
Section 11.10 No Proceedings.
Each of the Seller, the Deal Agent, the Liquidity Agent, the Servicer,
the Backup Servicer, the Collateral Custodian and the Secured Parties hereby
agrees that it will not institute against, or join any other Person in
instituting against VFCC any proceedings of the type referred to in Section
6.8(d) and 6.9(c) so long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.
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Section 11.11 Recourse Against Certain Parties.
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any manager or administrator of such
Secured Party or any incorporator, affiliate, stockholder, officer, employee or
director of such Secured Party or of any such manager or administrator, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise; it being expressly agreed and understood
that the agreements of such Secured Party contained in this Agreement and all of
the other agreements, instruments and documents entered into by it pursuant
hereto or in connection herewith are, in each case, solely the corporate
obligations of such Secured Party, and that no personal liability whatsoever
shall attach to or be incurred by any manager or administrator of such Secured
Party or any incorporator, stockholder, affiliate, officer, employee or director
of such Secured Party or of any such manager or administrator, as such, or any
other of them, under or by reason of any of the obligations, covenants or
agreements of such Secured Party contained in this Agreement or in any other
such instruments, documents or agreements, or which are implied therefrom, and
that any and all personal liability of every such manager or administrator of
such Secured Party and each incorporator, stockholder, affiliate, officer,
employee or director of such Secured Party or of any such manager or
administrator, or any of them, for breaches by such Secured Party of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement.
(b) Notwithstanding anything in this Agreement or any other Transaction
Document to the contrary, VFCC shall have no obligation to pay any amount
required to be paid by it hereunder or thereunder in excess of any amount
available to VFCC after paying or making provision for the payment of its
Commercial Paper Notes. All payment obligations of VFCC hereunder are contingent
on the availability of funds in excess of the amounts necessary to pay
Commercial Paper Notes; and each of the Seller, the Servicer, the Backup
Servicer, the Deal Agent, the Liquidity Agent and the Secured Parties agree that
they shall not have a claim under Section 101(5) of the Bankruptcy Code if and
to the extent that any such payment obligation exceeds the amount available to
VFCC to pay such amount after paying or making provision for the payment of its
Commercial Paper Notes.
(c) The provisions of this Section 11.11 shall survive the termination
of this Agreement.
Section 11.12 Protection of Ownership Interests of the Purchasers;
Intent of Parties; Security Interest.
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the Secured
Parties to exercise and enforce their rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder after five Business Days' notice from the Deal Agent, the
Deal Agent or any Secured Party may (but shall not be required to) perform, or
cause performance of, such obligation; and the Deal Agent's or such Secured
Party's costs and expenses incurred in connection therewith shall be payable by
the Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Article VIII, as applicable. The Seller
irrevocably authorizes the Deal Agent and appoints the Deal Agent as its
attorney-in-fact to act on behalf of the Seller (i) to execute on behalf of the
Seller as debtor and to file financing statements necessary or desirable in the
Deal Agent's sole discretion to perfect and to maintain the perfection and
priority of the interest of the Secured Parties in the Assets and (ii) to file a
carbon, photographic or other reproduction of this Agreement or any financing
statement with respect to the Assets as a financing statement in such offices as
the Deal Agent in its sole discretion deems necessary or desirable to perfect
and to maintain the perfection and priority of the interests of the Secured
Parties in the Assets. This appointment is coupled with an interest and is
irrevocable.
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(c) The parties hereto intend that the conveyance of Asset Interests by
the Seller to the Purchasers shall be treated as sales for all purposes. If,
despite such intention, a determination is made that such transactions shall not
be treated as sales, then the parties hereto intend that this Agreement
constitutes a security agreement and the transactions effected hereby constitute
secured loans by the Purchasers to the Seller under applicable law. For such
purpose, the Seller hereby transfers, conveys, assigns and grants to the Deal
Agent, for the benefit of the Secured Parties, a continuing security interest in
all Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Capital, all payments at any time due
or accrued in respect of the Yield on any Asset Interest and all other payments
at any time due (whether accrued or due) by the Seller hereunder (including
without limit any amount owing under Article VIII hereof), under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter to the Deal Agent and
each Purchaser.
Section 11.13 Confidentiality
(a) Each of the Deal Agent, the Secured Parties, the Liquidity Agent,
the Servicer, the Collateral Custodian, the Backup Servicer and the Seller shall
maintain and shall cause each of its employees and officers to maintain the
confidentiality of the Agreement and all information with respect to the other
parties, including all information regarding the business of the Seller and the
Servicer hereto and their respective businesses obtained by it or them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that each such party and its officers and employees
may (i) disclose such information to its external accountants, attorneys,
investors, potential investors and the agents of such Persons ("Excepted
Persons"), provided, however, that each Excepted Person shall, as a condition to
any such disclosure, agree for the benefit of the Deal Agent, the Secured
Parties, the Liquidity Agent, the Servicer, the Collateral Custodian, the Backup
Services and the Seller that such information shall be used solely in connection
with such Excepted Person's evaluation of, or relationship with, the Seller and
its affiliates, (ii) disclose the existence of the Agreement, but not the
financial terms thereof, (iii) disclose such information as is required by an
applicable law or an order of an judicial or administrative proceeding and (iv)
disclose the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving
any of the Transaction Documents or any Hedging Agreement for the purpose of
defending itself, reducing its liability, or protecting or exercising any of its
claims, rights, remedies, or interests under or in connection with any of the
Transaction Documents or any Hedging Agreement. It is understood that the
financial terms that may not be disclosed except in compliance with this Section
11.13(a) include, without limitation, all fees and other pricing terms, and all
Restricting Events, Servicer Defaults, and priority of payment provisions.
93
<PAGE>
(b) Anything herein to the contrary notwithstanding, the Seller and the
Servicer each hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Deal Agent, the Liquidity Agent, the Collateral
Custodian, the Backup Servicer or the Secured Parties by each other, (ii) by the
Deal Agent or the Purchasers to any prospective or actual assignee or
participant of any of them or (iii) by the Deal Agent, the Liquidity Agent or a
Purchaser to any Rating Agency, Commercial Paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to a Purchaser and to any officers,
directors, employees, outside accountants and attorneys of any of the foregoing,
provided each such Person is informed of the confidential nature of such
information. In addition, the Secured Parties, the Liquidity Agent and the Deal
Agent may disclose any such nonpublic information as required pursuant to any
law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
(c) Notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known, (ii) disclosure of any and all information
(A) if required to do so by any applicable statute, law, rule or regulation, (B)
to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Seller's, the Servicer's, the Collateral
Custodian's or the Backup Servicer's business or that of their affiliates, (C)
pursuant to any subpoena, civil investigative demand or similar demand or
request of any court, regulatory authority, arbitrator or arbitration to which
the Collateral Custodian or Backup Servicer or an affiliate or an officer,
director, employer or shareholder thereof is a party, (D) in any preliminary or
final offering circular, registration statement or contract or other document
pertaining to the transactions contemplated herein approved in advance by the
Seller or Servicer or (E) to any affiliate, independent or internal auditor,
agent, employee or attorney of the Collateral Custodian or Backup Servicer
having a need to know the same, provided that the Collateral Custodian or Backup
Servicer advises such recipient of the confidential nature of the information
being disclosed, or (iii) any other disclosure authorized by the Seller or
Servicer.
Section 11.14 Notice of Breach of Representations and Warranties.
Upon the discovery by the Seller, the Servicer, any Secured Party, the
Deal Agent, the Liquidity Agent of any Investor of a breach of any of the
representations and warranties contained in Section 4.2 herein, the party
discovering such breach shall give prompt notice to the others.
Section 11.15 Execution in Counterparts; Severability; Integration.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Purchasers.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
94
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: AMERICAN BUSINESS LEASE FUNDING CORPORATION
/s/ Jeffrey M. Ruben
-----------------------------
By: Jeffrey M. Ruben
Title: Senior Vice President
THE SERVICER: AMERICAN BUSINESS LEASING, INC.
/s/ Jeffrey M. Ruben
----------------------------
By: Jeffrey M. Ruben
Title: Senior Vice President
THE INVESTORS: FIRST UNION NATIONAL BANK
/s/ Bill A. Shirley
----------------------------
By: Bill A. Shirley
Title: Senior Vice President
Commitment: $100,000,000
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Bill A. Shirley
Facsimile No.: (704) 374-3254
Confirmation No: (704) 374-4001
<PAGE>
VFCC: VARIABLE FUNDING CAPITAL
CORPORATION
By First Union Capital Markets, a division of
Wheat First Securities, Inc. as attorney-in-fact
/s/ Darrell R. Baber
-----------------------
By: Darrell R. Baber
Title: Director
Variable Funding Capital Corporation
c/o First Union Capital Markets, a division of
Wheat First Securities, Inc.
One First Union Center, TW-6
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
With a copy to:
Lord Securities Corp.
Attention: Vice President
Facsimile No.: (212) 346-9012
Confirmation No.: (212) 346-9008
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS, a division
of WHEAT FIRST SECURITIES, INC.
/s/ Darrell R. Baber
-----------------------
By: Darrell R. Baber
Title: Director
First Union Capital Markets, a division of
Wheat First Securities, Inc.
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Telephone No.: (704) 383-9343
<PAGE>
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
/s/ Bill A. Shirley
----------------------------
By: Bill A. Shirley
Title: Senior Vice President
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Bill A. Shirley
Facsimile No.: (704) 374-3254
Telephone No.: (704) 374-4001
THE COLLATERAL CUSTODIAN: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Collateral Custodian
/s/ Aileen R. O'Connor
------------------------------
By: Aileen R. O'Connor
Title: Corporate Trust Officer
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0067
Attention: Custody Vault
Facsimile No.: (612) 667-1080
Confirmation No.: (612) 667-4960
<PAGE>
THE BACKUP SERVICER: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Backup Servicer
/s/ Aileen R. O'Connor
------------------------------
By: Aileen R. O'Connor
Title: Corporate Trust Officer
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services
Asset-Backed Administration
Facsimile No.: (612) 667-3539
Confirmation No.: (612) 667-8058
<PAGE>
AMERICAN BUSINESS LEASING: AMERICAN BUSINESS LEASING
/s/ Jeffrey M. Ruben
----------------------------
By: Jeffrey M. Ruben
Title: Senior Vice President
FEDERAL LEASING CORP.: FEDERAL LEASING CORP.
/s/ Jeffrey M. Ruben
----------------------------
By: Jeffrey M. Ruben
Title: Senior Vice President
<PAGE>
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
AMERICAN BUSINESS LEASING, INC.
FEDERAL LEASING CORP.
and
FIRST UNION NATIONAL BANK
dated
September 28, 1998
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1. Certain Definitions............................................................................................2
1.1. Definitions.............................................................................................2
1.2. Accounting Terms.......................................................................................10
2. The Credit....................................................................................................10
2.1. The Loans..............................................................................................10
2.2. The Note...............................................................................................10
2.3. Funding Procedures.....................................................................................11
(a) Requests for Advance...............................................................................11
(b) Irrevocability.....................................................................................11
(c) Availability of Funds..............................................................................11
(d) Funding of Net Amount..............................................................................11
2.4. Interest...............................................................................................11
(a) Prime Rate.........................................................................................11
(b) LIBO Rate..........................................................................................11
(c) Renewals and Conversions of Loans..................................................................12
(d) Automatic Reinstatement............................................................................12
2.5. Fees...................................................................................................12
(a) Structuring and Arranging Fee......................................................................12
(b) Commitment Fee.....................................................................................12
2.6. Voluntary Prepayments..................................................................................13
(a) Prime Rate Loans...................................................................................13
(b) LIBO Rate Loans....................................................................................13
2.7. Payments................................................................................................13
(a) Prime Rate Loans...................................................................................13
(b) LIBO Rate Loans....................................................................................13
(c) Form of Payments, Application of Payments, Payment Administration, Etc.............................13
(d) Net Payments.......................................................................................13
(e) Prepayment of LIBO Rate Loans......................................................................14
2.8. Changes in Circumstances; Yield Protection..............................................................14
2.9. Illegality..............................................................................................15
3. Representations and Warranties................................................................................16
3.1. Organization, Standing.................................................................................16
3.2. Corporate Authority, Validity, Etc.....................................................................16
3.3. Litigation.............................................................................................16
3.4. ERISA..................................................................................................17
3.5. Financial Statements...................................................................................17
3.6. Not in Default, Judgments, Etc.........................................................................17
3.7. Taxes..................................................................................................17
3.8. Permits, Licenses, Etc.................................................................................17
3.9. No Materially Adverse Contracts, Etc...................................................................17
3.10. Compliance with Laws, Etc.............................................................................18
3.11. Solvency..............................................................................................18
3.12. Subsidiaries, Etc.....................................................................................18
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
3.13. Title to Properties, Leases...........................................................................18
3.14. Public Utility Holding Company; Investment Company....................................................18
3.15. Margin Stock..........................................................................................19
3.16. Use of Proceeds.......................................................................................19
3.17. Year 2000 Problem.....................................................................................19
3.18. Disclosure Generally..................................................................................19
3.19. Prudential Securities Credit Corporation..............................................................19
4. Conditions Precedent..........................................................................................19
4.1. All Loans..............................................................................................19
(a) Documents..........................................................................................19
(b) Covenants; Representations.........................................................................19
(c) Defaults...........................................................................................20
(d) Material Adverse Change............................................................................20
(e) Borrowing Base Certificate.........................................................................20
(f) Restricting Event..................................................................................20
4.2. Conditions to First Loan...............................................................................20
(a) Articles, Bylaws...................................................................................20
(b) Evidence of Authorization..........................................................................20
(c) Legal Opinions.....................................................................................20
(d) Incumbency.........................................................................................20
(e) Note...............................................................................................20
(f) Guaranty Agreement.................................................................................20
(g) Documents..........................................................................................21
(h) Consents...........................................................................................21
(i) Other Agreements...................................................................................21
(j) Fees...............................................................................................21
5. Affirmative Covenants.........................................................................................21
5.1. Financial Statements and Reports.......................................................................21
(a) Annual Statements..................................................................................21
(b) Quarterly Statements...............................................................................21
(c) Compliance Certificate.............................................................................22
(d) ERISA..............................................................................................22
(e) Material Changes...................................................................................22
(f) Other Information..................................................................................22
(g) Borrowing Base Certificates........................................................................22
(h) Lease Receivables Report...........................................................................22
5.2. Corporate Existence.....................................................................................22
5.3. ERISA...................................................................................................22
5.4. Compliance with Regulations.............................................................................23
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws........................................23
5.6. Maintenance of Insurance................................................................................23
5.7. Payment of Debt; Payment of Taxes, Etc..................................................................23
5.8. Notice of Events........................................................................................23
5.9. Inspection Rights.......................................................................................24
5.10. Generally Accepted Accounting Principles...............................................................24
5.11. Compliance with Material Contracts.....................................................................24
5.12. Use of Proceeds........................................................................................24
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
5.13. Management.............................................................................................24
5.15. Year 2000 Program......................................................................................24
5.16. Further Assurances.....................................................................................24
5.17. Restrictive Covenants in Other Agreements..............................................................25
5.18. Intercreditor Agreement. .............................................................................25
6. Negative Covenants............................................................................................25
6.1. Consolidation and Merger...............................................................................25
6.3. Liens..................................................................................................25
6.4. Guarantees.............................................................................................25
6.5. Margin Stock...........................................................................................25
6.6. Acquisitions and Investments...........................................................................26
6.7. Transfer of Assets; Nature of Business.................................................................26
6.8. Accounting Change......................................................................................26
6.9. Transactions with Affiliates...........................................................................26
6.10. Restriction on Amendment of This Agreement.............................................................26
7. Financial Covenants...........................................................................................27
7.1. Borrowing Base.........................................................................................27
7.2. Minimum Tangible Net Worth.............................................................................27
7.3. Total Liabilities to Net Worth.........................................................................27
8. Default.......................................................................................................27
8.1. Events of Default......................................................................................27
(a) Payments...........................................................................................27
(b) Covenants..........................................................................................27
(c) Representations, Warranties........................................................................27
(d) Bankruptcy.........................................................................................28
(e) Certain Other Defaults.............................................................................28
(f) Judgments.........................................................................................28
(g) Attachments........................................................................................28
(h) Change in Control..................................................................................28
(i) Security Interests................................................................................28
(j) Receivables Purchase Agreement....................................................................28
(k) Material Adverse Change............................................................................29
9. Collateral....................................................................................................29
9.1. Collateral..............................................................................................29
10. Miscellaneous................................................................................................29
10.1. Waiver................................................................................................29
10.2. Amendments............................................................................................29
10.3. Governing Law.........................................................................................29
10.4. Participations and Assignments........................................................................29
10.5. Captions..............................................................................................30
10.6. Notices...............................................................................................30
10.7. Expenses; Indemnification.............................................................................30
10.8. Survival of Warranties and Certain Agreements.........................................................30
10.9. Severability..........................................................................................30
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
10.10. No Fiduciary Relationship............................................................................31
10.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.......................................................31
10.12. WAIVER OF JURY TRIAL.................................................................................31
10.13. Counterparts; Effectiveness..........................................................................31
10.14. Use of Defined Terms.................................................................................32
10.15. Offsets..............................................................................................32
10.16. Entire Agreement.....................................................................................32
- ----------
EXHIBIT A NOTE
EXHIBIT B BORROWING BASE CERTIFICATE
EXHIBIT C COMPLIANCE CERTIFICATE
EXHIBIT D GUARANTY AGREEMENT
EXHIBIT E SECURITY AGREEMENT
SCHEDULE 1 MISCELLANEOUS INFORMATION
</TABLE>
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<PAGE>
Credit Agreement
This Credit Agreement, dated September 28, 1998 (this "Agreement"), is
entered into by and among AMERICAN BUSINESS LEASING, INC., a Pennsylvania
corporation ("ABL") and FEDERAL LEASING CORP., a New Jersey corporation ("FLC"),
jointly and severally, and FIRST UNION NATIONAL BANK, a national banking
association (the "Bank").
Preliminary Statement
WHEREAS, ABL and FLC desire to have available to them a credit facility
the proceeds of which may be used for the purchase of new or used equipment for
lease to unaffiliated persons and the initial lease of that equipment.
WHEREAS, ABL and FLC have requested that the Bank establish such credit
facility and make loans to ABL and FLC under the terms and conditions
hereinafter set forth.
WHEREAS, American Business Financial Services, Inc., a Delaware
corporation ("ABFS"), owns, of record and beneficially, all the capital stock of
American Business Credit, Inc., a Pennsylvania corporation ("ABC").
WHEREAS, ABC owns all of the capital stock of (i) ABC Holdings Corp., a
Pennsylvania corporation ("ABC Holdings"), (ii) American Business Finance Corp.,
a Delaware ("ABFC"), (iii) ABL, (iv) HomeAmerican Consumer Discount Company, a
Pennsylvania corporation ("Discount"), (v) HomeAmerican Credit, Inc., a
Pennsylvania corporation ("HAC"), (vi) New Jersey Mortgage & Investment Corp., a
New Jersey corporation ("NJMI"), and (vii) Processing Service Center, Inc., a
Pennsylvania corporation ("Processing").
WHEREAS, NJMI owns all of the capital stock of FLC.
WHEREAS, it is in the best interests of ABFS, ABC, ABC Holdings, ABFC,
ABL, Discount, FLC, HAC, NJMI and Processing that the credit facilities
available to them be restructured with certain of them borrowers or co-borrowers
under certain facilities and ABL and FLC as borrowers under the credit facility
contemplated hereby with ABFS, ABC, ABC Holdings, ABFC, Discount, HAC, NJMI and
Processing as guarantors (individually, a "Guarantor", and collectively, the
"Guarantors") of the obligations of ABL and FLC hereunder.
WHEREAS, it is condition of all Loans made pursuant to this Agreement
that each of the Guarantors unconditionally guarantee the prompt and punctual
performance of all liabilities and obligations of ABL and FLC hereunder and
under any other Loan Document (as defined herein).
WHEREAS, the Bank is willing to establish such credit facility and to
make loans to ABL and FLC under the terms and conditions hereinafter set forth,
including but not limited to said guarantees.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Certain Definitions
1.1. Definitions.
"Account Receivable" shall have the meaning ascribed to "Accounts" in
the Security Agreement.
"Additional Amount" shall have the meaning set forth in (Section)
2.7.(e).
"Advance Funding Eligible Lease Receivables" shall mean accounts
receivable by ABL or FLC which meet all of the criteria of Eligible
Lease Receivables but not all of the equipment to be leased under the
applicable lease contract has been delivered to and accepted by the
lessee provided that the lessee shall have executed and delivered to
ABL or FLC, as applicable, an Advance Funding Addendum to the lease
contract in the form and substance reasonably satisfactory to the Bank.
The account receivable by ABL or FLC shall be, in each instance, the
"Advance Payment" amount set forth in each Advance Funding Addendum.
"Affiliate" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with ABL; (2)
which directly or indirectly beneficially owns or holds ten percent
(10%) or more of any class of voting stock of ABL; or (3) ten percent
(10%) or more of whose voting stock of which is directly or indirectly
beneficially owned or held by ABL. The term "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.
"Agreement" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and
all exhibits and schedules attached hereto.
"Borrowing Base" shall mean the lesser of (a) 92% of the present value
of each Eligible Lease Receivable included in the Collateral or (b)
100% of the invoice purchase price of the equipment underlying each
such Eligible Lease Receivable. Present value shall be determined by
discounting the Eligible Lease Receivable at the rate applicable to
United States Treasury certificates with a maturity of two years in
effect on the date of the calculation plus 2.00%. Eligible Lease
Receivables pertaining to the lease of equipment which was not new at
the time of purchase by ABL or FLC, as applicable, which are included
in the Borrowing Base shall not exceed $1,000,000 in the aggregate at
any time. Advance Funding Eligible Lease Receivables included in the
Borrowing Base shall not exceed $2,000,000 in the aggregate at any
time. Further, no Advance Funding Eligible Lease Receivable shall be
included in the calculation of the Borrowing Base if 60 days or more
shall have elapsed from the date of the first advance made pursuant to
an Advance Funding Addendum relating to the applicable equipment lease
agreement.
"Borrowing Base Certificate" shall mean a certificate in substantially
the form attached hereto as Exhibit B hereto which shall be signed by
the Presidents of ABL and FLC.
-2-
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia are authorized or
required to close under the laws of the Commonwealth of Pennsylvania
and, if the applicable day relates to a LIBO Rate Loan, or notice with
respect to a LIBO Rate Loan, a day on which dealings in Dollar deposits
are also carried on in the London interbank market and banks are open
for business in London ("London Business Day").
"Capitalized Lease" shall mean all lease obligations of any Person for
any property (whether real, personal or mixed) which have been or
should be capitalized on the books of the lessee in accordance with
General Accepted Accounting Principles.
"Capitalized Lease Obligations" with respect to any Person, shall mean
the aggregate amount which, in accordance with GAAP, is required to be
reported as a liability on the balance sheet of such Person at such
time in respect of such Person's interest as lessee under a Capital
Lease.
"Closing Date" shall mean the date closing shall occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and all rules and regulations with respect thereto in
effect from time to time.
"Collateral" shall have the meaning set forth in (Section) 9.1.
"Commitment" shall have the meaning set forth in (Section) 2.1.
"Commitment Fee" shall have the meaning set forth in (Section) 2.5.(b)
"Compliance Certificate" shall mean a certificate in substantially the
form attached hereto as Exhibit C which shall be signed by the
Presidents of ABL and FLC.
"Credit Termination Date" shall have the meaning set forth in (Section)
2.2.
"Debt" shall mean, as of any date of determination with respect to ABFS
and its consolidated subsidiaries, without duplication, (i) all items
which in accordance with Generally Accepted Accounting Principles would
be included in determining total liabilities as shown on the liability
side of a balance sheet such person as of the date on which Debt is to
be determined, (ii) all indebtedness of others with respect to which
ABL or FLC, as applicable, has become liable by way of a guarantee or
endorsement (other than for collection or deposit in the ordinary
course of business), (iii) all contingent liabilities, and (iv) lease
obligations that, in conformity with GAAP, have been capitalized.
"Default Rate" on any Loan shall mean 2% per annum above the Prime
Rate.
"Dollars" shall mean the lawful currency of the United States of
America.
"Eligible Lease Receivables" shall mean accounts receivable and general
intangibles of ABL or FLC in connection with the lease of equipment
each of which have the following characteristics: (i) ABL or FLC, as
applicable, is the sole lessor, (ii) the lease and the account
receivable arose in the ordinary course of business of ABL or FLC, as
-3-
<PAGE>
applicable, (iii) all of the Equipment to be leased pursuant to the
lease has been delivered to, and accepted by, the lessee (except in the
case of accounts receivable relating to Advance Funding Eligible Lease
Receivables) and is currently subject to a lease, (iv) none of the
lease, the account receivable or the Equipment is subject to any prior
assignment, claim, lien, security interest or other limitation on the
absolute title of ABL or FLC, as applicable, thereto, (v) neither the
lease nor the account receivable is not more than 61 days past due with
respect to any payment required thereby, (vi) the lease and the account
receivable is freely assignable, (vii) neither the lease nor the
account receivable is questionable as to collectibility, (vii) the
lessee/account debtor is not located outside of the United States of
America (except as specifically provided in the next sentence), (viii)
the lease is dated and has been in effect for not more than 210 days,
(ix) the lease is not cancelable by lessee, (x) the lease has an
original term not in excess of 63 months, except that leases not in
excess of 10% of the Commitment may have an original term greater than
63 months provided that no lease shall have an original term of 72
months or more, (xi) the lease has not been restructured or amended,
except for restructurings or amendments for reasons not involving the
creditworthiness of the lessee or the ability of the lessee to make
payments or maintain (or insure) leased equipment as required by the
applicable lease, (xii) the lease shall not be in default except as
otherwise covered in clause (v) above, and (xiii) the lease, the
account receivable and the equipment all constitute Collateral as
defined in the Security Agreement. In addition, the aggregate of all
Eligible Lease Receivables included in the Borrowing Base (a) for any
one lessee or group of affiliated lessees shall not at any time exceed
$450,000 and (b) which arise from the lease of equipment that was not
new at the origination of the lease shall not at any time exceed
$1,000,000. Notwithstanding clause (vii) above, Eligible Lease
Receivables shall include accounts receivable by ABL and FLC which do
not exceed in the aggregate $500,000 at any time outstanding where the
lessee/account debtor is located in a U.S. Territory, provided that
such accounts receivable meet all other eligibility criteria set forth
above.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations as ABL or FLC within the meaning
of (Section) 414(b) of the Code, or any trade or business which is
under common control with ABL or FLC within the meaning of (Section)
414(c) of the Code.
"Event of Default" shall have the meaning set forth in (Section) 8.1.
"Environmental Control Statutes" shall mean each and every applicable
federal, state, county or municipal environmental statute, ordinance,
rule, regulation, order, directive or requirement, together with all
successor statutes, ordinances, rules, regulations, orders, directives
or requirements, of any Governmental Authority, including without
limitation laws in any way related to Hazardous Substances.
"Fiscal Quarter" shall mean a quarterly period ending on the last day
of September, December, March or June.
"Fiscal Year" shall mean a fiscal year ending on the last day of June.
-4-
<PAGE>
"Guarantor" shall mean ABFS, ABC, ABC Holdings, ABFC, Discount, HAC,
NJMI or Processing, or any subsidiary of any of them created after the
date of this Agreement except for Subsidiaries which are special
purpose or bankruptcy remote that have debt on their respective balance
sheets which when consolidated with ABFS, ABL or FLC, as applicable, is
deemed to be non-recourse debt to the applicable parent.
"Guarantors" shall mean ABFS, ABC, ABC Holdings, ABFC, Discount, HAC,
NJMI and Processing, as well as all subsidiaries of any of them created
after the date of this Agreement except for Subsidiaries which are
special purpose or bankruptcy remote that have debt on their respective
balance sheets which when consolidated with ABFS, ABL or FLC, as
applicable, is deemed to be non-recourse debt to the applicable parent.
"Guaranty Agreement" shall mean the Guaranty Agreement in the form and
substance attached hereto as Exhibit D.
"Generally Accepted Accounting Principles" or "GAAP" shall mean
generally accepted accounting principles as in effect from time to time
in the United States, consistently applied.
"Governmental Authority" shall mean the federal, state, county or
municipal government, or any department, agency, bureau or other
similar type body obtaining authority therefrom or created pursuant to
any laws, including without limitation Environmental Control Statutes.
"Hazardous Substances" shall mean without limitation, any regulated
substance, toxic substance, hazardous substance, hazardous waste,
pollution, pollutant or contaminant, as defined or referred to in the
New Jersey Environmental Rights Act, N.J.S.A. 2A: 35A-1 et seg.; the
New Jersey Spill Compensation and Control Act, N.J.S.A.26:2C-1 et seg.;
the Resource Conservation and Recovery Act, as amended, 15 U.S.C.,
(Section) 2601 et seg.; the Comprehensive Environmental Response,
Compensation and Liability Act, 33 U.S.C. (Section) 1251 et seg.; the
Hazardous Substances Discharge: Reports and Notices Act, N.J.S.A. 13:
1K-15 et seg.; the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et
seg.; the New Jersey Underground storage of Hazardous Substances Act,
N.J.S.A. 58:L10A-21 et seg.; (P.L. 1986 Ch. 102), and the federal
underground storage tank law, Subtitle I of the Resource Conservation
and Recovery Act, as amended, P.L. 98-616, 42 U.S.C. (Section) 6901 et
seg.; together with any amendments thereto, regulations promulgated
thereunder and all substitutions thereof, as well as words of similar
purport or meaning referred to in any other federal, state, county or
municipal environmental statute, ordinance, rule or regulation.
"Indebtedness for Borrowed Money" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising, for
money borrowed by ABL or FLC, whether or not evidenced by any note,
indenture, or agreement (including, without limitation, the Note and
any indebtedness for money borrowed from an Affiliate) and (ii) all
indebtedness of others for money borrowed (including indebtedness of an
Affiliate) with respect to which ABL or FLC has become liable by way of
a guarantee or indemnity.
"Intangible Assets" shall mean all assets which would be classed as
intangible assets under GAAP consistently applied, including, without
limitation, goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), patents, trademarks, trade
names, copyrights, franchises, and deferred charges (including, without
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limitation, unamortized debt discount and expense, organization costs,
and research and development costs). For purposes of this definition,
prepayments of taxes, license fees and other expenses shall not be
deemed Intangible Assets.
"Interest Period" shall mean with respect to any LIBO Rate Loan, each
period commencing on the date any such Loan is made, or, with respect
to a Loan being renewed, the last day of the next preceding Interest
Period with respect to a Loan, and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on
the last day of the calendar month) in the first, second, third or
sixth calendar month thereafter as selected under the procedures
specified in (Section) 2.3, if the Bank is then offering LIBO Rate
Loans for such period; provided that each LIBO Rate Loan Interest
Period which would otherwise end on a day which is not a Business Day
(or, for purposes of Loans to be repaid on a London Business Day, such
day is not a London Business Day) shall end on the next succeeding
Business Day (or London Business Day, as appropriate) unless such next
succeeding Business Day (or London Business Day, as appropriate) falls
in the next succeeding calendar month, in which case the Interest
Period shall end on the next preceding Business Day (or London Business
Day, as appropriate).
"Investment" in any Person shall mean (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or
other securities of such Person; (b) any deposit with, or advance, loan
or other extension of credit to, such Person (other than any such
deposit, advance, loan or extension of credit having a term not
exceeding 90 days in the case of unaffiliated Persons and 120 days in
the case of Affiliates representing the purchase price of inventory or
supplies purchased in the ordinary course of business) or guarantee or
assumption of, or other contingent obligation with respect to,
Indebtedness for Borrowed Money or other liability of such Person; and
(c) (without duplication of the amounts included in (a) and (b)) any
amount that may, pursuant to the terms of such investment, be required
to be paid, deposited, advanced, lent or extended to or guaranteed or
assumed on behalf of such Person.
"Lease Receivables Report" shall mean a report in summary form of the
status of accounts receivable in respect of all leases which are part
of the Collateral in form and substance reasonably satisfactory to the
Bank.
"LIBO Rate" shall mean, for the applicable Interest Period, (i) the
rate, rounded upwards to the next one-sixteenth of one percent,
determined by the Bank two London Business Days prior to the date of
the corresponding LIBO Rate Loan, at which the Bank is offered deposits
in dollars at approximately 11:00 A.M., London time, as stated on
Telerate page 3750 for delivery on the date of the Loan, conversion or
renewal in an amount and for a period comparable to the amount and
Interest Period of the Loan, conversion or renewal and in like finds,
divided by (ii) a number equal to one (1.0) minus the LIBO Rate Reserve
Percentage. The LIBO Rate shall be adjusted automatically with respect
to any LIBO Rate Loan outstanding on the effective date of any change
in the LIBO Rate Reserve Percentage, as of such effective date. LIBO
Rate shall be calculated on the basis of the number of days elapsed in
a year of 360 days.
"LIBO Rate Reserve Percentage" shall mean, for any LIBO Rate Loan for
any Interest Period therefor, the daily average of the stated maximum
rate (expressed as a decimal) at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be
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maintained during such Interest Period under Regulation D by the Bank
against "Eurocurrency liabilities" (as such terms is used in Regulation
D) but without benefit of credit proration, exemptions, or offsets that
might otherwise be available to the Bank from time to time under
Regulation D. Without limiting the effect of the foregoing, the LIBO
Rate Reserve Percentage shall reflect any other reserves required to be
maintained by the Bank against (1) any category of liabilities which
includes deposits by reference to which the rate for LIBO Rate Loans is
to be determined; or (2) any category of extension of credit or other
assets which include LIBO Rate Loans.
"LIBO Rate Loans" shall mean Loans accruing interest based on the LIBO
Rate.
"Lien" shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any
kind securing satisfaction of an obligation, including any agreement to
give any of the foregoing, any conditional sales or other title
retention agreement, any lease in the nature thereof, and the filing of
or the agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction or similar evidence of any
encumbrance, whether within or outside the United States.
"Loan" or "Loans" shall mean the meanings set forth in (Section) 2.1.
"Loan Documents" shall mean this Agreement, the Note, the Guaranty
Agreement, the Security Agreement, and all other documents directly
related or incidental to said documents, the Loans or the Collateral.
"Material Adverse Change" shall mean any event or condition which, in
the reasonable determination of the Bank, could result in a material
adverse change in the financial condition, business, properties,
profits or prospects of ABL or FLC, or any Guarantor (as applicable),
or which gives reasonable grounds to conclude that ABL, FLC, or any
Guarantor (as applicable), may not or will not be able to perform or
observe (in the normal course) its obligations under the Loan Documents
to which it is a party, including but not limited to the Note and the
Guaranty Agreement (as applicable).
"Material Adverse Effect" shall mean a material adverse effect (i) on
the financial condition, business, properties, or profits of ABL or
FLC, or any Guarantor (as applicable), (ii) the ability of ABL or FLC,
or any Guarantor (as applicable, to perform its obligations under this
Agreement, the Note, the Guaranty Agreement and the other Loan
Documents, or (iii) the legality, validity or enforceability of this
Agreement, the Note, the Guaranty Agreement or the rights and remedies
of the holders of the Loans.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
ERISA (Section) 4001(a)(3), which covers employees of ABL, FLC or any
ERISA Affiliate.
"Net Income" shall mean net income after income taxes as shown on the
balance sheet.
"Net Worth" shall mean the sum of capital stock, plus paid-in capital,
plus retained earnings, minus treasury stock.
"Note" shall have the meaning set forth in (Section) 2.2.
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"Obligations" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every
kind, matured or unmatured, direct or contingent, owing, arising, due,
or payable to the Bank by or from ABL or FLC arising out of this
Agreement or any other Loan Document, including, without limitation,
all obligations to repay principal of and interest on the Loans, and to
pay interest, fees, costs, charges, expenses, professional fees, and
all sums chargeable to ABL or FLC, or for which ABL or FLC is liable as
indemnitor under the Loan Documents, whether or not evidenced by any
note or other instrument.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" shall mean, at any time, any Plan (including a
Multiemployer Plan), the funding requirements of which (under ERISA
(Section) 302 or Code (Section) 412) are, or at any time within the six
years immediately preceding the time in question, were in whole or in
part, the responsibility of ABL or any ERISA Affiliate.
"Permitted Liens" shall mean (a) any Liens for current taxes,
assessments and other governmental charges not yet due and payable or
being contested in good faith by ABL or FLC by appropriate proceedings
and for which adequate reserves have been established by ABL or FLC as
reflected in ABL's financial statements; (b) any mechanic's,
materialman's, carrier's, warehousemen's or similar Liens for sums not
yet due or being contested in good faith by ABL or FLC by appropriate
proceedings and for which adequate reserves have been established by
ABL or FLC as reflected in ABL's financial statements; (c) easements,
rights-of-way, restrictions and other similar encumbrances on the real
property or fixtures of ABL or FLC incurred in the ordinary course of
business which individually or in the aggregate are not substantial in
amount and which do not in any case materially detract from the value
or marketability of the property subject thereto or interfere with the
ordinary conduct of the business of ABL; (d) Liens (other than Liens
imposed on any property of ABL or FLC pursuant to ERISA or (Section)
412 of the Code) incurred or deposits made in the ordinary course of
business, including Liens in connection with workers' compensation,
unemployment insurance and other types of social security and Liens to
secure performance of tenders, statutory obligations, surety and appeal
bonds (in the case of appeal bonds such Lien shall not secure any
reimbursement or indemnity obligation in an amount greater than
$250,000), bids, leases that are not Capitalized Leases, performance
bonds, sales contracts and other similar obligations, in each case, not
incurred in connection with the obtaining of credit or the payment of a
deferred purchase price, and which do not, in the aggregate, result in
a Material Adverse Effect; (e) Liens, if any, existing on the date
hereof and listed in Schedule 1 hereto other than Liens of the
character referred to in clause (f); (f) Liens on specific assets
purchased whether before or after the date hereof and any revenue
stream directly attributable thereto provided that such liens are
limited to the Equipment so purchased and the revenue stream generated
therefrom and that there is no recourse against ABL or FLC beyond the
specific assets and such revenue stream, and (g) Liens created in favor
of the Bank as contemplated herein or any Loan Document.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity, or other
entity of whatever nature.
"Plan" shall mean an employee benefit plan as defined in (Section) 3(3)
of ERISA, other than a Multiemployer Plan, whether formal or informal
and whether legally binding or not.
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"Potential Default" shall mean an event, condition or circumstance that
with the giving of notice or lapse of time or both would become an
Event of Default.
"Prime Rate" shall mean, for any day, the prime commercial lending rate
of the Bank, as announced from time to time at its head office,
calculated on the basis of the actual number of days elapsed in a year
of 360 days.
"Prime Rate Loans" shall mean Loans accruing interest based on the
Prime Rate.
"Prohibited Transaction" shall mean a transaction that is prohibited
under Code (Section) 4975 or ERISA (Section) 406 and not exempt under
Code (Section) 4975 or ERISA (Section) 408.
"Regulation" shall mean any statute, law, ordinance, regulation, order
or rule of any United States or foreign, federal, state, local or other
government or governmental body, including, without limitation, those
covering or related to banking, financial transactions, securities,
public utilities, environmental control, energy, safety, health,
transportation, bribery, record keeping, zoning, antidiscrimination,
antitrust, wages and hours, employee benefits, and price and wage
control matters.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"Regulatory Change" shall mean any change after the date of this
Agreement in any Regulation (including Regulation D) or the adoption or
making after such date of any interpretations, directives or requests
of or under any Regulation (whether or not having the force of law) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof applying to a class of banks
but excluding any foreign office of the Bank.
"Release" shall mean without limitation, the presence, leaking,
leaching, pouring, emptying, discharging, spilling, using, generating,
manufacturing, refining, transporting, treating, or storing of
Hazardous Substances at, into, onto, from or about the property or the
threat thereof, regardless of whether the result of an intentional or
unintentional action or omission, and which is in violation of
applicable law.
"Reportable Event" shall mean, with respect to a Pension Plan: (a) Any
of the events set forth in ERISA Sections 4043(b) (other than a
reportable event as to which the provision of 30 days' notice to the
PBGC is waived under applicable regulations) or 4063(a) or the
regulations thereunder, (b) an event requiring ABL, FLC or any ERISA
Affiliate to provide security to a Pension Plan under Code (Section)
401(a)(29) and (c) any failure by ABL, FLC or any ERISA Affiliate to
make payments required by Code (Section) 412(m).
"Request for Advance" shall have the meaning set forth in (Section)
2.3.(a).
"Security Agreement" shall mean the Security Agreement in the form and
substance attached hereto as Exhibit E.
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"Solvent" shall mean, with respect to any Person, that the aggregate
present fair saleable value of such Person's assets is in excess of the
total amount of its probable liabilities on its existing debts as they
become absolute and matured, such Person has not incurred debts beyond
its foreseeable ability to pay such debts as they mature, and such
Person has capital adequate to conduct the business it is presently
engaged in or is about to engage in.
"Structuring and Arranging Fee" shall have the meaning set forth in
(Section) 2.5.(a).
"Subordinated Debt" shall mean shall mean Debt which is subordinated in
right of payment and all other respects to the Obligations, including
but not limited to the Note, pursuant to a written subordination
agreement in form and substance satisfactory to the Bank.
"Subsidiary" shall mean a corporation or other entity the shares of
stock or other equity interests of which having ordinary voting power
(other than stock or other equity interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries or both, by
ABL.
"Tangible Net Worth" shall mean Net Worth, minus Intangible Assets.
"Taxes" shall have the meaning set forth in (Section) 2.7.(d).
"Termination Event" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing
of a notice of intent to terminate a Pension Plan, or the treatment of
a Pension Plan amendment as a termination under ERISA (Section)
4041(c), (c) the institution of proceedings to terminate a Pension Plan
under ERISA (Section) 4042 or (d) the appointment of a trustee to
administer any Pension Plan under ERISA (Section) 4042.
"Unfunded Pension Liabilities" shall mean, with respect to any Pension
Plan at any time, the amount determined by taking the accumulated
benefit obligation, as disclosed in accordance with Statement of
Accounting Standards No. 87, over the fair market value of Pension Plan
assets.
"Unrecognized Retiree Welfare Liability" shall mean, with respect to
any Plan that provides post-retirement benefits other than pension
benefits, the amount of the accumulated post-retirement benefit
obligation, as determined in accordance with Statement of Financial
Accounting Standards No. 106, as of the most recent valuation date.
Prior to the date such statement is applicable to any ABL, such amount
of the obligation shall be based on an estimate made in good faith.
"Year 2000 Problem" shall mean the risk that computer applications may
be unable to recognize, and perform properly, date-sensitive functions
involving certain dates prior to and after December 31, 1999.
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with Generally Accepted Accounting
Principles consistent with those applied in the preparation of the financial
statements referred to in (Section) 3.5, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
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2. The Credit
2.1. The Loans. Subject to the terms and conditions herein set forth,
the Bank will make loans (herein called individually a "Loan" and collectively,
the "Loans") from time to time to ABL and FLC, jointly and severally, upon
receipt of loan requests therefor. Each Loan made shall in a minimum principal
amount of five hundred thousand ($500,000). All Loans together shall not exceed
an aggregate principal amount outstanding at any time of TWENTY MILLION DOLLARS
($20,000,000) (said maximum aggregate principal amount referred to herein as the
"Commitment").
2.2. The Note. The Loans made by the Bank shall be evidenced by a
single promissory note of ABL and FLC, made jointly and severally, (such
promissory note as it may be amended, extended, modified, restated, replaced,
substituted for or renewed, the "Note") in principal face amount equal to TWENTY
MILLION DOLLARS ($20,000,000) payable to the order of the Bank and otherwise in
the form attached hereto as Exhibit A. The Note shall be dated the Closing Date,
shall bear interest at the rate per annum and be payable as to principal and
interest in accordance with the terms hereof. The Note shall mature on the
earlier to occur of (i) the date the maturity of the Note is accelerated as
provided in (Section) 8.1 hereof, or (ii) September 30, 2000 (this date to be
deemed the "Credit Termination Date"). Upon maturity, the Loan evidenced by the
Note shall be due and payable. The Bank shall maintain records of all Loans
evidenced by the Note and of all payments thereon, which records shall be
conclusive absent manifest error.
2.3. Funding Procedures.
(a) Requests for Advance. Each request for a Loan, conversion of a
Loan to a different interest rate, or renewal of a Loan whose interest rate
period is expiring, shall be the subject of a "Request for Advance" and each
shall be deemed to be a new Loan. If the Bank shall offer to make the requested
Loan, the funds shall be delivered to or at the direction of ABL or FLC in the
case of a new Loan or be used to repay the Loan being converted or renewed in
the case of a conversion or renewal. Requests of Advance shall be made not later
than 11:00 a.m. one Business Day prior to the date of the proposed borrowing,
conversion or renewal in the case of Prime Rate Loans, and three London Business
Days prior to the date of the proposed borrowing, conversion or renewal in the
case of LIBO Rate Loans. No request shall be effective until actually received
in writing by the Bank. Each Request for Advance shall made by delivery to the
Bank of a written request therefor signed by ABL or FLC or, in the alternative,
a telephone request therefor followed promptly by written confirmation of the
request, in each case specifying the date, amount and type of the Loan to be
made, converted or renewed selecting the interest rate option to be applicable
thereto, and in the case of LIBO Rate Loans, specifying the Interest Period to
be applicable thereto.
(b) Irrevocability. Upon receipt of a Request for Advance by the
Bank, the request shall not be revocable by ABL or FLC.
(c) Availability of Funds. In the case of a borrowing, the Bank will
make funds immediately available to ABL and/or FLC on the date of each Loan by a
credit to the account of ABL or FLC, as applicable, at the Bank's address set
forth opposite its name on the signature page hereof or to such other
destination and in such other form as ABL or FLC may request, in writing. In the
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case of a conversion or renewal, no funds will actually be delivered but
appropriate book entries will be made showing the conversion or renewal.
(d) Funding of Net Amount. If the Bank makes a Loan on a day on which
all or any part of an outstanding Loan from the Bank is to be repaid, the Bank
shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by the Bank to ABL or FLC, as
applicable, as provided in clause 2.3.(c).
2.4. Interest. The following interest rates may be applicable to any
Loan or Loans, as requested by ABL or FLC from time to time.
(a) Prime Rate. Each Prime Rate Loan shall bear interest on the
principal amount thereof from the date made until such Loan is paid in full or
converted, at a rate per annum equal to the Prime Rate minus 1% per annum (100
basis points).
(b) LIBO Rate. Each LIBO Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full, renewed, or
converted, at a rate per annum equal to the LIBO Rate plus 187.5 basis points.
After receipt of a request for a LIBO Rate Loan, the Bank shall proceed to
determine the LIBO Rate to be applicable thereto. The Bank shall give prompt
notice by telephone or facsimile ABL or FLC, as applicable, of the LIBO Rate
thus determined in respect of each LIBO Rate Loan or any change therein. Not
more than six LIBO Rate Loans shall be in existence at any one time.
(c) Renewals and Conversions of Loans. On the last day of each Interest
Period, the LIBO Rate Loan then maturing shall be deemed to be the subject of
Request for Advance whether or not an actual request is actually delivered and
such LIBO Rate Loan shall automatically be renewed for a new Interest Period of
like duration, unless ABL or FLC shall have given the Bank an actual Request for
Advance specifying a conversion or renewal for an Interest Period of different
duration as provided in (Section) 2.3 hereof, or an Event of Default, or
Potential Default exists or would thereby occur, or renewal for a new Interest
Period of like duration would result in a date later than the Commitment
Termination Date. If no Event of Default or Potential Default exists or would
thereby occur, ABL and FLC shall have the right to convert Prime Rate Loans into
LIBO Rate Loans, to convert LIBO Rate Loans into Prime Rate Loans, and to renew
LIBO Rate Loans for Interest Periods of different duration, from time to time,
provided that it shall give the Bank notice of each permitted conversion or
renewal as provided in (Section) 2.3 hereof. LIBO Rate Loans may be converted or
renewed for different Interest Periods only as of the last day of the applicable
Interest Period for such Loans. The Bank shall use its best efforts to notify
ABL or FLC, as applicable, of the effectiveness of such conversion or renewal
(automatic or not automatic), and the new interest rate to which the converted
or renewed Loan is subject, as soon as practicable after the conversion or
renewal; provided, however, that any failure to give such notice shall not
affect ABL's obligations or the Bank's rights and remedies hereunder in any way
whatsoever. In the event a LIBO Rate Loan is not automatically renewed as
provided herein and ABL or FLC, as applicable, shall not have selected an
alternative Interest Period for any LIBO Rate Loan maturing as provided herein,
such Loan shall be automatically converted into a Prime Rate Loan on the last
day of the Interest Period for such Loan.
(d) Automatic Reinstatement. The liability of ABL and FLC under this
(Section) 2.4 shall continue to be effective or be automatically reinstated, as
the case may be, if at any time payment, in whole or in part, of any of the
payments to the Bank is rescinded or must otherwise be restored or returned upon
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the insolvency, bankruptcy, dissolution, liquidation or reorganization of ABL or
FLC or any other Person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to ABL or FLC or any other Person or any substantial part of its property, or
otherwise, all as though such payment had not been made.
2.5. Fees.
(a) Structuring and Arranging Fee. ABL and FLC agree to pay to the
Bank a fee (the "Structuring and Arranging Fee") as provided in a letter of even
date herewith.
(b) Commitment Fee. ABL and FLC agree to pay to the Bank a fee (the
"Commitment Fee") computed at the rate per annum equal to 20 basis points, if
average quarterly principal balance outstanding hereunder for such quarter is
less than or equal to 50% of the Commitment, and at the rate per annum equal to
12.5 basis points, if the average quarterly principal balance outstanding
hereunder for such quarter is greater than 50% of the Commitment, of the average
daily amount of the unused portion of the Commitment, accrued from and after the
date hereof. The Commitment Fee shall be payable in arrears on the first day of
each January, April, July and October, commencing October 1, 1998 (for the three
month period or portion thereof ended on the preceding day), and at maturity of
the Note, whether by acceleration or otherwise. The Commitment Fee shall be
calculated on the basis of a 360 day year.
2.6. Voluntary Prepayments.
(a) Prime Rate Loans. On one Business Day's notice to the Bank, ABL
or FLC, as applicable, may, at its option, prepay any Prime Rate Loan in whole
at any time or in part from time to time, provided that each partial prepayment
shall be in the minimum principal amount of $500,000 and, if less than $500,000
shall be outstanding, in principal amount equal to amount remaining outstanding.
(b) LIBO Rate Loans. ABL or FLC, as applicable, may, at its option
prepay any LIBO Rate Loan provided that if it shall prepay a LIBO Rate Loan
prior to the last day of the applicable Interest Period, or shall fail to borrow
any LIBO Rate Loan on the date such Loan is to be made, it shall pay to the
Bank, in addition to the principal and interest then to be paid in the case of a
prepayment, on such date of prepayment, the Additional Amount incurred or
sustained by the Bank as a result of such prepayment or failure to borrow as
provided in (Section) 2.3.(a).
2.7. Payments.
(a) Prime Rate Loans. Accrued interest on all Prime Rate Loans shall
be due and payable on the first Business Day of each calendar month and upon
maturity of the Note, whether by acceleration of maturity or otherwise.
(b) LIBO Rate Loans. Accrued interest on LIBO Rate Loans with
Interest Periods of one or three months shall be due and payable on the last day
of such Interest Period. Accrued interest on LIBO Rate Loans with an Interest
Period of six months shall be due and payable on the last day of the third month
of such Interest Period and on the last day of such Interest Period.
(c) Form of Payments, Application of Payments, Payment
Administration, Etc. Except as otherwise provided herein, all payments of
principal, interest, fees, or other amounts payable by ABL and FLC hereunder
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shall be remitted to the Bank at the address set forth opposite its name on the
signature page hereof or at such office or account as the Bank shall specify to
ABL or FLC in writing, in immediately available funds not later than 2:00 p.m.
on the day when due. Whenever any payment is stated as due on a day which is not
a Business Day, the maturity of such payment shall, except as otherwise provided
in the definition of "Interest Period", be extended to the next succeeding
Business Day and interest shall continue to accrue during such extension. ABL
authorizes the Bank to deduct from any account of ABL maintained at the Bank or
over which the Bank has control any amount payable under this Agreement, the
Note or any other Loan Document which is not paid in a timely manner. In the
event of any such deduction, the Bank will provide notice thereof to ABL or FLC,
as applicable, within three Business Days specifying the account or accounts and
the amounts deducted. The Bank's failure to deliver any bill, statement or
invoice with respect to amounts due under this Section or under any Loan
Document shall not affect ABL's or FLC's obligation to pay any installment of
principal, interest or any other amount under this Agreement when due and
payable.
(d) Net Payments. All payments made to the Bank by ABL or FLC
hereunder, under the Note or under any other Loan Document will be made without
set off, counterclaim or other defense. All such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or any political subdivision or
taxing authority thereof or therein (but excluding, except as provided below,
any tax imposed on or measured by the gross or net income of the Bank (including
all interest, penalties or similar liabilities related thereto) pursuant to the
laws of the United States of America or any political subdivision thereof, or
taxing authority of the United States of America or any political subdivision
thereof, in which the principal office or applicable lending office of the Bank
is located), and all interest, penalties or similar liabilities with respect
thereto (collectively, together with any amounts payable pursuant to the next
sentence, "Taxes"). If any Taxes are so levied or imposed, ABL and FLC agree to
pay the full amount of such Taxes, and such additional amounts as may be
necessary so that every payment of all amounts due hereunder, under any Note or
under any other Loan Document, after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein or in such
Note. ABL and FLC will furnish to the Bank upon request certified copies of tax
receipts evidencing such payment by ABL or FLC, as applicable. ABL and FLC will
indemnify and hold harmless the Bank, and reimburse the Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid or withheld
by the Bank.
(e) Prepayment of LIBO Rate Loans. If any principal of a LIBO Rate Loan
shall be repaid (whether upon prepayment, after acceleration or for any other
reason) prior to the last day of the Interest Period applicable to such LIBO
Rate Loan or if ABL or FLC fails for any reason to borrow a LIBO Rate Loan after
giving irrevocable notice pursuant to (Section) 2.3, ABL and FLC shall pay to
the Bank, in addition to the principal and interest then to be paid, such
additional amounts as may be necessary to compensate the Bank for all direct and
indirect costs and losses (including losses resulting from redeployment of
prepaid or unborrowed funds at rates lower than the cost of such funds to the
Bank, and including lost profits incurred or sustained by the Bank) as a result
of such repayment or failure to borrow (the "Additional Amount"). The Additional
Amount (which the Bank shall take reasonable measures to minimize) shall be
specified in a written notice or certificate delivered to ABL by the Bank. Such
notice or certificate shall contain a calculation in reasonable detail of the
Additional Amount to be compensated and shall be conclusive as to the facts and
the amounts stated therein, absent manifest error. Notwithstanding the
preceding, no Additional Amount shall be payable if the Bank is unable for
reasons unique to it to provide a LIBO Rate Loan to ABL or FLC.
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2.8. Changes in Circumstances; Yield Protection.
(a) If any Regulatory Change or compliance by the Bank with any request
made after the date of this Agreement by the Board of Governors of the Federal
Reserve System or by any Federal Reserve Bank or other central bank or fiscal,
monetary or similar authority (in each case whether or not having the force of
law) shall:
(i) impose, modify or make applicable any reserve, special deposit,
Federal Deposit Insurance Corporation premium or similar requirement or
imposition against assets held by, or deposits in or for the account
of, or loans made by, or any other acquisition of funds for loans or
advances by, the Bank;
(ii) impose on the Bank any other condition regarding the Note;
(iii) subject the Bank to, or cause the withdrawal or termination of
any previously granted exemption with respect to, any tax (including
any withholding tax but not including any income tax not currently
causing the Bank to be subject to withholding) or any other levy,
impost, duty, charge, fee or deduction on or from any payments due from
ABL; or
(iv) change the basis of taxation of payments from ABL or FLC to the
Bank (other than by reason of a change in the method of taxation of a
Bank's net income);
and the result of any of the foregoing events is to increase the cost to the
Bank of making or maintaining any Loan or to reduce the amount of principal,
interest or fees to be received by the Bank hereunder in respect of any Loan,
the Bank will immediately so notify ABL and FLC. If the Bank determines in good
faith that the effects of the change resulting in such increased cost or reduced
amount cannot reasonably be avoided or the cost thereof mitigated, then upon
written notice by the Bank to ABL and FLC containing a reasonable detailing or
explanation thereof, ABL and FLC shall pay to the Bank on each interest payment
date of the Loan, such additional amount as shall be necessary to compensate the
Bank for such increased cost or reduced amount.
(b) If the Bank shall determine that any Regulation regarding capital
adequacy or the adoption of any Regulation regarding capital adequacy, which
Regulation is applicable to banks (or their holding companies) generally and not
the Bank (or its holding company) specifically, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or its holding company) with
any such request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
the effect of reducing the rate of return on the Bank's capital as a consequence
of its obligations hereunder to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank's policies with respect to capital adequacy) by an amount deemed by the
Bank to be material, ABL and FLC shall promptly pay to the Bank, upon the demand
of the Bank, such additional amount or amounts as will compensate the Bank for
such reduction.
(c) If the Bank shall determine (which determination shall be, in the
absence of fraud or manifest error, conclusive and binding upon all parties
hereto) that by reason of abnormal circumstances affecting the interbank
eurodollar or applicable eurocurrency market adequate and reasonable means do
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not exist for ascertaining the LIBO Rate to be applicable to the requested LIBO
Rate Loan or that eurodollar or eurocurrency funds in amounts sufficient to fund
all the LIBO Rate Loans are not obtainable on reasonable terms, the Bank shall
give notice of such inability or determination by telephone to ABL and FLC at
least two Business Days prior to the date of the proposed Loan and thereupon the
obligations of the Bank to make, convert other Loans to, or renew such LIBO Rate
Loan shall be excused, subject, however, to the right of ABL and FLC at any time
thereafter to submit another request.
(d) Determination by the Bank for purposes of this Section 2.8 of the
effect of any Regulatory Change or other change or circumstance referred to
above on its costs of making or maintaining Loans or on amounts receivable by it
in respect of the Loans and of the additional amounts required to compensate the
Bank in respect of any additional costs, shall be made in good faith and shall
be evidenced by a certificate, signed by an officer of the Bank and delivered to
ABL, as to the fact and amount of the increased cost incurred by or the reduced
amount accruing to the Bank owing to such event or events. Such certificate
shall be prepared in reasonable detail and shall be conclusive as to the facts
and amounts stated therein, absent manifest error.
(e) The Bank will notify ABL and FLC, in writing, of any event
occurring after the date of this Agreement that will entitle the Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount of amounts
then payable pursuant to this Section. ABL and FLC shall pay the Bank the amount
shown as due on such notice within 30 days after its receipt of the same.
2.9. Illegality. Notwithstanding any other provision in this Agreement,
if the adoption of any applicable Regulation, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Bank to maintain
or fund its LIBO Rate Loans, then upon notice to ABL and FLC of such event,
ABL's and FLC's outstanding LIBO Rate Loans shall be converted into Prime Rate
Loans.
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3. Representations and Warranties
ABL and FLC, jointly and severally, represent and warrant to the Bank
that with respect to each of them:
3.1. Organization, Standing. It and each Guarantor (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and authority
necessary to own its assets, carry on its business and enter into and perform
its obligations hereunder, under each Loan Document to which it is a party, and
(iii) is qualified to do business and is in good standing in each jurisdiction
where the nature of its business or the ownership of its properties requires
such qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
3.2. Corporate Authority, Validity, Etc. The making and performance of
the Loan Documents to which it and each Guarantor, as applicable, is a party are
within its the power and authority and have been duly authorized by all
necessary corporate action. The making and performance of the Loan Documents do
not and under present law will not require any consent or approval of its or any
Guarantor's shareholder or any other person, do not and under present law will
not violate any law, rule, regulation order, writ, judgment, injunction, decree,
determination or award, do not violate any provision of its or any Guarantor's
charter or by-laws, do not and will not result in any breach of any material
agreement, lease or instrument to which it or any Guarantor is a party, by which
it or any Guarantor is bound or to which any of its or any Guarantor's assets
are or may be subject, and do not and will not give rise to any Lien upon any of
its or any Guarantor's assets. The number of shares and classes of the capital
stock of ABL, FLC and each Guarantor, respectively, and the ownership thereof
are accurately set forth on Schedule 1 attached hereto; all such shares are
validly issued, fully paid and non-assessable, and the issuance and sale thereof
are in compliance with all applicable federal and state securities and other
applicable laws; and the shareholders' ownership thereof is free and clear of
any liens or encumbrances or other contractual restrictions. Further, neither it
nor any Guarantor is in default under any such agreement, lease or instrument
except to the extent such default reasonably could not have a Material Adverse
Effect. No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by it or any Guarantor, as
applicable, of any Loan Document to which it is a party or for the validity or
enforceability thereof. Each Loan Document, when executed and delivered, will be
the legal, valid and binding obligation of it and each Guarantor, as applicable,
enforceable against it in accordance with its terms.
3.3. Litigation. Except as disclosed on Schedule 1, there are no
actions, suits or proceedings pending or, to the knowledge of any executive
officer of it or any Guarantor, threatened against or affecting it or any
Guarantor or any assets of either of them before any court, government agency,
or other tribunal which if adversely determined reasonably could have a Material
Adverse Effect or upon the ability of it or any Guarantor to perform under the
Loan Documents. If there is any disclosure on Schedule 1, the status (including
the tribunal, the nature of the claim and the amount in controversy) of each
such litigation matter as of the date of this Agreement is set forth in
Schedule 1.
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3.4. ERISA. (a) It and each ERISA Affiliate are in compliance in all
material respects with all applicable provisions of ERISA and the regulations
promulgated thereunder; and, neither it, nor any ERISA Affiliate maintains or
contributes to or has maintained or contributed to any multiemployer plan (as
defined in (Section) 4001 of ERISA) under which it or any ERISA Affiliate could
have any withdrawal liability; (b) neither it nor any ERISA Affiliate, sponsors
or maintains any Plan under which there is an accumulated funding deficiency
within the meaning of (Section) 412 of the Code, whether or not waived; (c) the
aggregate liability for accrued benefits and other ancillary benefits under each
Plan that is or will be sponsored or maintained by it or any ERISA Affiliate
(determined on the basis of the actuarial assumptions prescribed for valuing
benefits under terminating single-employer defined benefit plans under Title IV
of ERISA) does not exceed the aggregate fair market value of the assets under
each such defined benefit pension Plan; (d) the aggregate liability of it and
each ERISA Affiliate arising out of or relating to a failure of any Plan to
comply with the provisions of ERISA or the Code, will not have a Material
Adverse Effect; and (e) there does not exist any unfunded liability (determined
on the basis of actuarial assumptions utilized by the actuary for the plan in
preparing the most recent Annual Report) of it or any ERISA Affiliate under any
plan, program or arrangement providing post-retirement life or health benefits.
3.5. Financial Statements. The consolidated financial statements of
ABFS as of and for the Fiscal Years ending June 30, 1996 and June 30, 1997,
consisting in each case of a balance sheet, a statement of operations, a
statement of shareholders' equity, a statement of cash flows and accompanying
footnotes, and the interim consolidated and consolidating financial statements
of ABFS and its subsidiaries as of March 31, 1998 furnished to the Bank in
connection herewith, present fairly, in all material respects, the financial
position, results of operations and operating statistics of ABFS and its
subsidiaries as of the dates and for the periods referred to, in conformity with
Generally Accepted Accounting Principles. Except as set forth on Schedule 1
hereto, there are no liabilities, fixed or contingent, which are not reflected
in such financial statements, other than liabilities which are not required to
be reflected in such balance sheets. There has been no Material Adverse Change
since March 31, 1998.
3.6. Not in Default, Judgments, Etc.. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing. It and each
Guarantor has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board bureau, agency, or instrumentality, domestic or foreign.
3.7. Taxes. It and each Guarantor has filed all federal, state, local
and foreign tax returns and reports which it is required by law to file and as
to which its failure to file would have a Material Adverse Effect, and has paid
all taxes, including wage taxes, assessments, withholdings and other
governmental charges which are presently due and payable, other than those being
contested in good faith by appropriate proceedings, if any, and disclosed on
Schedule 1. The tax charges, accruals and reserves on the books of it and each
Guarantor are adequate to pay all such taxes that have accrued but are not
presently due and payable.
3.8. Permits, Licenses, Etc. It and each Guarantor possesses all
permits, licenses, franchises, trademarks, trade names, copyrights and patents
necessary to the conduct of its business as presently conducted or as presently
proposed to be conducted, except where the failure to possess the same would not
have a Material Adverse Effect.
3.9. No Materially Adverse Contracts, Etc.. Neither it nor any
Guarantor is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of its
directors or officers has or is expected in the future to have a materially
adverse effect on its operations, business, assets, liabilities or upon its
ability to perform under the Loan Documents. Neither it nor any Guarantor is a
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party to any contract or agreement which in the judgment of its directors or
officers has or is expected to have any materially adverse effect on its
business, except as otherwise reflected in adequate reserves.
3.10. Compliance with Laws, Etc.
(a Compliance Generally. It and each Guarantor is in compliance in all
material respects with all Regulations applicable to its business (including
obtaining all authorizations, consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications with, any court
or governmental department, public body or authority, commission, board, bureau,
agency, or instrumentality), the noncompliance with which reasonably could have
a Material Adverse Effect.
(b Hazardous Wastes, Substances and Petroleum Products. It and each
Guarantor has received all permits and filed all notifications necessary to
carry on its business; and is in compliance in all respects with all
Environmental Control Statutes. Neither it nor any Guarantor has given any
written or oral notice, nor has it failed to give required notice, to the
Environmental Protection Agency ("EPA") or any state or local agency with regard
to any actual or imminently threatened Release of Hazardous Substances on
properties owned, leased or operated by it or used in connection with the
conduct of its business and operations. Neither it nor any Guarantor has
received notice that it is potentially responsible for costs of clean-up or
remediation of any actual or imminently threatened Release of Hazardous
Substances pursuant to any Environmental Control Statute. To the knowledge and
belief of any executive officer of it and each Guarantor, no real property owned
or leased by it is in violation of any Environmental Laws and no Hazardous
Substances are present on said real property in violation of applicable law.
Neither it nor any Guarantor has been identified in any litigation,
administrative proceedings or investigation as a potentially responsible party
for any liability under any Environmental Laws.
3.11. Solvency. It and each Guarantor is, and after giving effect to
the transactions contemplated hereby, will be, Solvent.
3.12. Subsidiaries, Etc. Neither it nor any Guarantor has any
Subsidiaries, except as set forth in Schedule 1 hereto. Set forth in Schedule 1
hereto is a complete and correct list, as of the date of this Agreement, of all
Investments held by it and each Guarantor in any joint venture or other Person.
3.13. Title to Properties, Leases. It and each Guarantor each has good
and marketable title to all assets and properties reflected as being owned by it
in its financial statements as well as to all assets and properties acquired
since said date (except property disposed of since said date in the ordinary
course of business). Except for the Liens set forth in Schedule 1 hereto and any
other Permitted Liens, there are no Liens on any of such assets or properties.
It has the right to, and does, enjoy peaceful and undisturbed possession under
all material leases under which it is leasing property as a lessee. All such
leases are valid, subsisting and in full force and effect, and none of such
leases is in default, except where such default, either individually or in the
aggregate, could not have a Material Adverse Effect.
3.14. Public Utility Holding Company; Investment Company. Neither it
nor any Guarantor is a "public utility company" or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended; or a
"public utility" within the meaning of the Federal Power Act, as amended.
Further, neither is an "investment company" or an "affiliated person" of an
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"investment company" or a company "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended.
3.15. Margin Stock. Neither it nor any Guarantor is or will be engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying or trading in any margin stocks
or margin securities (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System as amended from time to time). It will
not use or permit any proceeds of the Loans to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying margin stocks or margin securities.
3.16. Use of Proceeds. It will use the proceeds of each Loan made
pursuant hereto for the purchase of new or used equipment which is to be the
subject of a lease or leases to an unaffiliated Person or Persons in ordinary
course of its leasing business.
3.17. Year 2000 Problem. It is taking all action reasonably necessary
to assess the risk that the computer applications they use in its business may
be unable to properly perform date sensitive functions on or after December 31,
1999. Further, it is in the process of taking all remedial action reasonably
necessary to avoid such risk and expect to timely complete such action. To its
knowledge, no third party with which it has any material contractual
relationship has identified any similar risk in its own computer applications
which it is not addressing and which, if not properly addressed, would be likely
to have a Material Adverse Effect.
3.18. Disclosure Generally. The representations and statements made by
it or on its behalf in connection with this credit facility and the Loans,
including representations and statements in each of the Loan Documents, do not
and will not contain any untrue statement of a material fact or omit to state a
material fact or any fact necessary to make the representations made not
materially misleading. No written information, exhibit, report, brochure or
financial statement furnished by it or any Guarantor to the Bank in connection
with this credit facility, the Loans, or any Loan Document contains or will
contain any material misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
3.19. Prudential Securities Credit Corporation. There are no loans
outstanding that certain Interim Warehouse and Security Agreement for Contracts
among Prudential Securities Credit Corporation, ABL and FLC and no loans will be
requested or accepted thereunder prior to the delivery of an Intercreditor
Agreement as contemplated by '5.18 hereof.
4. Conditions Precedent
4.1. All Loans. After this Agreement has become effective, the
obligation of the Bank to make any Loan hereunder (including but not limited to
the first Loan hereunder) is conditioned upon the following:
(a) Documents. ABL or FLC, as applicable, shall have delivered to, and
the Bank shall have received, a Request for Advance in such form as the Bank may
reasonably request from time to time.
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(b) Covenants; Representations. ABL, FLC and each Guarantor,
respectively, each shall be in compliance with all covenants, agreements and
conditions in each Loan Document and each representation and warranty contained
in each Loan Document shall be true with the same effect as if such
representation or warranty had been made on the date such Loan is made or
issued.
(c) Defaults. Immediately prior to and after giving effect to such
transaction, no Event of Default or Potential Default shall exist.
(d) Material Adverse Change. Since March 31, 1998, there shall not
have been any Material Adverse Change with respect to ABL, FLC or any Guarantor,
and there shall not be any other event or circumstance which gives the Bank
reasonable grounds to conclude that ABL, FLC or any Guarantor, may not or will
not be able to perform or observe (in the normal course) its obligations
hereunder and under the Note, the Guaranty Agreement or the other Loan
Documents.
(e) Borrowing Base Certificate. The Bank shall have received a
Borrowing Base Certificate dated as of the date of the borrowing.
(f) Restricting Event. No Restricting Event (as defined in the
Receivables Purchase Agreement) shall have occurred and be continuing, except
the Termination Date (as provided in (Section) 7.2(m) thereof) shall occurred
and said Receivables Purchase Agreement shall not have been reinstated or
renewed.
4.2. Conditions to First Loan. In addition to the conditions to all
Loans as provided in (Section) 4.1, the obligation of the Bank to make the first
Loan hereunder is conditioned upon the following:
(a) Articles, Bylaws. The Bank shall have received copies of the
Articles or Certificates of Incorporation and Bylaws of ABL, FLC and each
Guarantor, certified by its Secretary or Assistant Secretary; together with
Certificate of Good Standing from any jurisdiction where the nature of the
business or the ownership of properties of ABL, FLC or any Guarantor requires
such qualification except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) Evidence of Authorization. The Bank shall have received copies
certified by the Secretary or Assistant Secretary of ABL, FLC and each Guarantor
or other appropriate official (in the case of a Guarantor that is not a
corporation) of all corporate or other action taken by each Person other than
the Bank who is a party to any Loan Document to authorize its execution and
delivery and performance of the Loan Documents and to authorize the Loans,
together with such other related papers as the Bank shall reasonably require.
(c) Legal Opinions. The Bank shall have received a favorable written
opinion in form and substance satisfactory to the Bank from legal counsel to
ABL, FLC and the Guarantors, which shall be addressed to the Bank, be dated the
date of the first Loan and be from counsel reasonably acceptable to the Bank.
(d) Incumbency. The Bank shall have received a certificate signed by
the secretary or assistant secretary of ABL, FLC and each Guarantor, together
with the true signature of the officer or officers authorized to execute and
deliver the Loan Documents and certificates thereunder, upon which the Bank
shall be entitled to rely conclusively until it shall have received a further
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certificate of the secretary or assistant secretary of ABL, FLC or a Guarantor,
as applicable, amending the prior certificate and submitting the signature of
the officer or officers named in the new certificate as being authorized to
execute and deliver Loan Documents and certificates thereunder.
(e) Note. The Bank shall have received the Note duly executed,
completed and issued in accordance herewith.
(f) Guaranty Agreement. The Bank shall have received the Guaranty
Agreement duly executed, completed and issued by each Guarantor in accordance
herewith.
(g) Documents. The Bank shall have received all certificates,
instruments and other documents then required to be delivered pursuant to any
Loan Documents, in each instance in form and substance reasonably satisfactory
to it.
(h) Consents. ABL, FLC and each Guarantor shall have provided to the
Bank evidence satisfactory to it that all governmental, shareholder and third
party consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect.
(i) Other Agreements. ABL, FLC and each Guarantor shall have executed
and delivered each other Loan Document required hereunder.
(j) Fees. ABL and FLC shall have executed and delivered to the Bank the
fee letter pertaining to the Structuring and Arranging Fee, and shall have paid
all fees due hereunder or any other Loan Document.
5. Affirmative Covenants
ABL and FLC, jointly and severally, covenant and agree that, without
the prior written consent of the Bank, from and after the date hereof and so
long as any Obligation remains unpaid or outstanding, each of them will:
5.1. Financial Statements and Reports. Furnish to the Bank the
following financial information:
(a) Annual Statements. No later than one hundred and twenty (120) days
after the end of each Fiscal Year, the consolidated and consolidating balance
sheet of ABFS and the consolidated balance sheets of ABL and of FLC as of the
end of such year and the prior year in comparative form, and related statements
of operations, shareholders' equity, and cash flows (for ABFS and ABL only) for
the Fiscal Year and the prior Fiscal Year in comparative form. The financial
statements shall be in reasonable detail with appropriate notes and be prepared
in accordance with Generally Accepted Accounting Principles. The consolidated
annual financial statements shall be certified (without any qualification or
exception) by BDO Seidman, LLP or other independent public accountants
acceptable to the Bank. Such financial statements shall be accompanied by a
report of such independent certified public accountants stating that, in the
opinion of such accountants, such consolidated financial statements present
fairly, in all material respects, the financial position, and the results of
operations and the cash flows of ABFS, ABL and FLC for the period then ended in
conformity with Generally Accepted Accounting Principles, except for
inconsistencies resulting from changes in accounting principles and methods
agreed to by such accountants and specified in such report, and that, in the
case of such financial statements, the examination by such accountants of such
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financial statements has been made in accordance with generally accepted
auditing standards and accordingly included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and assessing
the accounting principles used and significant estimates made, as well as
evaluating the overall financial statement presentation.
(b) Quarterly Statements. No later than ninety (90) calendar days
after the end of each of the first three Fiscal Quarters of each Fiscal Year,
the consolidated and consolidating balance sheet of ABFS and the balance sheets
of ABL and FLC, the related statements of operations and shareholders' equity
for ABFS, ABL and FLC, and cash flows of ABFS for such quarterly period and for
the period from the beginning of such fiscal year to the end of such Fiscal
Quarter and a corresponding financial statement for the same periods in the
preceding Fiscal Year certified by the chief financial officers of ABFS, ABL and
FLC as having been prepared in accordance with Generally Accepted Accounting
Principles (subject to changes resulting from audits and year-end adjustments).
(c) Compliance Certificate. Within sixty (60) calendar days after the
end of each of the first three Fiscal Quarters of each Fiscal Year and within
one hundred and twenty (120) calendar days after the end of each Fiscal Year, a
Compliance Certificate substantially in the form attached hereto as Exhibit C or
such other form as the Bank shall reasonably request.
(d) ERISA. All reports and forms filed with respect to all Plans,
except as filed in the normal course of business and that would not result in an
adverse action to be taken under ERISA, and details of related information of a
Reportable Event, promptly following each filing.
(e) Material Changes. Notification to the Bank of any litigation,
administrative proceeding, investigation, business development, or change in
financial condition which could reasonably have a Material Adverse Effect,
promptly following its discovery.
(f) Other Information. Promptly, upon request by the Bank from time to
time (which may be on a monthly or other basis), ABL or FLC, as applicable,
shall provide such other information and reports regarding its operations,
business affairs, prospects and financial condition as the Bank may reasonably
request unless such information or report is subject to a written
confidentiality agreement.
(g) Borrowing Base Certificates. ABL and FLC will deliver to the Bank,
no later than 15 days after the end of such calendar month as of the last day of
the preceding calendar month, a Borrowing Base Certificate signed by the
President of ABL and of FLC.
(h) Lease Receivables Report. ABL and FLC each will deliver to the
Bank, no later than 15 days after the end of such calendar month, a Lease
Receivables Report including portfolio agings and static pool agings as of the
end of such prior month for all leases originated by ABL and FLC, respectively.
Static pool agings need not include information for any lease entered into prior
to January 15, 1999.
5.2. Corporate Existence. Preserve its corporate existence and all
material franchises, licenses, patents, copyrights, trademarks and trade names
consistent with good business practice; and maintain, keep, and preserve all of
its properties (tangible and intangible) necessary or useful in the conduct of
its business in good working order and condition, ordinary wear and tear
expected.
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5.3. ERISA. Comply in all material respects with the provisions of
ERISA to the extent applicable to any Plan maintained for the employees of ABL,
FLC or any ERISA Affiliate; do or cause to be done all such acts and things that
are required to maintain the qualified status of each Plan and tax exempt status
of each trust forming part of such Plan; not incur any material accumulated
funding deficiency (within the meaning of ERISA and the regulations promulgated
thereunder), or any material liability to the PBGC (as established by ERISA);
not permit any event to occur as described in (Section) 4042 of ERISA or which
may result in the imposition of a lien on its properties or assets; notify the
Bank in writing promptly after it has come to the attention of senior management
of ABL, FLC, ABC or ABFS of the assertion or threat of any "reportable event" or
other event described in (Section) 4042 of ERISA (relating to the soundness of a
Plan) or the PBGC's ability to assert a material liability against it or impose
a lien on its, or any ERISA Affiliates', properties or assets; and refrain from
engaging in any Prohibited Transactions or actions causing possible liability
under (Section) 5.02 of ERISA.
5.4. Compliance with Regulations. Comply in all material respects with
all Regulations applicable to its business, the noncompliance with which
reasonably could have a Material Adverse Effect.
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws.
Continue to engage in an efficient and economical manner in a business of the
same general type as conducted by it on the date of this Agreement; maintain in
full force and effect, its franchises, and all licenses, patents, trademarks,
trade names, contracts, permits, approvals and other rights necessary to the
profitable conduct of its business.
5.6. Maintenance of Insurance. Maintain insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.
5.7. Payment of Debt; Payment of Taxes, Etc. Where the amount involved
exceeds $500,000 or where the non-payment or non-discharge would otherwise have
a Material Adverse Effect on it or any of its assets: promptly pay and discharge
(a) all of its Debt in accordance with the terms thereof; (b) all taxes,
assessments, and governmental charges or levies imposed upon it or upon its
income and profits, upon any of its property, real, personal or mixed, or upon
any part thereof, before the same shall become in default; (c) all lawful claims
for labor, materials and supplies or otherwise, which, if unpaid, might become a
lien or charge upon such property or any part thereof; provided, however, that
so long as it promptly notifies the Bank of its intention to do so, it shall not
be required to pay and discharge any such Debt, tax, assessment, charge, levy or
claim so long as the failure to so pay or discharge does not constitute or
result in an Event of Default or a Potential Default hereunder and so long as no
foreclosure or other similar proceedings shall have been commenced against such
property or any part thereof and so long as the validity thereof shall be
contested in good faith by appropriate proceedings diligently pursued and it
shall have set aside on its books adequate reserves with respect thereto.
5.8. Notice of Events. Promptly upon discovery of any of the following
events, it shall provide telephone notice to the Bank (confirmed within three
(3) calendar days by written notice), describing the event and all action ABL,
FLC or any Guarantor, as applicable, proposes to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement or
any other Loan Document;
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(b) any default or event of default under a contract or contracts and
the default or event of default involves payments by ABL, FLC or any Guarantor
in an aggregate amount equal to or in excess of $500,000;
(c) a default or event of default under or as defined in any evidence
of or agreements for Indebtedness for Borrowed Money under which its or any
Guarantor's liability is equal to or in excess of $500,000, singularly or in the
aggregate, whether or not an event of default thereunder has been declared by
any party to such agreement or any event which, upon the lapse of time or the
giving of notice or both, would become an event of default under any such
agreement or instrument or would permit any party to any such instrument
agreement to terminate or suspend any commitment to lend to ABL, FLC or any
Guarantor or to declare or to cause any such indebtedness to be accelerated or
payable before it would otherwise be due;
(d) the institution of, any material adverse determination in, or the
entry of any final judgment or order or stipulated judgment or order in, any
suit, action, arbitration, administrative proceeding, criminal prosecution or
governmental investigation against ABL, FLC or any Guarantor in which the amount
in controversy is in excess of $500,000, singularly or in the aggregate; or
(e) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which would have a Material Adverse Effect.
5.9. Inspection Rights. At any time during the existence of an Event of
Default or Potential Default, during regular business hours and then as often as
requested of ABL, FLC or any Guarantor by the Bank, permit the Bank, or any
authorized officer, employee, agent, or representative of the Bank to examine
and make abstracts from the records and books of account of ABL, FLC or any
Guarantor, wherever located, and to visit the properties of ABL, FLC or any
Guarantor; and to discuss the affairs, finances, and accounts of ABL, FLC or any
Guarantor with its President, any other executive officer, its chief financial
officer and its independent public accountants. If no Event of Default or
Potential Default shall be in existence, the expense of each inspection shall be
borne by ABL and FLC, jointly and severally, but ABL and FLC shall not be
obligated to reimburse the Bank for expenses in excess of $7,500 in the
aggregate for any calendar year. If an inspection shall be made during the
continuance of a Potential Default or an Event of Default, the expense of such
inspection shall be borne by ABL and FLC, jointly and severally) and the
foregoing annual limit of $7,500 shall not be applicable. At all times, it is
understood and agreed that all expenses in connection with any such inspection
which may be incurred by ABL, FLC, any Guarantor, any officers and employees
thereof and the attorneys and independent public accountants therefor shall be
expenses payable by ABL, FLC and the Guarantors and shall not be expenses of the
Bank.
5.10. Generally Accepted Accounting Principles. Maintain books and
records at all times in accordance with Generally Accepted Accounting
Principles.
5.11. Compliance with Material Contracts. It will comply in all
material respects with all obligations, terms, conditions and covenants, as
applicable, in all Debt of it and all instruments and agreements related
thereto, and all other instruments and agreements to which it is a party or by
which it is bound or any of its properties is affected and in respect of which
the failure to comply reasonably could have a Material Adverse Effect.
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5.12. Use of Proceeds. It will use the proceeds of each Loan made
pursuant hereto for the purchase of new or used equipment which is to be the
subject of a lease or leases to an unaffiliated person or persons in ordinary
course of its leasing business.
5.13. Management. ABFS will continue to retain Anthony J. Santilli and
Beverly Santilli as senior executive officers.
5.14. Delinquency. It shall cause the leases included in the managed
portfolio to have a thirty-day delinquency rate of less than or equal to 8%.
5.15. Year 2000 Program. It will use its best efforts to continue to
monitor the potential impact of the Year 2000 Problem and if any problem is
determined to exist to develop and implement a comprehensive detailed program to
address on a timely basis such problem.
5.16. Further Assurances. Do such further acts and things and execute
and deliver to the Bank such additional assignments, agreements, powers and
instruments, as the Bank may reasonably require or reasonably deem advisable to
carry into affect the purposes of this Agreement or to better assure and confirm
unto the Bank its rights, powers and remedies hereunder.
5.17. Restrictive Covenants in Other Agreements. In the event that it
shall enter into or otherwise become subject to or suffer to exist any agreement
pertaining to Indebtedness for Money Borrowed which contains covenants or
restrictions that are more restrictive on it than the covenants and restrictions
contained in this Agreement, each and every such covenant and restriction shall
be deemed incorporated herein by reference as fully as if set forth herein. If
and to the extent that any such covenant or restriction shall be inconsistent
with or otherwise be in conflict with any covenant or restriction set forth
herein (other than by reason of its being more restrictive), this Agreement
shall govern.
5.18. Intercreditor Agreement. It will provide to the Bank on or before
November 15, 1998 an Intercreditor Agreement signed by Prudential Securities
Credit Corporation, which agreement shall be in form and substance reasonably
acceptable to the Bank.
6. Negative Covenants
ABL and FLC, jointly and severally, covenants and agrees that, without
the prior written consent of the Bank, from and after the date hereof and so
long as Obligation remains unpaid or outstanding, neither will:
6.1. Consolidation and Merger. Merge or consolidate with or into any
corporation except, if no Potential Default or Event of Default shall have
occurred and be continuing either immediately prior to or upon the consummation
of such transaction, any Person may be merged into it as long as it is the
surviving entity.
6.2. Indebtedness for Borrowed Money. Incur, create, or permit to exist
any Indebtedness for Borrowed Money except:
(a) Indebtedness for Borrowed Money of it under this Agreement or the
Note;
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(b) Indebtedness for Borrowed Money existing on the date hereof and
disclosed in the financial statements referred to in Section 3.5 or otherwise
disclosed to the Bank on Schedule 1, but without any renewals, extensions, or
refinancings thereof other than the refinancing of the Warehouse Line with
Prudential Securities pursuant to a credit facility in an amount not to exceed
$100,000,000 which is substantially similar to that in existence at the date of
this Agreement;
(c) Indebtedness for Borrowed Money which is either non-recourse or
partial recourse and is part of a purchase program but that is not required to
be included in liabilities shown on the consolidated balance sheet of ABFS and
its consolidated subsidiaries (including but not limited to ABL and FLC) in
accordance with GAAP.
6.3. Liens. Create, assume or permit to exist any Lien on any of its
property or assets, whether now owned or hereafter acquired, or upon any income
or profits therefrom, except Permitted Liens.
6.4. Guarantees. Guarantee or otherwise in any way become or be
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts) of any other Person, contingently or
otherwise.
6.5. Margin Stock. Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.
6.6. Acquisitions and Investments. Purchase or otherwise acquire
(including without limitation by way of share exchange) any part or amount of
the capital stock or assets of, or make any Investments in any other Person
(including any Affiliate); or enter into any new business activities or ventures
not directly related to its present business; or create any Subsidiary, except
(a) it may acquire and hold stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to it,
and (b) it may make and own (i) Investments in certificates of deposit or time
deposits having maturities in each case not exceeding one year from the date of
issuance thereof and issued by a Bank, or any FDIC-insured commercial bank
incorporated in the United States or any state thereof having a combined capital
and surplus of not less than $150,000,000, (ii) Investments in marketable direct
obligations issued or unconditionally guaranteed by the United States of
America, any agency thereof, or backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date of
issuance or acquisition thereof, (iii) Investments in commercial paper issued by
a corporation incorporated in the United States or any State thereof maturing no
more than one year from the date of issuance thereof and, at the time of
acquisition, having a rating of A-1 (or better) by Standard & Poor's Corporation
or P-1 (or better) by Moody's Investors Service, Inc.,(iv) Investments in money
market mutual funds all of the assets of which are invested in cash or
investments described in the immediately preceding clauses (i), (ii) and (iii),
and (v) acquisitions of companies engaged in the business of equipment leasing
to the extent the aggregate acquisition cost of such entities is not in excess
of $5,000,000 after the date of this Agreement.
6.7. Transfer of Assets; Nature of Business. Sell, transfer, pledge,
assign or otherwise dispose of any of its assets unless such sale or disposition
shall be in the ordinary course of its business for value received; or
discontinue, liquidate or change in any material respect any substantial part of
its operations or business. Sales of individual or small groups of leases and
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related equipment from time to time and sales of groups of leases in
securitization transactions shall be deemed to be in the ordinary course of its
business.
6.8. Accounting Change. Make or permit any change in financial
accounting policies or financial reporting practices, except as required by
Generally Accepted Accounting Principles or regulations of the Securities and
Exchange Commission or NASDAQ, if applicable.
6.9. Transactions with Affiliates. Enter into any transaction
(including, without limitation, the purchase, sale or exchange of property, the
rendering of any services, the payment of management fees or the making of any
loans or advances) with any Affiliate (including but not limited to any
Guarantor), except transactions not involving the making of any loans or
advances which in the ordinary course of, and pursuant to the reasonable
requirements of, its business, and in good faith and upon commercially
reasonable terms.
6.10. Restriction on Amendment of This Agreement. Enter into or
otherwise become subject to or suffer to exist any agreement which would require
it to obtain the consent of any other person as a condition to the ability of
the Bank, ABL and FLC or any Guarantor to amend or otherwise modify this
Agreement.
7. Financial Covenants
ABL and FLC, jointly and severally, covenant and agree that, without
the prior written consent of the Bank, from and after the date hereof and so
long as any Obligation remains unpaid or outstanding:
7.1. Borrowing Base. The aggregate principal amount of Loans
outstanding shall not at any time exceed the Borrowing Base or the Commitment,
whichever is less; provided, however, that this covenant shall not be deemed
breached if, at the time such aggregate amount exceeds said level, within five
Business Days after the earlier of the date either of them first has knowledge
of such excess or the date of the next Borrowing Base Certificate disclosing the
existence of such excess, a prepayment of Loans shall be made in an amount
sufficient to assure continued compliance with this covenant in the future.
7.2. Minimum Tangible Net Worth. Tangible Net Worth of ABFS and its
consolidated subsidiaries (including but not limited to ABL and FLC) will not at
any time be less than the sum of (i) $23,000,000 plus (ii) seventy-five percent
(75%) of net income of ABFS and its consolidated subsidiaries (including but not
limited to ABL and FLC) for each fiscal quarter ending after June 30, 1998
(without deduction for any net loss if any fiscal quarter shall have a net
loss), and (iii) any additions to the paid-in capital of ABFS after June 30,
1998.
7.3. Total Liabilities to Net Worth. The ratio of total liabilities
(excluding Subordinated Debt) to Net Worth plus Subordinated Debt will not
exceed 4.00:1 determined on a consolidated basis for ABFS and its consolidated
subsidiaries (including but not limited to ABL and FLC).
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8. Default
8.1. Events of Default. ABL and FLC shall be in default if any one or
more of the following events (each an "Event of Default") occurs:
(a) Payments. ABL or FLC fails to pay any principal of or interest on
the Note when due and payable (whether at maturity, by notice of
intention to prepay, or otherwise) or fails to pay when it is due and
payable any other amount payable under any Loan Document and such
failure shall continue for five Business Days.
(b) Covenants. ABL, FLC or any Guarantor, as applicable, fails to
observe or perform (1) any term, condition or covenant set forth in
Article 5 (Sections) 5.1(a)(b)(c)(g) or (h) or 5.2 (as to corporate
existence only)), Article 6 or Article 7 of this Agreement, as and when
required, or (2) any term, condition or covenant contained in this
Agreement or any other Loan Document other than as set forth in clause
(1) above, as and when required and such failure shall continue for a
period of 10 days or more.
(c) Representations, Warranties. Any representation or warranty made or
deemed to be made by ABL, FLC or any Guarantor, as applicable, herein
or in any Loan Document or in any exhibit, schedule, report or
certificate delivered pursuant hereto or thereto shall prove to have
been false, misleading or incorrect in any material respect when made
or deemed to have been made.
(d) Bankruptcy. ABL, FLC or any Guarantor is dissolved or liquidated,
makes an assignment for the benefit of creditors, files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies
to any tribunal for any receiver or trustee, commences any proceeding
relating to itself under any bankruptcy, reorganization, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction,
has commenced against it any such proceeding which remains undismissed
for a period of sixty (60) days, or indicates its consent to, approval
of or acquiescence in any such proceeding, or any receiver of or
trustee for ABL, FLC or any Guarantor or any substantial part of the
property of ABL, FLC or any Guarantor is appointed, or if any such
receivership or trusteeship to continues undischarged for a period of
sixty (60) days.
(e) Certain Other Defaults. ABL, FLC or any Guarantor shall fail to pay
when due any Indebtedness for Borrowed Money which singularly or in the
aggregate exceeds $500,000, and such failure shall continue beyond any
applicable cure period, or ABL, FLC or any Guarantor shall suffer to
exist any default or event of default in the performance or observance,
subject to any applicable grace period, of any agreement, term,
condition or covenant with respect to any agreement or document
relating to Indebtedness for Borrowed Money if the effect of such
default is to permit, with the giving of notice or passage of time or
both, the holders thereof, or any trustee or agent for said holders, to
terminate or suspend any commitment (which is equal to or in excess of
$500,000) to lend money or to cause or declare any portion of any
borrowings thereunder to become due and payable prior to the date on
which it would otherwise be due and payable, provided that during any
applicable cure period the Bank's obligations hereunder to make further
Loans shall be suspended.
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(f) Judgments. Any judgments against ABL, FLC or any Guarantor or
against its or their assets or property for amounts in excess of
$500,000 in the aggregate remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of thirty (30)
days.
(g) Attachments. Any assets of ABL, FLC or any Guarantor shall be
subject to attachments, levies, or garnishments for amounts in excess
of $500,000 in the aggregate which have not been dissolved or satisfied
within twenty (20) days after service of notice thereof to ABL, FLC or
ABFS.
(h) Change in Control. ABFS shall cease to own, directly or indirectly,
at least 51% of the issued and outstanding voting and capital stock of
ABL and FLC.
(i) Security Interests. Any security interest created pursuant to any
Loan Document shall cease to be in full force and effect, or shall
cease in any material respect to give the Bank, the Liens, rights,
powers and privileges purported to be created thereby (including,
without limitation, a perfected security interest in, and Lien on, all
of the Collateral), superior to and prior to the rights of all third
Persons, and subject to no other Liens (except as permitted by
(Section) 6.3).
(j) Receivables Purchase Agreement. A Receivables Purchase Agreement
(the "Receivables Purchase Agreement"), substantially in the form and
substance existing in draft form on the date hereof, shall not have
been entered into by the close of business on December 1, 1998 by and
among American Business Lease Funding Corporation II (as the seller),
American Business Leasing, Inc. (as the servicer), the investors named
therein (or replacements thereof), Variable Funding Capital Corporation
(as a purchaser), First Union Capital Markets a division of Wheat First
Securities, Inc. (as the deal agent), First Union National Bank (as the
liquidity agent) and a custodian (as collateral custodian and backup
servicer).
(k) Material Adverse Change. A Material Adverse Change shall have
occurred.
THEN and in every such event other than that specified in (Section) 8.1.(d), the
Bank may immediately declare the Note and all other Obligations, including
without limitation accrued interest, to be, and they shall thereupon forthwith
become due and payable without presentment, demand, or notice of any kind, all
of which are hereby expressly waived by ABL, FLC and each Guarantor. Upon the
occurrence of any event specified in (Section) 8.1.(d), the Note and all other
Obligations, including without limitation accrued interest, shall immediately be
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by ABL, FLC and each Guarantor.
From and after the date an Event of Default shall have occurred and for so long
as an Event of Default shall be continuing, the Loans shall bear interest at the
Default Rate.
9. Collateral
9.1. Collateral. Except as otherwise specifically set forth herein or
in any other Loan Document, any Loans made and outstanding and their repayment
at all times shall be secured by a first priority, perfected, security interest
in the Collateral (as defined in the Security Agreement, hereinafter referred to
as the "Collateral").
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10. Miscellaneous
10.1. Waiver. No failure or delay on the part of the Bank or any holder
of the Note in exercising any right, power or remedy under any Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy under any Loan Document. The
remedies provided under the Loan Documents are cumulative and not exclusive of
any remedies provided by law.
10.2. Amendments. No amendment, modification, termination or waiver of
any Loan Document or any provision thereof nor any consent to any departure by
ABL, FLC or any Guarantor therefrom shall be effective unless the same shall
have been approved in writing by the Bank, be in writing and be signed by the
Bank, ABL and FLC and then any such waiver or consent shall be effective only in
the instance and for the specific purpose for which given. No notice to or
demand on the ABL or FLC shall entitle ABL or FLC or any Guarantor to any other
or further notice or demand in similar or other circumstances.
10.3. Governing Law. The Loan Documents and all rights and obligations
of the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
10.4. Participations and Assignments. ABL, FLC and each Guarantor
hereby acknowledges and agrees that the Bank may at any time: (a) grant
participations in all or any portion of the Note or of its right, title and
interest therein or in or to this Agreement (collectively, "Participations") to
any other lending office of the Bank or to any other bank, lending institution
or other entity which has the requisite sophistication to evaluate the merits
and risks of investments in Participations ("Participants") and which in the
case of other entities is not consider by ABL or FLC to be a direct competitor
of either of them in the leasing business; provided, however, that: (i) all
amounts payable by ABL, FLC and each Guarantor shall be determined as if the
Bank had not granted such Participation; and (ii) any agreement pursuant to
which the Bank may grant a Participation: (x) shall provide that the Bank shall
retain the sole right and responsibility to enforce the obligations of ABL, FLC
and the Guarantors including, without limitation, the right to approve any
amendment, modification or waiver of any provisions of this Agreement; and (y)
such participation agreement may provide that the Bank will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participant if such modification, amendment or waiver would reduce the principal
of or rate of interest on any Loan or postpone the date fixed for any payment of
principal of or interest on any Loan; and (b) the Bank may assign all or any
part of the Note.
10.5. Captions. Captions in the Loan Documents are included for
convenience of reference only and shall not constitute a part of any Loan
Document for any other purpose.
10.6. Notices. All notices, requests, demands, directions, declarations
and other communications between the Bank, ABL and FLC provided for in any Loan
Document shall, except as otherwise expressly provided, be mailed by registered
or certified mail, return receipt requested, or telegraphed, or faxed, or
delivered in hand to the applicable party at its address indicated opposite its
name on the signature pages hereto. The foregoing shall be effective and deemed
received three days after being deposited in the mails, postage prepaid,
addressed as aforesaid and shall whenever sent by telegram, telegraph or fax or
delivered in hand be effective when received. Any party may change its address
by a communication in accordance herewith.
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10.7. Expenses; Indemnification. ABL and FLC will from time to time
reimburse the Bank promptly following demand for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel) in connection with
(i) the preparation of the Loan Documents, (ii) the making of any Loans, (iii)
the administration of the Loan Documents, and (iv) the enforcement of the Loan
Documents; and reimburse the Bank for all out-of-pocket expenses (including
reasonable fees and expenses of legal counsel) in connection with the
enforcement of the Loan Documents. In addition to the payment of the foregoing
expenses, ABL and FLC, jointly and severally, hereby agree to indemnify, protect
and hold the Bank and any holder of the Note and the officers, directors,
employees, agents, affiliates and attorneys of the Bank and such holder
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature, including reasonable
fees and expenses of legal counsel, which may be imposed on, incurred by, or
asserted against such Indemnitee by ABL or FLC or any Guarantor or other third
parties and arise out of or relate to this Agreement or the other Loan Documents
or any other matter whatsoever related to the transactions contemplated by or
referred to in this Agreement or the other Loan Documents; provided, however,
that neither ABL nor FLC shall have any obligation to an Indemnitee hereunder to
the extent that the liability incurred by such Indemnitee has been determined by
a court of competent jurisdiction to be the result of gross negligence or
willful misconduct of such Indemnitee.
10.8. Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of ABL and FLC set
forth in (Sections) 2.7, 2.8, 2.9 and 10.7 shall survive the payment of the
Loans and the termination of this Agreement. This Agreement shall remain in full
force and effect until the repayment in full of all amounts owed by ABL and FLC
under the Note or any other Loan Document.
10.9. Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.
10.10. No Fiduciary Relationship. No provision in this Agreement or in
any of the other Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty by the Bank to ABL or FLC.
10.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ABL, FLC AND THE
BANK EACH HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE EASTERN DISTRICT OF PENNSYLVANIA AND IRREVOCABLY AGREES THAT,
ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS MAYBE LITIGATED IN SUCH COURTS. EACH PARTY
TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENT, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY
NOTE, OR SUCH OTHER LOAN DOCUMENT.
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10.12. WAIVER OF JURY TRIAL. ABL, FLC AND THE BANK EACH HEREBY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. ABL, FLC AND THE BANK EACH ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. ABL, FLC AND
THE BANK EACH FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR RESTATEMENTS TO THIS AGREEMENT, THE
LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
10.13. Counterparts; Effectiveness. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement and any amendments
hereto or waivers hereof shall become effective when the Bank shall have
received signed counterparts or notice by fax of the signature page that the
counterpart has been signed and is being delivered to it or facsimile that such
counterparts have been signed by all the parties hereto or thereto.
10.14. Use of Defined Terms. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
10.15. Offsets. Nothing in this Agreement shall be deemed a waiver or
prohibition of the Bank's right of banker's lien or offset.
10.16. Entire Agreement. This Agreement, the Note issued hereunder and
the other Loan Documents constitute the entire understanding of the parties
hereto as of the date hereof with respect to the subject matter hereof and
thereof and supersede any prior agreements, written or oral, with respect hereto
or thereto.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
AMERICAN BUSINESS LEASING, INC.
By /s/ Jeffrey M. Ruben
----------------------------
Jeffrey M. Ruben
Senior Vice President
Notices To:
Jeffrey M. Ruben
Senior Vice President, Secretary and General Counsel
American Business Leasing, Inc.
Bala Pointe Office Centre, Suite 215
111 Presidential Boulevard
Bala Cynwyd, PA 19004
FAX No.: (610) 668-1468
FEDERAL LEASING CORP.
By /s/ Jeffrey M. Ruben
----------------------------
Jeffrey M. Ruben
Senior Vice President
Notices To:
Jeffrey M. Ruben
Senior Vice President, Secretary and General Counsel
Federal Leasing Corp.
Bala Pointe Office Centre, Suite 215
111 Presidential Boulevard
Bala Cynwyd, PA 19004
FAX No.: (610) 668-1468
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<PAGE>
FIRST UNION NATIONAL BANK
By /s/ David D'Antonio
----------------------------
David D'Antonio
Vice President
Notices To:
Mr. David D'Antonio
Vice President
First Union National Bank
Transportation Leasing and Construction Industry Services
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
-35-
<PAGE>
Reference Table of Definitions
definition page defined
ABC....................................................................1
ABC Holdings...........................................................1
ABFC...................................................................1
ABFS...................................................................1
ABL....................................................................1
Account Receivable.....................................................2
Additional Amount.....................................................14
Advance Funding Eligible Lease Receivables.............................2
Affiliate..............................................................2
Agreement..............................................................1
Bank...................................................................1
Borrowing Base.........................................................2
Borrowing Base Certificate.............................................2
Business Day...........................................................2
Capitalized Lease......................................................3
Capitalized Lease Obligations..........................................3
Closing Date...........................................................3
Code...................................................................3
Collateral............................................................29
Compliance Certificate.................................................3
Credit Termination Date...............................................11
Debt...................................................................3
Default Rate...........................................................3
Discount...............................................................1
Dollars................................................................3
Eligible Lease Receivables.............................................3
Environmental Control Statutes.........................................4
ERISA..................................................................4
ERISA Affiliate........................................................4
Event of Default......................................................27
Fiscal Quarter.........................................................4
Fiscal Year............................................................4
FLC....................................................................1
GAAP...................................................................5
Generally Accepted Accounting Principles...............................5
Governmental Authority.................................................5
Guarantor..............................................................1
Guarantors.............................................................1
Guaranty Agreement.....................................................5
HAC....................................................................1
Hazardous Substances...................................................5
-36-
<PAGE>
Indebtedness for Borrowed Money........................................5
Indemnitees...........................................................30
Intangible Assets......................................................5
Interest Period........................................................5
Investment.............................................................6
Lease Receivables Report...............................................6
LIBO Rate..............................................................6
LIBO Rate Loans........................................................6
LIBO Rate Reserve Percentage...........................................6
Lien...................................................................7
Loan..................................................................10
Loan Documents.........................................................7
Loans.................................................................10
London Business Day....................................................3
Material Adverse Change................................................7
Material Adverse Effect................................................7
Maximum Loan Amount...................................................10
Multiemployer Plan.....................................................7
Net Worth..............................................................7
NJMI...................................................................1
Note..................................................................10
Obligations............................................................7
Participants..........................................................29
Participations........................................................29
PBGC...................................................................7
Pension Plan...........................................................8
Permitted Liens........................................................8
Person.................................................................8
Plan...................................................................8
Potential Default......................................................8
Prime Rate.............................................................8
Prime Rate Loans.......................................................8
Processing.............................................................1
Prohibited Transaction.................................................8
Receivables Purchase Agreement........................................28
Regulation.............................................................9
Regulation D...........................................................9
Regulatory Change......................................................9
Release................................................................9
Reportable Event.......................................................9
Request for Advance...................................................11
Security Agreement.....................................................9
Servicing Fee.........................................................12
Solvent................................................................9
Structuring and Arranging Fee.........................................12
Subordinated Debt......................................................9
Subsidiary.............................................................9
-37-
<PAGE>
Tangible Net Worth....................................................10
Taxes.................................................................14
Termination Event.....................................................10
Unfunded Pension Liabilities..........................................10
Unrecognized Retiree Welfare Liability................................10
Year 2000 Problem.....................................................10
-38-
<PAGE>
EXHIBIT A
Note
$20,000,000 Philadelphia, PA
September 28, 1998
For Value Received, AMERICAN BUSINESS LEASING, INC., a Pennsylvania corporation
("ABL") and FEDERAL LEASING CORP., a New Jersey corporation ("FLC"), jointly and
severally, hereby promise to pay to the order of FIRST UNION NATIONAL BANK (the
"Bank"), in lawful currency of the United States of America in immediately
available funds at the Bank's offices located at Broad and Chestnut Streets,
Philadelphia, Pennsylvania, on the earlier to occur of the maturity date as
provided in the Credit Agreement described below or the Credit Termination Date,
the principal sum of TWENTY MILLION DOLLARS ($20,000,000) or, if less, the then
unpaid principal amount of all Loans made by the Bank pursuant to the Credit
Agreement.
ABL and FLC, jointly and severally, promise also to pay interest on the unpaid
principal amount hereof in like money at such office from the date hereof until
paid in full at the rates and at the times provided in the Credit Agreement.
This Note is the Note referred to in, is entitled to the benefits of and is
secured by security interests referred to in the Credit Agreement, dated
September 28, 1998 by and among ABL, FLC and the Bank (as such may be amended,
modified, supplemented, restated or replaced from time to time, the "Credit
Agreement"). This Note is subject to voluntary prepayment and mandatory
repayment prior to acceleration of maturity or the Credit Termination Date, in
whole or in part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
ABL and FLC each hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the liability of ABL and FLC
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness to the Bank relating to the Bank's Loans, including all principal
and interest, together with all fees and expenses as provided in the Credit
Agreement, as established by the Bank's books and records which shall be
conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective meanings
assigned to them in the Credit Agreement.
-1-
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
AMERICAN BUSINESS LEASING, INC.
By ______________________________
Name:
Title:
FEDERAL LEASING CORP.
By ______________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT D
SECURITY AGREEMENT
This Security Agreement, dated September 28, 1998, by and among
AMERICAN BUSINESS LEASING, INC., a Pennsylvania corporation, with its main
business office located at Suite 215, 111 Presidential Blvd, Bala Cynwyd, PA
19004, FEDERAL LEASING CORP., a New Jersey corporation, with its main business
office located at Suite 215, 111 Presidential Blvd, Bala Cynwyd, PA 19004
(individually and together referred to herein as the "Debtor") and FIRST UNION
NATIONAL BANK, a national banking association (the "Secured Party"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned in the Credit Agreement.
Preliminary Statement
This Security Agreement is entered into in accordance with and is a
condition precedent to any Loan under the Credit Agreement.
Now, therefore, the Debtor and the Secured Party, intending to be
legally bound, agree as follows:
1. Definitions.
As used herein the following terms shall have the meanings indicated:
(a) "Collateral" means all:
(i) Chattel Paper consisting of (1) leases of personal property
listed and described in Schedule B-1 hereto, plus (2) leases
of personal property listed and described in any and all
supplemental Schedules B-1 delivered by the Debtor to the
Secured Party from time to time after the date hereof (and all
amendments, replacements, amendment and restatements and
substitutions therefor and thereof), minus (3) leases of
personal property listed in any Schedule B-3 hereto any and
all of which are delivered by the Debtor to the Secured Party
from time to time after the date hereof (and all amendments,
replacements, amendment and restatements and substitutions
therefor and thereof),
(ii) Inventory and/or Equipment consisting of all of the personal
property leased pursuant to Chattel Paper included in the
Collateral (as contemplated in clause (i) above), or
previously leased pursuant to Chattel Paper included in the
Collateral but at any subsequent date held by the Debtor for
any reason (including but not limited to repossession or
return) pending sale or lease, and all existing and future
accessions, accessories and attachments thereto and
replacements thereof.
(iii) Accounts, Instruments, Documents, Contract Rights and General
Intangibles relating to Collateral referred to clauses (i) and
(ii) above.
(iv) cash and non-cash Proceeds of all of the foregoing, including
without limitation, insurance Proceeds.
- 1 -
<PAGE>
(v) any balance or share belonging to the Debtor of any deposit,
agency or other account with the Secured Party and any other
amounts which may be owing from time to time by the Secured
Party to the Debtor.
(vi) property of any nature whatsoever of the Debtor now or
hereafter in the possession of or assigned or hypothecated to
the Secured Party, together with all products and Proceeds
(including insurance Proceeds) of any of the foregoing.
(b) "Credit Agreement" means that certain Credit Agreement, dated the
date hereof (as such agreement may be amended, restated, modified, replaced or
substituted hereafter) between the Debtor and First Union National Bank.
(c) "Accounts," "Chattel Paper," "Documents," "Equipment," "General
Intangibles," "Instruments," and "Proceeds" shall have the meanings assigned to
them under the Uniform Commercial Code as in effect in the Commonwealth of
Pennsylvania and shall be applicable solely for purposes of the
Collateral.
(d) "Liabilities" means all existing and future indebtedness and other
liabilities, absolute or contingent, direct or indirect, primary or secondary,
of the Debtor to the Secured Party arising hereunder or in respect of the Note
or otherwise in connection with the Credit Agreement or any Loan Document plus
all obligations of the Debtor to the Secured Party in respect of any interest
rate swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement, interest rate floor agreement or other similar
agreement or arrangement.
(e) "Prevailing Interest Rate" as of any date means the highest rate of
interest then being paid by the Debtor under any Loan (as defined in the Credit
Agreement) as such may change from time to time.
(f) "Lease" means any capital lease or operating lease upon which the
Debtor is the lessor or an assignee of the lessor which lease is included in the
Collateral.
2. Grant of Security; Assignment of Leases.
To secure the payment, promptly when due, and the punctual performance
of all of the Liabilities, the Debtor hereby:
(a) pledges and assigns to the Secured Party, and grants to the Secured
Party and agrees that the Secured Party shall have, a general continuing lien
upon and security interest in all the Collateral, which lien and security
interest shall be a general continuing first priority lien upon and security
interest in all the Collateral.
(b) assigns and transfers to the Secured Party all Debtor's right, title
and interest in and to all rentals and other amounts payable under the Leases,
and all proceeds from insurance and any proceeding, payable to or receivable by
the Debtor under or in connection therewith, and all rights, powers and remedies
(but none of the duties or obligations, if any) of the Debtor under the Leases,
including all rights of the Debtor to give and receive any notice, consent,
waiver, demand or approval under or in respect of the Leases,
- 2 -
<PAGE>
to exercise any election or option thereunder or in respect thereof, to accept
any surrender of any property subject thereto, to execute and deliver any bill
of sale for any such property, and to do all other things which Debtor is
entitled to do under the Leases.
3. Leases.
(a) The Debtor shall remain liable as lessor under the Leases to perform
all the obligations, if any, assumed by the Debtor thereunder. The obligations
of Debtor, if any, under the Leases may be performed by Secured Party or any
subsequent assignee of the Secured Party ("Subsequent Secured Party") without
releasing Debtor therefrom. The Secured Party or any Subsequent Secured Party
shall have no liability or obligation under the Leases by reason of this
Agreement and shall not, by reason of this Agreement, be obligated to perform
any of the obligations of Debtor under the Leases or to file any claim or take
any other action to collect or enforce any payment assigned hereunder.
(b) The Debtor hereby agrees (i) to perform duly and punctually each of
the terms, conditions and covenants contained in the Leases which may be
applicable to it, and (ii) subject to the Debtor's business judgment and
reasonable commercial practice, to exercise promptly and diligently each and
every right it may have under the Leases.
(c) The Debtor does hereby warrant and represent that all Leases are in
full force and effect and that the Debtor has not assigned or pledged, and
hereby covenants that it will not assign or pledge, so long as this Agreement
shall remain in effect, the whole or any part of the rights hereby assigned, to
anyone other than Secured Party or its designee.
(d) Subject to the provisions of this Agreement, and until the
occurrence of an Event of Default and upon demand by the Secured Party, the
Debtor may exercise all the rights and enjoy all the benefits of the lessor
under the Leases.
4. Books and Records. The Debtor shall faithfully keep complete and
accurate books and records and make all necessary entries therein to reflect the
quantities, costs, current values and locations of all Collateral, the events
and transactions giving rise thereto and all payments, credits and adjustments
applicable thereto, shall keep the Secured Party fully and accurately informed
as to the locations of all such books and records and shall permit the Secured
Party's agents to have such access to them and to any other records pertaining
to the Debtor's business as the Secured Party may request from time to time.
5. Control of and Access to Collateral.
(a) Each originally executed Lease included in the Collateral shall be
(i) marked "original" and legended in form satisfactory to the Secured Party to
indicate that it is the original of the Lease with all other copies marked
"copy", (ii) marked with a legend to state the Secured Party's interest in the
rentals and other sums due thereunder, and (iii) delivered by the Debtor to the
Secured Party prior to said Lease being included in the Borrowing Base
calculation.
(b) Upon the occurrence of an Event of Default, the Secured Party shall
have the right at any time to take possession of the Collateral or any part
thereof. Notwithstanding any such taking of possession, the Collateral shall
remain at all times at the Debtor's sole risk, and to the full extent permitted
by law the
- 3 -
<PAGE>
Secured Party shall not be responsible for any loss, damage or diminution in the
value thereof. All costs of transportation, packaging, custody, processing,
storage, and insurance of any unit or item of Collateral which may be incurred
by the Secured Party shall be promptly repaid to the Secured Party by the Debtor
together with interest thereon at the Prevailing Interest Rate, and the Debtor's
liability to the Secured Party for such repayment with interest shall be
included in the Liabilities.
(c) If any item or unit of Collateral is now or hereafter the subject of
a certificate of title or is required by law so to be, the Debtor will promptly
procure the necessary certificate of title and take all steps necessary to cause
the Secured Party's lien or security interest therein to be noted on the face of
such certificate and undertake such other steps as may be necessary to assure
that the Secured Party has a first priority, perfected security interest in each
such item or unit of Collateral, and shall thereafter deposit the original of
such certificate of title with the Secured Party.
(d) The Debtor shall immediately notify the Secured Party of any event
causing any deterioration, loss or depreciation in value of any substantial
portion of the Collateral and the Debtor's best estimate of the amount of such
deterioration, loss or depreciation.
(e) Upon an Event of Default, the Secured Party is hereby granted a
license or other right to use, without charge, Debtor's labels, intellectual
property, or use of any name, trade secrets, tradenames, trademarks and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in advertising for sale, and selling any Collateral and Debtor's
rights under all licenses and all franchise agreements shall inure to the
Secured Party's benefit.
6. Maintenance of Collateral; Sale. Subject to the Debtor's business
judgment and reasonable commercial practice, the Debtor shall take good care of
the Collateral in the form of equipment returned to and shall afford it suitable
preventive maintenance. The Debtor shall pay the cost of all repairs to or
maintenance of said Collateral and shall not permit anything to be done that
might in any way impair the value of any of such Collateral or any of the
security intended to be afforded by this Agreement. The Debtor shall not sell,
exchange, salvage, replace or dispose of any items or unit of its equipment
included in the Collateral or any of its rights therein, except that so long as
the Debtor is not in default hereunder, it shall have the right to sell such
equipment in each case in the ordinary course of its business and it shall have
the right to lease or re-lease such equipment in the ordinary course of its
business.
7. Insurance.
(a) The Debtor shall bear the risk of each item or unit of equipment
included in the Collateral being lost, destroyed, irreparably damaged or
rendered permanently unfit for sale, lease or use or being damaged in part, from
any cause whatsoever at any time during the term of this Agreement, and shall at
its own cost and expense obtain, and keep in full force and effect, in kind and
form reasonably satisfactory to the Secured Party, or in the alternative shall
cause the lessee under each applicable Lease to do the same with respect to
equipment subject to the lessee's Lease, all risk of physical loss or damage
insurance covering the equipment wherever the same may be located, insuring
against the risks of fire, explosion, theft and such other risks as are
customarily insured against by organizations engaged in the same business and
similarly situated with the Debtor (and specifically including vandalism,
malicious mischief coverage, loss overboard and breakage), in an amount usually
- 4 -
<PAGE>
carried by organizations engaged in the same business or similarly situated with
the Debtor. All policies of such insurance shall be written for the benefit of
the Debtor as the insured, and shall provide for at least fifteen (15) days'
advance written notice to the Secured Party of any cancellation or shall be
similar written in the case of policies obtain by lessees with respect to such
property under Lease.
(b) If the Debtor or the applicable lessee fails to pay any premium on
any such insurance, the Secured Party shall have the right, but shall be under
no obligation, to pay such premium for the Debtor's account. The Debtor shall
repay to the Secured Party on demand all sums which the Secured Party shall have
paid under this section in respect of insurance premiums, with interest thereon
at the Prevailing Interest Rate, and the Debtor's liability to the Secured Party
for such repayment with interest shall be included in the Liabilities. The
Debtor hereby assigns to the Secured Party any return or unearned premium which
may be due upon the cancellation for any reason whatsoever of any policy of
insurance maintained in respect of the Collateral and hereby directs the insurer
to pay the Secured Party any amount so due. The Debtor's right to receive
payment of any such return or unearned premium and the proceeds of any such
insurance shall constitute a part of the Collateral for all purposes hereof.
8. Title to Collateral.
(a) The Debtor has acquired or shall acquire absolute and exclusive
title to each and every item or unit of the Collateral free and clear of all
liens, claims, security interests and other encumbrances, except as permitted
under the Credit Agreement, and the Debtor shall warrant and defend its title to
the Collateral, subject to the rights of the Secured Party, against the claims
and demands of all persons whomsoever. Without limiting the generality of the
foregoing, the Debtor shall not pledge, assign or otherwise encumber, or permit
any liens or security interests (other than Permitted Liens and those in favor
of the Secured Party) to attach to, any of the Collateral, nor permit any of the
Collateral to be levied upon under any legal process.
(b) The Secured Party may, at its sole election but without obligation
to do so, discharge any unpermitted encumbrance pertaining to the Collateral and
all expenses incurred by the Secured Party in so doing, together with interest
thereon at the Prevailing Interest Rate, shall be added to the Liabilities and
shall be payable by the Debtor on demand.
9. Taxes and Liens. The Debtor shall promptly notify the Secured Party
in the event there ever arises against any of the Collateral any lien,
assessment or tax or other liability, whether or not entitled to priority over
the Secured Party's security interest hereunder. In any such event, whether or
not such notice is given, the Secured Party shall have the right (but shall be
under no obligation) to pay any tax or other liability of the Debtor deemed by
the Secured Party in good faith to affect the Secured Party's interests
hereunder. The Debtor shall repay to the Secured Party on demand all sums which
the Secured Party shall have paid under this section in respect of taxes or
other liabilities of the Debtor, with interest thereon at the Prevailing
Interest Rate, and the Debtor's liability to the Secured Party for such
repayment with interest shall be included in the Liabilities. The Secured Party
shall be subrogated to the extent of any such payment by it to all the rights
and liens of the payee against the Debtor's assets.
- 5 -
<PAGE>
10. Collection of Accounts, Etc.
(a) Until the occurrence of an Event of Default, the Debtor may collect
all the Accounts but the Proceeds of all Accounts so collected by the Debtor
shall be held by the Debtor in trust for the Secured Party. The Secured Party
may at any time during the existence of an Event of Default terminate the
authority hereby given to the Debtor to collect the Proceeds of such Accounts
and, acting if it so chooses in the Debtor's name, collect such Accounts itself,
directly or through an agent, sell, assign, compromise, discharge or extend the
time for payment of such Accounts, institute legal action for the collection of
such Accounts and do all acts and things necessary or incidental thereto, and
the Debtor hereby ratifies all that the Secured Party shall lawfully do under
the authority hereby granted to it. The Secured Party may at any time during the
existence of an Event of Default, without notice to the Debtor, notify any
account debtor on any such Account that such Account has been assigned to the
Secured Party and is to be paid directly to the Secured Party. Alternatively, at
its election the Secured Party may require the Debtor to, and in such event the
Debtor at its sole expense will, notify its account debtors that payments
thereon are thenceforth to be made directly to the Secured Party. Without the
written consent of the Secured Party in each case, the Debtor shall not
compromise, discharge, extend the time for payment of or otherwise grant any
indulgence or allowance with respect to any such Account except for minor
indulgences or allowances in the ordinary course of business which are not
related to an extension or restructuring of credit to an account debtor of a
duration in excess of 30 days in any instance.
(b) If any such Account arises out of a contract with the United States
or any department, agency or instrumentality thereof, the Debtor will
immediately so notify the Secured Party in writing and will execute all
instruments and take all steps required by the Secured Party in order that the
security interest of the Secured Party hereunder in all such Accounts under such
contract and the Proceeds thereof shall be perfected under the Federal
Assignment of Claims Act.
(c) From and after the occurrence and during the continuance of any
Event of Default, if any of the Collateral is or becomes evidenced by a
promissory note, draft, trade acceptance, Chattel Paper, Instrument or Document
of Title, the Debtor will promptly deliver the same to the Secured Party
appropriately endorsed to the Secured Party's order. Regardless of the form of
such endorsement, the Debtor hereby waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect
thereto. The Debtor will promptly notify the Secured Party of any Material
Adverse Change of which it has knowledge in the financial condition of any
account debtor on any material Account pertaining to a Lease or in the
collectibility of any of such Accounts, and of all claims, rejections, returns
and adjustments which may result in a material reduction of the liability of an
account debtor on any such Account.
11. Locations of the Collateral; Name.
(a) If any of the Collateral or any of the Debtor's records concerning
any of the Collateral are at any time to be located on premises leased by the
Debtor, or any premises owned by the Debtor subject to a mortgage or other lien,
upon request by the Secured Party the Debtor shall obtain and deliver to the
Secured Party, prior to the delivery of any such Collateral or books or records
to such premises, an agreement in form satisfactory to the Secured Party waiving
the landlord's, mortgagee's or other lienholder's right to enforce against the
Collateral or the Debtor's records concerning the same and assuring the Secured
- 6 -
<PAGE>
Party's access to such Collateral and books and records to facilitate the
Secured Party's exercise of its rights to take possession thereof. The location
of Debtor's chief executive office and all locations at which the Debtor
maintains a place of business are set forth in Schedule A, and the Debtor agrees
to provide the Secured Party annually with a list of each location of any such
place of business or the establishment of any additional place of business of
the Debtor.
(b) The Debtor represents and warrants that at no time during the past
five (5) years has it been known by or used any other name, including any trade
or fictitious name, except as disclosed in Schedule A.
12. Further Assurances. The Debtor shall continue to conduct its
business in substantially the manner heretofore conducted and will make no
material changes therein which might impair the security of the Secured Party.
The Debtor shall execute and deliver to the Secured Party from time to time all
such other agreements, instruments and other documents (including without
limitation all requested financing and continuation statements) and do all such
other and further acts and things as the Secured Party may reasonably request in
order further to evidence or carry out the intent of this Agreement or to
perfect the liens and security interests created hereby or intended so to be.
13. Default and Remedies.
(a) The Debtor shall be in default hereunder upon the occurrence of any
one of the following events (each an "Event of Default"):
(i) the Debtor shall fail to pay any amount payable in respect of
any Liability when due (including the expiration of any
applicable grace periods).
(ii) any representation, warranty or information herein, heretofore
or hereafter furnished to the Secured Party by the Debtor in
connection with any of the Liabilities, including any warranty
made by the Debtor through the submission of any schedule,
statement, certificate or other document pursuant to or in
connection with this Agreement, shall be false in any material
respect.
(iii) there shall exist any Potential Default or Event of Default
as defined under the Credit Agreement.
(b) Upon the occurrence of any Event of Default which shall be
continuing, (i) unless the Secured Party elects otherwise, the entire unpaid
amount of such of the Liabilities as is not then otherwise due and payable shall
become immediately due and payable without notice to or demand on the Debtor,
(ii) the Secured Party or its agents may enter the Debtor's premises to exercise
the Secured Party's right to take possession of any Collateral, and (iii) the
Secured Party may at its option exercise from time to time any and all rights
and remedies available to it under the Uniform Commercial Code or otherwise,
including the right to assemble, receipt for, adjust, modify, repair, refurnish
or refurbish (but without any obligation to do so) or foreclose or otherwise
realize upon any of the Collateral and to dispose of any of the Collateral at
one or more public or private sales or other proceedings. The Debtor agrees that
the Secured Party or its nominee may become the purchaser at any such sale or
sales. The Debtor further agrees that ten (10) days shall be reasonable prior
- 7 -
<PAGE>
notice of the date of any public sale or other disposition of all or any part of
the Collateral, or of the date on or after which any private sale or other
disposition of the same may be made.
(c) The exercise by the Secured Party of any one right or remedy shall
not be deemed a waiver or release of or any election against any other right or
remedy, and the Secured Party may proceed against the Debtor and the Collateral
and any other collateral granted by the Debtor to the Secured Party under any
other agreement, all in any order and through any available remedies. A waiver
on any one occasion shall not be construed as a waiver or bar on any future
occasion. All property of any kind held at any time by the Secured Party as
Collateral shall stand as one general continuing collateral security for all the
Liabilities and may be retained by the Secured Party as security until all the
Liabilities are fully satisfied. The Debtor shall pay to the Secured Party on
demand any and all expenses (including reasonable attorneys' fees and legal
expenses) which may have been incurred by the Secured Party with interest at the
Prevailing Interest Rate (i) in the prosecution or defense of any action growing
out of or connected with the subject matter of this Agreement, the Liabilities,
the Collateral or any of the Secured Party's rights therein or thereto; or (ii)
in connection with the custody, preservation, use, operation, preparation for
sale or sale of any of the Collateral, the incurring of all of which are hereby
authorized to the extent the Secured Party deems the same advisable. The
Debtor's liability to the Secured Party for any such payment with interest shall
be included in the Liabilities. The Proceeds of any Collateral received by the
Secured Party at any time before or after default, whether from a sale or other
disposition of Collateral or otherwise, or the Collateral itself, may be applied
to the payment in full or in part of such of the Liabilities and in such order
and manner as the Secured Party may elect. The Debtor to the extent of its
rights in the Collateral waives and releases any right to require the Secured
Party to collect any of the Liabilities from any other of the Collateral or any
other collateral then held by the Secured Party under any theory of marshaling
of assets or otherwise.
14. Power of Attorney. The Debtor hereby irrevocably appoints any
officer, employee or agent of the Secured Party as the Debtor's true and lawful
attorney-in-fact with power to (i) endorse the Debtor's name upon any notes,
checks, drafts, money orders, or other instruments or payments or other
Collateral that may come into the Secured Party's possession; (ii) sign and
endorse the Debtor's name upon any Documents of Title, invoices, freight or
express bills, assignments, verifications and notices in connection with any of
the Collateral, and any instruments or documents relating thereto or to the
Debtor's rights therein; and (iii) execute in the Debtor's name and file one or
more financing, amendment and continuation statements covering the Collateral.
Any such attorney of the Debtor shall have full power to do any and all things
necessary to be done with respect to the above transactions as fully and
effectually as the Debtor might do, and the Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.
15. Financing Statements. The Debtor shall execute all financing
statements and amendments thereto as the Secured Party may request from time to
time to evidence the security interest granted to the Secured Party hereunder
and will pay all filing fees and taxes, if any, necessary to effect the filing
thereof. Wherever permitted by law, the Debtor authorizes the Secured Party to
file financing statements with respect to the Collateral without the signature
of the Debtor. A copy of this Agreement or a copy of any financing statement
prepared in connection with this Agreement may itself be filed as a financing
statement.
- 8 -
<PAGE>
16. Miscellaneous.
(a) This Agreement shall commence on the date hereof and shall continue
in full force and effect so long as any of the Liabilities shall exist from time
to time.
(b) No modification or waiver of any provision hereof shall be effective
unless the same is in writing and signed by the party against whom its
enforcement is sought. This Agreement and any amendment hereto or waiver of any
provision hereof may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(c) All the rights and remedies of the Secured Party hereunder shall be
concurrent and cumulative with and not alternative to or in lieu of the Secured
Party's rights and remedies under any other agreement or agreements.
(d) This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns, except that the Debtor shall not
assign any of its rights hereunder without the Secured Party's prior written
consent.
(e) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(f) No persons other than the Debtor and the Secured Party, and the
assignees of the Secured Party, are intended to be benefitted hereby or shall
have any rights hereunder, as third-party beneficiaries or otherwise.
(g) The Debtor acknowledges that this Agreement and the obligations of
the Debtor hereunder and the security created or intended to be created hereby
have constituted, and were intended by the Debtor to constitute, a material
inducement to the Secured Party to enter into the Credit Agreement and other
agreements referred to therein, knowing that the Secured Party will rely upon
this Agreement. The Debtor intends to be legally bound hereby.
(h) This Agreement shall be deemed to be a contract made under and shall
be construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to Pennsylvania or federal principles of conflict of laws.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
Debtor
AMERICAN BUSINESS LEASING, INC.
By ______________________________
Name:
Title:
Notices To:
Jeffrey M. Ruben
Senior Vice President, Secretary and General Counsel
American Business Leasing, Inc.
Bala Pointe Office Centre, Suite 215
111 Presidential Boulevard
Bala Cynwyd, PA 19004
FAX No.: (610) 668-1468
FEDERAL LEASING CORP.
By ______________________________
Name:
Title:
Notices To:
Jeffrey M. Ruben
Senior Vice President, Secretary and General Counsel
Federal Leasing Corp.
Bala Pointe Office Centre, Suite 215
111 Presidential Boulevard
Bala Cynwyd, PA 19004
FAX No.: (610) 668-1468
.
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<PAGE>
Secured Party
FIRST UNION NATIONAL BANK
By ______________________________
David D'Antonio
Vice President
Notices To:
Mr. David D'Antonio
Vice President
First Union National Bank
Transportation Leasing and Construction Industry Services
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
- 11 -
<PAGE>
EXHIBIT D
GUARANTY AGREEMENT
Guaranty Agreement, executed and delivered September 28, 1998 (this
"Agreement"), made by American Business Financial Services, Inc., a Delaware
corporation ("ABFS"), American Business Credit, Inc., a Pennsylvania corporation
("ABC"), ABC Holdings Corp., a Pennsylvania corporation ("ABC Holdings"),
American Business Finance Corp., a Delaware ("ABFC"), HomeAmerican Consumer
Discount Company, a Pennsylvania corporation ("Discount"), HomeAmerican Credit,
Inc., a Pennsylvania corporation ("HAC"), New Jersey Mortgage & Investment
Corp., a New Jersey corporation ("NJMI"), and Processing Service Center, Inc., a
Pennsylvania corporation ("Processing") in favor of First Union National Bank, a
national banking association (the "Bank"). The obligations of each Guarantor
shall be joint and several with each other Guarantor.
Preliminary Statement
WHEREAS, American Business Leasing, Inc., a Pennsylvania corporation
("ABL") and Federal Leasing Corp., a New Jersey corporation ("FLC") are entering
into Credit Agreement dated September 28, 1998 with the Bank (such agreement as
it may be amended from time to time after the date hereof, the "Credit
Agreement"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings ascribed to them in the Credit Agreement.
WHEREAS, ABFS is the owner, beneficially and of record, of 100% of the
issued and outstanding capital stock of ABC. ABC is the owner, beneficially and
of record, of 100% of the issued and outstanding capital stock of ABC Holdings,
ABFC, ABL, Discount, HAC, NJMI and Processing. NJMI is the owner, beneficially
and of record, of 100% of the issued and outstanding capital stock of FLC.
WHEREAS, it is in the best interests of ABFS, ABC, ABC Holdings, ABFC,
ABL, Discount, FLC, HAC, NJMI and Processing that the credit facilities
available to them be restructured with certain of them borrowers or co-borrowers
under certain new credit facilities and ABL and FLC as borrowers under the
Credit Agreement with ABFS, ABC, ABC Holdings, ABFC, Discount, HAC, NJMI and
Processing as guarantors (individually, a "Guarantor", and collectively, the
"Guarantors") of the obligations of ABL and FLC under the Credit Agreement and
all other Loan Documents.
WHEREAS, it is a condition to the making of all Loans under the Credit
Agreement that this Agreement be executed and delivered by the Guarantors in
favor of the Bank and be in continuous full force and effect.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, each Guarantor
hereby makes the following representations and warranties to the Bank and
covenants and agrees with the Bank as follows:
1. Continuing and Unconditional Guaranty. Each Guarantor hereby
unconditionally and absolutely guaranties to and for the Bank the due
performance, including without limitation the prompt payment when due or within
any applicable grace period, whether at stated maturity, upon acceleration or
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<PAGE>
otherwise and at all times thereafter of any and all obligations of ABL and/or
FLC owed to the Bank under the Credit Agreement and the Note and Loan Documents
referred to therein, or under any renewals, extensions or modifications thereof,
or any interest rate swap agreement, interest rate cap agreement, interest
collar agreement, interest rate hedging agreement, interest rate floor agreement
or other similar agreement or arrangement relating to the foregoing (the
"Obligations") irrespective of (a) any lack of enforceability of any Obligation,
(b) any change of the time, manner, place of payment, or any other term of any
Obligation, (c) any exchange, release or non-perfection of any collateral
securing payment of any Obligation, (d) any law, regulation or order of any
jurisdiction affecting the genuineness, validity, or rights of the Bank with
respect to the Obligations or any instruments evidencing any of the Obligations,
or (e) any other circumstance which might otherwise constitute a defense to or
discharge of any Guarantor. Each Guarantor agrees that its obligations hereunder
are irrevocable; that a separate action or actions may be brought and prosecuted
against it regardless of whether ABL or FLC is joined in any such action or
actions; and that it waives the benefit of any statute of limitations affecting
its liabilities hereunder or the enforcement hereof.
If, absent the provisions of this paragraph, this Agreement would be
held or determined to be void, invalid or unenforceable on account of the amount
of any Guarantor's aggregate liability under this Agreement, then,
notwithstanding any other provision of this Agreement to the contrary, the
aggregate amount of such liability shall, without any further action by such
Guarantor, the Bank or any other person, be automatically limited and reduced to
the highest amount which is valid and enforceable as determined in such action
or proceeding, which (without limiting the generality of the foregoing) may be
an amount which is not greater than the greater of the excess of the amount of
the fair saleable value of the assets of such Guarantor, over the amount of all
liabilities of such Guarantor (all as determined in accordance with applicable
federal and state laws governing determinations of the insolvency of debtors),
(a) as of the date hereof, and (b) as of the date of the enforcement of this
Agreement. Nothing contained in this paragraph shall be deemed to waive,
diminish or modify each Guarantor's representations, acknowledgments or recitals
set forth herein, in the Credit Agreement or in any other Loan Document.
Each Guarantor agrees that its obligations as a guarantor shall not be
impaired, modified, changed, released, or limited in any manner whatsoever by
any impairment, modification, change, release or limitation of the liability of
ABL or FLC or its estate in bankruptcy, resulting from the operation of any
present or future provision of the Bankruptcy laws or other similar statute, or
from the decision of any court in a bankruptcy proceeding. Notwithstanding any
provision herein to the contrary, the Obligations shall include all amounts that
would otherwise constitute Obligations but for the fact that they are
unenforceable or not allowable due to the existence of any proceedings or taking
of any actions under any such laws. This Agreement shall continue to be
effective, or shall be reinstated, as the case may be, if at any time payment,
or any part thereof, of any Obligation is rescinded or must otherwise be
restored or returned by the Bank in connection with any proceeding involving ABL
or FLC, each Guarantor or any other person under any bankruptcy, insolvency,
reorganization or similar laws relating to relief of debtors.
This is a continuing guaranty and shall remain in full force and effect
and be binding upon each Guarantor, its successors and assigns until payment in
full of all the Obligations.
- 2 -
<PAGE>
2. Payment of Obligations. In furtherance of, and not limiting the
obligations of any Guarantor or the Guarantors, jointly and severally, pursuant
to Section 1 hereof, upon the occurrence of an Event of Default under the Credit
Agreement, each Guarantor shall immediately pay the Obligation or Obligations
(as determined pursuant to Section 1 hereof) in lawful currency of the United
States of America and in same day funds to the office of the Bank as set forth
in the Credit Agreement, or to such other location as the Bank may from time to
time specify in writing. Notwithstanding anything to the contrary contained
herein or elsewhere, it shall not be necessary for the Bank to make any demand
upon or bring any legal, equitable or other action, institute suit, to exhaust
it rights against ABL or FLC or any other guarantor of ABL or FLC, or to
proceed, enforce or exhaust its rights against any security given to secure
payment of the Obligations.
3. Waiver. Each Guarantor hereby waives all notices of any character
whatsoever with respect to this Agreement and the Obligations, including but not
limited to notice of the acceptance hereof and reliance hereon, of the present
existence or future incurring of any Obligations, of the amounts, terms and
conditions thereof, and of any defaults thereon and further waives the defenses
of diligence, presentment for payment, protest, demand or extensions of time for
payment. Each Guarantor hereby consents to the taking of, or failure to take,
from time to time without notice to it or any other Guarantor, any such action
of any nature whatsoever with respect to the Obligations and with respect to any
rights against any person or persons or in any property, including but not
limited to any renewals, extensions, modifications, postponements, compromises,
settlements, substitutions, refusals or failures to exercise or enforce,
indulgences, waivers, surrenders, exchanges and releases, and each Guarantor
will remain fully liable hereon notwithstanding any of the foregoing. Each
Guarantor hereby waives the benefit of all laws now or hereafter in effect in
any way limiting or restricting the liability of each Guarantor hereunder,
including without limitation (a) all defenses whatsoever to its liability
hereunder except the defense of payment made on account of the Obligations to
the Bank and the Guarantors' liability hereunder; (b) all right to stay of
execution and exemption of property in any action to enforce the liability of
each Guarantor hereunder; and (c) all rights accorded each Guarantor under any
other statutory provisions of any other applicable jurisdiction affecting the
rights of the Bank to enforce the obligations of each Guarantor under this
Agreement.
4. Representations and Warranties. Each Guarantor hereby represents and
warrants to the Bank as follows:
(a) Organization; Good Standing. Each Guarantor is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and authority
necessary to own its assets, carry on its business and enter into and perform
its obligations hereunder and under the other Loan Documents to which it is a
party. Each Guarantor is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which it is required to so qualify
or where its failure to do so will not have a material adverse effect on its
ability to perform its obligations or potential obligations hereunder.
(b) Corporate Authority. The making and performance of this
Agreement and the other Loan Documents to which each Guarantor is a party, if
any, are within each Guarantor's power and authority and have been duly
authorized by all necessary corporate action. The making and performance of this
Agreement and the other Loan Documents to which each Guarantor is a party (i) do
not and under present law will not require any consent or approval of any of its
shareholders or any other person, and (ii) do not and under present law will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
- 3 -
<PAGE>
determination or award, do not and will not violate any provision of its charter
or by-laws, do not and will not result in any breach of any agreement, lease or
instrument to which each Guarantor is a party, by which it is bound or to which
any of its assets are or may be subject. Each Guarantor is not in default in any
material respect under any of the foregoing.
(c) Validity of Documents. This Agreement and the other Loan
Documents to which each Guarantor is a party, if any, are, or when executed and
delivered will be, the legal, valid and binding obligation of each Guarantor
enforceable against it in accordance with its terms. Except as has been duly
obtained, no authorization, consent, approval, license, exemption of or filing
or registration with any court, governmental agency or other tribunal is or
under present law will be necessary to the validity or performance of this
Agreement or the other Loan Documents to which each Guarantor is a party.
6. Subordination of Certain Amounts Payable to Each Guarantor by ABL or
FLC. Each Guarantor hereby subordinates its claims and demands against ABL
and/or FLC for the payment of Subordinated Liabilities (defined below), due or
to become due, and any and all liens and security interests held by it in any
assets or properties of ABL and/or FLC, to the prior and full payment,
performance, satisfaction and discharge of all obligations, indebtedness and
other liabilities of ABL and FLC to the Bank, including without limitation all
of such obligations, indebtedness and other liabilities arising under or in
respect of the Credit Agreement or the Note, whether due or to become due,
direct or indirect, primary or secondary, fixed or contingent (all of such
obligations, indebtedness and other liabilities under or in respect of the
Credit Agreement or the Note being herein sometimes referred to collectively as
the "Superior Indebtedness"), and each Guarantor agrees that the Bank shall
first be paid in full with interest all sums now due or that may hereafter
accrue and become due and payable by ABL and/or FLC under the Credit Agreement
and the Note, before it or any other Guarantor shall be paid anything by ABL or
FLC or out of any property of ABL or FLC for or on account of any of the
Subordinated Liabilities. Each Guarantor further agrees that the Bank may at any
time and from time to time renew or extend the time of payment of any
indebtedness of ABL and/or FLC to the Bank, or any portion of such indebtedness,
and may make additional loans to ABL and/or FLC, secured or unsecured, under the
Credit Agreement or otherwise, with or without a guarantee, and may renew or
extend the time of payment of any obligation of ABL and/or FLC under the Credit
Agreement or the Note, all without any notice to any Guarantor who shall
nonetheless remain fully bound by the subordination agreement herein set forth
until it has been terminated in the manner hereinafter provided. Each Guarantor
acknowledges that it has received a copy of the Credit Agreement with all the
exhibits attached and that it is fully familiar and satisfied therewith.
The term "Subordinated Liabilities" shall mean that amount which is
payable by ABL or FLC to any Guarantor in respect of any monies or goods
advanced or loaned by any Guarantor to ABL or FLC at the time or times, if any,
that an Event of Default shall exist under Section 8.1(a) of the Credit
Agreement.
7. Expenses. In addition to all other liabilities of Each Guarantor
hereunder, each Guarantor also agrees to pay to the Bank, on demand, all
reasonable costs and expenses (including reasonable fees, costs and
disbursements of outside counsel) which may be incurred in the enforcement of
the Obligations or the liabilities of each Guarantor hereunder.
- 4 -
<PAGE>
8. Modification of Obligations. Each Guarantor hereby consents and
agrees that without further notice to or assent from it, the amount of the
Obligations, the time of payment of any or all the Obligations may be changed,
any other term or condition relating to any or all the Obligations may be
changed, ABL and/or FLC may be discharged from any or all the Obligations, any
composition or settlement relating thereto may be consummated and accepted, and
that each Guarantor will remain bound upon this Agreement notwithstanding any or
all of the foregoing.
9. No Waivers; Rights and Remedies Cumulative. No failure on the part
of the Bank to exercise, and no delay in exercising, any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
the Bank of any right, power or remedy preclude any other further exercise
thereof or the exercise of any other right, power or remedy. The rights and
remedies provided herein shall be in addition to and not exclusive of any rights
or remedies provided at law or in equity, and may be exercised in such order as
the Bank shall determine, in its sole discretion.
10. Other Guaranties. A subsequent guaranty by any other guarantor of
any of the Obligations shall not be deemed to be in lieu of or to supersede or
terminate this Agreement but shall be construed as an additional or
supplementary guaranty unless otherwise expressly provided therein; and if any
other guarantor has given to the Bank a previous guaranty or guaranties, this
Agreement shall be construed to be an additional or supplementary guaranty, and
not to be in lieu thereof or to terminate such previous guaranty or guaranties.
11. Right of Set-off. Upon and during the continuance of an Event of
Default under the Credit Agreement, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set-off and
apply any and all deposits at any time held and other indebtedness at any time
owing by the Bank to or for the credit of each Guarantor against any and all of
the obligations of each Guarantor now or hereafter existing under this
Agreement.
12. Termination of Guaranty. Nothing except payment in full of all the
Obligations shall release any Guarantor from liability under this Agreement.
This Agreement will be returned when (a) all Obligations shall have been paid in
full, and (b) the Credit Agreement shall have expired or otherwise terminated.
13. Binding Effect; Assignment. The provisions of this Agreement shall
be binding upon and inure to the benefit of each Guarantor and the Bank and
their respective successors and assigns, except that each Guarantor may not
assign or otherwise transfer any of its rights hereunder. The Bank may at any
time sell, assign, pledge, grant participations in or otherwise transfer its
rights under this Agreement in whole or in part.
14. Amendments and Waivers. Any provision of this Agreement may be
amended if such amendment is in writing and is signed by each Guarantor and the
Bank, and any provision of this Agreement may be waived by the Bank.
15. Governing Law; Jurisdiction. THIS GUARANTY SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA
WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL PRINCIPLES OR CONFLICT OF LAWS. Each
Guarantor hereby consents to the
- 5 -
<PAGE>
jurisdiction of the courts of Pennsylvania in any action or proceeding which may
be brought against it under or in connection with this Agreement or any
transaction contemplated hereby or to enforce any agreement contained herein,
and in the event any such action or proceeding shall be brought against it, each
Guarantor agrees not to raise any objection to such jurisdiction or to the
laying of venue in Philadelphia County. Each Guarantor agrees that service of
process in such action or proceeding may be duly effected upon it by service in
accordance with the provisions of the Uniform Interstate and International
Procedure Act.
IN WITNESS WHEREOF, each undersigned Guarantor has executed this
Agreement as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
American Business Financial Services, Inc. American Business Credit, Inc.
By ________________________________ By ________________________________
Name: Name:
Title: Title:
ABC Holdings, Corp. American Business Finance Corp.
By ________________________________ By ________________________________
Name: Name:
Title: Title:
HomeAmerican Consumer Discount Company HomeAmerican Credit, Inc.
By ________________________________ By ________________________________
Name: Name:
Title: Title:
New Jersey Mortgage & Investment Corp. Processing Center, Inc.
By ________________________________ By ________________________________
Name: Name:
Title: Title:
</TABLE>
- 6 -
<PAGE>
================================================================================
INTERIM WAREHOUSE AND
SECURITY AGREEMENT FOR CONTRACTS
among
PRUDENTIAL SECURITIES
CREDIT CORPORATION,
as Lender,
AMERICAN BUSINESS LEASING, INC.,
as Borrower
and
FEDERAL LEASING CORP.,
as Borrower
Dated as of April 3, 1998
================================================================================
<PAGE>
Table of Contents
Page
----
Section 1. The Loan.........................................................2
Section 2. Additional Conditions Precedent to Advance.......................5
Section 3. Contract Files and Custodian.....................................7
Section 4. Representations, Warranties and Covenants........................8
Section 5. Mandatory Prepayment of Loan....................................16
Section 6. Release of Contract Files following Payment of Loan.............17
Section 7. Servicing.......................................................17
Section 8. No Oral Modifications; Successors and Assigns; Assignment of
Collateral......................................................17
Section 9. Reports.........................................................17
Section 10. Events of Default...............................................19
Section 11. Remedies Upon Default...........................................20
Section 12. Indemnification.................................................21
Section 13. Power of Attorney...............................................21
Section 14. Agreement Constitutes Security Agreement........................22
Section 15. Lender May Act Through Affiliates...............................22
Section 16. Notices.........................................................22
Section 17. Severability....................................................24
Section 18. Counterparts....................................................24
Section 19. Certain Definitions.............................................24
<PAGE>
INTERIM WAREHOUSE AND SECURITY AGREEMENT FOR CONTRACTS
This INTERIM WAREHOUSE AND SECURITY AGREEMENT FOR CONTRACTS,
dated as of April 3, 1998 (as amended or otherwise modified from time to time,
this "Agreement") among PRUDENTIAL SECURITIES CREDIT CORPORATION, a Delaware
corporation, having an office at One Seaport Plaza, New York, New York 10292
(the "Lender"), AMERICAN BUSINESS LEASING, INC., a Pennsylvania corporation,
having its principal office at 111 Presidential Boulevard, Bala Cynwyd,
Pennsylvania 19004 ("ABL"), and FEDERAL LEASING CORP., a New Jersey corporation,
having its principal office at 111 Presidential Boulevard, Bala Cynwyd,
Pennsylvania 19004 ("Federal Leasing", and together with ABL, the "Borrowers").
WHEREAS, the Lender intends to lend and the Borrowers intend
to borrow up to $50,000,000 (fifty million dollars) to fund the purchase or
origination by the Borrowers of conditional sale contracts, loan and security
agreements, operating leases, direct financing equipment leases, software and
network licensing agreements and promissory notes, in each case, under which the
Borrowers finance the purchase of specified Equipment by a third-party obligor
or a third-party obligor leases specified Equipment from either of the Borrowers
as lessor or as successor in interest to an originating lessor, at a specified
monthly rate (each, a "Contract"). Each Contract shall be substantially in the
form of one of the Contracts attached hereto as Exhibit G, or shall be in a form
approved by the Lender in its sole, good faith discretion. For purposes of this
Agreement, "Equipment" means either medical equipment, hospital laundry
equipment, computer equipment (including, without limitation, software and
network licensing agreements), telecommunications equipment, furniture, fixtures
and equipment, machinery, facsimile machines, general business office equipment,
modular buildings and any other collateral in the Lender's sole discretion; and
WHEREAS, the Lender's affiliate, Prudential Securities
Incorporated ("PSI") will act as the sole or lead manager on an equipment
lease-backed securities issuance (a "Securitization") to be sponsored by the
Borrowers (or by an affiliate thereof) from time to time and collateralized by
the Pledged Contracts.
An index to the location of the definitions of the defined
terms used herein is set forth in Section 19 hereof.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties hereto hereby agree as follows:
<PAGE>
Section 1. The Loan.
A. Subject to the terms of this Agreement:
1. The Lender agrees to lend to the Borrowers up to
$50,000,000 (such borrowing, the "Loan") to be made in one or more
advances (each, an "Advance"); provided, however, that, in no event
shall the outstanding debt owed to the Lender by the Borrowers or any
of their Affiliates (including, without limitation, American Business
Credit, Inc., HomeAmerican Credit, Inc. d/b/a Upland Mortgage, and New
Jersey Mortgage and Investments Corp.) under any loan agreement
(including, without limitation, this Agreement) exceed $50,000,000;
provided, further, that at any time when funds are on deposit in a
Pre-Funding Account (as defined herein), the amount of the Loan shall
not exceed the amount on deposit in such Pre-Funding Account. The
Borrower agrees that the Loan shall be used to warehouse Contracts that
are to be included in a Securitization, as such Contracts are
identified to the Lender in writing and in electronic form from time to
time. Such Contracts may be (a) included at the time of closing of the
Securitization or (b) purchased by the Securitization trust subsequent
to closing with funds on deposit in an account (a "Pre-Funding
Account") relating to the Securitization and designated for such
purpose. The Lender may refuse to lend against any Contract(s) which
the Lender in its sole, good faith discretion believes will not be
eligible for inclusion in a securitized pool either (x) due to the
characteristics of such Contract or (y) due to the expected aggregate
characteristics of the pool of Contracts.
2. Each Advance shall be made on a date prior to the Maturity
Date referred to below (each such date, a "Funding Date"); provided,
that:
(i) the conditions precedent to the making of
Advances set forth in Section 2 hereof shall have been satisfied, and
the representations and warranties of the Borrowers in Section 4 hereof
shall be true and correct on and as of such Funding Date as if made on
and as of such date;
(ii) no Event of Default shall have occurred and be
continuing or would exist after the making of the Advance on such
Funding Date;
(iii) the Lender shall have received (A) in
connection with each Advance, no later than 12:00 noon (Eastern
Standard Time) on the related Funding Date, a certificate from the
Custodian referred to below to the effect that it has in its possession
and has reviewed the contract files relating to the Contracts being
pledged in connection with the Advance being made on such Funding Date
and has found no material deficiencies in such contract files (the
"Custodian's Certification") and (B) prior to the initial Advance,
legal opinions from counsel (which may be in-house counsel) to ABL and
Federal Leasing in the form of Exhibit B-1 and Exhibit B-2,
respectively, attached hereto;
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(iv) the Borrowers shall have delivered or caused to
be delivered to the Custodian all required documents with respect to
the Contracts being pledged on such Funding Date;
(v) the applicable Borrower shall deliver evidence
of the release of any prior security interest that may have been
granted with respect to the Pledged Contracts and the related
Equipment.
(vi) the Lender shall have received acknowledgment
copies of the following filings, registrations and recordations stamped
by the appropriate filing, registration or recording officer (or, in
lieu thereof, other evidence satisfactory to the Lender that all such
filings, registrations and recordations have been made): (a) with
respect to the assignment of the Contracts by the related Borrower to
the Custodian, UCC-1 financing statements naming the related Borrower,
as debtor, and the "Chase Bank of Texas, N.A., as custodian and trustee
under the applicable custodial or trust agreement", as secured party,
(b) with respect to the Equipment subject to Contracts which are "true"
or "operating" leases, UCC-1 financing statements in each jurisdiction
in which such Equipment is located naming the related Borrower, as
debtor, and the "Chase Bank of Texas, N.A., as custodian and trustee
under the applicable custodial or trust agreement", as secured party,
and (c) with respect to the Equipment subject to Contracts which are
"finance" leases, (i) with respect to Contracts originated by a
Borrower relating to Equipment with an Original Equipment Cost of
greater than $10,000 or with respect to Contracts originated by a
source other than a Borrower relating to Equipment with an Original
Equipment Cost of greater than $10,000 for which a prior UCC-1
financing statement was not filed, UCC-1 financing statements filed in
the jurisdiction where the Equipment is located naming the user, as
debtor, and the related Borrower, as secured party, and (ii) with
respect to Contracts originated by a source other than a Borrower
relating to Equipment with an Original Equipment Cost of greater than
$25,000 for which a prior UCC-1 financing statement was filed, UCC-3
amendments filed in the jurisdiction where the Equipment is located
amending such filing to name the user, as debtor, and the related
Borrower, as secured party (the Equipment referenced in (b), (c)(i) and
(c)(ii) above is collectively referred to as the "Perfected
Equipment"). The filings referenced in clause (a) shall include all
related rights relating to such Contracts, including the security
interests in the Equipment subject to this Section 1(A)(2)(vi) and the
other Secured Obligations.
(vii) to the extent described in Section 5(C)
hereof, no notice described in said Section 5(C) shall have been
received by PSI; and
(viii) there shall be in full force and effect from
American Business Financial Services, Inc. (the "Guarantor") a Guaranty
(the "Guaranty") in the form attached hereto as Exhibit D.
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3. The Loan shall accrue interest daily on its outstanding
principal amount, with interest calculated for the actual number of
days elapsed, based on a 360-day year. The interest rate shall be
(except as otherwise provided in Section 1(E)(2) or Section 11(D)
hereof) LIBOR plus 1.25%, and shall be reset on each business day.
Interest which accrues during each calendar month shall be payable on
the 3rd (third) business day of the following month, with any
outstanding interest due and payable in its entirety on the date of
termination of this warehouse facility (including the Maturity Date).
"LIBOR" shall mean, the London interbank offered rate for
one-month U.S. dollar deposits, as reported on the display designated
as "Page 3750" on the Telerate Service (or such other display as may
replace Page 3750 on the Telerate Service).
Any amounts pre-paid under this Agreement prior to the
Maturity Date may be re-borrowed, subject to the terms and conditions
of this Agreement, until the Maturity Date.
B. The amount of each Advance shall not be less than
$1,000,000 and, after the making of such Advance, the outstanding principal
amount of the Loan shall not exceed the lesser of (i) 88% of the Collateral
Value, (ii) the aggregate Original Equipment Cost of the Equipment related to
the Contracts then so pledged to the Lender hereunder and (iii) the expected net
proceeds from the sale of the investment grade securities (such investment grade
rating to be provided by any of Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch IBCA, Inc.
("Fitch")) in the Securitization, as determined by PSI in its sole, good faith
discretion (such lesser amount, the "Maximum Loan Amount"). For purposes of this
Agreement, "Collateral Value" shall be equal to the aggregate Contract Value of
the Pledged Contracts. The Lender may, in its sole, good faith discretion, make
a determination of the Collateral Value of the Collateral weekly or daily to
ensure that the outstanding principal amount of the Loan does not exceed the
Maximum Loan Amount.
For purposes of this Agreement:
Maturity Date means, (i) if no Pre-Funding Account is utilized
in the Securitization the earlier of (a) June 30, 1998 and (b) the date
on which such Securitization occurs and (ii) if a Pre-Funding Account
is utilized in the Securitization, the earlier of (a) September 30,
1998 and (b) the date on which the funds in the Pre-Funding Account are
reduced to zero. The Maturity Date may be extended by the Lender, in
the Lender's sole and unreviewable discretion, on any date by the
execution and delivery of a Credit Increase Confirmation and Note
Amendment in the form of Exhibit C hereto.
Pledged Contracts means, as of any date of determination, any
Contracts then held by the Custodian on behalf of the Lender to secure
the Loan.
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C. The Loan evidenced hereby shall mature on the Maturity Date
and all amounts outstanding hereunder shall be due and payable on the Maturity
Date.
D. The Loan is pre-payable at any time without premium or
penalty, in whole or in part; provided, that Pledged Contracts may not be
removed from this warehouse facility (including in connection with any
prepayment of the Loan in part) with the result that, in the Lender's sole, good
faith discretion, the remaining Pledged Contracts, are, in the aggregate,
materially inferior as collateral as compared to the pool of Pledged Contracts
immediately prior to such removal. In addition, no Pledged Contracts may be
removed from this warehouse facility with the result that the outstanding amount
of the Loan exceeds the Maximum Loan Amount. Notwithstanding the foregoing,
however, a Pledged Contract, may in any event be removed from this facility if
such Pledged Contract has been paid in full by the lessor. If the Borrowers
intend to prepay the Loan in whole or in substantial part from a source other
than the proceeds of the Securitization, the Borrowers shall give two business
days' written notice to the Lender.
E. 1. If the Loan is not extended by means of a
Credit Increase Confirmation and Note Amendment, the Loan shall
immediately and automatically become due and payable without any
further action by the Lender on the then scheduled Maturity Date, and
in the event of non-payment in full on such Maturity Date the Lender
may exercise all rights and remedies available to it as the holder of a
first priority perfected security interest under the Uniform Commercial
Code of the State of New York (the "New York UCC").
2. If the Borrowers award a Securitization or whole-loan trade
involving any Pledged Contracts to an investment banking house, agent,
broker or underwriter other than PSI or to a group of managers for
which PSI is not the lead manager, then the interest rate on the Loan
shall increase to LIBOR plus 500 basis points, which higher rate shall
retroactively be applied as of the related Funding Date for all prior
Advances or Pledged Contracts so involved; provided, however, that if
the Borrowers had first offered such Securitization or whole-loan trade
to PSI at a reasonable market price and PSI refused such offer, then
this subsection 2 shall have no effect.
F. The Loan shall be evidenced by the secured promissory note
of the Borrowers in the form attached hereto as Exhibit A (the "Secured Note").
Section 2. Additional Conditions Precedent to Advance.
A. Not later than two business days prior to the proposed
Funding Date for an Advance the applicable Borrower shall deliver to the Lender
(x) a written notice in the form of Exhibit E hereto or, with respect to
Contracts already pledged hereunder, a Borrowing Base Report substantially in
the form of Exhibit F and (y) an electronic disk or tape, in a mutually
satisfactory form to be agreed upon detailing certain specified characteristics,
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as of a date no more than seven days prior to the proposed Funding Date for such
Advance (such date, the "Contract Schedule Cut-Off Date"), of the Contracts
proposed to be pledged in connection with such Advance and the Contracts
previously pledged (each such schedule, a "Contract Schedule") setting forth the
following information as to each Contract pledged to the Lender hereunder (such
Contract Schedule to be delivered to the Custodian, who shall deliver such
Contract Schedule to the Lender): (i) the Contract identifying number; (ii) the
user's name; (iii) the street address of the user and the street address where
the Equipment is in use, including the zip code; (iv) the description of the
related Equipment; (v) the original number of months to maturity and the number
of months remaining to maturity from the Contract Schedule Cut-Off Date; (vi)
the Contract yield; (vii) amount of the monthly payment; (viii) the original
cost of the related Equipment inclusive of amounts, if any, paid for taxes,
warranty extensions or service contracts (the "Original Equipment Cost"); (ix)
the present value (using a discount rate equal to the yield on the United States
treasury obligation having a three-year maturity as quoted in the Wall Street
Journal on the business day on which the Notice of Borrowing or Borrowing Base
Report, as applicable, is to be delivered to the Lender) plus a credit spread
equal to 2.50% (which spread may be adjusted, from time to time, by the Lender,
in its sole unreviewable discretion, to account for market movements or changes
in the structure or subordination levels of the Securitization) (the "Discount
Rate") of the remaining scheduled contract payments of the Contract (the
"Contract Value") as of the close of business on the Contract Schedule Cut-Off
Date; (x) the paid through date of such Contract; (xi) the delinquency status of
each such Contract, together with a separate schedule setting forth the future
payment stream (i.e., a debt service schedule) for each Contract then being
pledged, as of the Contract Schedule Cut-Off Date; (xii) the first payment date
of such Contract; and (xiii) the last payment date of such Contract; provided
that if such Advance relates to Contracts acquired by the Borrowers from other
originators in a bulk acquisition and either (A) such Contracts have an
aggregate principal amount in excess of $1,000,000 but less than $5,000,000 (any
such acquisition by the Borrowers, a "Small Bulk Acquisition"), such items shall
be furnished at least four business days prior to the requested Funding Date or
(B) such Contracts have an aggregate principal amount in excess of $5,000,000
(any such acquisition by the Borrowers, a "Large Bulk Acquisition"), such items
shall be furnished at least ten business days prior to the requested Funding
Date.
B. Prior to the initial Funding Date, the Lender shall have
received:
1. Duly executed originals of (i) this Agreement, (ii) the
Custodial Agreement, (iii) the Secured Note and (iv) the Guaranty.
2. A certificate of the Secretary of each Borrower certifying
(i) a copy of such Borrower's articles of incorporation; (ii) a copy of
such Borrower's by-laws; (iii) the names and signature of officers of
such Borrower authorized on its behalf to execute this Agreement and
any other documents to be delivered by it hereunder (on which the
Lender may conclusively rely until such time as the Lender shall
receive from such Borrower a revised certificate); and (iv) a copy of
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minutes of a meeting of such Borrower's board of directors authorizing
the authorized signatories to enter into this Agreement.
3. The Lender shall have received a certificate of the
Secretary of the Guarantor certifying (i) a copy of the Guarantor's
articles of incorporation; (ii) a copy of Guarantor's by-laws; (iii)
the names and signatures of the officers authorized on its behalf to
execute the Guaranty, and any other documents to be delivered by it
thereunder (on which the Lender may conclusively rely until such time
as the Lender shall receive from the Guarantor a revised certificate);
and (iv) a copy of the resolutions of the executive committee of the
board of directors of the Guarantor authorizing the Guarantor to
deliver the Guaranty.
4. The Lender shall have received an opinion of the counsel of
each of ABL and Federal Leasing which may be an attorney employed by
one of its affiliates, in substantially the form of Exhibit B-1 and
Exhibit B-2, respectively, attached hereto.
5. The Lender shall have received an opinion of the counsel to
the Guarantor in substantially the form of Exhibit B-3 hereto.
6. The Lender shall have received the most recent available
servicing reports, if any, with respect to the Contracts.
7. The Lender and/or any independent contractor appointed by
the Lender shall have completed such investigation as the Lender may
reasonably require with respect to each Contract which is the subject
of any funding and the results of such investigation (and all other
legal and documentary matters with respect to such Contract) shall be
satisfactory to the Lender.
8. The related Borrower shall have executed all documents,
including but not limited to financing statements under the Uniform
Commercial Code as in effect in any applicable jurisdictions, as the
Lender may reasonably require to effectively perfect and evidence the
Lender's first priority security interest in the Contracts and the
related Perfected Equipment.
9. A copy of the blanket Insurance Policy or Insurance
Certificate referred to in Section 4(B)(35).
10. The Borrowers shall deliver to the Lender a copy of any
back-up servicing agreement, including, without limitation, the back-up
servicing agreement with SunGard Recovery Services Inc. (each, a
"Servicing Agreement").
Section 3. Contract Files and Custodian.
The related Borrower shall deliver to Chase Bank of Texas,
N.A., as custodian (the "Custodian") on behalf of the Lender, the documents and
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instruments listed in Section 2 of that certain Custodial Agreement for
Contracts dated as of April 3, 1998 (the "Custodial Agreement") among the
Lender, the Borrowers, and the Custodian. Such documents and instruments
evidencing and relating to the Contracts and the related Equipment, including,
without limitation, the proceeds of any Insurance Policy or Insurance
Certificate which relate to a Pledged Contract, together with any proceeds
thereof, are hereinafter referred to as the "Collateral". Each Borrower hereby
pledges and grants a first priority security interest in all of its right, title
and interest in and to the Collateral to the Lender to secure the repayment of
principal of and interest on the Loan and all other amounts owing by the
Borrowers to the Lender hereunder or under any other agreement or arrangement
among either Borrower or its Affiliates and the Lender or its affiliates now
existing or hereafter entered into by such parties (collectively, the "Secured
Obligations").
Section 4. Representations, Warranties and Covenants.
A. Each of the Borrowers represents and warrants to the Lender
that:
1. ABL and Federal Leasing have each been duly organized and
are validly existing as corporations in good standing under the laws of
their respective states of incorporation.
2. It is duly licensed as a "Licensee" or is otherwise
qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except
where failure to so qualify or such default would not have a material
adverse effect on the ability of such Borrower to conduct its business
or to perform its obligations under this Agreement. It has the
requisite power and authority and legal right to own and grant a lien
on all of its right, title and interest in and to the Collateral, and
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the terms and conditions of, this Agreement, the
Custodial Agreement and the Secured Note.
3. At all times after the Custodian has received a Contract
from such Borrower and until payment in full of the Loan, such Borrower
will not knowingly and intentionally commit any act in violation of
applicable laws, or regulations promulgated with respect thereto.
4. Such Borrower is solvent and is not in default under any
mortgage, borrowing agreement or other instrument or agreement
pertaining to indebtedness for borrowed money, and the execution,
delivery and performance by such Borrower of this Agreement, the
Custodial Agreement, and the Secured Note do not conflict with any term
or provision of the certificate of incorporation or by-laws of such
Borrower or any law, rule, regulation, order, judgment, writ,
injunction or decree applicable to such Borrower of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over such Borrower and will not result in any violation of
any such mortgage, instrument or agreement.
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5. All financial statements or certificates of such Borrower,
any Affiliate of such Borrower or any of its officers furnished to the
Lender are true and complete and do not omit to disclose any material
liabilities or other facts relevant to such Borrower's or such
Affiliate's condition. As used in this Agreement, "Affiliate" means (i)
American Business Financial Services, Inc., Processing Service Center,
Inc., American Business Credit, Inc., HomeAmerican Credit, Inc. d/b/a
Upland Mortgage, New Jersey Mortgage and Investments, Inc., ABC
Holdings Corporation and HomeAmerican Consumer Discount Company and
(ii) any person directly or indirectly controlling, controlled by, or
under common control (within the definition of "control" set forth in
the Securities and Exchange Act of 1934, as amended) with such
Borrower, who, in accordance with GAAP, can be consolidated with such
Borrower for financial reporting purposes. All such financial
statements have been prepared in accordance with GAAP. No financial
statement or other financial information as of a date later than that
supplied to the Lender, has been furnished by such Borrower or any of
its Affiliates to another lender of such Borrower or any of its
Affiliates that has not been furnished to the Lender.
6. No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or
court is required under applicable law in connection with the
execution, delivery and performance by such Borrower of this Agreement,
the Custodial Agreement and the Secured Note.
7. There is no action, proceeding or investigation pending
with respect to which such Borrower has received service of process or,
to the best of such Borrower's knowledge threatened against it before
any court, administrative agency or other tribunal (A) asserting the
invalidity of this Agreement, the Custodial Agreement or the Secured
Note, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, the Custodial Agreement or
the Secured Note, or (C) which would materially and adversely affect
the validity of the Contracts or the performance by it of its
obligations under, or the validity or enforceability of, this
Agreement, the Custodial Agreement or the Secured Note.
8. There has been no material adverse change in the business,
operations, financial condition, properties or prospects of such
Borrower or any Affiliate since the date set forth in the financial
statements supplied to the Lender.
9. This Agreement, the Custodial Agreement and the Secured
Note have been duly authorized, executed and delivered by such Borrower
all requisite corporate action having been taken, and each is valid,
binding and enforceable against such Borrower in accordance with its
terms except as such enforcement may be affected by bankruptcy, by
other insolvency laws, or by general principles of equity.
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10. There are no Liens on any Servicing Agreement or on any
computer hardware or software relating to the servicing of the Pledged
Contracts.
B. With respect to every Contract delivered to the Custodian,
the related Borrower represents and warrants to the Lender that:
1. Such Contract and all accompanying documents are complete
and authentic and all signatures thereon are genuine;
2. Such Contract arose from a bona fide lease, complying with
all applicable State and Federal laws and regulations, to persons
having the legal capacity to contract;
3. All amounts represented to be payable on such Contract are,
in fact, payable in accordance with the provisions of such Contract;
4. Such Contract is secured by a piece of Equipment;
5. The Equipment subject to any security interest given in
connection with such Contract is not subject to any encumbrance, except
for liens released simultaneously with the grant of a security interest
in favor of the Lender hereunder in such Contract and Equipment;
6. Such Contract has been fully paid for by the related
Borrower;
7. Immediately prior to its pledge hereunder, with respect to
each item of Collateral, the related Borrower held good and
indefeasible title to, and was the sole owner of, such Collateral, and
such Collateral is not subject to any liens, charges, mortgages,
participations, encumbrances or rights of others, except for liens
released simultaneously with the Borrowers' pledge of such Collateral
made herein;
8. Each Contract conforms to the description thereof as set
forth on the related Contract Schedule;
9. No Contract has been rejected for financing by any of the
Borrowers' other financing sources for warehouse financing, or was
removed from any other of the Borrowers' warehouse lines for breaching
any requirement for financing thereunder unless such Contract has been
approved by the Lender in writing;
10. The information in respect of the Contract set forth in
the related Contract Schedule is true and correct;
11. (A) The Contract contains provisions requiring the user to
assume all risk of loss or malfunction of the related Equipment and to
maintain appropriate liability insurance with respect thereto, and
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making the user absolutely and unconditionally liable for all payments
required to be made thereunder, without any right of set-off for any
reason whatsoever, subject only to the user's right of quiet enjoyment,
(B) the Contract may not be terminated or prepaid without the consent
of the Lender, (C) the Contract does not provide for the substitution,
exchange or addition of any other items of Equipment pursuant to such
Contract which would result in any reduction or extension of payments
due under the Contract and (D) the rights with respect to such Contract
are assignable by the Borrowers without the consent of any person other
than, with respect to certain Contracts, the consent to assignment of
the underlying user which the Borrowers have received prior to the
pledge to the Lender hereunder;
12. All requirements of applicable federal, state and local
laws, and regulations thereunder, including, without limitation, usury
laws, if any, in respect of the origination and servicing of the
Contract have been complied with in all material respects;
13. The Contract represents the legal, valid and binding
payment obligation of the user, enforceable in accordance with its
terms, subject to bankruptcy, insolvency and other laws (including, but
not limited to, principles of equity) affecting the rights of
creditors;
14. No instrument of release or waiver has been executed in
connection with the Contract, and no lessee/borrower in respect of such
Contract has been released from its obligations thereunder, in whole or
in part;
15. Except as otherwise reflected in the Contract Schedule,
the Contract has not been amended after the date on which such Contract
is listed on the Contract Schedule and pledged to the Lender hereunder
in any material respect or such that the amount of any monthly payment
or the total number of the monthly payments is increased or decreased;
16. The Contract is not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and
no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
17. There are no proceedings or investigations pending, or, to
the best of each of the Borrower's knowledge after due inquiry,
threatened, before any court, administrative agency, or other tribunal
or governmental instrumentality (A) asserting the invalidity of the
Contract or the lien, if any, on the related Equipment, (B) asserting
the bankruptcy or insolvency of a user, (C) seeking to prevent payment
and performance of the Contract, or (D) seeking any determination or
ruling that might materially and adversely affect the validity or
enforceability of the Contract or the lien, if any, on the related
Equipment;
18. The Borrowers have duly fulfilled all obligations on their
respective parts, required by the Agreement, to be fulfilled under or
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in connection with the Contract and have done nothing to impair the
rights of the Lender in the Contract or payments with respect thereto,
or in the related Equipment;
19. There is no default, breach, violation or event of
acceleration existing under the Contract, and no event has occurred
which, with the passage of time or with notice, would constitute a
default, breach, violation or event of acceleration; and none of the
Borrowers have waived any monetary or non-monetary default, breach,
violation or event of acceleration in respect of the Contract;
20. All parties to each Contract had legal capacity to execute
such Contract and each such Contract has been duly and properly
executed by such parties;
21. The Contract was not selected by the Borrowers on any
basis intended to adversely affect the value of the Lender's security
interest therein;
22. The Contract was not originated in, nor is it subject to
the laws of, any jurisdiction the laws of which would make unlawful the
pledge, transfer or assignment of such document or the related
Equipment under this Agreement, including any sale in accordance with
this Agreement;
23. Immediately after the pledge, assignment and transfer to
the Lender as herein contemplated, all necessary action will have been
taken to grant (a) a valid and enforceable first priority perfected
security interest in such Contract (including the filing or amendment
of UCC statements in all applicable jurisdictions) and all payments to
become due thereunder and all rights of the Borrowers in the Perfected
Equipment and (b) a valid and enforceable first priority security
interest in all rights of the Borrowers in the Equipment other than the
Perfected Equipment, in each case free and clear of all liens and
encumbrances, except for the interests of users pursuant to the
Contract, and for those subsequent liens which, by operation of law,
take priority over a previously perfected security interest;
24. (A) The Contract has not been sold, transferred, assigned
or pledged by the Borrowers to any person other than the Lender, except
for liens released simultaneously with the grant of a security interest
in favor of the Lender hereunder and (B) immediately prior to the
pledge and conveyance of the Contract pursuant to Section 3 hereof, the
related Borrower was the sole owner of the Contract and had good and
marketable title thereto, free and clear of all liens and encumbrances;
25. There is only one original executed counterpart of the
Contract that constitutes "chattel paper" or an "instrument" for
purposes of Sections 9-105(1)(b) and 9-105(1)(i), respectively, and
9-308 of the UCC;
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26. The Borrowers' computer records shall have been marked to
indicate that such Contract has been pledged, assigned and transferred
to the Lender pursuant to this Agreement;
27. In the event that all insurance policies required to be
maintained by the Contract are not in full force and effect, each of
the Borrowers will indemnify the Lender for any losses, liabilities and
expenses that result from the fact that such policies are not in full
force and effect;
28. Each individual Contract was originated or purchased by
one of the Borrowers using its underwriting guidelines previously
approved by PSI. The user is not insolvent or in bankruptcy and the
Borrowers have no knowledge of any circumstances or conditions with
respect to the Contract, the Equipment or the user's credit standing
that could reasonably be expected to cause the Lender to regard the
Contract as an unacceptable security, cause the Contract to become
delinquent or adversely affect the value or marketability of the
Contract;
29. The Equipment was properly delivered to the user in good
repair, without defects and in satisfactory order and, to the best of
each of the Borrowers' knowledge, is in proper working order as of the
date on which such Contract was pledged to the Lender and listed on the
Contract Schedule;
30. The Contract does not have characteristics which are
materially worse than those of other Contracts financed by the
Borrowers during the twelve-month period preceding the initial Funding
Date;
31. On the date of the Advance relating to such Contract, it
is not more than 20 days delinquent, and, on any date of determination,
no more than 1.0% of the pool of Pledged Contracts are more than 30
days delinquent, and no Pledged Contract is more than 45 days
delinquent;
32. For each piece of Equipment subject to a Contract which is
a "finance" lease, (a) with an Original Equipment Cost greater than
$10,000, there has previously been filed a UCC-1 Financing Statement
naming the related User, as debtor and the related Borrower as secured
party, (or, to the extent such Contract was originated by a third-party
originator, naming such originator as secured party) or (b) with an
Original Equipment Cost greater than $25,000, to the extent such
Contract was originated by a third-party originator, a UCC-3 assignment
of a previously filed financing statement (in each case naming the user
as "debtor" and the originator of such Contract as "Secured Party")
naming the related Borrower as assignee or secured party;
33. For each piece of Equipment subject to a Contract which is
a "true" or "operating" lease, a UCC-1 Financing Statement naming the
related Borrower, as debtor, and the Custodian, as secured party;
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34. Such Contract has an original principal balance of less
than $500,000; provided, that the aggregate original principal balance
of each Contract relating to a single user is less than $1,000,000;
provided, further, that the average original principal balance of all
Pledged Contracts is less than $50,000;
35. Each piece of Equipment (a) with an Original Equipment
Cost greater than $100,000, is covered by an Insurance Policy or
Insurance Certificate, as the case may be, or (b) with an Original
Equipment Cost less than $100,000, is covered by a blanket Insurance
Policy or Insurance Certificate, as the case may be, in each case,
naming the related Borrower as the loss payee; and
36. The Borrowers have reviewed each Contract for conformity
with the representations and warranties listed in this Section 4(B),
and found such Contract to conform with such representations and
warranties, before requesting the Lender to make an Advance against
such Contract.
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C. Each of the Borrowers covenants with the Lender that,
during the term of this facility:
1. Such Borrower and any of its Affiliates shall not create or
suffer to exist any Lien, other than Permitted Liens, on any of such
Borrower's or any of its Affiliate's assets, including, without
limitation, any Servicing Agreement and any computer hardware and
software relating to such Borrowers' servicing of the Pledged Assets.
2. Such Borrower shall not pledge, assign or grant to any
other party any security interest in any Pledged Contract or the
related Equipment.
3. Such Borrower's Tangible Net Worth shall not be less than
$100,000.
For purposes of this Agreement:
Lien means, with respect to any asset of a Borrower or any of
its Affiliates, any mortgage, lien, pledge, charge, security interest
or other similar encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable
law (including, without limitation, any conditional sale or other title
retention agreement, and any financing lease in the nature thereof, any
agreement to sell, and any filing of, or agreement to give, any
financing statement (other than notice filings not perfecting a
security interest) under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
Permitted Lien means (i) Liens for taxes, assessments or
governmental charges or claims that either (a) are not yet delinquent
or (b) are being contested in good faith by appropriate proceedings and
as to which appropriate reserves or other provisions have been made in
accordance with GAAP; (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and with
respect to amounts that either (a) are not yet delinquent or (b) are
being contested in good faith by appropriate proceedings and as to
which appropriate reserves or other provisions have been made in
accordance with GAAP; (iii) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974, as amended) incurred
or deposits due in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, progress payments, government contracts and other
obligations of like nature (exclusive of obligations for the payment of
borrowed money), in each case incurred in the ordinary course of
business; (v) attachment or judgment Liens not giving rise to an Event
of Default; (vi) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering with the ordinary
conduct of the business of a Borrower or any of its Affiliates; (vii)
leases or subleases granted to others not interfering with the ordinary
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<PAGE>
conduct of the business of a Borrower or any of its Affiliates; (viii)
the Lien granted to the Lender pursuant hereto; (ix) secured borrowing
facilities or other Liens which are secured by assets of a Borrower or
any of its Affiliates other than the Contracts; provided, that no such
secured borrowing facility or other Lien may be secured by a blanket
lien on the assets of a Borrower or any of its Affiliates, including,
without limitation, any Servicing Agreement and any computer hardware
and software relating to such Borrowers' servicing of the Pledged
Assets; and (x) any other Lien to which the Lender has given its prior
written consent.
Tangible Net Worth means the related Borrower's stated net
worth minus intangible assets and the amount of any receivable from any
of its Affiliates.
Section 5. Mandatory Prepayment of Loan.
A. Upon discovery by either Borrower or the Lender of any
breach of any of the representations and warranties listed in Section 4(B)
preceding, the party discovering such breach shall promptly give notice of such
discovery to the others.
The Lender has the right to require, in its unreviewable
discretion, the related Borrower to repay the Loan in part in an amount equal to
the amount of the Advance relating to such Contract with respect to any Contract
which breaches one or more of the representations and warranties listed in
Section 4(B) preceding or which is determined by the Lender to be unacceptable
for inclusion in such Securitization; provided, however, that upon the Lender's
written consent, then in lieu of any prepayment required by this Section 5(A),
such Borrower may pledge additional Contracts complying with the terms of this
Agreement such that the aggregate principal amount of the Loan does not exceed
the Maximum Loan Amount.
B. If (x) more than 1,0% of the Pledged Contracts, as
indicated on any Supplemental Contract Schedule delivered pursuant to Section
9(A) hereof, become 31 or more days delinquent, or (y) any of the Pledged
Contract become 45 or more days delinquent, the Lender may require the related
Borrower to prepay the Loan in part in an amount equal to the amount of the
Advance relating to such Contracts, or, with the Lender's consent, deliver
qualifying substitute contracts in their place.
C. If the Borrowers award a Securitization or any whole-loan
trade involving any Pledged Contracts to an investment banking house, agent or
underwriter other than PSI, or to a group of managers for which PSI is not the
lead manager, then (x) the Lender may demand that the Borrowers prepay any
portion of the Loan evidenced hereby relating to the dollar amount of the
Contracts to be included in such Securitization or whole loan trade, in which
PSI has not been selected for participation, for payment within five business
days of the demand for prepayment, (y) the Lender may refuse to make further
Advances hereunder if such Advances would relate to Contracts to be included in
such Securitization or whole-loan trade in which PSI has not been selected for
participation and (z) the interest rate on the Loan shall increase as set forth
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<PAGE>
in Section 1(E)(2) hereof. The Borrowers shall give immediate notice, by
facsimile transmission, to the attention of Murray Weiss at the Lender and to
the attention of Len Blum at PSI (fax 212-778-7401) of any decision to award the
lead manager role or to name any group of managers for any Securitization or
whole-loan trade involving any Pledged Contracts.
D. If at any time the outstanding principal amount of the Loan
exceeds the Maximum Loan Amount, the Borrowers shall, no later than one business
day after receipt of notice of such excess, either prepay the Loan (together
with interest thereon) in part or in whole, or pledge additional Collateral to
the Lender, or both, such that, after giving effect to such prepayment or
pledge, or both, the aggregate outstanding principal amount of the Loan does not
exceed the Maximum Loan Amount.
Section 6. Release of Contract Files following Payment of
Loan.
The Lender agrees to cause to be released from the lien hereof
the documents described in Section 2 of the Custodial Agreement at the request
of the Borrowers upon payment in full of the Loan, or, if a partial payment of
the Loan occurs, the documents relating to a pro rata portion of the Pledged
Contracts.
Section 7. Servicing.
Each Borrower shall service the related Contracts with the
degree of skill and care consistent with that which such Borrower customarily
exercises with respect to similar contracts owned, managed, or serviced by it
and all applicable industry standards. Each Borrower (i) shall not knowingly
fail to comply with all applicable Federal and State laws and regulations, (ii)
shall maintain all State and Federal licenses and franchises necessary for it to
perform its servicing responsibilities hereunder, (iii) shall not impair the
rights of the Lender in any Contracts or for payment thereunder and (iv) shall
not violate any laws which affect its ability to service the related Contracts.
Section 8. No Oral Modifications; Successors and Assigns;
Assignment of Collateral.
No provisions of this Agreement shall be waived or modified
except by a writing duly signed by the authorized agents of the Lender and each
of the Borrowers. This Agreement shall be binding upon the successors and
assigns of the parties hereto. The Borrowers acknowledge and agree that the
Lender may re-pledge, enter into repurchase transactions, and otherwise
re-hypothecate (including the granting of participation interests therein) the
Collateral for the Loan; provided, that no such act shall in any way affect the
Borrowers' rights to the Collateral.
Section 9. Reports.
A. The related Borrower shall provide the Lender with an
electronic disk or tape (each, a "Supplemental Contract Schedule") (i) on the
date any additional Contracts are delivered pursuant to Section 5(D), (ii) at
the earliest of (A) two business days before each Funding Date or (B) two weeks
17
<PAGE>
following the date that the last such schedule was provided and (iii) within two
business days following any request by the Lender or any affiliate thereof for
such a schedule. Such Supplemental Contract Schedule will contain the
information set forth in Section 2(A) hereof concerning (x) the Contracts then
held in the warehouse facility and (y) any Contracts proposed to be delivered to
the warehouse facility on the next Funding Date or in connection with Collateral
maintenance pursuant to Section 5(D) hereof, and shall be in the format as may
be agreed upon by the Borrowers and the Lender from time to time and contain the
information set forth in Section 2(A) hereof.
B. Each Borrower shall furnish to the Lender (x) promptly,
copies of any material and adverse notices (including, without limitation,
notices of defaults, breaches, potential defaults or potential breaches) given
to or received from its other lenders, (y) immediately, notice of the occurrence
of any "Event of Default" hereunder or of any situation which such Borrower,
with the passage of time, reasonably expects to develop into an "Event of
Default" hereunder and (z) the following:
(i) unaudited consolidating financial statements of
such Borrower and its Affiliates (setting forth such Borrower's balance
sheet and income statement), within 105 days of such Borrower's fiscal
year end;
(ii) unaudited consolidating financial statements of
such Borrower and its Affiliates (setting forth such Borrower's balance
sheet and income statement) for each of such Borrower's first three
quarters of each fiscal year, within 50 days after quarter end; and
(iii) copies of all SEC filings by such Borrower and
its Affiliates, within five business days of their filing with the SEC.
All required financial statements, information and reports
shall be prepared in accordance with U.S. GAAP, or, if applicable to SEC
filings, SEC accounting regulations.
C. On the fifth business day of each calendar month, the
Borrowers shall provide the Lender with a report both in hardcopy and on a
computer diskette or via electronic transmission, which report shall contain
information concerning the portfolio performance data with respect to the
Pledged Contracts, including, without limitation, information regarding any
outstanding delinquencies, prepayments in whole or in part and any repurchases
by the Borrowers, in a format as may be agreed upon by the Borrowers and the
Lender from time to time.
D. In conjunction with the delivery of each of the financial
statements to be delivered by the Borrowers pursuant to Section 9(B), each
Borrower shall deliver to the Lender an officer's certificate of such Borrower
certifying that, as of the date of delivery of such financial statements, such
Borrower is in compliance with all the terms of this Agreement, including,
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<PAGE>
without limitation, each of the representations and warranties set forth in
Section 4(B) and the covenants set forth in Section 4(C). Such certificate
shall, as appropriate, set forth any calculations necessary to determine such
compliance, including, without limitation, a calculation showing compliance with
the representations set forth in Section 4(B)(34).
Section 10. Events of Default.
Each of the following shall constitute an "Event of Default"
hereunder:
A. Failure of either Borrower to make any payment of interest
or principal or any other sum which has become due, whether by acceleration or
otherwise, under the terms of the Secured Note, this Agreement, any warehouse
and security agreement or any other document evidencing or securing indebtedness
of either Borrower to the Lender or to any affiliate of the Lender; provided,
however, that, with respect to payments of interest hereunder, the Borrowers
shall have one (1) Business Day to cure such deficiency.
B. Any "event of default" or any occurrence which with the
passage of time would become an "event of default" by either Borrower, the
Guarantor or any of their Affiliates under any agreement relating to any
indebtedness of either Borrower, the Guarantor or any of their Affiliates to any
other lender.
C. Any default of any term, condition or agreement or any
breach of any representation or warranty of the Guarantor under the Guaranty or
any other guaranty executed by the Guarantor in favor of the Lender or its
affiliates.
D. Assignment or attempted assignment by the Borrowers of this
Agreement or any rights hereunder, without first obtaining the specific written
consent of the Lender, or the granting by the Borrowers of any security
interest, lien or other encumbrance on any Collateral to other than the Lender.
E. The filing by either Borrower or the Guarantor of a
petition for liquidation, reorganization, arrangement or adjudication as a
bankrupt or similar relief under the bankruptcy, insolvency or similar laws of
the United States or any state or territory thereof or of any foreign
jurisdiction; the failure of either Borrower or the Guarantor to secure
dismissal of any such petition filed against it within ninety (90) days of such
filing; the making of any general assignment by either Borrower or the Guarantor
for the benefit of creditors; the appointment of a receiver or trustee for
either Borrower or the Guarantor, or for any part of either Borrower's or the
Guarantor's assets; the institution by either Borrower or the Guarantor of any
other type of insolvency proceeding (under the Bankruptcy Code or otherwise) or
of any formal or informal proceeding, for the dissolution or liquidation of,
settlement of claims against, or winding up of the affairs of, either Borrower
or the Guarantor; the institution of any such proceeding against either Borrower
or the Guarantor if such party shall fail to secure dismissal thereof within
ninety (90) days thereafter; the consent by either Borrower or the Guarantor to
any type of insolvency proceeding against either Borrower or the Guarantor
19
<PAGE>
(under the Bankruptcy Code or otherwise); the occurrence of any event or
existence of any condition which could be the ground, basis or cause for any
proceeding or petition described in this Section 10.
F. Any materially adverse change in the financial condition of
either Borrower or any of its Affiliates or the existence of any other condition
which, in the Lender's sole, reasonable determination, constitutes an impairment
of either Borrower's ability to perform its obligations under this Agreement or
the Secured Note.
G. Failure by either Borrower to service the Contracts in
substantial compliance with the servicing requirements set forth in Section 7
hereof.
H. A breach by either Borrower of any representation, warranty
or covenant set forth in Section 4(A), 4(C) or Section 9 hereof or a use by
either Borrower of the proceeds of the Loan for a purpose other than as set
forth in Section 1(A) hereof.
I. Any "event of default" under any agreement between either
Borrower or any of their Affiliates and the Lender or any of its affiliates.
Section 11. Remedies Upon Default.
A. Upon the occurrence of one or more Events of Default and
notice thereof to the Borrowers, the Lender may (x) refuse to make further
Advances hereunder and (y) immediately declare the principal of the Secured Note
then outstanding to be immediately due and payable, together with all interest
thereon and fees and expenses accruing under this Agreement; provided, that,
upon the occurrence of the Event of Default referred to in Section 10(D), such
amounts shall immediately and automatically become due and payable without any
further action by any person or entity. Upon such declaration or such automatic
acceleration, the balance then outstanding on the Secured Note shall become
immediately due and payable without presentation, demand or further notice of
any kind to the Borrowers.
B. Upon the occurrence of one or more Events of Default, the
Lender shall have the right to obtain physical possession, and to commence an
action to obtain physical possession, of all files of the Borrowers relating to
the Collateral and all documents and information relating to the Collateral
which are then or may thereafter come in to the possession of the Borrowers or
any third party acting for the Borrowers, including, without limitation, all
computer data relating to the Collateral and the servicing of the Collateral.
The Lender shall be entitled to specific performance of all agreements of the
Borrowers contained in this Agreement. The Borrowers and the Lender hereby
acknowledge that the Lender's right to obtain physical possession of the
Collateral is deemed for all purposes to be equivalent to the rights of "seizure
of property or maintenance or continuation of perfection of an interest in
property" as specified under Bankruptcy Code Sections 362(b) and 546(b)(2).
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<PAGE>
C. Upon the occurrence of one or more Events of Default, the
Lender shall have the right to direct all servicers then servicing any Pledged
Contracts to remit all collections on the Pledged Contracts to the Lender, and
if any such payments are received by either Borrower, such Borrower shall not
commingle the amounts received with other funds of such Borrower and shall
promptly pay them over to the Lender. In addition, the Lender shall have the
right to dispose of the Collateral as provided herein, or as provided in the
other documents executed in connection herewith, or in any commercially
reasonable manner, or as provided by law. Such disposition may be on either a
servicing-released or a servicing-retained basis. The Lender shall be entitled
to place the Contracts which it recovers after any default in a pool for
issuance of equipment lease-backed securities at the then-prevailing price for
such securities and to sell such securities for such prevailing price in the
open market as a commercially reasonable disposition of Collateral, subject to
the applicable requirements of the New York UCC. The Lender shall also be
entitled to sell any or all of such Contracts individually for the prevailing
price as a commercially reasonable disposition of Collateral subject to the
applicable requirements of the New York UCC. The specification in this Section
11 of manners of disposition of collateral as being commercially reasonable
shall not preclude the use of other commercially reasonable methods (as
contemplated by the New York UCC) at the option of the Lender.
D. Following the occurrence and during the continuance of an
Event of Default, interest shall accrue on the Loan at a default interest rate
of LIBOR plus 5.00%.
Section 12. Indemnification.
Each of the Borrowers agrees to hold the Lender harmless from
and indemnifies the Lender against all liabilities, losses, damages, judgments,
costs and expenses of any kind which may be imposed on, incurred by, or asserted
against the Lender relating to or arising out of this Agreement, the Custodial
Agreement, the Secured Note, the Guaranty or any transaction contemplated hereby
or thereby resulting from anything other than the Lender's gross negligence or
willful misconduct. Each of the Borrowers also agrees to reimburse the Lender
for all reasonable expenses in connection with the enforcement of this
Agreement, the Custodial Agreement, the Secured Note and the Guaranty,
including, without limitation, the reasonable fees and disbursements of counsel.
Each of the Borrowers' agreements in this Section shall survive the payment in
full of the Secured Note and the expiration or termination of this Agreement.
Each of the Borrowers hereby acknowledges that, notwithstanding the fact that
the Secured Note is secured by the Collateral, the obligations of such Borrower
under the Secured Note are recourse obligations of such Borrower.
Section 13. Power of Attorney.
The related Borrower hereby authorizes the Lender, at such
Borrower's expense, to file such financing statement or statements relating to
the Collateral without such Borrower's signature thereon as the Lender at its
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reasonable option may deem appropriate and necessary, and appoints the Lender as
such Borrower's attorney-in-fact to execute any such financing statement or
statements in such Borrower's name and to perform all other acts which the
Lender deems appropriate to perfect and continue the security interest granted
hereby and to protect, preserve and realize upon the Collateral, including, but
not limited to, the right to endorse notes, complete blanks in documents,
transfer servicing, and sign assignments on behalf of such Borrower as its
attorney-in-fact. This Power of Attorney is coupled with an interest and is
irrevocable without the Lender's consent. Notwithstanding the foregoing, the
power of attorney hereby granted may be exercised only during the occurrence and
continuance of any Event of Default hereunder.
Section 14. Agreement Constitutes Security Agreement.
This Agreement is intended by the parties hereto to be
governed by New York Law, and to constitute a security agreement within the
meaning of the New York UCC.
Section 15. Lender May Act Through Affiliates.
The Lender may, from time to time, designate one or more
affiliates for the purpose of performing any action hereunder.
Section 16. Notices.
All demands, notices, reports and communications relating to
this Agreement shall be in writing and shall be deemed to have been duly given
if mailed, by registered or certified mail, return receipt requested, or by
overnight courier, or, if by other means, when received by the other party or
parties at the address shown below, or such other address as may hereafter be
furnished to the other party or parties by like notice. Any such demand, notice,
report or communication hereunder shall be deemed to have been received on the
date delivered to or received at the premises of the addressee (as evidenced, in
the case of registered or certified mail, by the date noted on the return
receipt).
If to ABL:
Anthony J. Santilli
Chairman
American Business Leasing, Inc.
111 Presidential Blvd.
Bala Cynwyd, PA 19004
Phone Number: 610-668-2440
Fax Number: 610-668-1468
22
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with a copy to:
Lawrence F. Flick, II, Esq.
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, Pennsylvania 19103-2599
Phone Number: 215-569-5500
Fax Number: 215-569-5555
If to Federal Leasing:
Anthony J. Santilli
Chairman
Federal Leasing Corp.
111 Presidential Blvd.
Bala Cynwyd, PA 19004
Phone Number: 610-668-2440
Fax Number: 610-668-1468
with a copy to:
Lawrence F. Flick, II, Esq.
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, Pennsylvania 19103-2599
Phone Number: 215-569-5500
Fax Number: 215-569-5555
If to the Lender:
Prudential Securities Credit Corporation
One Seaport Plaza, 27th Floor
Treasury Department
New York, New York 10292
Attention: Elizabeth Castagna
Phone Number: 212-214-7772
Fax Number: 212-214-7572
with copies to:
Prudential Securities Credit Corporation
One Seaport Plaza
New York, New York 10292
Attention: Jeffrey French
Phone Number: 212-214-7558
Fax Number: 212-214-7678
23
<PAGE>
Prudential Securities Credit Corporation
One Seaport Plaza
New York, New York 10292
Attention: Jim Maitland
Phone Number: 212-214-7231
Fax Number: 212-214-7678
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Mr. Len Blum
Phone Number: 212-778-1397
Fax Number: 212-778-7401
Section 17. Severability.
Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization, without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
together constitute one and the same instrument.
Section 19. Certain Definitions.
The following capitalized terms are defined in the
corresponding sections specified below:
"Advance" - Section 1(A)(1).
"Affiliate" - Section 4(A)(5).
"Agreement" - Introductory Clause.
"Borrowers" - Introductory Clause.
"Collateral" - Section 3.
"Collateral Value" - Section 1(B)(1).
"Contract" - Recitals.
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<PAGE>
"Contract Schedule" - Section 2(A).
"Contract Schedule Cut-Off Date" - Section 2(A).
"Contract Value" - Section 2(A).
"Custodian" - Section 3.
"Custodial Agreement" - Section 3.
"Custodian's Certification" - Section 1(A)(2)(iii).
"Discount Rate" - Section 2(A).
"Equipment" - Recitals.
"Event of Default" - Section 9.
"Funding Date" - Section 1(A)(2).
"Guarantor" - Section 1(A)(2)(vii).
"Guaranty" - Section 1(A)(2)(vii)
"Lien" - Section 4.
"Lender" - Introductory Clause.
"Leverage Ratio" - Section 4.
"LIBOR" - Section 1(A)(3).
"Loan" - Section 1(A)(1).
"Maturity Date" - Section 1(B)(2).
"Maximum Loan Amount" - Section 1(B)(1).
"NY UCC" - Section 1(E)(1).
"Original Equipment Cost" - Section 2(A).
"Perfected Equipment" - Section 1(A)(2)(vi).
"Permitted Lien" - Section 4.
"Pledged Contracts" - Section 1(B)(2).
"Pre-Funding Account" - Section 1(A)(2).
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"PSI" - Recitals.
"Secured Note" - Section 1(F).
"Secured Obligations" - Section 3.
"Securitization" - Recitals.
"Servicing Agreement" - Section 2(B)(9).
"Supplemental Contract Schedule" - Section 9(A).
"Tangible Net Worth" - Section 4.
26
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
FEDERAL LEASING CORP.
By: /s/ David M. Levin
---------------------------------------
Name: David M. Levin
Title: Chief Financial Officer
AMERICAN BUSINESS LEASING, INC.
By: /s/ David M. Levin
---------------------------------------
Name: David M. Levin
Title: Chief Financial Officer
PRUDENTIAL SECURITIES CREDIT CORPORATION
By: /s/ Jeffrey French
---------------------------------------
Name: Jeffrey French
Title: Vice President
<PAGE>
Exhibit A
SECURED NOTE
Dated as of April 3, 1998
FOR VALUE RECEIVED, the undersigned, FEDERAL LEASING CORP., a
corporation organized under the laws of the State of New Jersey, whose address
is 111 Presidential Boulevard, Bala Cynwyd, Pennsylvania 19004 ("Federal
Leasing") and AMERICAN BUSINESS LEASING, INC., a corporation organized under the
laws of the State of Pennsylvania, whose address is 111 Presidential Boulevard,
Bala Cynwyd, Pennsylvania 19004 ("ABL", and together with Federal Leasing, the
"Borrowers"), jointly and severally promise to pay to the order of PRUDENTIAL
SECURITIES CREDIT CORPORATION, a Delaware corporation, whose address is One
Seaport Plaza, New York, New York 10292 (the "Lender") on or before the Maturity
Date the amount then outstanding (including accrued interest) under that certain
Interim Warehouse and Security Agreement for Contracts dated as of April 3, 1998
(the "Agreement"). Initially, the maximum principal amount which may be
outstanding is $50,000,000 (as such amount may be amended from time to time by a
Credit Increase Confirmation and Note Amendment). Capitalized terms used herein
and not defined herein shall have their respective meanings as set forth in the
Agreement.
The holder of this Note is authorized to record the date and
amount of each Advance and the date and amount of each repayment of principal
thereof on the schedule to be maintained by the Lender (which schedule may be
obtained upon the Borrowers' request), and any such recordation shall constitute
prima facie evidence of the accuracy of the amount so recorded; provided, that
the failure of the holder hereof to make such recordation (or any error in such
recordation) shall not affect the obligations of the Borrowers hereunder or
under the Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of
interest herein shall never exceed the maximum rate, if any, which may be
legally charged on the Loan evidenced by this Note ("Maximum Rate"), and if the
provisions for interest contained in this Note would result in a rate higher
than the Maximum Rate, interest shall nevertheless be limited to the Maximum
Rate and any amounts which may be paid toward interest in excess of the Maximum
Rate shall be applied to the reduction of principal, or, at the option of the
Lender, returned to the Borrowers.
DUE DATE: The Loan evidenced hereby not paid before the
Maturity Date shall be due and payable on the Maturity Date.
A-1
<PAGE>
PLACE OF PAYMENT: All payments hereon shall be made, and all
notices to the Lender required or authorized hereby shall be given, at the
office of the Lender at the address designated in the heading of this Note, or
to such other place as the Lender may from time to time direct by written notice
to the Borrowers.
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable
hereunder are payable by wire transfer in immediately available funds to the
account number specified by the Lender, in lawful money of the United States.
Payments remitted by the Borrowers via wire transfer initiated after 1:00 p.m.
New York City time shall be deemed to be received on the next business day. The
Borrowers agree to pay all costs of collection when incurred, including, without
limiting the generality of the foregoing, reasonable attorneys' fees through
appellate proceedings, and to perform and comply with each of the covenants,
conditions, provisions and agreements contained in every instrument now
evidencing or securing said indebtedness.
SECURITY: This Note is issued pursuant to the Agreement and is
secured by a pledge of the collateral described therein. Notwithstanding the
pledge of the collateral, each of the Borrowers hereby acknowledges, admits and
agrees that the Borrower's obligations under this Note are recourse obligations
of such Borrower to which such Borrower pledges its full faith and credit.
DEFAULTS: Upon the occurrence of an Event of Default (as
defined in the Agreement), the Lender shall have all rights and remedies set
forth in the Agreement.
The failure to exercise any of the rights and remedies set
forth in the Agreement shall not constitute a waiver of the right to exercise
the same or any other option at any subsequent time in respect of the same event
or any other event. The acceptance by the Lender of any payment hereunder which
is less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such rights and remedies without the express consent
of the Lender, except as and to the extent otherwise provided by law.
WAIVERS: Each of the Borrowers waives diligence, presentment,
protest and demand and also notice of protest, demand, dishonor and nonpayments
of this Note, and expressly agrees that this Note, or any payment hereunder, may
be extended from time to time, and consents to the acceptance of further
collateral, the release of any collateral for this Note, the release of any
party primarily or secondarily liable hereon, and that it will not be necessary
for the Lender, in order to enforce payment of this Note, to first institute or
exhaust the Lender's remedies against such Borrower or any other party liable
hereon or against any collateral for this Note. None of the foregoing shall
affect the liability of such Borrower. No extension of time for the payment of
this Note, or an installment hereof, made by agreement by the Lender with any
person now or hereafter liable for the payment of this Note, shall affect the
liability under this Note of the Borrowers, even if the Borrowers are not a
A-2
<PAGE>
party to such agreement; provided, however, that the Lender and the Borrowers,
by written agreement between them, may affect the liability of the Borrowers.
TERMINOLOGY: If more than one party joins in the execution of
this Note, the covenants and agreements herein contained shall be the joint and
several obligation of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference herein
to the Lender shall be deemed to include and apply to every subsequent holder of
this Note. Words of masculine or neuter import shall be read as if written in
the neuter or masculine or feminine when appropriate.
AGREEMENT: Reference is made to the Agreement for provisions
as to Advances, rates of interest, mandatory principal repayments, collateral
and acceleration. If there is any conflict between the terms of this Note and
the terms of the Agreement, the terms of the Agreement shall control.
APPLICABLE LAW: This Note shall be governed by and construed
under the laws of the State of New York, the laws of which the Borrowers hereby
expressly elect to apply to this Note. The Borrowers agree that any action or
proceeding brought to enforce or arising out of this Note may be commenced in
the Supreme Court of the State of New York, or in the District Court of the
United States for the Southern District of New York.
FEDERAL LEASING CORP.
By: _________________________________________
Name:
Title:
AMERICAN BUSINESS LEASING, INC.
By: _________________________________________
Name:
Title:
A-3
<PAGE>
Exhibit D
FORM OF GUARANTY
THIS GUARANTY is given as of the 3rd day of April, 1998 by
AMERICAN BUSINESS FINANCIAL SERVICES, INC. (the "Guarantor"), a corporation
organized and existing under the laws of the State of Pennsylvania and having
its principal office at 111 Presidential Boulevard, Bala Cynwyd, Pennsylvania
19004.
WHEREAS, Prudential Securities Credit Corporation (the
"Lender") has entered into an Interim Warehouse and Security Agreement for
Contracts dated as of April 3, 1998 (the "Warehouse Agreement") with Federal
Leasing Corp. ("Federal Leasing") and American Business Leasing, Inc. ("ABL",
and together with Federal Leasing, the "Borrowers") (capitalized terms not
defined herein shall have the meanings set forth in the Warehouse Agreement,
unless otherwise noted) providing for a loan by the Lender to the Borrowers
secured by certain Contracts and the related Equipment; and
WHEREAS, the Lender and the Borrowers have entered into a
Custodial Agreement for Contracts with Chase Bank of Texas, N.A. (the
"Custodian") dated as of April 3, 1998 (the "Custodial Agreement") whereby the
Custodian agrees to act as Custodian on behalf of the Borrowers with respect to
the Contracts; and
WHEREAS, the Guarantor represents that it directly or
indirectly owns all of the stock of the Borrowers and is financially interested
in its affairs and expects to derive advantage from the transactions
contemplated by each of the Warehouse Agreement and the Custodial Agreement;
NOW, THEREFORE, to induce the Lender to enter into the
transactions with the Borrowers contemplated by the Warehouse Agreement and the
Custodial Agreement and for other good and valuable consideration receipt of
which is hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the full and complete payment when due and performance
of each of the Borrowers' obligations under the Warehouse Agreement, every
Advance evidenced by the Secured Note issued pursuant to the Warehouse
Agreement, and the Custodial Agreement. In addition, the Guarantor agrees that
in the event that either of the Borrowers defaults in the performance of or
payment when due of any or all obligations or sums hereby guaranteed, the
Guarantor shall forthwith pay such sums or perform such obligations. All amounts
payable by the Guarantor to the Lender hereunder shall be paid in immediately
available funds in U.S. Dollars and at the place and otherwise in the manner and
D-1
<PAGE>
on the terms required by the Warehouse Agreement or, if so specified and
applicable, the Custodial Agreement. This is a Guaranty of payment and not of
collection. This Guaranty shall be a continuing Guaranty and shall remain in
full force and effect until all the obligations of the Borrowers hereby
guarantied are paid or performed in full. The Guarantor's obligations under this
Guaranty shall be reinstated and be continued in full force and effect if at any
time any payment received by the Lender under the Warehouse Agreement or the
Custodial Agreement is invalidated, declared to be fraudulent or preferentially
set aside and/or required to be repaid by the Lender.
2. The Guarantor hereby expressly waives all setoffs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, notices of sale, surrender or other handling or
disposition of assets subject to the Warehouse Agreement or the Custodial
Agreement, any requirement that the Lender exhaust any right, power or remedy or
take any action against the Borrowers or against any assets subject to the
Warehouse Agreement or the Custodial Agreement, and other formalities of any
kind. The obligation of the Guarantor hereunder is absolute and unconditional
irrespective of the genuineness, legality, validity, regularity or
enforceability of the Warehouse Agreement, the Custodial Agreement, or any other
agreement, instrument or document contemplated therein or thereby and
irrespective of the obligation of any other party or person, and shall not in
any manner be affected by reason of any action taken or not taken by the Lender,
which action or inaction is herein consented and agreed to, or of any lack of
prior enforcement or retention of any rights against the Borrowers, the
Guarantor or any other person or property. The Guarantor hereby waives, to the
fullest extent permitted by applicable law, all defenses of a surety to which it
may be entitled by statute or otherwise. The Lender may neglect or forbear to
enforce payment or performance hereunder, under the Warehouse Agreement, the
Custodial Agreement, or under any other agreement, instrument or document
contemplated therein or thereby, or waive, amend or otherwise alter the terms of
the Warehouse Agreement or the Custodial Agreement in any manner, or release or
cause the release of any assets subject to the Warehouse Agreement, in each case
without in any way affecting or impairing the liability of the Guarantor
hereunder.
3. The Guarantor hereby waives all rights of subrogation,
exoneration, reimbursement or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Federal Bankruptcy Code) or otherwise by reason of any payment by it
hereunder and further agrees with the Borrowers for the benefit of its creditors
that any such payment by it shall constitute a contribution of capital by the
Guarantor to the related Borrower.
4. Any indebtedness of the Borrowers now or hereafter held by
the Guarantor is hereby subordinated to any obligations of the Borrowers to the
Lender under the Warehouse Agreement and the Custodial Agreement.
D-2
<PAGE>
5. If an Event of Termination under the Warehouse Agreement or
an Event of Default under the Custodial Agreement shall have occurred and be
continuing, the Guarantor agrees that, as between the Guarantor and the Lender,
the obligations of the Borrowers guaranteed hereunder may be declared to be due
for purposes of this Guaranty notwithstanding any stay, injunction or other
prohibition which may prevent, delay or vitiate any such declaration as against
the Borrowers and that, in the event of any such declaration (or attempted
declaration), such obligations shall forthwith become due by the Guarantor for
purposes of this Guaranty.
6. All of the Lender's rights and remedies shall be cumulative
and any failure of the Lender to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right any
time and from time to time thereafter.
7. All notices, demands and other communications hereunder
shall be given in writing and delivered or telefaxed (i) to the Guarantor, at
American Business Financial Services, Inc., 111 Presidential Boulevard, Bala
Cynwyd, Pennsylvania 19004, Attention: Anthony J. Santilli, Facsimile: (610)
668-1468, (ii) to the Lender at (a) Prudential Securities Credit Corporation,
One Seaport Plaza, 27th Floor, Treasury Department, New York, New York 10292,
Attention: Elizabeth Castagna, Facsimile: (212) 214-7572, (b) Prudential
Securities Credit Corporation, One Seaport Plaza, New York, New York 10292,
Attention: Jeffrey French, Facsimile (212) 214-7678, and (c) Prudential
Securities Credit Corporation, One Seaport Plaza, New York, New York 10292,
Attention: Jim Maitland, Facsimile (212) 214-7678, and shall be effective upon
actual receipt and (iii) to PSI at Prudential Securities Incorporated, One New
York Plaza, New York, New York 10292, Attention: Len Blum, Facsimile (212)
778-7401.
8. This Guaranty shall inure to the benefit of the Lender, its
successors, assigns and any person to whom the Lender may grant any interest in
any of the Secured Note or the Contracts, and shall be binding upon the
Guarantor, its successors, heirs, executors, administrators, legal
representatives and assigns.
9. The Guarantor covenants with the Lender that, during the
term of this Guaranty: (i) the Guarantor's Tangible Net Worth ("Tangible Net
Worth" being Net Worth less intangible assets, less receivables from Affiliates,
and "Net Worth" being the sum of (a) the book value of the common stock, plus
(b) paid in capital, plus (c) retained earnings, plus (d) the book value of any
preferred stock not payable within five years) at all times shall not be less
than the sum of (A) $15,000,000, plus (B) 75% of the positive earnings of the
Guarantor subsequent to December 31, 1997, plus (C) the net proceeds to the
Guarantor from the issuance of any common stock or preferred stock subsequent to
December 31, 1997; (ii) the Guarantor shall maintain a minimum of $25,000,000 of
outstanding subordinated debentures maturing in more than one year; (iii) the
Guarantor's leverage ratio shall not exceed 4.00:1, such ratio being the ratio
of (x) the excess of (A) the Guarantor's total liabilities over (B) outstanding
D-3
<PAGE>
subordinated debentures maturing in more than one year, to (y) the sum of (A)
the Guarantor's Tangible Net Worth and (B) outstanding subordinated debentures
maturing in more than one year; (iv) the subordinated debentures shall be
subordinate to the Guarantor's obligations hereunder, including, any unsecured
obligations to the Lender, and (v) the Guarantor shall at no time have
guarantees outstanding in respect of obligations in excess of $200,000,000. All
calculations made pursuant to this Section 9 shall be made in accordance with
generally accepted accounting principles.
10. As long as this Guaranty is in effect, the Guarantor shall
(i) promptly upon preparation, but in no event later than 50 days following the
end of its first three fiscal quarters, deliver to the Lender its unaudited
company-prepared financial statements as of the end of such fiscal quarter,
prepared in accordance with GAAP, and (ii) promptly upon preparation, but in no
event later than 105 days following the end of its fourth fiscal quarter,
deliver to the Lender its audited and certified financial statements, prepared
in accordance with GAAP, as of the end of and for the most recently ended fiscal
year, which audits and certification shall be prepared by a nationally
recognized independent accounting firm or by a regionally recognized independent
accounting firm with the prior written consent of the Lender, which consent
shall not be unreasonably withheld. In all cases, financial statements shall
include, without limitation, a balance sheet, a profit and loss statement and a
statement of cash flows. In conjunction with the delivery of each of the
financial statements to be delivered by the Guarantor pursuant to this Paragraph
10, the Guarantor shall deliver to the Lender (a) an officer's certificate of
the Guarantor certifying that, as of the date of delivery of such financial
statements, the Guarantor is in compliance with all the terms of this Guaranty,
including, without limitation, each of the covenants set forth in Paragraph 9,
(b) a schedule setting forth by month of maturity all outstanding subordinated
debentures of the Guarantor, and (c) a schedule of other receivables and other
assets of the Guarantor. Such compliance certificate shall, as appropriate, set
forth any calculations necessary to determine such compliance.
11. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAWS RULES THEREOF. This Guaranty may not be modified, altered or
amended except by a writing signed by both the Guarantor and the Lender.
12. THE GUARANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED
IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT AGAINST IT WHICH IS RELATED TO ANY MATTER CONTAINED IN THIS GUARANTY,
AND THE GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION,
DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, SUIT OR PROCEEDING, THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT PROVIDED THAT SERVICE
D-4
<PAGE>
OF PROCESS IS MADE BY ANY LAWFUL MEANS, THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM OR THAT VENUE IN ANY SUCH COURT IS IMPROPER. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE GUARANTOR IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY OR ANY MATTER ARISING HEREUNDER.
D-5
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the day and year first above written.
AMERICAN BUSINESS FINANCIAL
SERVICES, INC.
By: ___________________________________
Name:
Title:
D-6
<PAGE>
CREDIT INCREASE CONFIRMATION
AND NOTE AMENDMENT NO. 1
TO THE
INTERIM WAREHOUSE AND SECURITY AGREEMENT
FOR CONTRACTS, SECURED NOTE AND GUARANTY
Dated as of May 29, 1998
Reference is made to (x) the Interim Warehouse and Security
Agreement for Contracts, dated as of April 3, 1998 (the "Interim Warehouse
Agreement") among Prudential Securities Credit Corporation (the "Lender") and
Federal Leasing Corp. ("Federal Leasing") and American Business Leasing, Inc.
("ABL", and together with Federal Leasing, the "Borrowers"), (y) the Secured
Note, dated as of April 3, 1998 (the "Note"), from the Borrowers to the Lender,
and (z) the Guaranty, dated as of April 3, 1998 (the "Guaranty"), from the
Borrowers' parent, American Business Financial Services, Inc. ("ABFS" or the
"Guarantor"), to the Lender.
WHEREAS, the Lender and the Borrowers desire to amend the
Interim Warehouse Agreement; and
WHEREAS, the Lender and the Guarantor desire to amend the
financial covenants contained in the Guaranty;
NOW THEREFORE, the Lender, the Borrowers and the Guarantor
hereby amend the Interim Warehouse Agreement, the Secured Note and the Guaranty
as follows:
Section 1. Amendment of the Interim Warehouse Agreement.
Section 1(A)(1) of the Interim Warehouse Agreement is hereby
deleted in its entirety and replaced with the following:
The Lender agrees to lend to the Borrowers up to $50,000,000
(such borrowing, the "Loan") to be made in one or more
advances (each, an "Advance"); provided, however, that, in no
event shall the outstanding debt owed to the Lender by the
Borrowers or any of their Affiliates (including, without
limitation, American Business Credit, Inc., HomeAmerican
Credit, Inc. d/b/a Upland Mortgage and New Jersey Mortgage and
Investments Corp.) under any loan agreement (including,
without limitation, this Agreement) exceed $100,000,000;
provided, further, that, at any time when funds are on deposit
in a Pre-Funding Account (as defined herein), the amount of
<PAGE>
the Loan shall not exceed the amount on deposit in such
Pre-Funding Account. The Borrower agrees that the Loan shall
be used to warehouse Contracts that are to be included in a
Securitization, as such Contracts are identified to the Lender
in writing and in electronic form from time to time. Such
Contracts may be (a) included at the time of closing of the
Securitization or (b) purchased by the Securitization trust
subsequent to closing with funds on deposit in an account (a
"Pre-Funding Account") relating to the Securitization and
designated for such purpose. The Lender may refuse to lend
against any Contract(s) which the Lender reasonably believes
will not be eligible for inclusion in a securitized pool
either (x) due to the characteristics of such Contract or (y)
due to the expected aggregate characteristics of the
Contracts.
Section 2. Amendment of the Guaranty.
Section 9 of the Guaranty is hereby deleted in its entirety
and replaced with the following:
9. The Guarantor covenants with the Lender that, during the
term of this Guaranty: (i) the Guarantor's Tangible Net Worth
("Tangible Net Worth" being Net Worth less intangible assets,
less receivables from Affiliates, and "Net Worth" being the
sum of (a) the book value of the common stock, plus (b) paid
in capital, plus (c) retained earnings, plus (d) the book
value of any preferred stock not payable within five years) at
all times shall not be less than the sum of (A) $15,000,000,
(B) 75% of the positive earnings of the Guarantor subsequent
to December 31, 1997, plus (C) the net proceeds to the
Guarantor from the issuance of any common stock or preferred
stock subsequent to December 31, 1997; (ii) the Guarantor
shall maintain a minimum of $43,000,000 of outstanding
subordinated debentures maturing in more than one year; (iii)
the Guarantor's leverage ratio shall not exceed 3.75:1, such
ratio being the ratio of (x) the excess of (A) the Guarantor's
total liabilities over (B) outstanding subordinated debentures
maturing in more than one year, to (y) the sum of (A) the
Guarantor's Tangible Net Worth and (B) outstanding
subordinated debentures maturing in more than one year; (iv)
the subordinated debentures shall be subordinate to the
Guarantor's obligations hereunder, including, any unsecured
obligations to the Lender; and (v) the Guarantor shall at no
time have guarantees outstanding in respect of obligations in
excess of $250,000,000. All calculations made pursuant to this
Section 9 shall be made in accordance with generally accepted
accounting principles.
2
<PAGE>
Section 3. Confirmation of the Interim Warehouse Agreement, the Note and the
Guaranty.
As amended by Section 1 and Section 2 hereof, all provisions
of the Interim Warehouse Agreement, the Note and the Guaranty, are reconfirmed
as of the date hereof. Each of the Borrowers and the Guarantor, in addition,
hereby reconfirms and remakes as of the date hereof each and every one of its
representations, warranties and covenants as set forth in the Interim Warehouse
Agreement, the Note or the Guaranty, as applicable.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
AMERICAN BUSINESS LEASING, INC.,
as Borrower
By: /s/ Beverly Santilli
------------------------------------
Name: Beverly Santilli
Title: President
FEDERAL LEASING CORP., as Borrower
By: /s/ Jeffery M. Ruben
------------------------------------
Name: Jeffrey M. Ruben
Title: Senior Vice President
AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
as Guarantor
By: /s/ Anthony J. Santilli, Jr.
------------------------------------
Name: Anthony J. Santilli, Jr.
Title: President
PRUDENTIAL SECURITIES CREDIT CORPORATION,
as Lender
By: /s/ Elisabeth W. Castagna
------------------------------------
Name: Elisabeth W. Castagna
Title: Treasurer
<PAGE>
CREDIT INCREASE CONFIRMATION
AND NOTE AMENDMENT NO. 2
TO THE
INTERIM WAREHOUSE AND SECURITY AGREEMENT
FOR CONTRACTS, SECURED NOTE AND GUARANTY
Dated as of August 27, 1998
Reference is made to (x) the Interim Warehouse and Security
Agreement for Contracts, dated as of April 3, 1998 (the "Interim Warehouse
Agreement") among Prudential Securities Credit Corporation (the "Lender") and
Federal Leasing Corp. ("Federal Leasing") and American Business Leasing, Inc.
("ABL", and together with Federal Leasing, the "Borrowers"), as amended by
Credit Increase Confirmation and Note Amendment No.1, dated May 29, 1998, (y)
the Secured Note, dated as of April 3, 1998 (the "Note"), from the Borrowers to
the Lender, and (z) the Guaranty, dated as of April 3, 1998 (the "Guaranty"),
from the Borrowers' parent, American Business Financial Services, Inc. ("ABFS"
or the "Guarantor"), to the Lender.
WHEREAS, the Lender and the Borrowers desire to amend the
Interim Warehouse Agreement;
NOW THEREFORE, the Lender, the Borrowers and the Guarantor
hereby amend the Interim Warehouse Agreement, the Secured Note and the Guaranty
as follows:
Section 1. Amendment of the Interim Warehouse Agreement and Note.
The definition of "Maturity Date" in Section 1(B) is hereby
deleted in its entirety and replaced with the following:
Maturity Date means, (i) the earlier of (a) December 31, 1998
and (b) the next Securitization if no Pre-Funding Account is
utilized in the Securitization or (ii) if a Pre-Funding
Account is utilized in the next Securitization, the earlier of
(a) March 31, 1999 and (b) the date on which the funds in the
Pre-Funding Account are reduced to zero. The Maturity Date may
be extended by the Lender, in the Lender's sole and
unreviewable discretion, on any date by the execution and
delivery of a Credit Increase Confirmation and Note Amendment
in the form of Exhibit C hereto.
<PAGE>
Section 2. Confirmation of the Interim Warehouse Agreement, the Note and
the Guaranty.
As amended by Section 1 hereof, all provisions of the Interim
Warehouse Agreement, the Note and the Guaranty, are reconfirmed as of the date
hereof. Each of the Borrowers and the Guarantor, in addition, hereby reconfirms
and remakes as of the date hereof each and every one of its representations,
warranties and covenants as set forth in the Interim Warehouse Agreement, the
Note or the Guaranty, as applicable.
[Remainder of Page Intentionally Left Blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
AMERICAN BUSINESS LEASING, INC.,
as Borrower
By: /s/ Jeffrey M. Ruben
--------------------
Jeffrey M. Ruben
Senior Vice President
FEDERAL LEASING CORP., as Borrower
By: /s/ Jeffrey M. Ruben
--------------------
Jeffrey M. Ruben
Senior Vice President
AMERICAN BUSINESS FINANCIAL
SERVICES, INC., as Guarantor
By: /s/ Jeffrey M. Ruben
--------------------
Jeffrey M. Ruben
Senior Vice President
PRUDENTIAL SECURITIES CREDIT
CORPORATION, as Lender
By: /s/ Jeffrey French
--------------------
Jeffrey French
Vice President
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
between
AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC.,
(d/b/a UPLAND MORTGAGE),
and
NEW JERSEY MORTGAGE & INVESTMENT CORP.,
as Co-Borrowers,
AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
as Parent,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent and Collateral Agent,
CHASE SECURITIES, INC.,
as Syndication Agent,
and
CERTAIN LENDERS,
as Lenders
Up to
$200,000,000
October 1, 1998
--------------------------------------------------
| PREPARED BY HAYNES AND BOONE, L.L.P. |
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1 DEFINITIONS AND REFERENCES......................................................................1
1.1 Definitions.....................................................................................1
1.2 Time References................................................................................15
1.3 Other References...............................................................................15
1.4 Accounting Principles..........................................................................16
SECTION 2 BORROWING PROVISIONS...........................................................................16
2.1 Commitments....................................................................................16
2.2 Borrowing Request..............................................................................17
2.3 Fundings.......................................................................................17
2.4 Wet Borrowings.................................................................................18
2.5 Swing Borrowing Procedures.....................................................................18
2.6 Increases and Terminations.....................................................................19
2.7 Multiple Borrowers.............................................................................20
SECTION 3 PAYMENT TERMS..................................................................................21
3.1 Notes..........................................................................................21
3.2 Payment Procedures.............................................................................21
3.3 Scheduled Payments.............................................................................21
3.4 Prepayments....................................................................................22
3.5 Order of Application...........................................................................22
3.6 Sharing........................................................................................23
3.7 Interest Rates.................................................................................24
3.8 Interest Periods...............................................................................25
3.9 Basis Unavailable or Inadequate for LIBOR......................................................25
3.10 Additional Costs...............................................................................25
3.11 Change in Governmental Requirements............................................................26
3.12 Funding Loss...................................................................................27
3.13 Foreign Lenders, Participants, and Purchasers..................................................27
3.14 Fees...........................................................................................27
SECTION 4 COLLATERAL PROCEDURES..........................................................................28
4.1 Eligible Collateral............................................................................28
4.2 Borrowing Base.................................................................................28
4.3 Collateral Delivery............................................................................28
4.4 Bailee and Administrative Agent................................................................28
4.5 Shipment for Sale..............................................................................28
4.6 Shipment for Correction........................................................................29
4.7 Release of Collateral..........................................................................29
SECTION 5 CONDITIONS PRECEDENT...........................................................................30
SECTION 6 REPRESENTATIONS AND WARRANTIES.................................................................30
6.1 Purpose of Credit..............................................................................30
6.2 About the Companies............................................................................30
6.3 Authorization and Contravention................................................................31
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.4 Binding Effect.................................................................................31
6.5 Fiscal Year....................................................................................31
6.6 Current Financials.............................................................................31
6.7 Debt...........................................................................................31
6.8 Intellectual Property..........................................................................31
6.9 Litigation.....................................................................................31
6.10 Transactions with Affiliates...................................................................31
6.11 Taxes..........................................................................................32
6.12 Employee Plans.................................................................................32
6.13 Property and Liens.............................................................................32
6.14 Environmental Matters..........................................................................32
6.15 Government Regulations.........................................................................32
6.16 Insurance......................................................................................32
6.17 Appraisals.....................................................................................32
6.18 Full Disclosure................................................................................32
6.19 Y2K............................................................................................33
SECTION 7 AFFIRMATIVE COVENANTS..........................................................................33
7.1 Reporting Requirements.........................................................................33
7.2 Use of Proceeds................................................................................34
7.3 Books and Records..............................................................................34
7.4 Inspections....................................................................................34
7.5 Taxes..........................................................................................34
7.6 Expenses.......................................................................................34
7.7 Maintenance of Existence, Assets, and Business.................................................35
7.8 Insurance......................................................................................35
7.9 Appraisals.....................................................................................35
7.10 Y2K............................................................................................35
7.11 INDEMNIFICATION................................................................................35
SECTION 8 NEGATIVE COVENANTS.............................................................................36
8.1 Debt...........................................................................................36
8.2 Liens..........................................................................................37
8.3 Investments....................................................................................38
8.4 Distributions..................................................................................39
8.5 Merger or Consolidation........................................................................39
8.6 Liquidations and Dispositions of Assets........................................................39
8.7 Use of Proceeds................................................................................39
8.8 Transactions with Affiliates. ................................................................40
8.9 Employee Plans.................................................................................40
8.10 Compliance with Governmental Requirements and Documents........................................40
8.11 Government Regulations.........................................................................40
8.12 Fiscal Year Accounting.........................................................................40
8.13 New Businesses.................................................................................40
8.14 Assignment.....................................................................................40
8.15 Retention of Servicing Portfolio...............................................................40
8.16 Strict Compliance..............................................................................40
SECTION 9 FINANCIAL COVENANTS............................................................................40
9.1 Tangible Net Worth.............................................................................40
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
9.2 Leverage Ratio.................................................................................40
SECTION 10 EVENTS OF DEFAULT AND REMEDIES.................................................................41
10.1 Event of Default...............................................................................41
10.2 Remedies.......................................................................................42
10.3 Right of Offset................................................................................43
10.4 Waivers........................................................................................43
10.5 Performance by Administrative Agent............................................................43
10.6 No Responsibility..............................................................................44
10.7 No Waiver......................................................................................44
10.8 Cumulative Rights..............................................................................44
10.9 Rights of Individual Lenders...................................................................44
10.10 Notice to Administrative Agent.................................................................44
10.11 Costs..........................................................................................44
SECTION 11 ADMINISTRATIVE AGENT...........................................................................44
11.1 Authorization and Action.......................................................................45
11.2 Administrative Agent's Reliance, Etc...........................................................45
11.3 Administrative Agent and Affiliates............................................................45
11.4 Credit Decision................................................................................45
11.5 INDEMNIFICATION................................................................................45
11.6 Successor Administrative Agent.................................................................46
11.7 Inspection.....................................................................................46
SECTION 12 MISCELLANEOUS..................................................................................46
12.1 Nonbusiness Days...............................................................................46
12.2 Communications.................................................................................46
12.3 Form and Number of Documents...................................................................47
12.4 Exceptions to Covenants........................................................................47
12.5 Survival.......................................................................................47
12.6 Governing Law..................................................................................47
12.7 Invalid Provisions.............................................................................47
12.8 Conflicts Between Credit Documents.............................................................47
12.9 Discharge and Certain Reinstatement............................................................47
12.10 Amendments, Consents, Conflicts, and Waivers...................................................47
12.11 Multiple Counterparts..........................................................................48
12.12 Parties........................................................................................48
12.13 Participations.................................................................................49
12.14 Transfers......................................................................................49
12.15 VENUE, SERVICE OF PROCESS, AND JURY TRIAL......................................................50
12.16 Limitation of Liability........................................................................50
12.17 Confidentiality................................................................................50
12.18 ENTIRE AGREEMENT...............................................................................51
</TABLE>
(iii)
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 2 - Lenders and Commitments
Schedule 4.1 - Eligibility Conditions
Schedule 4.3 - Collateral Procedures
Schedule 5 - Closing Conditions
Schedule 6.2 - Companies
Schedule 6.9 - Litigation and Judgments
Schedule 6.10 - Affiliate Transactions
Exhibit A-1 - Warehouse Note
Exhibit A-2 - Amended and Restated Swing Note
Exhibit B - Guaranty
Exhibit C-1 - Amended and Restated Security Agreement
Exhibit C-2 - Financing Statement
Exhibit C-3 - Shipping Request
Exhibit C-4 - Bailee Letter
Exhibit C-5 - Trust Receipt and Agreement
Exhibit C-6 - Release Request
Exhibit D-1 - Borrowing Request
Exhibit D-2 - Collateral-Delivery Notice
Exhibit D-3 - Borrowing-Base Report
Exhibit D-4 - Compliance Certificate
Exhibit D-5 - Acquisition-Compliance Certificate
Exhibit E - Opinion of Counsel
Exhibit F - Assignment and Assumption Agreement
(iv)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AGREEMENT is entered into as of October 1, 1998, between AMERICAN
BUSINESS CREDIT, INC., a Pennsylvania corporation ("ABC"), HOMEAMERICAN CREDIT,
INC., a Pennsylvania corporation d/b/a Upland Mortgage ("HAC"), and NEW JERSEY
MORTGAGE & INVESTMENT CORP., a New Jersey corporation ("NJMI") (ABC, HAC, and
NJMI are "Co-Borrowers"); AMERICAN BUSINESS FINANCIAL SERVICES, INC., a Delaware
corporation ("Parent"); the Lenders described below; CHASE SECURITIES, INC., as
syndication agent; and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as
administrative agent and collateral agent for Lenders.
(see Section 1.1 for defined terms)
A. Co-Borrowers have requested Lenders and Administrative Agent to
enter into this agreement to extend, renew, and entirely amend and restate the
Existing-Credit Agreement.
B. Co-Borrowers are direct-wholly-owned Subsidiaries of ABC, and have
borrowed certain amounts under the Existing-Credit Agreement guaranteed by
Parent to finance the origination and acquisition of Commercial Loans and
Mortgage Loans until those Commercial Loans and Mortgage Loans are sold in the
secondary market.
C. Co-Borrowers have requested Lenders to commit to provide Borrowings
under this agreement initially in an amount necessary to renew the outstanding
borrowings under the Existing-Credit Agreement and additionally in amounts
necessary to finance Co-Borrowers' origination and acquisition of additional
Commercial Loans and Mortgage Loans until such Commercial Loans and Mortgage
Loans are sold in the secondary market.
D. Co-Borrowers, among other things, granted a Lien on the Collateral
under the Existing-Credit Agreement to secure the Existing Obligation related to
those borrowings. Under Section 4 of this agreement, among other things,
Co-Borrowers renew, extend, and ratify that Lien as a Lender Lien under this
agreement in respect of the Obligation under this agreement.
E. Lenders have agreed upon the terms and applicable sublimits of this
agreement to provide those Borrowings up to the lesser of either the total
Commitments or the total Borrowing Base.
ACCORDINGLY, for adequate and sufficient consideration, Co-Borrowers,
Parent, Lenders, Syndication Agent, and Administrative Agent agree as follows:
SECTION 1 DEFINITIONS AND REFERENCES. Unless stated otherwise, the following
provisions apply to each Credit Document, and annexes, exhibits, and schedules
to (and certificates, reports, and other writings delivered under) the Credit
Documents.
1.1 Definitions.
"ABC" is defined in the preamble to this agreement.
"Acquisition" by any Person means any transaction or series of
transactions on or after the Closing Date pursuant to which that Person directly
or indirectly -- whether in the form of a capital expenditure, an Investment, a
merger, a consolidation, or otherwise and whether through a solicitation or
tender of equity securities, one or more negotiated block, market, private,
other transactions, or any combination of the
1
<PAGE>
foregoing -- purchases (a) all or substantially all of the business or assets of
any other individual or entity or operating division or business unit of any
other individual or entity, (b) assets of an individual, entity, operating
division, or business unit for a total purchase price (including all cash or
deferred payment and all Debt to be guaranteed, assumed, or paid by any Company
other than Debt owed by the acquired Person for which no other Company has any
obligation whatsoever) of $1,000,000 or more, or (c) more than 50% of the equity
interest in any other entity.
"Acquisition-Compliance Certificate" means a certificate that must be
signed by one or more Responsible Officers of Parent and Co-Borrowers and must
be substantially in the form of Exhibit D-5.
"Administrative Agent" means, at any time, Chase Bank of Texas,
National Association, formerly named Texas Commerce Bank, National Association
(or its successor appointed under Section 11.6), acting as administrative,
collateral, and managing agent for Lenders under the Credit Documents.
"Affiliate" of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition (a) "control," "controlled
by," and "under common control with" mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise), and (b) the Companies are "Affiliates" of each other.
"Agent's Request" is defined in Section 2.3(f).
"Applicable-Covered Rate" means -- for each Borrowing-Purpose Category
in the table below --the annual interest rate stated beside that category:
- -------------------------------------------------------------------------------
Borrowing-Purpose Category Applicable-Covered Rate
- -------------------------------------------------- -----------------------
Wet Borrowings and High LTV Borrowings 1.6250%
- -------------------------------------------------------------------------------
Seasoned Borrowings and Commercial Loan Borrowings 1.7500%
- -------------------------------------------------------------------------------
Other Borrowings 1.3875%
- -------------------------------------------------------------------------------
"Applicable Margin" means -- for each Borrowing-Purpose Category and
relevant Borrowing-Price Category in the table below -- the interest margin
beside those categories:
- -------------------------------------------------------------------------------
Borrowing-Purpose Category Borrowing-Price Category Applicable Margin
- --------------------------- ------------------------ -----------------
Wet Borrowings and High LTV Base Rate 0.2500%
Borrowings
- -------------------------------------------------------------------------------
LIBOR 1.6250%
- -------------------------------------------------------------------------------
Seasoned Borrowings and Base Rate 0.3750%
Commercial Loan Borrowings
- -------------------------------------------------------------------------------
LIBOR 1.7500%
- -------------------------------------------------------------------------------
Other Borrowings Base Rate 0.0000%
- -------------------------------------------------------------------------------
LIBOR 1.3875%
- -------------------------------------------------------------------------------
2
<PAGE>
"Appraisal" means for any Mortgage Loan or Commercial Loan, a written
statement of the market value of the real property securing it.
"Appraisal Requirement" means any Governmental Requirement that is
applicable to appraisals of mortgaged-residential real property, mortgaged
non-residential real property, or other property in connection with transactions
involving that property, including, without limitation, Title XI of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the
Federal Deposit Insurance Corporation Improvement Act of 1991, 12 C.F.R. Chapter
I, Part 34, Subpart C, 12 C.F.R. Chapter II, Subchapter A, Part 225, Subpart G,
and 12 C.F.R. Chapter III, Subchapter B, Part 323.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement executed by a selling Lender and a Purchaser under Section
12.12 and Section 12.14, and delivered to Administrative Agent in substantially
the form of Exhibit F.
"Average-Adjusted-Base Rate" means, for any period, an annual interest
rate equal to the quotient of (a) the sum of the Base Rate plus the Applicable
Margin, for each calendar day during that period, divided by (b) the number of
calendar days during that period.
"Average-Adjusted-LIBOR" means, for any period, an annual interest rate
equal to the quotient of (a) the sum of LIBOR plus the Applicable Margin, for
each calendar day during that period, divided by (b) the number of calendar days
during that period.
"Average Commitment" means, for any period and any Lender, the quotient
of the (a) the sum of that Lender's Commitment as of the close of business for
each calendar day (which for any day that is not a Business Day is deemed for
this definition to be such Lender's Commitment for the preceding Business Day)
during that period divided by (b) the number of calendar days during that
period.
"Average-Eligible Balances" means, for any period and any Lender, an
amount equal to (a) the quotient of (i) the sum of that Lender's Eligible
Balances as of the close of business for each calendar day (which for any day
that is not a Business Day are deemed for this definition to be those balances
for the preceding Business Day) during that period divided by (ii) the number of
calendar days during that period minus (b) amounts necessary to satisfy any
deposit insurance, reserve, special deposit, Taxes (other than that Lender's
general corporate income or franchise Taxes), duty, or other imposition (in each
case at the applicable rates) requirements applicable to that Lender for those
accounts, minus (c) amounts required to compensate that Lender for direct
processing and transaction costs and other services actually rendered in
connection with those accounts in accordance with that Lender's system of
charges for similar accounts, minus (d) unless otherwise paid directly to that
Lender, any amounts in those accounts utilized as of that day in the calculation
of interest on any other Debt payable by any Co-Borrower to that Lender.
"Average-Principal Debt" means, for any period and any Lender, the
quotient of (a) the sum of the Principal Debt owed to that Lender as of the
close of business for each calendar day (which for any day that is not a
Business Day is deemed for this definition to be the Principal Debt as of the
close of business for the preceding Business Day) during that period divided by
(b) the number of calendar days during that period.
"Bailee Letter" means a letter executed and delivered by Administrative
Agent in substantially the form of Exhibit C-4.
"Base Rate" means an annual interest rate equal from day to day to the
floating annual interest rate established by Administrative Agent from time to
time as its prime-rate of interest, which may not be the lowest interest rate
charged by Administrative Agent on loans similar to Borrowings.
3
<PAGE>
"Base-Rate Borrowing" means any Borrowing bearing interest at the
Average-Adjusted-Base Rate.
"Borrowing" means any amount disbursed (a) by any Lender to any
Co-Borrower under the Credit Documents as an original disbursement of funds or
(b) by Administrative Agent or any Lender in accordance with, and to satisfy a
Company's obligations under, any Credit Document.
"Borrowing Base" means, at any time, the sum of:
(a) the total collateral value of each Eligible-Mortgage Loan
and each Eligible-Commercial Loan, equal to 98% of the lowest of (i)
the unpaid principal balance of the underlying promissory note, (ii)
the actual amount funded by ABC, HAC, or NJMI, as the case may be, with
respect to that Eligible-Mortgage Loan or Eligible-Commercial Loan, or
(iii) the Market Value thereof, as determined by Administrative Agent;
plus
(b) the total collateral value of each Eligible-Seasoned Loan,
equal to 90% of the lowest of (i) the unpaid principal balance of the
underlying promissory note, (ii) the actual amount funded by ABC, HAC,
or NJMI, as the case may be, with respect to that Eligible-Seasoned
Loan, or (iii) the Market Value thereof, as determined by
Administrative Agent; plus
(c) the total collateral value of each Eligible-High LTV Loan,
equal to 95% of the lowest of (i) the unpaid principal balance of the
underlying promissory note, (ii) the actual amount funded by ABC, HAC,
or NJMI, as the case may be, with respect to that Eligible-High LTV
Loan, or (iii) the Market Value thereof, as determined by
Administrative Agent.
"Borrowing-Base Report" means a report executed by Administrative Agent
and delivered to Co-Borrowers and Lenders in substantially the form of Exhibit
D-3.
"Borrowing Date" means, for any Borrowing, the date it is disbursed.
"Borrowing Excess" means, at any time, the amount by which any of the
limitations of Section 2.1 is exceeded.
"Borrowing-Price Category" means any category of Borrowing determined
with respect to the applicable interest option (e.g., a Base-Rate Borrowing,
LIBOR Borrowing, or Fixed-Rate Borrowing).
"Borrowing-Purpose Category" means any category of Borrowing determined
with respect to its purpose (e.g., a Dry Borrowing, Wet Borrowing, Swing
Borrowing, Second-Lien Borrowing, Seasoned Borrowing, High LTV Borrowing, or
Commercial Loan Borrowing).
"Borrowing Request" means a request executed by one or more Responsible
Officers of Co-Borrowers requesting a Borrowing and delivered to Administrative
Agent in substantially the form of Exhibit D-1.
"Business-Purpose Loan" means a loan that is (a) extended to a
business, (b) evidenced by a valid promissory note, and (c) secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-priority
Lien (or a second-priority Lien with respect to Second-Lien Borrowings) on
residential or commercial real property.
"Business Day" means (a) for purposes of any LIBOR Borrowing or
Fixed-Rate Borrowing, a day specified in clause (b) of this definition when
commercial banks are open for international business in London,
4
<PAGE>
England, and (b) for all other purposes, any day other than Saturday, Sunday,
and any other day that commercial banks are authorized by applicable
Governmental Requirements to be closed in Texas.
"Calendar Month" means that portion of a calendar month that occurs at
any time from the date of this agreement to the Termination Date.
"Calendar Quarter" means that portion of a calendar quarter that occurs
at any time from the date of this agreement to the Termination Date.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. (Sections) 9601 et seq.
"Closing Date" means October 1, 1998.
"Co-Borrowers" is defined in the preamble to this agreement.
"Collateral" means all Collateral as defined in the Security Agreement
or as otherwise delivered by any Person as security for the Obligation.
"Collateral Agent" means Administrative Agent.
"Collateral-Delivery Notice" means a notice executed by Co-Borrowers
and delivered to Administrative Agent in substantially the form of Exhibit D-2.
"Collateral Documents" means the documents and other items described on
Schedule 4.3 and required to be delivered to Administrative Agent under Section
4.3.
"Commercial Loan" means a loan that is not a construction or
residential loan, is evidenced by a valid promissory note, and is secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-or
second-priority Lien on commercial real property.
"Commercial Loan Borrowing" means a Borrowing that is subject to the
Commercial Loan Sublimit and the Commercial Loan for which meets the eligibility
requirements set forth on Schedule 4.1.
"Commercial Loan Sublimit" means, at any time, 5% of the total
Commitments.
"Commitment" means, at any time and for any Lender, the amounts stated
beside that Lender's name on the most-recently amended Schedule 2 (which amount
is subject to reduction and cancellation as provided in this agreement).
"Commitment Percentage" means, for any Lender, the proportion (stated
as a percentage) that its Commitment bears to the total Commitments of all
Lenders.
"Companies" means, at any time, Parent and each of its Subsidiaries
(including, without limitation, Co-Borrowers).
"Compliance Certificate" means a certificate substantially in the form
of Exhibit D-4 and signed by one or more Responsible Officers of Parent and each
Co-Borrower.
"Correction Period" means 14 calendar days.
5
<PAGE>
"Coupon Rate" means the pre-maturity interest rate applicable to a
Mortgage Loan or Commercial Loan on any day, stated as an annual interest rate,
less 0.375% (rounded down to the nearest 0.125%), and each determination by
Administrative Agent of any Coupon Rate may be computed using any reasonable
averaging and attribution method and, absent manifest error, shall be conclusive
and binding.
"Credit Documents" means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
including without limitation the Notes, the Guaranties, and the Security
Agreement, (b) all agreements, documents, and instruments in favor of
Administrative Agent or Lenders (or Administrative Agent on behalf of Lenders)
ever delivered under this agreement or otherwise delivered in connection with
any of the Obligation (other than assignments), and (c) all renewals,
extensions, and restatements of, and amendments and supplements to, any of the
foregoing.
"Current Financials" means either (a) the Companies' Financials for the
year ended June 30, 1998, or (b) at any time after the Companies' annual
Financials are first delivered under Section 7.1(a), the Companies' annual
Financials then most recently delivered to Administrative Agent, together with
the Companies' interim Financials then most recently delivered to Administrative
Agent.
"Debt", for any Person and without duplication, means (a) all
obligations required by GAAP to be classified upon that Person's balance sheet
as liabilities, (b) liabilities secured (or for which the holder of the
liabilities has an existing Right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) obligations
that under GAAP should be capitalized for financial reporting purposes, and (d)
all guaranties, endorsements, and other contingent obligations with respect to
Debt of others or in respect of any Employee Plan.
"Debtor Laws" means the Bankruptcy Code of the United States of America
and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar Governmental Requirements affecting creditors' Rights.
"Default Condition," in respect of any action or event, means that (a)
an Event of Default or Potential Default exists immediately before, or will
occur as a result of (or otherwise will exist immediately after), the occurrence
of that action or event or (b) the occurrence of the event or action will cause
any of the representations or warranties (unless they speak to a specific date
or are based on facts which have changed by transactions contemplated or
expressly permitted by this agreement) in the Credit Documents to be materially
incorrect.
"Default Rate" means, for any day, an annual interest rate equal to the
lesser of either (a) the Fed-Funds Rate plus 5%, or (b) the Maximum Rate.
"Distribution" means, at any time and with respect to any shares of any
capital stock or other equity securities issued by a Person, (a) the retirement,
redemption, purchase, or other acquisition for value of those securities, (b)
the declaration or payment of any dividend on or with respect to those
securities, (c) any loan or advance by that Person to, or other Investment by
that Person in, the holder of any of those securities, and (d) any other payment
by that Person with respect to those securities.
"Dry Borrowing" means a Borrowing for which all of the Collateral
Documents have been delivered to Administrative Agent in accordance with Section
4.3.
"Eligible Balances" means, for any calendar day and Lender, the sum
(which for any day that is not a Business Day is deemed for this definition to
be that sum as determined as of the close of business on the preceding Business
Day) of collected balances as of the close of business on that day in all
identified non-
6
<PAGE>
interest bearing demand deposit accounts or money market zero reserve accounts
of or maintained by Co-Borrowers with such Lender.
"Eligible-Commercial Loan" means, at any time, a Commercial Loan for
which the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.
"Eligible-High LTV Loan" means, at any time, a High LTV Loan for which
the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.
"Eligible-Mortgage Loan" means, at any time, a Mortgage Loan (other
than a Seasoned Loan or High LTV Loan) for which the applicable conditions for
eligibility described in Schedule 4.1 are satisfied and which may under Section
4.1 be included in the Borrowing Base.
"Eligible-Seasoned Loan" means, at any time, a Seasoned Loan for which
the applicable conditions for eligibility described in Schedule 4.1 are
satisfied and which may under Section 4.1 be included in the Borrowing Base.
"Employee Plan" means any employee-pension-benefit plan (a) covered by
Title IV of ERISA and established or maintained by any Company or any ERISA
Affiliate (other than a Multiemployer Plan) or (b) established or maintained by
any Company or any ERISA Affiliate, or to which any Company or any ERISA
Affiliate contributes, under the Governmental Requirements of any foreign
country.
"Environmental Governmental Requirement" means any applicable
Governmental Requirement that relates to protection of the environment or to the
regulation of any Hazardous Substances, including, without limitation, CERCLA,
the Hazardous Materials Transportation Act (49 U.S.C.(Section) 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. (Section) 6901 et seq.),
the Clean Water Act (33 U.S.C. (Section) 1251 et seq.), the Clean Air Act (42
U.S.C. (Section) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
(Section) 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. (Section) 136 et seq.), the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. (Section) 11001 et seq.), the Safe Drinking Water
Act (42 U.S.C. (Section) 201 and (Section) 300f et seq.), the Rivers and Harbors
Act (33 U.S.C. (Section) 401 et seq.), the Oil Pollution Act (33 U.S.C.
(Section) 2701 et seq.), analogous state and local Governmental Requirements,
and any analogous future enacted or adopted Governmental Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any Person that, for purposes of Title IV of
ERISA, is a member of any Company's controlled group or is under common control
with any Company within the meaning of Section 414 of the IRC.
"Event of Default" is defined in Section 10.1.
"Existing-Credit Agreement" means that certain Credit Agreement (as
renewed, extended, amended, or restated through the date of this agreement)
dated as of July 31, 1997, between Co-Borrowers, Chase Bank of Texas, National
Association (formerly Texas Commerce Bank, National Association), as
Administrative Agent, and certain lenders.
"Existing Obligation" means the Obligation as defined in and arising
under the Existing-Credit Agreement.
7
<PAGE>
"Fed-Funds Rate" means, for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal-funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
the day of such transactions received by Administrative Agent from three
federal-funds brokers of recognized standing selected by Administrative Agent.
If for any reason Administrative Agent shall determine (and its determination
shall be conclusive absent manifest error) that it is unable to ascertain for
any reason -- including Administrative Agent's inability or failure (as a result
of such inability) to obtain sufficient quotations in accordance with the
immediately preceding sentence -- the Fed-Funds Rate for any day, then for each
such day that such circumstances exist, the Fed-Funds Rate shall be deemed to be
equal to the Base Rate for that day minus 2.0%. Any rate of interest based on
the Fed-Funds Rate shall be (a) computed on the basis of a year consisting of
360 days applied for the actual number of days for which the principal sum to
which it applies is outstanding and bears interest in accordance with this
agreement at such rate of interest based on the Fed-Funds Rate (i.e., on the
360-day basis) and (b) adjusted as of the effective date of each change in the
Fed-Funds Rate.
"FHA" means the Federal Housing Administration within the United States
Department of Housing and Urban Development.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Financials" of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash flow
prepared (a) according to GAAP (subject to year end audit adjustments with
respect to interim Financials) and (b) except as stated in Section 1.4, in
comparative form to prior year-end figures or corresponding dates or periods of
the preceding fiscal year or other relevant period, as applicable.
"Fixed Rate" means, for any Fixed-Rate Borrowing, a fixed rate of
interest equal to the sum of LIBOR on the Borrowing Date of that Fixed-Rate
Borrowing plus the Applicable Margin for LIBOR Borrowings.
"Fixed-Rate Borrowing" means any Borrowing that bears interest at a
Fixed Rate (except that Swing Borrowings and Wet Borrowings may not bear
interest at a Fixed Rate), which Borrowing shall be in an amount of at least
$10,000,000 or any higher integral multiple of $100,000.
"FNMA" means the Federal National Mortgage Association.
"Funding Loss" means any reasonable, out-of-pocket loss or expense that
any Lender incurs because any Co-Borrower (a) fails or refuses, for any reason
other than a default by the Lender claiming that loss or expense, to take any
Fixed-Rate Borrowing that it has requested under this agreement, or (b) prepays,
pays, or converts any Fixed-Rate Borrowing at any time other than the last day
of the applicable Interest Period.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable from time to time.
"GNMA" means the Government National Mortgage Association.
8
<PAGE>
"Governmental Authority" means any (a) local, state, territorial,
federal, or foreign judicial, executive, regulatory, administrative,
legislative, or governmental agency, board, bureau, commission, department, or
other instrumentality, (b) private arbitration board or panel, or (c) central
bank.
"Governmental Requirements" means all applicable statutes, laws,
treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, and interpretations of any Governmental Authority.
"Guarantor" means Parent and each other Person that has executed, or is
required to execute, a Guaranty.
"Guaranty" means a Guaranty in substantially the form of Exhibit B.
"HAC" is defined in the preamble to this agreement.
"Hazardous Substance" means any substance that is designated, defined,
classified, or regulated as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, carcinogenic,
mutagenic, radioactive, or toxic or hazardous substance under any Environmental
Governmental Requirement, including, without limitation, any hazardous substance
within the meaning of (Section) 101(14) of CERCLA.
"Hedge Contract" means, for any Person, any present or future, whether
master or single, agreement, document or instrument providing for, or
constituting an agreement to enter into, (a) commodity hedges in the normal
course of business in accordance with prior practices of that Person before the
date of this agreement for purposes of hedging material purchases, (b)
foreign-currency purchases and swaps, and (c) interest-rate swap, cap, collar,
or similar arrangements.
"High LTV Borrowing" means a Borrowing that is subject to the High LTV
Sublimit and the High LTV Loan for which meets the eligibility requirements set
forth on Schedule 4.1.
"High LTV Investor" means an investor that has delivered its
underwriting guidelines to and has been approved to purchase certain High LTV
Loans by Co-Borrowers and Administrative Agent.
"High LTV Loan" means a Mortgage Loan which has a loan-to-value ratio
greater than 90%, and less than or equal to 125%.
"High LTV Sublimit" means, at any time, 5% of the total Commitments.
"Interest Period" is determined in accordance with Section 3.8.
"Investment," in respect of any Person, means any (a) loan, advance,
extension of credit, or capital contribution to that Person, (b) investment in
that Person, (c) purchase or commitment to purchase any equity securities or
Debt issued by that Person or substantially all of the assets or a division or
other business unit of that Person, or (d) any Hedge Contract with that Person.
"Investor" means an investor in Mortgage Loans and Commercial Loans
generally, or a High LTV Investor.
"IRC" means the Internal Revenue Code of 1986.
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"Lender Lien" means any present or future first-priority Lien securing
the Obligation and assigned, conveyed, and granted to, or created in favor of,
Administrative Agent for the benefit of Lenders under the Credit Documents.
"Lenders" means the financial institutions (including, without
limitation, the entity which is Administrative Agent in respect of its share of
Borrowings) named on Schedule 2 or on the most-recently-amended Schedule 2, if
any, delivered by Administrative Agent under this agreement, and, subject to
this agreement, their respective successors and permitted assigns (but not any
Participant who is not otherwise a party to this agreement).
"Leverage Ratio" means, as of the last day of each fiscal quarter of
Borrower, the ratio of (a) Total-Adjusted Debt to (b) the sum of Parent's Net
Worth plus the outstanding principal amount of Subordinated Debt.
"LIBOR" means, for any day, the rate of interest per annum which is
equal to the arithmetic mean of the rates appearing on Bloomberg as of 11:00
a.m. London time for that day for the offering by such institutions as are named
therein to prime banks in the interbank dollar market in London, England, of One
Million Dollar ($1,000,000) deposits in United States dollars for a one month
period. If Administrative Agent cannot determine that rate for any day, then
LIBOR for that day shall be the rate that deposits in United States dollars in
that amount and for that period are offered to the entity which is
Administrative Agent at approximately 11:00 a.m., London time, on that day or,
if that information is not reasonably available to Administrative Agent, on the
next later day for which such information is so available. Administrative
Agent's determination of LIBOR for each day shall be conclusive and binding,
absent manifest error. For purposes of this agreement and each Note, LIBOR shall
fluctuate upward and downward automatically and concurrently with day-to-day
changes in such arithmetic mean, and in the amount of the change.
"LIBOR Borrowing" means any Borrowing that bears interest at LIBOR.
"Lien" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds prior
to the claims of other creditors or the owners (other than title of the lessor
under an operating lease).
"Litigation" means any action by or before any Governmental Authority.
"Market Value" means, on any day for any Mortgage Loan or Commercial
Loan at Administrative Agent's sole (but reasonably-exercised) discretion, the
market value of that Mortgage Loan or Commercial Loan as determined by
Administrative Agent based on the then-most recent posted net yield for Mortgage
Loans or Commercial Loans of the same type and Coupon Rate furnished by FNMA and
published and distributed by Telerate Mortgage Services, or, if such posted net
yield is not available from Telerate Mortgage Services, upon the posted net
yield stated by FNMA as determined by Administrative Agent or, for any Mortgage
Loan or Commercial Loan not eligible for purchase by FNMA, upon the current net
yield for Mortgage Loans or Commercial Loans of the same type and Coupon Rate as
reasonably determined by Administrative Agent.
"Material-Adverse Event" means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Commitments are fully canceled or terminated and the Obligation is
fully paid and performed) in any (a) material impairment of (i) the ability of
Parent, Co-Borrowers, or any Guarantor to perform any of its payment or other
material obligations under any Credit Document or (ii) the ability of
Administrative Agent or any Lender to enforce any of those obligations or any of
their
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respective Rights under the Credit Documents, (b) material and adverse effect on
the financial condition of the Companies as a whole as represented to Lenders in
the Current Financials most recently delivered before the date of this
agreement, (c) material and adverse impact on any Collateral, or (d) Event of
Default.
"Material Agreement" means, for any Person, any material written or
oral agreement, contract, commitment, or understanding to which such Person is a
party, by which such Person is directly or indirectly bound, or to which any
assets of such Person may be subject, (a) that involves revenues to, or
financial obligations of, any such Person in excess of 5% of Parent's Net Worth
from time to time in the aggregate during any 12-month period, being
Co-Borrowers' fiscal year, and which is not cancelable by such Person upon 30
days or less notice without liability for further payment other than nominal
penalty.
"Maximum Amount" and "Maximum Rate" respectively mean, for any day and
for any Lender, the maximum non-usurious amount and the maximum non-usurious
rate of interest that, under applicable Governmental Requirements, such Lender
is permitted to contract for, charge, take, reserve, or receive (from
Co-Borrowers, Parent, or each of them) on its portion of the Obligation.
"Mortgage Collateral" means all Mortgage Loans and Commercial Loans and
related Collateral Documents held as Collateral under the Credit Documents.
"Mortgage Loan" means a loan that is not a construction loan or
Commercial Loan, is evidenced by a valid promissory note, and is secured by a
mortgage, deed of trust, or trust deed that grants a perfected first-priority
Lien (or second-priority Lien with respect to Second-Lien Borrowings) on
residential real property.
"Multiemployer Plan" means a multiemployer plan as defined in Section
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the IRC (or any similar type
of plan established or regulated under the Governmental Requirements of any
foreign country) to which any Company or any ERISA Affiliate is making, or has
made, or is accruing, or has accrued, an obligation to make contributions.
"Net Income" means, for any period and any Person, the amount that
should, in accordance with GAAP, be reflected on that Person's income statement
as net income (reflecting that Person's profit or loss after deducting its Tax
expense).
"Net Worth" means, for any Person, the sum of its stockholders' equity
or other equity as determined under GAAP.
"NJMI" is defined in the preamble to this agreement.
"Note Payment Accounts" means the following non-interest bearing
restricted checking accounts maintained with Administrative Agent separately for
each Co-Borrower:
o For ABC, Account No. 0010-267-2640, styled "American Business
Financial Services, Inc. - Note Payment Account."
o For HAC, Account No. 0010-267-2640, styled "American Business
Financial Services, Inc. - Note Payment Account."
o For NJMI, Account No. 0010-267-2640, styled "American Business
Financial Services, Inc. - Note Payment Account"
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which accounts are to be used for (a) Administrative Agent's deposits of
proceeds of Borrowings and payments constituting the proceeds of principal from
any Collateral (other than regular principal and interest payments on the
Mortgage Collateral) of the particular Co-Borrower; (b) Administrative Agent's
deposits of principal and interest payments for the repayment of Borrowings
received from the particular Co-Borrower or for the particular Co-Borrower's
account; and (c) only if and when no Event of Default exists unless
Administrative Agent has declared in writing that is has been cured or waived,
the particular Co-Borrower's withdrawal of proceeds of its Borrowings for the
purposes permitted under this agreement and Administrative Agent's transfer from
that Note Payment Account to that Co-Borrower's own account (or to a controlled
disbursement account maintained by that Co-Borrower with Administrative Agent)
or proceeds of sales or other dispositions of released Collateral for that
Co-Borrower in excess of its Borrowings borrowed and then outstanding against
that released Collateral. The Note Payment Accounts are (and shall continuously
be) part of the Collateral for the Obligation. The Note Payment Accounts shall
be subject to set off by Administrative Agent. Co-Borrowers shall not have any
right to directly withdraw funds from any Note Payment Account, but instead
those funds may be withdrawn or paid out only against the order of any
authorized officer of Administrative Agent, although under the circumstances
described in clause (c) of the first sentence of this definition and subject to
the conditions specified in that clause, Administrative Agent shall use diligent
and reasonable efforts to cause Borrowings and excess Collateral proceeds that
are received as therein described and that are deposited to the Note Payment
Account before 3:00 p.m. on a Business Day to be transferred to an account on
which the particular Co-Borrower does have withdrawal order authority on that
same Business Day.
"Notes" means the Warehouse Notes and the Swing Note
"Obligation" means all (a) present and future indebtedness,
obligations, and liabilities of Co-Borrowers or Parent to Administrative Agent
or any Lender and related to any Credit Document, whether principal, interest,
fees, costs, attorneys' fees, or otherwise, (b) Debts, liabilities, or
obligations owed by Parent or any Co-Borrower to any Lender or any Affiliate of
any Lender who, in either case, is also a Rate-Protection Party under any Hedge
Contract, (c) amounts that would become due but for operation of 11 U.S.C.
(Sections) 502 and 503 or any other provision of Title 11 of the United States
Code, and all renewals, extensions, and modifications of any of the foregoing,
and (d) pre- and post-maturity interest on any of the foregoing, including,
without limitation, all post-petition interest if Parent or any Co-Borrower
voluntarily or involuntarily files for protection under any Debtor Law.
"Organizational Documents" means, for any Person, the documents for its
formation and organization, which, for example, for a (a) corporation are its
corporate charter and bylaws, (b) for a partnership is its partnership
agreement, (c) for a limited-liability company are its certificate of
organization and regulations, and (d) for a trust is the trust agreement or
indenture under which it is created.
"Parent" is defined in the preamble to this agreement.
"Participant" is defined in Section 12.13.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" means any Acquisition for which all of the
following conditions are satisfied:
(a) No Default Condition will exist as a result of such Acquisition;
(b) The Acquisition is within the Companies' lines of business;
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(c) At least 15 days before such Acquisition, subject to prescriptions
under applicable securities laws and to non-disclosure obligations of
the Administrative Agent and Lenders under Section 12.17(c),
Co-Borrowers give to Administrative Agent and Lenders (A) a written
description of the target entity and of its business and operations,
(B) a written description of such Acquisition, which includes a
reasonably-detailed calculation of (and description of the funding
sources, if applicable, for) the total Investment involved, including
all Debt for which the acquired Person is to remain obligated and what
portion of it, if any, is to be guaranteed, assumed, or paid (through
merger or otherwise) by any other Company, (C) a copy of the related
purchase, merger, or other governing agreement, and (D) an Acquisition
Compliance Certificate with respect to the Companies immediately
before completion of such Acquisition;
(d) The total of all Investments involved in all Permitted Acquisitions
(including, but without duplication, any Debt to be guaranteed,
assumed, or paid by any Company other than Debt owed by the acquired
Person for which no Company has any obligation whatsoever) during any
fiscal year of the Companies does not cause the Leverage Ratio to
exceed 4.0 to 1.0;
(e) The board of directors of the Person to be acquired has not notified
any Company or Lender that it opposes the offer by any Company to
acquire that Person or such opposition has been withdrawn;
(f) If structured as a merger or consolidation, Section 8.5 is complied
with; and
(g) Concurrently with and as a condition precedent to the closing of such
Acquisition, Co-Borrowers shall (A) deliver to Administrative Agent
all documents necessary to be in compliance with the applicable
provisions of Section 4 (except to the extent of any exceptions in
those provisions), (B) shall deliver to Administrative Agent and
Lenders supplements or amendments to the schedules delivered under
Section 6 that are required to make the disclosures in those schedules
accurate after giving effect to such Acquisition, (C) obtain the prior
written consent of Required Lenders as to the supplements or
amendments to the schedules under clause (B) preceding, (D) deliver to
Administrative Agent and Lenders an Acquisition Compliance Certificate
with respect to the Companies immediately after giving effect to such
Acquisition, and (E) deliver to Administrative Agent such other
documents and take such action as Administrative Agent or any Lender
may reasonably request in order to effect the provisions of the Credit
Documents.
Notwithstanding the foregoing, the conditions set forth in clauses (c) and (g)
above shall not need to be satisfied for any Acquisition to be a Permitted
Acquisition provided the aggregate total purchase price for such Acquisitions in
any fiscal year is less than or equal to $2,000,000.
"Permitted Debt" is defined in Section 8.1.
"Permitted Investments" is defined in Section 8.3.
"Permitted Liens" is defined in Section 8.2.
"Person" means any individual, entity, or Governmental Authority.
"Potential Default" means any event's occurrence or any circumstance's
existence that would -- upon any required notice, time lapse, or both -- become
an Event of Default.
"Principal Debt" means, at any time, the outstanding principal balance
of all Borrowings.
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"Purchaser" is defined in Section 12.14.
"Ratable Borrowing" means a Borrowing that is advanced by Lenders to a
Co-Borrower in accordance with their Commitment Percentages.
"Rate-Protection Exposure" means -- at any time and for any Hedge
Contract described in clause (c) of the definition of Hedge Contract above --
the amount, if any, that would be payable to the Rate-Protection Party in that
Hedge Contract for any "agreement value" as though that Hedge Contract were
terminated at that time, in each case (a) calculated as provided in the
International Swap Dealers Association Inc. Code of Standard Wording,
Assumptions, and Provisions for SWAPS and (b) determined by Administrative Agent
in good faith in reliance upon any information (including any information
provided by that Rate-Protection Party) that Administrative Agent believes (with
no obligation to verify accuracy) to be accurate, absent manifest error.
"Rate-Protection Party" means, at any time, any party that has entered
into a Hedge Contract with Parent or any Co-Borrower that could give rise to
Rate-Protection Exposure.
"Regulation U" means Regulation U promulgated by the Board of Governors
of the Federal Reserve System, 12 C.F.R. Part 221.
"Release Request" means a Release Request executed and delivered by a
Responsible Officer of Co-Borrowers to Administrative Agent in substantially the
form of Exhibit C-6.
"Representatives" means authorized representatives, officers,
directors, employees, attorneys, and agents.
"Required Lenders" means, at any time, any combination of Lenders whose
(a) Termination Percentages total at least 66 2/3% at any time on or after the
Termination Date, or (b) Commitment Percentages total at least 66 2/3% at all
other times.
"Responsible Officer" means (a) the chairman, president, chief
executive officer, any vice president, or chief financial officer of
Co-Borrowers and Parent to the extent that such officer's name, title, and
signature have been certified to Administrative Agent by the secretary or an
assistant secretary of Co-Borrowers and Parent, or (b) any other officer
designated as a "Responsible Officer" in writing to Administrative Agent by any
officer in clause (a) preceding.
"Rights" means rights, remedies, powers, privileges, and benefits.
"Seasoned Borrowing" means a Borrowing which is subject to the Seasoned
Sublimit and the Mortgage Loan or Commercial Loan for which meets the
eligibility requirements set forth on Schedule 4.1.
"Seasoned Loan" means, at any time, either (a) a Mortgage Loan or
Commercial Loan for which the Collateral Documents have been included in the
Borrowing Base for more than 364 days, or (b) a Mortgage Loan or Commercial Loan
which is initially included in the Borrowing Base more than 364 days following
its date of origination.
"Seasoned Sublimit" means $25,000,000.
"Second-Lien Borrowing" means a Borrowing which is subject to the
Second-Lien Sublimit and the Commercial Loan or Mortgage Loan for which meets
the eligibility requirements set forth on Schedule 4.1.
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"Second-Lien Sublimit" means, at any time, 35% of the total
Commitments.
"Security Agreement" means the Amended and Restated Security Agreement
in substantially the form of Exhibit C-1.
"Shipping Period" means 45 calendar days.
"Shipping Request" means a Shipping Request executed and delivered by a
Responsible Officer of Co-Borrowers to Administrative Agent in substantially the
form of Exhibit C-3.
"Stated-Termination Date" means October 1, 2000.
"Subordinated Debt" is defined in Section 8.1(i).
"Subsidiary" of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person. Unless otherwise specified
or the context otherwise requires, "Subsidiary" refers to a Subsidiary of
Parent.
"Swing Borrowing" means a Borrowing that is advanced by Administrative
Agent to any Co-Borrower under the Swing Sublimit.
"Swing Note" means a promissory note executed and delivered by
Co-Borrowers, payable to the order of Administrative Agent, in the stated
principal amount of the Swing Sublimit, and substantially in the form of Exhibit
A-2.
"Swing Sublimit" means $50,000,000.
"Syndication Agent" means Chase Securities, Inc.
"Take-Out Commitment" means a binding commitment from an Investor to
purchase Mortgage Collateral, acceptable in form and substance to Administrative
Agent, in favor of a Co-Borrower, with respect to which there is be no condition
which cannot be reasonably anticipated to be satisfied or complied with before
its expiration.
"Tangible Net Worth" means, as of the last day of each fiscal quarter
of Borrower, the sum (without duplication) of (a) Parent's Net Worth, minus (b)
treasury stock, minus (c) any surplus resulting from the write-up of assets,
minus (d) goodwill, including, without limitation, any amounts representing the
excess of the purchase price paid for acquired assets, stock, or interests over
the book value assigned to them, minus (e) patents, trademarks, service marks,
trade names, and copyrights, minus (f) other intangible assets, plus (g) to the
extent already deducted under clauses (b) through (f) above, receivables or
Investments consisting of the excess spread relating to the Companies' asset
securitizations, plus (h) to the extent already deducted under clauses (b)
through (f) above, mortgage servicing rights retained or obtained in connection
with the Companies' asset securitizations.
"Taxes" means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises, or assets.
"Termination Date" means the earlier of either (a) the
Stated-Termination Date, or (b) the date that Lenders' commitments under this
agreement are fully canceled or terminated.
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"Termination Percentage" means -- at any time for any Lender -- the
proportion (stated as a percentage) that its Principal Debt bears to the total
Principal Debt.
"Total-Adjusted Debt" means, on any date of determination, Parent's
total Debt minus the Subordinated Debt, minus (b) obligations under repurchase
agreements, minus (c) obligations under escrow-arbitrage facilities.
"Trust Receipt" means a Trust Receipt and Agreement executed and
delivered by Co-Borrowers to Administrative Agent in substantially the form of
Exhibit C-5.
"UCC" means the Uniform Commercial Code as enacted in Texas or other
applicable jurisdictions.
"VA" means the Department of Veterans' Affairs.
"Warehouse Note" means a promissory note executed and delivered by
Co-Borrowers, jointly and severally, payable to a Lender's order, in the stated
principal amount of that Lender's Commitment, and substantially in the form of
Exhibit A-1.
"Wet Borrowing" means a Borrowing for which all of the Collateral
Documents have not been delivered to Administrative Agent in accordance with
Section 4.3.
"Wet Period" means seven Business Days.
"Wet Sublimit" means, at any time, a percentage of the total
Commitments, which percentage is (a) 25% for the first four and last three
Business Days of each Calendar Month, and (b) 15% at all other times.
"Wire Instructions" means, for any Person, the information for wire
transfers of funds to that Person, which (until changed by written notice to all
other parties to this agreement) are stated for Co-Borrowers, Administrative
Agent, and each Lender, below their names on Schedule 2.
"Y2K" means the risk that computer applications used by any Company or
by any of its suppliers or vendors may be unable properly to recognize and
perform date-sensitive functions involving certain dates before and any date
after December 31, 1999.
1.2 Time References. Unless otherwise specified, in the Credit
Documents (a) time references (e.g., 10:00 a.m.) are to time in Houston, Texas,
and (b) in calculating a period from one date to another (A) in the case of
provisions addressing the giving of notice, the word "from" means "from but
excluding," and the word "to" or "until" means "to and including," and (B) in
all other cases the word "from" means "from and including," and the word "to" or
"until" means "to but excluding,"
1.3 Other References. Unless otherwise specified, in the Credit
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Credit Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy transmissions,
(f) references to "including" mean including, without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items as being
limited to the same type or character of those specific items is not applicable,
(h) references to any Person include that Person's heirs, personal
representatives, successors, trustees, receivers, and permitted assigns, (i)
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references to any Governmental Requirement include every amendment or supplement
to it, rule and regulation adopted under it, and successor or replacement for
it, and (j) references to any Credit Document or other document include every
renewal and extension of it, amendment and supplement to it, and replacement or
substitution for it.
1.4 Accounting Principles. Unless otherwise specified, in the Credit
Documents (a) GAAP in effect on this date determines all accounting and
financial terms and compliance with financial covenants, (b) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period, and
(c) while Parent has any consolidated Subsidiaries (i) all accounting and
financial terms and compliance with reporting covenants must be on a
consolidating and consolidated basis, as applicable, and (ii) compliance with
financial covenants must be on a consolidated basis.
SECTION 2 BORROWING PROVISIONS.
2.1 Commitments. Subject to the limitations below and other provisions
of the Credit Documents and on Business Days before the Termination Date, each
Lender severally agrees to provide its Commitment Percentage of Borrowings
(except for Administrative Agent in respect of Swing Borrowings) so long as, in
each case, no Borrowing may be disbursed for less than $100,000 or that would
cause any of the following applicable limitations to be exceeded, which
limitations must be read together and are not mutually exclusive:
o The total Principal Debt may never exceed the lesser of either
(a) the total Commitments or (b) the total Borrowing Base.
o The total Principal Debt of all Swing Borrowings may never exceed
the Swing Sublimit.
o The total Principal Debt of Wet Borrowings may never exceed the
Wet Sublimit.
o The total Principal Debt of Fixed-Rate Borrowings may never
exceed $100,000,000.
o The total Principal Debt of Second-Lien Borrowings may never
exceed the Second-Lien Sublimit.
o The total Principal Debt of Seasoned Borrowings may never exceed
the lesser of either (i) the Seasoned Sublimit, or (ii) the
portion of the Borrowing Base attributable to Eligible-Seasoned
Loans.
o The total Principal Debt of Commercial Loan Borrowings may never
exceed the lesser of either (i) the Commercial Loan Sublimit, or
(ii) the portion of the Borrowing Base attributable to
Eligible-Commercial Loans.
o The total Principal Debt of High LTV Borrowings may never exceed
the High LTV Sublimit.
o The Principal Debt of Borrowings funded to and actually received
and used by a Co-Borrower may not exceed the Borrowing Base
attributable to the Collateral owned by such Co-Borrower.
o Except for Administrative Agent in respect of Swing Borrowings,
no Lender's direct or indirect portion of the Principal Debt
under this Section may ever exceed either its Commitment or its
Commitment Percentage.
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2.2 Borrowing Request. Co-Borrowers may only request a Borrowing by
timely delivering to Administrative Agent a Collateral-Delivery Notice and
required Collateral Documents under Section 4.3 and by delivering to
Administrative Agent a Borrowing Request for the Borrowing before 12:00 p.m. on
the applicable Borrowing Date for a Base-Rate Borrowing or a LIBOR Borrowing or
the third Business Day before the Borrowing Date for a Fixed-Rate Borrowing.
Unless otherwise indicated on the Borrowing Request, any Borrowing will be
funded as a LIBOR Borrowing. A Borrowing Request is irrevocable and binding on
Co-Borrowers when delivered. Administrative Agent shall use its best efforts to
promptly -- but at least by 1:00 p.m. on the day it timely receives a Borrowing
Request for a Ratable Borrowing -- send a copy of it to each Lender by fax and
confirm it by telephone.
2.3 Fundings.
(a) Remittance by Lenders. Each Lender shall remit its
Commitment Percentage of any Ratable Borrowing requested in a Borrowing
Request to Administrative Agent's principal office in Houston, Texas,
by wire transfer according to Administrative Agent's Wire Instructions,
in funds that are available for immediate use by Administrative Agent,
by 2:00 p.m. on the Borrowing Date.
(b) Funding by Administrative Agent. Subject to receipt of
those funds, Administrative Agent shall (i) for a Borrowing under an
Agent's Request, treat those funds as a payment by Co-Borrowers on the
Principal Debt of Swing Borrowings, and (ii) for any other Borrowing on
the Borrowing Date -- unless to its actual knowledge any of the
applicable conditions precedent have not been satisfied by Co-Borrowers
or waived by the requisite Lenders -- either deposit those funds into
the applicable Note Payment Account for a Dry Borrowing, or wire
transfer those funds in accordance with the Borrowing Request for a Wet
Borrowing.
(c) Non-remittance under Borrowing Request. Absent contrary
written notice from a Lender received by Administrative Agent by 3:00
p.m. on the Borrowing Date, Administrative Agent may assume that each
Lender has made its Commitment Percentage of a Ratable Borrowing under
a Borrowing Request available to Administrative Agent on the Borrowing
Date and may -- but is not obligated to -- make available to
Co-Borrowers a corresponding amount. If a Lender fails to make its
Commitment Percentage of that Borrowing available to Administrative
Agent on the Borrowing Date -- whether because of that Lender's
default, because that Lender is not open for business on that Business
Day, or otherwise -- then Administrative Agent may recover that amount
on demand (i) from that Lender, together with interest at the Fed-Funds
Rate, during the period from the Borrowing Date to the date
Administrative Agent recovers that amount from that Lender, which
payment is then deemed to be that Lender's Commitment Percentage of
that Borrowing and upon which interest shall accrue from the Borrowing
Date until such payment is made, or (ii) if that Lender fails to pay
that amount upon demand, then from Co-Borrowers, if actually advanced,
together with interest which shall accrue at an annual interest rate
equal to the rate applicable to the requested Borrowing during the
period from the Borrowing Date to the date Administrative Agent
recovers that amount from Co-Borrowers. For purposes of this
subparagraph (c), payments collected by Administrative Agent shall be
deemed received in accordance with Section 3.2(a). Notwithstanding
these provisions, each Lender remains obligated to lend its Commitment
Percentage of that Borrowing, assumes the credit risk for that amount
when that Borrowing is made available to or for Co-Borrowers, and,
after Administrative Agent has recovered the amount of interest
provided for in clause (i) above, is entitled to interest on that
amount from the Borrowing Date.
(d) Non-remittance under Agent's Request. If a Lender fails to
make its Commitment Percentage of a Ratable Borrowing under an Agent's
Request available to Administrative Agent on
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its Borrowing Date, then -- without acquiescing in that Lender's
default or waiving any Rights Administrative Agent has against that
Lender -- by 10:00 a.m. on the next Business Day, Administrative Agent
shall notify Co-Borrowers of the amount of Principal Debt of Swing
Borrowings that remains.
(e) Other Lenders. Although no Lender is responsible for the
failure of any other Lender to make its Commitment Percentage of any
Ratable Borrowing, that failure does not excuse any other Lender from
making its Commitment Percentage of that Borrowing.
(f) Agent's Request. On any Business Day on which there are
Swing Borrowings outstanding, Administrative Agent may -- but at least
once every five Business Days when those circumstances exist,
Administrative Agent shall (without any liability for failing to) --
unilaterally request a Ratable Borrowing under this Section 2.3, that
is (i) to be made in the amount of the Principal Debt of Swing
Borrowings outstanding on the date of such request, (ii) to be advanced
on the Business Day following such request, and (iii) to be made as a
Base-Rate Borrowing. That Ratable Borrowing is for the account of
Co-Borrowers, but does not require any Co-Borrower's joinder or other
action. Administrative Agent shall fax that request (an "Agent's
Request") to each Lender and Co-Borrowers and confirm it by telephone
by 2:00 p.m. on the Borrowing Date for the requested Ratable Borrowing.
When so made, an Agent's Request irrevocably binds Co-Borrowers.
2.4 Wet Borrowings. The conditions and procedures of Section 2.2 and
Section 2.3 apply to Wet Borrowings, except as follows:
(a) Collateral Documents. A Wet Borrowing may be funded before
delivery to Administrative Agent of all of the required Collateral
Documents for the eligible Collateral supporting that Wet Borrowing.
The Collateral-Delivery Notice delivered to Administrative Agent for a
Wet Borrowing may be sent to Administrative Agent by fax but must
identify and describe each Mortgage Loan or Commercial Loan that
supports that Wet Borrowing and the amount of the Borrowing Base
applicable to it. By delivering the Collateral-Delivery Notice,
Co-Borrowers confirm their grant under this agreement of Lender Liens
-- from the Borrowing Date for each Wet Borrowing -- on each Collateral
Document offered as Collateral in that Collateral-Delivery Notice that
is perfected subject to the delivery of the related promissory notes
for those Mortgage Loans and Commercial Loans to Administrative Agent
or its bailee.
(b) Funding by Administrative Agent. Administrative Agent
shall make the funds available to Co-Borrowers by 3:00 p.m. on the
Borrowing Date by wire transferring these funds in accordance with the
Borrowing Request or by depositing these funds into the applicable Note
Payment Account.
2.5 Swing Borrowing Procedures. The conditions and procedures of
Section 2.2, Section 2.3, and Section 2.4 apply to Swing Borrowings except as
follows:
(a) Borrowing Request. The Borrowing Request for a Swing
Borrowing must be delivered to Administrative Agent by 3:00 p.m. on the
Borrowing Date and may not request a Base-Rate Borrowing or Fixed-Rate
Borrowing.
(b) Election by Administrative Agent. Administrative Agent
shall then elect in its sole discretion whether to loan that Swing
Borrowing. If Administrative Agent elects to loan that Swing Borrowing,
then it shall follow the funding procedures that are applicable under
Sections 2.2, 2.3, and 2.4.
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(c) Participations. Immediately upon Administrative Agent's
funding a Swing Borrowing, Administrative Agent is deemed to have sold
and transferred to each other Lender -- and each other Lender is deemed
irrevocably and unconditionally to have purchased and received from
Administrative Agent -- without recourse or warranty, an undivided
interest and participation in that Swing Borrowing to the extent of
that Lender's Commitment Percentage of the amount of it, which
participation must be paid for on demand by Administrative Agent.
2.6 Increases and Terminations.
(a) Increases up to $200,000,000. Co-Borrowers may from time
to time request any one or more Lenders to increase their respective
Commitments or other financial institutions first approved by
Administrative Agent to agree to a Commitment so that the total
Commitments may be increased to no more than $200,000,000. That
increase must be effected by an amendment that is executed in
accordance with Section 12.10 by the Companies, Administrative Agent,
and the one or more Lenders who have agreed to increase their
Commitments or new Lenders who have agreed to new Commitments in
accordance with Section 12.10. Co-Borrowers shall execute and deliver
to each such Lender a Warehouse Note in the stated amount of its new
Commitment. No Lender is obligated to increase its Commitment under any
circumstances, and no Lender's Commitment may be increased except by
its execution of an amendment to this agreement in accordance with
Section 12.10. Each new Lender providing such additional Commitment
shall be a "Lender" hereunder, entitled to the rights and benefits, and
subject to the duties, of a Lender under the Credit Documents. All
amounts advanced hereunder pursuant to any such additional Commitment
shall be secured by the Collateral on a pari passu basis with all other
amounts advanced hereunder. In the event the total Commitments are
increased, Co-Borrowers shall execute a new Warehouse Note in favor of
the Lender extending such additional Commitment in a stated amount of
its new Commitment and shall notify each Lender in writing of such
additional Commitment. In such case, each Lender's Commitment
Percentage shall be recalculated to reflect the new proportionate share
of the revised total Commitments and the Lender responsible for the
additional Commitment shall, immediately upon receiving notice from
Administrative Agent, pay to each Lender an amount equal to its pro
rata share of the Borrowings outstanding as of such date. All such
payments shall reduce the outstanding principal balance of the Note of
each Lender receiving such payments and shall represent Borrowings to
Co-Borrowers under the purchasing Lender's Warehouse Note. The
purchasing Lender shall be entitled to share ratably in interest
accruing on the balances purchased, at the rates provided herein for
such balances, from and after the date of purchase. All new Borrowings
occurring after an increase of the total Commitments shall be funded in
accordance with each Lender's revised Commitment Percentage.
(b) Termination of a Lender. After giving written and
irrevocable notice to Agent and each Lender at least three Business
Days before the effective date of any termination, Co-Borrowers may
fully terminate any Lender's Commitment before the Stated-Termination
Date. Also, a Lender may agree to a partial termination of its
Commitment before the Stated-Termination Date by executing an amendment
under Section 12.10. A full or partial termination under this clause
(b) may occur on one or more occasions but may only occur if (i) no
Event of Default or Potential Default exists unless otherwise consented
to by Lenders (other than the terminating Lender), whose Termination
Percentages total at least 51%, and (ii) such termination requires (A)
no full or partial termination of any other Lender's Commitment, (B) a
mandatory prepayment under Section 3.4 on the effective date of the
termination, (C) payment of any related Funding Loss, and (D) no other
premium or penalty. All fees under Sections 3.14(b) and (c) cease to
accrue in respect of the portion of the Commitment so terminated
effective as of the date the termination is effective. Notwithstanding
the termination of any Lender's Commitment, the rights of such Lender
under Sections 3.10, 7.6, and
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7.11 shall continue as to any portion of the Obligation which remains
owing to such Lender and for any period of time prior to such date of
termination.
(c) Terminations of all Lenders. After giving written and
irrevocable notice to Administrative Agent and each Lender at least
three Business Days before the effective date of any termination,
Co-Borrowers may fully or partially terminate the Commitments. A
termination under this clause (c) (i) if partial, (A) must be at least
$10,000,000 or a greater integral multiple of $5,000,000, (B) must be
ratable for each Lender according to its Commitment Percentage, (C)
requires a mandatory prepayment under Section 3.4 on the effective date
of termination, and (D) requires no other premium or penalty, or (ii)
if full, requires (A) a mandatory prepayment under Section 3.4 on the
effective date of the termination, and (B) no other premium or penalty.
(d) Termination Date. The total Commitments automatically
terminate on the Termination Date.
(e) Reinstatement. Once terminated, no part of any commitment
or agreement to extend credit under this agreement may be reinstated
except by an amendment to this agreement under Section 12.10.
2.7 Multiple Borrowers.
(a) Co-Borrowers. Each representation and warranty in the
Credit Documents by any Co-Borrower is deemed to be its separate
representation and warranty and the joint and several representation
and warranty of each other Co-Borrower, and vice versa. Each covenant
and agreement by any Co-Borrower under the Credit Documents is deemed
to be its separate covenant and agreement and the joint and several
covenant and agreement of each other Co-Borrower, and vice versa. Any
communication under the Credit Documents to any Co-Borrower is deemed
to have been concurrently received by each other Co-Borrower, and vice
versa.
(b) Basis for Structure. Co-Borrowers desire to utilize their
borrowing potential on a combined basis to the same extent possible if
they were merged into a single-corporate entity. Each Co-Borrower has
determined that it will specifically and materially benefit from all
Borrowings. Each Co-Borrower intends, and Lenders have required, that
each Co-Borrower execute and deliver this agreement, the Notes, and
certain other Credit Documents. Each Co-Borrower has requested and
bargained for the structure and terms of, and security for, Borrowings.
(c) Joint and Several Obligation. Each Co-Borrower irrevocably
and unconditionally agrees (i) that it is jointly and severally liable
to Administrative Agent and Lenders for full payment and performance of
the Obligation and all obligations of Co-Borrowers under the Credit
Documents, (ii) to fully pay and perform the Obligation and all of
those obligations of Co-Borrowers, and (iii) TO INDEMNIFY, AS A PRIMARY
OBLIGOR, ADMINISTRATIVE AGENT AND EACH LENDER FOR AND AGAINST ANY LOSS
THAT ADMINISTRATIVE AGENT OR ANY LENDER INCURS AS A RESULT OF ANY
OBLIGATIONS OR BORROWINGS BEING OR BECOMING VOID, VOIDABLE,
UNENFORCEABLE, OR INEFFECTIVE FOR ANY REASON (OTHER THAN AS A RESULT OF
THE OPERATION OF DEBTOR LAWS OR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ADMINISTRATIVE AGENT, OR ANY LENDER) WHATSOEVER (WHETHER
KNOWN TO ADMINISTRATIVE AGENT, ANY LENDER, OR ANY OTHER PERSON) THE
AMOUNT OF THAT LOSS BEING THE AMOUNT WHICH ADMINISTRATIVE AGENT OR THAT
LENDER, AS THE CASE MAY BE, WOULD OTHERWISE HAVE BEEN ENTITLED TO
RECOVER FROM ANY CO-BORROWER. THIS INDEMNITY SURVIVES FOR A PERIOD OF
TWO YEARS FOLLOWING THE PAYMENT AND PERFORMANCE OF THE OBLIGATION AND
TERMINATION OF THE CREDIT DOCUMENTS.
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(d) Contribution Rights. Each Co-Borrower intends that its
obligations under the Credit Documents are not subject to challenge on
any basis. Therefore, as of the date any transfer is deemed to occur
under the Credit Documents, each Co-Borrower's liabilities under the
Credit Documents and all other liabilities -- calculated in each case
to the full extent of their probable-net exposure when and if those
liabilities become absolute and mature (i.e., "dated liabilities") --
are intended by them to be less than the fair valuation of all of its
assets as of that date (i.e., its "dated assets"). To that end, each
Co-Borrower (i) grants to and recognizes in the others ratable Rights
of subrogation and contribution in the amount, if any, by which the
granting party's dated assets (but for the total subrogation and
contribution in its favor under this section) would exceed the granting
party's dated liabilities, and (ii) acknowledges receipt of and
recognizes its ratable Rights to subrogation and contribution from each
other Co-Borrower in the amount that the other Co-Borrower's dated
assets (but for the total subrogation and contribution in its favor
under this section) would exceed the other Co-Borrower's dated
liabilities. Each Co-Borrower will recognize Rights of subrogation and
contribution at least equal to its obligations under the Credit
Documents. It is a material objective of this section that each
Co-Borrower recognize Rights to subrogation and contribution rather
than be deemed insolvent by reason of an arbitrary interpretation of
its obligations under the Credit Documents.
SECTION 3 PAYMENT TERMS.
3.1 Notes. The Principal Debt and interest on it are evidenced by the
Notes. Notwithstanding any sale of participating interests under Section 12.13
or any contrary notice, other than an Assignment and Assumption Agreement,
Co-Borrowers and Administrative Agent may deem and treat each Lender as the
absolute owner of its respective Note or Notes for all purposes.
3.2 Payment Procedures.
(a) Payments. Co-Borrowers shall make each payment and
prepayment on the Obligation to Administrative Agent, on behalf of
Lenders, in accordance with Administrative Agent's Wire Instructions,
in funds that are available for immediate use by Administrative Agent.
Payments that are received by 1:00 p.m. on a Business Day are deemed
received on that Business Day. Payments that are received after 1:00
p.m. on a Business Day are deemed received on the next Business Day.
Subject to Section 3.7(f), applicable interest continues to accrue
through the calendar day immediately before the Business Day on which a
payment is deemed received. No Lender directly invoices Co-Borrowers
for (and only Administrative Agent invoices Co-Borrowers for) interest
under the Credit Documents.
(b) Distributions. When received under clause (a) above,
Administrative Agent shall distribute each payment to each Lender, in
accordance with Section 3.5 and each Lender's Wire Instructions,
reasonably promptly after receipt, but by no later than 3:30 p.m. on
the Business Day that payment is deemed to be received by
Administrative Agent under clause (a) above. If Administrative Agent
fails to distribute any payment to any Lender as required by this
clause, then Administrative Agent shall pay to that Lender on demand
interest on that payment, from the date due under this clause until
paid, at an annual interest rate equal from day to day to the Fed-Funds
Rate.
3.3 Scheduled Payments. Unless otherwise provided in this agreement,
Co-Borrowers shall pay the Obligation in accordance with the following table:
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- --------------------------------------------------------------------------------
Obligation Payable
================================================================================
Interest on each Fixed-Rate Borrowing As it accrues on (a) the last day of
except at the Default Rate that Borrowing's Interest Period
and -- if that Interest Period is
longer than three months -- 90 days
after its first day and each 90 days
after that, and (b) on the
Termination Date.
- --------------------------------------------------------------------------------
Interest on each Base-Rate Borrowing On (a) the 15th day of each Calendar
or LIBOR Borrowing except at the Month as it accrued on the last day
Default Rate of the preceding Calendar Month and
(b) on the Termination Date.
- --------------------------------------------------------------------------------
Interest at the Default Rate On demand as it accrues.
- --------------------------------------------------------------------------------
Principal of Swing Borrowings On demand
- --------------------------------------------------------------------------------
3.4 Prepayments.
(a) Commitment Termination. On the effective date of any (i)
termination of a Lender's Commitment under Section 2.6(b), Co-Borrowers
shall pay to Administrative Agent for that Lender the Obligation owed
to that Lender, (ii) partial termination of the Commitments under
Section 2.6(c), Co-Borrowers shall pay to Administrative Agent for
Lenders the amount that the Principal Debt exceeds the reduced total
Commitments, together with accrued and unpaid interest on such excess,
all accrued fees, if any, and any related Funding Loss, and (iii) full
termination of the Commitments under Section 2.6(c) or Section 2.6(d),
Co-Borrowers shall prepay the full Obligation.
(b) Borrowing Excess. Co-Borrowers shall, on demand when any
Borrowing Excess exists, prepay the appropriate Principal Debt
(together with any related Funding Loss) or take any other actions in
accordance with this agreement necessary to eliminate the Borrowing
Excess and any accrued unpaid interest thereon.
(c) Voluntary Prepayments. Co-Borrowers may otherwise
voluntarily prepay any of the Obligation at any time without premium or
penalty, but with any applicable Funding Loss and accrued unpaid
interest on any such portion of the Obligation being prepaid.
3.5 Order of Application. All payments and proceeds (whether
voluntary, involuntary, through the exercise of any Right of set-off or other
Right, realization against any Collateral, or otherwise) shall be applied in the
following order:
(a) No Event of Default. While no Event of Default exists, (i)
all payments of regularly scheduled interest shall be applied to
accrued and unpaid interest on the Obligation, payable ratably to
Lenders in the proportion that the amount of interest owed to each
Lender bears to the total of all interest owed to all Lenders, (ii) all
payments and proceeds from the sale or other disposition of Collateral
shall be applied to the Principal Debt for the applicable
Borrowing-Purpose Category, applied first against the then-outstanding
Swing Borrowings (in each case payable solely to Administrative Agent,
which Administrative Agent shall distribute in accordance with the
participation interests in that Principal Debt that any one or more
Lenders may have purchased and paid for under Section 2.5(c)) and then
to non-Swing Borrowings, payable ratably to each Lender in accordance
with its Commitment Percentage, and (iii) all other payments and
proceeds shall be applied as Co-Borrowers direct, except that principal
payments must always be applied first to Swing Borrowings (in each case
payable solely to Administrative Agent, which Administrative Agent
shall distribute in accordance with the participation interests in that
Principal Debt that any one or more Lenders may have purchased and paid
for under Section 2.5(c)) before being applied to non-Swing Borrowings
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(in each case payable ratably to each Lender in accordance with its
Commitment Percentage). Administrative Agent may, to the extent
possible, rearrange the order of application of payments and proceeds
against Principal Debt to avoid the application of any Funding Loss.
(b) Event of Default. While an Event of Default exists, to:
(i) all costs and expenses incurred by Administrative
Agent in connection with its duties under the Credit Documents
-- including, without limitation, reasonable fees and expenses
paid by Administrative Agent to any servicing companies
reasonably and necessarily retained by Administrative Agent to
assist it in servicing any Collateral required to be serviced,
to any attorneys, or to Administrative Agent -- that have not
been reimbursed by Lenders, together with interest at the
Default Rate, payable solely to Administrative Agent;
(ii) all costs and expenses incurred by any Lender in
connection with the Credit Documents that are reimbursable to
it under the Credit Documents, and all amounts paid by that
Lender to Administrative Agent as a reimbursement to it of
costs and expenses incurred by Administrative Agent in
connection with its duties under the Credit Documents,
together with interest at the Default Rate -- payable ratably
to Lenders in the proportion that each Lender's share of those
costs and expenses bears to the total of those costs and
expenses for all Lenders;
(iii) accrued and unpaid interest on the Obligation,
payable ratably to Lenders in the proportion that the amount
of interest owed to each Lender bears to the total of all
interest owed to all Lenders;
(iv) Principal Debt of Swing Borrowings -- in each
case payable solely to Administrative Agent, which
Administrative Agent shall distribute in accordance with the
participation interests in that Principal Debt that any one or
more Lenders may have purchased and paid for under Section
2.5(c);
(v) Principal Debt of non-Swing Borrowings, payable
ratably to each Lender in accordance with its Termination
Percentage (except as the order may be rearranged by
Administrative Agent to the extent possible to avoid the
application of any Funding Loss;
(vi) all other portions of the Obligation, payable
ratably to Lenders and their Affiliates in the proportion that
each Lender's or Lender's Affiliate's share of those amounts
bears to the total of those amounts for all Lenders and their
Affiliates; and
(vii) either (i) to Co-Borrowers or to their
successors or assigns on their behalf, to be divided among
them as they may agree, or (ii) as a court of competent
jurisdiction may direct.
3.6 Sharing. If any Lender obtains any amount (whether voluntary,
involuntary, or otherwise, including, without limitation, as a result of
exercising its Rights under Section 10.3) that exceeds the portion of that
amount to which it is otherwise entitled under the Credit Documents, then that
Lender shall purchase from the other Lenders participations that result in the
purchasing Lender's sharing the excess amount ratably with each Lender in
accordance with the portion it is entitled to receive under the Credit
Documents. If all or any of that excess amount is subsequently recovered from
that purchasing Lender, then the purchase of participations in it is
automatically rescinded and the purchase price is restored to that purchasing
Lender to the extent of the recovery. Any Lender purchasing a participation from
another Lender under this section may,
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to the extent lawful, exercise all of its Rights of payment (including the Right
of offset) with respect to that participation as fully as if that Lender were
the direct creditor of Co-Borrowers in the amount of that participation.
3.7 Interest Rates.
(a) Non-Default Rate. Subject to clause (b) below, all
Principal Debt bears an annual interest rate equal to the lesser of
either the Maximum Rate or the rate applicable in the following table:
- --------------------------------------------------------------------------------
Principal Debt Rate
================================================================================
Average-Principal Debt of all Borrowings Applicable-Covered Rate
(other than Fixed-Rate Borrowings) owed to
any Lender during any Calendar Month that
does not exceed the Average-Eligible
Balances with that Lender for that Calendar
Month
- --------------------------------------------------------------------------------
Average-Principal Debt of all Borrowings For LIBOR Borrowings, Average-
owed to any Lender during any Calendar Adjusted-LIBOR for that Calendar
Month and not bearing interest under Month
the above section of this table ----------------------------------
For Base-Rate Borrowings, the
Average-Adjusted-Base Rate for
that Calendar Month
----------------------------------
For each Fixed-Rate Borrowing,
the Fixed Rate applicable to its
Interest Period
- --------------------------------------------------------------------------------
(b) Default Rate. All past-due Principal Debt and past-due
interest on it bears interest at the Default Rate from the date due
(stated or by acceleration) until paid, whether or not payment is
before or after entry of a judgment.
(c) Rate Changes. Each change in the Base Rate, LIBOR, the
Fed-Funds Rate, and the Maximum Rate is effective upon the effective
date of change without contemporaneous notice to Co-Borrowers or any
other Person; provided, however, that Administrative Agent shall use
reasonable efforts to provide notification of each such rate change to
Co-Borrowers and Lenders within five Business Days of the effective
date of such change.
(d) Calculations. Interest is calculated on the basis of
actual days (including the first but excluding the last) over a 360-day
year, unless the calculation would result in an interest rate greater
than the Maximum Rate, in which event interest is calculated on the
basis of the actual days in that year. All interest rate determinations
and calculations by Administrative Agent are conclusive and binding
absent manifest error.
(e) Recapture. If the designated interest rate applicable to
any Borrowing exceeds the Maximum Rate, the interest rate on that
Borrowing is limited to the Maximum Rate. However, any subsequent
reductions in the designated interest rate shall not become effective
until the total amount of accrued interest equals the amount of
interest that would have accrued, to the extent lawful, if that
designated interest rate had always been in effect. If at maturity
(stated or by acceleration), or at
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<PAGE>
final payment of the Notes, the total interest paid or accrued is less
than the interest that would have accrued if the designated interest
rates had always been in effect, then, at that time and to the extent
permitted by Governmental Requirements, Co-Borrowers shall pay an
amount equal to the difference of (i) the lesser of either the amount
of interest that would have accrued if the designated interest rates
had always been in effect, or the amount of interest that would have
accrued if the Maximum Rate had always been in effect, minus (ii) the
amount of interest actually paid or accrued on the Notes.
(f) Maximum Rate. Regardless of any Credit Document provision,
no Lender is entitled to contract for, charge, take, reserve, receive,
or apply, as interest on all or any of the Obligation, any amount in
excess of the Maximum Rate. If a Lender ever does so, then any excess
is treated as a partial prepayment of principal (such payment not
subject to the accrual of prepayment premiums or penalties), if any,
and any remaining excess shall be refunded to Co-Borrowers promptly
after determination. In determining if the interest paid or payable
exceeds the Maximum Rate, Co-Borrowers and Lenders shall, to the extent
lawful (i) treat all Borrowings as but a single extension of credit,
(ii) characterize any nonprincipal payment as an expense, fee, or
premium rather than as interest, (iii) exclude voluntary prepayments
and their effects, and (iv) amortize, prorate, allocate, and spread the
total amount of interest throughout the full-contemplated term of the
Obligation. However, if the Obligation is paid in full before the end
of that full-contemplated term and the interest received for the
Obligation's actual period of existence exceeds the Maximum Amount,
then Lenders shall promptly refund any excess without being subject to
any penalties provided by any Governmental Requirements. If Texas
Governmental Requirements are applicable for purposes of determining
the "Maximum Rate" or the "Maximum Amount," then those terms mean the
"indicated rate ceiling" from time to time in effect under Article
1.04, Title 79, Texas Revised Civil Statutes, as amended. Chapter 15,
Subtitle 79, Texas Revised Civil Statutes, 1925 (which regulates
certain revolving credit loan accounts and revolving tri-party
accounts), does not apply to the Obligation.
3.8 Interest Periods. When any Co-Borrower requests any Fixed-Rate
Borrowing, it may elect the applicable interest period (each an "Interest
Period") -- which may be either seven days, 14 days, or one, two, three, or six
months at its option or such other period as it and Administrative Agent may
agree (after first obtaining approval of all Lenders) -- subject to the
following conditions: (a) the initial Interest Period commences on the
applicable Borrowing Date and each subsequent applicable Interest Period
commences on the day when the next preceding applicable Interest Period expires;
(b) if any Interest Period (other than an Interest Period consisting of either
seven or 14 days) begins on a day for which no numerically corresponding
Business Day in the Calendar Month at the end of that Interest Period exists,
then that Interest Period ends on the last Business Day of such Calendar Month;
(c) if an Interest Period would otherwise not end on a Business Day, it shall
end on the immediately succeeding Business Day unless such succeeding Business
Day is in the next Calendar Month in which case such Interest Period shall end
on the immediately preceding Business Day; (d) no Interest Period for any
portion of the Obligation may extend beyond the scheduled repayment date for
that portion of the Obligation; and (e) no more than four Interest Periods may
be in effect at any time.
3.9 Basis Unavailable or Inadequate for LIBOR. If, on or before any
date when LIBOR is to be determined for either a LIBOR Borrowing or a Fixed-Rate
Borrowing, Administrative Agent or any Lender (upon notice to Administrative
Agent) reasonably determines that the basis for determining the applicable rate
is not available or that the resulting rate does not accurately reflect the cost
to any Lender of making or converting Borrowings at that rate (and, if
applicable, for the applicable Interest Period), then Administrative Agent shall
promptly notify Co-Borrowers and Lenders of that determination (which is
conclusive and binding on Co-Borrowers, absent manifest error), and that
Borrowing shall be a Base-Rate Borrowing. Until Administrative Agent notifies
Co-Borrowers and Lenders that it or the notifying Lender (upon notice to
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<PAGE>
Administrative Agent) has determined that those circumstances no longer exist
(which it shall promptly do), then Lenders' commitments under this agreement to
make LIBOR Borrowings and Fixed-Rate Borrowings are suspended.
3.10 Additional Costs. This section survives the full satisfaction of
the Obligation, termination of the Credit Documents, and release of Lender
Liens.
(a) For any LIBOR Borrowing or Fixed-Rate Borrowing, if (i)
(A) any change after the date of this agreement in any present or
future Governmental Requirement (and, for purposes of this Section
3.10, Governmental Requirement includes interpretations and guidelines
of any Governmental Authority, whether or not having the force of law)
or any future Governmental Requirement imposes, modifies, or deems
applicable (or if compliance by any Lender with any requirement of any
Governmental Authority results in) any requirement that any reserves
(including, without limitation, any marginal, emergency, supplemental,
or special reserves) be maintained, (B) those reserves reduce any sums
receivable by any Lender under this agreement or increase the costs
incurred by any Lender in advancing or maintaining any portion of any
LIBOR Borrowing or Fixed-Rate Borrowing, and (C) that Lender determines
that the reduction or increase is material (and it may, in determining
the material nature of the reduction or increase, utilize reasonable
assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (ii) that Lender
(through Administrative Agent) shall deliver to Co-Borrowers a
certificate, within six months of any such change, stating in
reasonable detail the calculation of the amount necessary to compensate
it for its reduction or increase (which certificate is conclusive and
binding absent manifest error), and Co-Borrowers shall pay that amount
to that Lender within ten days after demand.
(b) If (i) (A) any change after the date of this agreement in
any present or future Governmental Requirement regarding capital
adequacy or compliance by any Lender with any request, directive, or
requirement now or in the future imposed by any Governmental Authority
regarding capital adequacy or any change in the risk category of this
transaction reduces the rate of return on its capital as a consequence
of its obligations under this agreement to a level below that which it
otherwise could have achieved (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the material nature of the
reduction, utilize reasonable assumptions and allocations of costs and
expenses and use any reasonable averaging or attribution method), then
(ii) that Lender (through Administrative Agent) shall deliver to
Co-Borrowers a certificate, within six months of any such change,
stating in reasonable detail the calculation of the amount necessary to
compensate it for its reduction (which certificate is conclusive and
binding absent manifest error), and Co-Borrowers shall pay that amount
to that Lender within ten days after demand.
(c) Any Taxes payable by Administrative Agent or any Lender or
ruled (by a Governmental Authority) payable by Administrative Agent or
any Lender in respect of any Credit Document shall -- if permitted by
Governmental Requirement and if deemed material by Administrative Agent
or that Lender (who may, in determining the material nature of the
amount payable, utilize reasonable assumptions and allocations of costs
and expenses and use any reasonable averaging or attribution method) --
be paid by Co-Borrowers, together with interest and penalties, if any
(except for Taxes payable on the overall Net Income of Administrative
Agent or that Lender and except for interest and penalties incurred as
a result of the gross negligence or willful misconduct of
Administrative Agent or any Lender). Administrative Agent or that
Lender (through Administrative Agent) shall notify Co-Borrowers and
promptly deliver to Co-Borrowers a certificate stating in reasonable
detail the calculation of the amount of payable Taxes, which
certificate is conclusive and binding (absent manifest error), and
Co-Borrowers shall pay that amount to
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Administrative Agent for the account of Administrative Agent or that
Lender, as the case may be, within ten days after demand. If
Administrative Agent or that Lender subsequently receives a refund of
the Taxes paid to it by Co-Borrowers, then the recipient shall promptly
pay the refund to Co-Borrowers.
(d) Notwithstanding anything to the contrary in Section 10,
any breach of Section 9.1 or Section 9.2 arising solely as a result of
payments made to any Lender pursuant to this Section 3.10 shall not be
deemed to be an Event of Default.
3.11 Change in Governmental Requirements. If any change, after the date
of this agreement, in any present or future Governmental Requirement makes it
unlawful for any Lender to make or maintain LIBOR Borrowings or Fixed-Rate
Borrowings, then that Lender shall promptly notify Administrative Agent, who
shall promptly notify Co-Borrowers and (a) as to undisbursed funds, any
requested Borrowing shall be made as a Base-Rate Borrowing, (b) as to any
outstanding Borrowing (i) if maintaining that Borrowing as a LIBOR Borrowing or
Fixed-Rate Borrowing is unlawful, that Borrowing shall be converted to a
Base-Rate Borrowing as of the date of notice, or (ii) if maintaining that
Borrowing as a LIBOR Borrowing or Fixed-Rate Borrowing is not unlawful, that
Borrowing shall be converted to a Base-Rate Borrowing only at the option of
Co-Borrowers, or (iii) if any conversion will not resolve the unlawfulness,
Co-Borrowers shall promptly prepay that Borrowing.
3.12 Funding Loss. Subject to Section 3.11, CO-BORROWERS AGREE TO
INDEMNIFY EACH LENDER AGAINST (AND PAY TO IT UPON DEMAND) ANY FUNDING LOSS OF
THAT LENDER. When any Lender demands that Co-Borrowers pay any Funding Loss,
that Lender shall deliver to Administrative Agent, who shall promptly deliver to
Co-Borrowers, a certificate stating in reasonable detail the basis for imposing
Funding Loss and the calculation of the amount (which certificate is conclusive
and binding absent manifest error). This Section 3.12 survives the satisfaction
and payment of the Obligation and termination of the Credit Documents for a
period of six months.
3.13 Foreign Lenders, Participants, and Purchasers. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Purchaser (by executing an assignment and assumption agreement) that is not
organized under the Governmental Requirements of the United States of America or
one of its states (a) represents to Administrative Agent and Co-Borrowers that
(i) no Taxes are required to be withheld by Administrative Agent or Co-Borrowers
with respect to any payments to be made to it in respect of the Obligation, and
(ii) it has furnished to Administrative Agent and Co-Borrowers, two duly
completed copies of either U.S. Internal Revenue Service Form 4224, Form 1001,
Form W-8, or any other form acceptable to Administrative Agent that entitles it
to exemption from U.S. federal withholding Tax on all interest payments under
the Credit Documents, and (b) covenants to (i) provide Administrative Agent and
Co-Borrowers a new Form 4224, Form 1001, Form W-8, or other form acceptable to
Administrative Agent upon the expiration or obsolescence of any previously
delivered form according to applicable Governmental Requirements, duly executed
and completed by it, and (ii) comply from time to time with all Governmental
Requirements with regard to the withholding Tax exemption. If any of the
foregoing is not true or the applicable forms are not provided, then
Co-Borrowers and Administrative Agent (without duplication) may deduct and
withhold any United States federal income Tax (at the full rate applicable under
the IRC) from interest payments under the Credit Documents.
3.14 Fees. The following fees are not compensation for the use,
detention, or forbearance of money, are in addition to, and not in lieu of,
interest and expenses otherwise described in the Credit Documents, are
non-refundable, bear interest if not paid when due at the Default Rate, and are
calculated on the basis of actual days (including the first but excluding the
last) elapsed over a year of 360 days (or actual
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days during that year, if the calculation would otherwise result in exceeding
the Maximum Amount and the payment were deemed to be interest, notwithstanding
the above provisions to the contrary):
(a) Administrative Agent's Fees. Co-Borrowers shall promptly
pay to Administrative Agent (for its sole account) administration,
syndication, and custodial fees in amounts and upon such payment terms
as may be separately agreed upon by Co-Borrowers and Administrative
Agent.
(b) Facility Fee. On the Closing Date, Co-Borrowers shall pay
to Administrative Agent for the account of each initial Lender to this
agreement a facility fee equal to $46,875. On the first day of each
Calendar Quarter thereafter, Co-Borrowers shall pay to Administrative
Agent for the account of each Lender a facility fee equal to a
percentage per annum calculated as the product of 0.125% multiplied by
each Lender's Commitment. When received, Administrative Agent shall pay
to each Lender that Lender's Commitment Percentage of this fee.
(c) Non-use Fee. On the first Business Day of each Calendar
Quarter Co-Borrowers shall pay to Administrative Agent a non-use fee
for the account of all Lenders. Each payment of that fee is calculated
for the period from the first day of the preceding Calendar Quarter to
and including the last day of that preceding Calendar Quarter. When
received, Administrative Agent shall pay to each Lender that Lender's
Commitment Percentage of that fee less the applicable portion of that
fee accruing for any period before that Lender became a Lender. The
amount of that fee for that period is:
(i) 0.125%, multiplied by
(ii) the remainder of (A) the Average Commitments for
all Lenders for that period, minus (B) the Average-Principal
Debt for all Lenders for that period. If the amount remaining
after subtracting clause (B) from clause (A) above is less
than $0, then that remainder shall be deemed to be zero for
the subject Calendar Quarter.
SECTION 4 COLLATERAL PROCEDURES.
4.1 Eligible Collateral. The requirements for Mortgage Collateral to be
included in the Borrowing Base are listed on Schedule 4.1. If at any time any
item of Mortgage Collateral ceases to meet those requirements, then that item is
automatically excluded from all calculations of the Borrowing Base.
4.2 Borrowing Base. By 1:00 p.m. on the date of any Borrowing, any
payment of Principal Debt, or removal of any Collateral, and in any event, at
least quarterly, Administrative Agent shall deliver to Co-Borrowers and Lenders
a Borrowing-Base Report prepared on the basis of the information then available
to Administrative Agent as provided in this agreement.
4.3 Collateral Delivery. Co-Borrowers must comply with all the required
procedures in Schedule 4.3 for Mortgage Collateral offered in connection with
this agreement by no later than 11:00 a.m. on the Borrowing Date for Collateral
supporting any new Borrowing.
4.4 Bailee and Administrative Agent. Administrative Agent and Lenders
appoint Co-Borrowers, and Co-Borrowers shall act, as their (a) special agent,
for the sole and limited purpose of obtaining and maintaining Appraisals for
Mortgage Loans and Commercial Loans as required by the Credit Documents, and (b)
bailee, until delivery of all such Collateral Documents as required by Schedule
4.3, to (i) hold in trust for Administrative Agent for the benefit of Lenders
(A) the original recorded copy of the mortgage, deed of trust, or trust deed
securing each Mortgage Loan or Commercial Loan, (B) a mortgagee policy of title
insurance (or
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binding unexpired and unconditional commitment to issue such insurance if the
policy has not yet been delivered to Co-Borrowers) insuring Co-Borrowers'
perfected, first priority Lien (or second-priority Lien with respect to
Second-Lien Borrowings) created by that mortgage, deed of trust, or trust deed,
(C) the original insurance policies referred to on Schedule 4.1, (D) original
copies of all Take-Out Commitments, and (E) all other original documents, (ii)
specifically identify those items in the appropriate Collateral-Delivery Notice,
and (iii) deliver to Administrative Agent any of the foregoing items as soon as
reasonably practicable upon Administrative Agent's request.
4.5 Shipment for Sale.
(a) Shipment of Collateral. If no Event of Default, Potential
Default, or Borrowing Excess exists, and if shipment would not result
in any Investor (other than FNMA, FHLMC, and GNMA, or any other
Investor that Administrative Agent has approved in writing), or its
servicers and custodians, holding Collateral Documents for Mortgage
Loans or Commercial Loans with more than a total $5,000,000 face amount
(or $7,500,000 face amount for the first three and last five days of
each Calendar Month), then Co-Borrowers may, by a Shipping Request
delivered to Administrative Agent by 11:00 a.m. on the Business Day
immediately preceding the requested shipping date, request
Administrative Agent to ship Collateral Documents to an Investor, or
its servicer or custodian, for purchase of the related Mortgage Loans
or Commercial Loans; provided that such limitations shall not apply to
shipment of Collateral Documents in connection with the securitization
of the related Mortgage Loans or Commercial Loans. If Administrative
Agent has no actual knowledge that any of the above conditions have not
been satisfied, then Administrative Agent shall use its best efforts to
ship the Collateral Documents it holds for those Mortgage Loans or
Commercial Loans to that Investor, or its servicer or custodian, under
an appropriate Bailee Letter by the end of the Business Day following
the date of receipt of the applicable Shipping Request.
(b) Ineligible Collateral. Collateral shipped under clause (a)
above, unless returned timely to Administrative Agent, ceases to be an
Eligible-Mortgage Loan, Eligible-Commercial Loan, or Eligible-High LTV
Loan, as applicable, (i) to the extent that Collateral Documents for
Mortgage Loan or Commercial Loan with more than a total face amount of
$1,000,000 are held by or for any Investor (other than FNMA, FHLMC, and
GNMA, or any other Investor that Administrative Agent has approved in
writing), and (ii) upon the earlier of either the release of the Lender
Liens in that Collateral under clause (c) below, or the expiration of
the Shipping Period for that Collateral.
(c) Release of Liens. The Lender Liens on any Collateral
shipped under clause (a) above continue on that Collateral until
Administrative Agent receives payment in the applicable Note Payment
Account in an amount at least equal to the full amount of the
Borrowings made with respect to those Eligible-Mortgage Loans,
Eligible-Commercial Loans, or Eligible-High LTV Loans.
(d) Certain Credits. Neither Administrative Agent nor any
Lender is obligated at any time to credit Co-Borrowers for any amounts
due from any purchase of any Mortgage Collateral contemplated under
this agreement until Administrative Agent has actually received
immediately available funds for that Mortgage Collateral in the amount
required under this agreement. Neither Administrative Agent nor any
Lender is obligated at any time to collect any amounts or otherwise
enforce any obligations due from any purchaser in respect of any such
purchase.
4.6 Shipment for Correction. If no Event of Default, Potential
Default, or Borrowing Excess exists or occurs as a result of the shipment, and
if shipment would not result in any Collateral Documents for Mortgage Loans,
Commercial Loans with more than an aggregate total face amount of $500,000 being
outstanding for correction, then Co-Borrowers may, by a Trust Receipt delivered
to Administrative Agent,
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request that Administrative Agent ship to Co-Borrowers the entire file of
Collateral Documents for any Mortgage Loan or Commercial Loan so that certain of
those Collateral Documents may be corrected or replaced for clerical or other
non-substantive mistakes. If Administrative Agent has no actual knowledge that
any of the above conditions have not been satisfied, then, and subject to the
limitations below, Administrative Agent shall use its best efforts to ship to
Co-Borrowers the entire file of Collateral Documents to be corrected or replaced
by the end of the Business Day following the date of receipt of the applicable
Trust Receipt. Co-Borrowers shall re-deliver to Administrative Agent the
corrected Collateral Documents (meeting the requirements of Schedule 4.3) before
the expiration of the Correction Period. Collateral shipped under this section,
unless returned to Administrative Agent, ceases to be an Eligible-Mortgage Loan,
Eligible-Commercial Loan, or Eligible-High LTV Loan (a) to the extent that
Collateral Documents for Mortgage Loans or Commercial Loans with more than an
aggregate total face amount of $500,000 are outstanding for correction at any
time, and (b) upon the expiration of the Correction Period. The Lender Liens on
any Collateral shipped under this section continue in full force and effect.
4.7 Release of Collateral.
(a) Excess Collateral. If no Event of Default or Potential
Default exists, and no Borrowing Excess exists or would occur (after
taking into account any corresponding payment on the Obligation) as a
result of the release, Co-Borrowers may, by a Release Request delivered
to Administrative Agent by 11:00 a.m. on the Business Day of the
release, request that Administrative Agent release the Lender Liens on
any Collateral.
(b) Satisfaction of Obligation. If the Obligation is fully
paid and performed, and all commitments by each Lender to extend credit
under the Credit Documents are terminated or canceled, Co-Borrowers
may, by written request to Administrative Agent, request that
Administrative Agent release the Lender Liens on all of the Collateral,
return to Co-Borrowers or their respective designees all Collateral
Documents then held by Administrative Agent, and execute a release of
any financing statements or other documents filed or recorded to
perfect the Lender Liens.
(c) Releases. If Administrative Agent has no actual knowledge
that any of the above conditions for a release have not been satisfied,
then Administrative Agent shall effect those releases.
SECTION 5 CONDITIONS PRECEDENT.
(a) Initial Borrowing. No Lender is obligated to fund its part
of any Borrowing unless Administrative Agent has received all of the
documents and items described on Schedule 5.
(b) Each Borrowing. In addition, no Lender is obligated to
fund its part of any Borrowing unless on the applicable Borrowing Date
(and after giving effect to the requested Borrowing): (a)
Administrative Agent has timely received a Borrowing Request; (b) all
of the representations and warranties of the Companies in the Credit
Documents are true and correct in all material respects (unless they
speak to a specific date or are based on facts which have changed by
transactions contemplated or permitted by this agreement); (c) no Event
of Default or Potential Default exists; (d) the funding of the
Borrowing is permitted by all Governmental Requirements and does not
cause a Borrowing Excess; and (e) if reasonably requested by
Administrative Agent, it has received evidence substantiating any of
the matters in the Credit Documents that are necessary to enable
Co-Borrowers to qualify for that Borrowing.
(c) General. Each condition precedent in this agreement
(including, without limitation, those on Schedule 5) is material to the
transactions contemplated by this agreement, and time is of
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the essence with respect to each. Subject to first obtaining the
approval of all Lenders, Administrative Agent or any Lender may fund
any Borrowing without all conditions being satisfied. However, to the
extent lawful, that funding is not a waiver of the requirement that
each condition precedent be satisfied as a prerequisite for any
subsequent funding, unless all Lenders specifically waive an item in
writing.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Parent and each Co-Borrower jointly
and severally represent and warrant to Administrative Agent and Lenders as
follows:
6.1 Purpose of Credit. Borrowings are to be used as stated in the
recitals of this agreement. No Company is engaged principally (or as one of its
important activities) in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U. No
part of the proceeds of any Borrowing is to be used, directly or indirectly, for
a purpose that violates any Governmental Requirement, including, without
limitation, the provisions of Regulation U.
6.2 About the Companies.
(a) Subsidiaries and Trade Names. Except as described on
Schedule 6.2 (i) no Company has any Subsidiaries, and (ii) no
Co-Borrower has used or transacted business under any other corporate
or trade name in the six month period preceding the date of this
agreement.
(b) Existence, Qualification, and Compliance. Each of Parent
and each Co-Borrower is duly organized, validly existing, and in good
standing under the Governmental Requirements of the jurisdiction in
which it is incorporated or formed as stated on Schedule 6.2. Except
where such failure is not a Material-Adverse Event, each of Parent and
each Co-Borrower (i) is duly qualified to transact business and is in
good standing as a foreign corporation or other entity in each
jurisdiction where the nature and extent of its business and properties
require due qualification and good standing (as described on Schedule
6.2), (ii) possesses all requisite authority, permits, and power to
conduct its business as is now being, or as is contemplated by this
agreement to be, conducted, and (iii) is in compliance with all
applicable Governmental Requirements.
(c) Offices. Each Co-Borrower's chief executive office and
other principal offices are described on Schedule 6.2. The present and
foreseeable location of each Co-Borrower's books and records concerning
accounts and accounts receivable is at its chief executive office, and
all of its books and records are in its possession.
6.3 Authorization and Contravention. The execution and delivery by
Parent and each Co-Borrower of each Credit Document to which it is a party, and
the performance by it of its related obligations (a) are within its corporate
power or partnership authority, as applicable, (b) have been duly authorized by
all necessary corporate or partnership action, as applicable, (c) except for any
action or filing that has been taken or made on or before the date of this
agreement, require no action by, or filing with, any Governmental Authority, (d)
do not violate any provision of its charter, articles of incorporation, bylaws,
or partnership agreement, as applicable, (e) except where not a Material-Adverse
Event, do not violate any provision of Governmental Requirement applicable to
it, or of any material agreements to which it is a party, and (f) except for
Lender Liens, do not result in the creation or imposition of any Lien on any
asset of any Company.
6.4 Binding Effect. Upon execution and delivery by all parties to it,
each Credit Document will constitute a legal and binding obligation of Parent
and each Co-Borrower party to it, and is enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable Debtor
Laws and general principles of equity.
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6.5 Fiscal Year. The Companies' fiscal year ends each June 30.
6.6 Current Financials. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the financial
condition, results of operations, and cash flows of the Companies as of, and for
the portion of the fiscal year ending on, their date or dates (subject only to
normal year-end adjustments). All material liabilities of the Companies as of
the date or dates of the Current Financials are reflected in them or notes to
them. Except for transactions directly related to, or specifically contemplated
by, the Credit Documents, no subsequent material adverse changes have occurred
in the financial condition of the Companies from that shown in the Current
Financials in effect as of the Closing Date, nor has any Company incurred any
subsequent material liability.
6.7 Debt. Neither Parent nor any Co-Borrower has any Debt except
Permitted Debt.
6.8 Intellectual Property. Each of Parent and each Co-Borrower owns
all material licenses, patents, patent applications, copyrights, copyright
applications, service marks, service mark applications, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses as
presently conducted by it and proposed to be conducted by it immediately after
the date of this agreement. Each of Parent and each Co-Borrower is conducting
its business without infringement or claim of infringement of any license,
patent, copyright, service mark, trademark, trade name, trade secret, or other
intellectual property right of others, other than any infringements or claims
that, if successfully asserted against or determined adversely to that Company,
are not a Material-Adverse Event. To Parent's and each Co-Borrower's knowledge,
no infringement or claim of infringement by others of any material license,
patent, copyright, service mark, trademark, trade name, trade secret, or other
intellectual property of that Company exists.
6.9 Litigation. Except as disclosed on Schedule 6.9 (a) neither Parent
nor any Co-Borrower is subject to, or aware of the threat of, any investigation
by any Governmental Authority or Litigation that is reasonably likely to be
determined adversely to it, or, if so adversely determined, would be a
Material-Adverse Event, and (b) no outstanding or unpaid judgments against
Parent or any Co-Borrower exist.
6.10 Transactions with Affiliates. Neither Parent nor any Co-Borrower
is a party to a material transaction with any of its Affiliates, except (a)
transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate, and (b) the transactions described on Schedule 6.10.
6.11 Taxes. All Tax returns of each Company required to be filed have
been filed (or extensions have been granted) before delinquency, except for
returns for which the failure to file is not a Material-Adverse Event, and all
Taxes imposed upon each Company that are due and payable have been paid before
delinquency.
6.12 Employee Plans. Except where occurrence or existence is not a
Material-Adverse Event, (a) no Employee Plan has incurred an "accumulated
funding deficiency" (as defined in (Section) 302 of ERISA or (Section) 412 of
the IRC), (b) no Company has incurred liability under ERISA to the PBGC in
connection with any Employee Plan, (c) no Company has withdrawn in whole or in
part from participation in a Multiemployer Plan, (d) no Company has engaged in
any "prohibited transaction" (as defined in (Section) 406 of ERISA or (Section)
4975 of the IRC), and (e) no "reportable event" (as defined in (Section) 4043 of
ERISA) has occurred in respect of any Employee Plan, excluding events for which
the notice requirement is waived under applicable PBGC regulations.
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6.13 Property and Liens. Each of Parent and each Co-Borrower has good
and marketable title to all its property reflected on the Current Financials,
except for property that is obsolete or that has been disposed of either in the
ordinary course of business, or, after the date of this agreement, as otherwise
permitted by this agreement. All Collateral is free and clear of any Liens and
adverse claims of any nature except Permitted Liens.
6.14 Environmental Matters. Except where not a Material-Adverse Event,
neither Parent nor any Co-Borrower (a) knows of any environmental condition or
circumstance adversely affecting any Company's properties or operations, or any
material portion of the properties subject to Mortgage Loans or Commercial
Loans, (b) has received any report of any Company's violation of any
Environmental Governmental Requirement, or (c) knows that any Company is under
any obligation to remedy any violation of any Environmental Governmental
Requirement. Each Company has taken prudent steps to determine that its
properties and operations, and substantially all of the properties subject to
Mortgage Loans or Commercial Loans do not violate any Environmental Governmental
Requirement, except those that are not a Material-Adverse Event.
6.15 Government Regulations. Neither Parent nor any Co-Borrower is
subject to regulation under the Investment Company Act of 1940, as amended, or
the Public Utility Holding Company Act of 1935, as amended.
6.16 Insurance. Parent and each Co-Borrower maintains with financially
sound, responsible, and reputable insurance companies or associations (or, as to
workers' compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it operates) insurance
concerning its properties and businesses against casualties and contingencies,
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.
6.17 Appraisals. With respect to the property the subject of any
Mortgage Loan or Commercial Loan, each Co-Borrower has obtained Appraisals in
material compliance with all Appraisal Requirements.
6.18 Full Disclosure. Each material fact or condition relating to the
Credit Documents or the financial condition, business, or property of the
Companies that is a Material-Adverse Event has been disclosed in writing to
Administrative Agent and Lenders. All information previously furnished by any
Company to Administrative Agent or any Lender in connection with the Credit
Documents was (and all information furnished in the future by any Company to
Administrative Agent or any Lender will be) true and accurate in all material
respects or based on reasonable estimates on the date the information is stated
or certified.
6.19 Y2K. Co-Borrowers have (a) initiated a review and assessment of
all areas within each Company's business and operations (including those
affected by suppliers and vendors) that could be adversely affected by Y2K, (b)
developed a plan and time line for addressing Y2K on a timely basis, and (c) to
date implemented in all material respects that plan in accordance with that
timetable.
SECTION 7 AFFIRMATIVE COVENANTS. Until all commitments by Lenders to extend
credit under this agreement have been canceled or terminated, and the Obligation
is fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows:
7.1 Reporting Requirements. Parent shall furnish to Administrative
Agent the following, all in form and detail reasonably satisfactory to
Administrative Agent:
(a) Annual Financials. Promptly when available (but at least
within 90 days after the last day of each fiscal year of the Companies)
(i) audited consolidated Financials (reflecting the
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corresponding figures as of the end of and for the preceding fiscal
year in comparative form) and an unaudited consolidating balance sheet
and income statement of the Companies as of that year end, (ii) audited
Financials (reflecting the corresponding figures as of the end of and
for the preceding fiscal year in comparative form) of HAC as of that
year end, (iii) audited Financials of NJMI and its Subsidiary as of
that year end (reflecting the corresponding figures as of the end of
and for the preceding fiscal year in comparative form), and (iv)
unqualified opinions of a firm of independent certified public
accountants acceptable to Administrative Agent stating that those
audited Financials were prepared in accordance with GAAP applied on a
basis consistent with prior periods, except for such changes in GAAP
concurred in by the Companies' independent public accountants and
present fairly the (in the case of the Companies, consolidated)
financial condition and results of operations of the Companies, HAC, or
NJMI, as the case may be, as of (and for the fiscal year ending on)
that last day, and (vi) a Compliance Certificate.
(b) Monthly Financials. Promptly when available (but at least
within 45 days after the end of each Calendar Month) (i) unaudited
consolidated Financials, (ii) a current production report for the
Companies, and (iii) a static pool analysis and a report detailing
delinquencies and charge-offs, each in form and substance acceptable to
Administrative Agent and prepared as of the last day of the Calendar
Month just ended.
(c) Quarterly Reports. Promptly when available, but at least
within 45 days after the end of each Calendar Quarter, a Compliance
Certificate prepared as of the last day of the Calendar Quarter just
ended.
(d) Other Reports. Promptly after preparation and
distribution, accurate and complete copies of all reports and other
material communications about material financial matters or material
corporate plans or projections by or for any Company for distribution
to any Governmental Authority or any existing or potential creditor or
shareholder (i) including, without limitation, each Form 10-K (or
10-KSB), 10-Q (or 10-QSB), and S-8 filed with the Securities and
Exchange Commission but (ii) excluding (A) credit, trade, and other
reports prepared and distributed in the ordinary course of business,
and (B) information otherwise furnished to Administrative Agent and
Lenders under this agreement.
(e) Audit Reports. Promptly when available, copies of each
report prepared by any independent public accountants or other third
parties with respect to a Co-Borrower's compliance with the minimum
servicing standards identified in the Mortgage Bankers Association of
America's Uniform Single Attestation Program for Mortgage Bankers
(USAP).
(f) Information Regarding Brokers and Correspondents. Upon
Administrative Agent's request, information regarding any brokers or
correspondents from which any Co-Borrower purchases or otherwise
acquires Mortgage Loans or Commercial Loans.
(g) Notices. Notice, promptly after Parent or any Co-Borrower
knows or has reason to know, of (i) the existence and status of any
Litigation that, if determined adversely to any Company, would be a
Material-Adverse Event, (ii) any change in any material fact or
circumstance represented or warranted by Parent or any Co-Borrower in
any Credit Document that constitutes a Material-Adverse Event, (iii)
the receipt by any Company of notice of any violation or alleged
violation of ERISA, any Environmental Governmental Requirement, or
other Governmental Requirement, if that violation is a Material-Adverse
Event, or (iv) an Event of Default or Potential Default specifying the
nature thereof and what action the Companies have taken, are taking, or
propose to take with respect to it.
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(h) Other Information. Promptly upon reasonable request by
Administrative Agent or Required Lenders (through Administrative
Agent), information (not otherwise required to be furnished under the
Credit Documents and to the extent that neither Parent nor any
Co-Borrower is prohibited by a binding confidentiality agreement with a
Person who is not an Affiliate of any Company from providing that
information) respecting the business affairs, assets, and liabilities
of any Company, and opinions, certifications, and documents in addition
to those mentioned in this agreement.
7.2 Use of Proceeds. Co-Borrowers shall use the proceeds of Borrowings
only for the purposes represented in this agreement.
7.3 Books and Records. Each Company shall maintain books, records, and
accounts necessary to prepare Financials in accordance with GAAP.
7.4 Inspections. Upon reasonable request and notice, Parent and each
Co-Borrower shall allow Administrative Agent and its Representatives and
(subject to the following sentence) any Lender and its Representatives to
inspect any of its properties, to review reports, files, and other records, to
make and take away copies, to conduct tests or investigations, and to discuss
any of its affairs, conditions, and finances with its directors, officers,
employees, or representatives from time to time during reasonable business
hours. Lenders and their Representatives shall make their requests for the
foregoing through Administrative Agent, shall endeavor to conduct the foregoing
in reasonable groups, and shall not make on-site inspections more than once each
12-month period unless an Event of Default exists. Upon reasonable request,
Parent and each Co-Borrower shall allow Administrative Agent, any Lender, or
their respective Representatives to inspect any of its properties, to review
reports, files, and other records, to make and take away copies, to conduct
tests or investigations, and to discuss any of its affairs, conditions, and
finances with its directors, appropriate officers, employees, or representatives
from time to time during reasonable business hours.
7.5 Taxes. Parent and each Co-Borrower shall promptly pay when due any
and all Taxes, other than Taxes for which the failure to pay is not a
Material-Adverse Event or which are being contested in good faith by lawful
proceedings diligently conducted, against which reserve or other provision
required by GAAP has been made, and in respect of which levy and execution of
any Lien have been and continue to be stayed.
7.6 Expenses. Parent and each Co-Borrower shall pay (a) all reasonable
legal fees and expenses incurred by Administrative Agent in connection with the
preparation, negotiation, and execution of the Credit Documents, (b) all
reasonable legal fees and expenses incurred by Administrative Agent in
connection with each separate future amendment, consent, waiver, or approval
executed in connection with any Credit Document, (c) all other reasonable legal
fees and expenses by Administrative Agent in connection with the exercise of any
right under any Credit Document on or after the Closing Date, (d) all fees,
charges, or Taxes for the recording or filing of any Credit Document to create
or perfect Lender Liens, (e) all other reasonable out-of-pocket expenses of
Administrative Agent or any Lender in connection with the preparation,
negotiation, execution, or administration of the Credit Documents -- including,
without limitation, courier expenses incurred in connection with the Mortgage
Collateral, (f) all amounts expended, advanced, or incurred by Administrative
Agent or any Lender to satisfy any obligation of any Company under any Credit
Document, to collect the Obligation, or to enforce the Rights of Administrative
Agent or any Lender under any Credit Document -- including, without limitation,
all court costs, attorneys' fees (whether for trial, appeal, other proceedings,
or otherwise), fees of auditors and accountants, and investigation expenses
reasonably incurred by Administrative Agent or any Lender in connection with any
such matters, (g) interest at an annual interest rate equal to the Default Rate
on each item specified in clause (f) above from 30 days after the date of
written demand or request for reimbursement to the date of reimbursement, and
(h) any and all stamp and other Taxes payable or determined to be payable in
connection with the execution, delivery, or recordation of any Credit Document
- -- IN CONNECTION WITH WHICH PARENT AND EACH CO-BORROWER SHALL INDEMNIFY AND SAVE
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ADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES WITH RESPECT TO OR RESULTING FROM ANY DELAY IN PAYING OR OMISSION TO
PAY THOSE TAXES TO THE EXTENT THOSE LIABILITIES ARISE SOLELY BECAUSE PARENT OR
ANY CO-BORROWER FAILED TO PAY THE TAXES UPON DEMAND BY ADMINISTRATIVE AGENT OR
ANY LENDER, WHICH INDEMNITY, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
SURVIVES THE PAYMENT AND PERFORMANCE OF THE OBLIGATION AND TERMINATION OF THE
CREDIT DOCUMENTS WITH RESPECT TO AMOUNTS DUE BEFORE SUCH PAYMENT, PERFORMANCE,
AND TERMINATION.
7.7 Maintenance of Existence, Assets, and Business. Each Company shall
(a) except as permitted by Section 8.5, maintain its corporate existence and
good standing in its state of incorporation and its authority to transact
business in all other states where failure to maintain its authority to transact
business is a Material-Adverse Event, and (b) maintain all licenses, permits,
and franchises necessary for its business where failure to do so is a
Material-Adverse Event.
7.8 Insurance. Each Company shall (a) maintain with financially sound
and reputable insurers, insurance with respect to its assets and business
against such liabilities, casualties, risks, and contingencies and in such types
and amounts -- including, without limitation, a fidelity bond or bonds in form
and with coverage, with a company, and with respect to such individuals or
groups of individuals -- as satisfy prevailing FHA, VA, and other requirements
applicable to a qualified mortgage institution and otherwise as is customary in
the case of Persons engaged in the same or similar businesses and similarly
situated, and (b) upon Administrative Agent's request, furnish to Administrative
Agent from time to time (i) a summary of its insurance coverage, in form and
substance satisfactory to Administrative Agent, and (ii) originals or copies of
the applicable policies.
7.9 Appraisals. Upon reasonable notice, each Co-Borrower shall promptly
(a) permit Administrative Agent's and (subject to the last sentence of this
section) any Lender's authorized Representatives to discuss with that
Co-Borrower's officers or with the appraisers furnishing Appraisals the
procedures for preparation, review, and retention of (and to review and obtain
copies of) all Appraisals pertaining to any Mortgage Collateral, and (b) upon
Administrative Agent's or (subject to the last sentence of this section) any
Lender's request, cooperate with it to ascertain that the Appraisals comply with
all Appraisal Requirements. Lenders and their Representatives shall exercise
their Rights under this section through Administrative Agent and shall endeavor
to conduct investigations in reasonable groups.
7.10 Y2K. Except where any non-compliance is not a Material-Adverse
Event, Co-Borrowers shall (a) cause the Companies' computer applications to be
unaffected by Y2K on a timely basis and (b) promptly notify Administrative Agent
if any Company discovers or determines that any computer application of any of
the Companies' suppliers and vendors is not reasonably expected to be unaffected
by Y2K on a timely basis.
7.11 INDEMNIFICATION. IN CONSIDERATION OF THE COMMITMENTS BY
ADMINISTRATIVE AGENT AND LENDERS UNDER THE CREDIT DOCUMENTS, EACH COMPANY SHALL
INDEMNIFY AND DEFEND ADMINISTRATIVE AGENT, EACH LENDER, AND THEIR RESPECTIVE
AFFILIATES AND REPRESENTATIVES (COLLECTIVELY, THE "INDEMNIFIED PARTIES") -- AND
DEFEND THEM AND HOLD EACH OF THEM HARMLESS -- AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, DEFICIENCIES, INTEREST, JUDGMENTS, COSTS, OR
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) INCURRED BY
ANY OF THEM ARISING FROM OR BECAUSE OF (A) ANY INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING BROUGHT IN CONNECTION WITH ANY CREDIT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED BY THE CREDIT DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, ANY USE BY ANY COMPANY OF THE PROCEEDS OF BORROWINGS, (B) ANY
IMPOUNDMENT, ATTACHMENT, OR RETENTION OF ANY MORTGAGE COLLATERAL, (C) ANY
VIOLATION OF ANY FEDERAL OR STATE GOVERNMENTAL REQUIREMENT RELATING TO USURY IN
CONNECTION WITH ANY MORTGAGE COLLATERAL ALLEGED IN WRITING, AND (D) ANY
REPRESENTATION MADE BY ANY COMPANY UNDER ANY CREDIT DOCUMENT. ALTHOUGH EACH
INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION FOR ANY INDEMNIFIED PARTY'S
ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY
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IS ENTITLED TO INDEMNIFICATION FOR ITS OWN GROSS NEGLIGENCE, UNLAWFUL CONDUCT,
WILLFUL MISCONDUCT, OR FRAUD. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
THIS INDEMNITY SURVIVES FOR TWO YEARS AFTER THE PAYMENT AND PERFORMANCE OF THE
OBLIGATION AND TERMINATION OF THE CREDIT DOCUMENTS.
SECTION 8 NEGATIVE COVENANTS. Until all commitments by Lenders to extend credit
under this agreement have been canceled or terminated and the Obligation is
fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows, except as
provided in referenced Schedules:
8.1 Debt. Neither Parent nor any Co-Borrower shall create, incur,
permit to exist, or commit to create or incur any (a) Debt used to fund wet
borrowings other than Wet Borrowings under this agreement, (b) any mortgage loan
repurchase agreements except in connection with any Permitted Debt, whose
description specifically allows for mortgage loan repurchase agreements, or (c)
any other Debt except the following (collectively, the "Permitted Debt"):
(a) The Obligation;
(b) Obligations to pay Taxes;
(c) Liabilities for accounts payable, non-capitalized
equipment or operating leases, and similar liabilities if in each case
incurred in the ordinary course of business;
(d) Accrued expenses, deferred credits, and loss contingencies
that are properly classified as liabilities under GAAP;
(e) Debt incurred by any Company under any swap, collar,
floor, cap, or other contract entered into by such Company with any
Lender or an Affiliate of any Lender or another Person under the
Governmental Requirements of a jurisdiction in which such contracts are
legal and enforceable (except as enforceability may be limited by
applicable Debtor Laws and general principles of equity), which is
intended to reduce or eliminate the risk of fluctuations in interest
rates applicable to Borrowings or any Company's portfolio and/or
pipeline of loans and leases under this or any other agreement entered
into by such Company;
(f) Liabilities for capital leases and similar liabilities of
up to $2,000,000, in each case incurred in the ordinary course of
business;
(g) Debt in an aggregate principal amount of up to
$150,000,000 under one or more warehouse financing agreements so long
as the lenders or their agents under each of those arrangements enter
into intercreditor arrangements reasonably acceptable to Administrative
Agent to the extent those financing arrangements extend to
Business-Purpose Loans or Mortgage Loans that would be deemed supported
Wet Borrowings if financed under this agreement.
(h) Debt in an aggregate principal amount of up to $20,000,000
under one or more lease financing agreements;
(i) Subordinated Debt. For purposes of this agreement,
"Subordinated Debt" means, at any time:
(i) Debt in an original aggregate principal amount of
up to $1,200,000 (as reduced by any amounts repaid thereunder)
under certain Subordinated Debentures issued
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by American Business Finance Corporation, Inc. pursuant to a
prospectus dated March 30, 1992;
(ii) Debt in an original aggregate principal amount
of up to $10,000,000 (as reduced by any amounts repaid
thereunder) under certain Subordinated Fixed Rate Term Notes
issued by Parent pursuant to a prospectus dated June 28, 1993;
(iii) Debt in an original aggregate principal amount
of up to $25,000,000 (as reduced by any amounts repaid
thereunder) under certain Subordinated Fixed Rate Term Notes
issued by Parent pursuant to a prospectus dated April 29,
1994; as supplemented by a prospectus dated March 23, 1995;
(iv) Debt in an original aggregate principal amount
of up to $50,000,000 (as reduced by any amounts repaid
thereunder) under certain Subordinated Investment Notes issued
by Parent pursuant to a prospectus dated December 18, 1995;
(v) Debt in an outstanding principal amount of
$3,000,000 under that certain Rothschild Senior Subordinated
Note issued by Parent and due July 1, 2002;
(vi) Debt in an aggregate principal amount of up to
$125,000,000 (as reduced by any amounts repaid thereunder)
under certain Unsecured Subordinated Investment Notes and
certain Unsecured Adjustable-Rate Subordinated Money Market
Notes issued pursuant to an Indenture with First Trust
National Association, as trustee, and Parent, as issuer, dated
as of May 27, 1997 (the Debt described in clauses (i)-(vi)
above being hereinafter referred to as the
"existing-Subordinated Debt"); and
(vii) Debt, so long as that Debt (A) is subject to
subordination, payment blockage, and standstill provisions at
least as favorable to Lenders as applicable to the
existing-Subordinated Debt under this agreement or otherwise,
and (B) is subject to representations, covenants, events of
default, and other provisions not significantly more onerous
to any Company than the existing-Subordinated Debt;
(j) Other Debt of Parent or a Co-Borrower that is acceptable
to Required Lenders;
(k) Debt incurred in connection with the collapsing and
repurchasing of securities issued in connection with a securitization
which repurchase is provided for and permitted under the applicable
securitization documentation; and
(l) Debt secured solely by the residual interests of Parent or
any Co-Borrower in the income stream to be received under any asset
securitization program.
8.2 Liens. Neither Parent nor any Co-Borrower shall (a) enter into,
permit to exist, or commit to enter into any arrangement or agreement (except
the Credit Documents) that directly or indirectly prohibits any Company from
creating or incurring any Lien on any of its assets, or (b) create, incur,
permit to exist, or commit to create or incur any Lien on any of its assets
except the following (the "Permitted Liens"):
(a) Any interest or title of a lessor in assets being leased
under any non-capitalized equipment or operating lease;
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(b) Pledges or deposits that (i) do not encumber any
Collateral and (ii) are made to secure payment of workers'
compensation, unemployment insurance, or other forms of governmental
insurance or benefits or to participate in any fund in connection with
workers' compensation, unemployment insurance, pensions, or other
social security programs;
(c) Good-faith pledges or deposits that (i) do not cover any
Collateral and (ii) are either (A) not in excess of 10% of the amounts
due under, and made to secure, any Company's performance of bids,
tenders, contracts (except for the repayment of borrowed money), or
leases, or (B) made to secure statutory obligations, surety or appeal
bonds, or indemnity, performance, or other similar bonds benefitting
any Company in the ordinary course of its business;
(d) Zoning and similar restrictions on the use of real
property that do not materially impair the use of the real property and
that are not violated by existing or proposed structures or land use;
(e) The following if no Lien has been filed in any
jurisdiction or agreed to: (i) Liens for Taxes not yet due and payable
and (ii) if, to the extent they cover any Collateral, they are
subordinate to the Lender Liens in form and substance reasonably
acceptable to Administrative Agent, (iii) mechanic's Liens and
materialman's Liens for services or materials for which payment is not
yet due and payable and (iv) landlord's Liens for rent not yet due and
payable;
(f) The following if the validity or amount thereof is being
contested in good faith and by appropriate and lawful proceedings
diligently conducted, reserve or other appropriate provision (if any)
required by GAAP has been made, levy and execution continue to be
stayed, any of which covering any Collateral must be subordinate to the
Lender Liens in form and substance reasonably acceptable to
Administrative Agent, and any of which do not in the aggregate
materially detract from the value of the property of the Company in
question, or materially impair the use of that property in the
operation of its business: (i) claims and Liens for Taxes due and
payable; (ii) claims and Liens upon, and defects of title to, real or
personal property (other than any Collateral), including any attachment
of personal or real property or other legal process before adjudication
of a dispute on the merits; (iii) claims and Liens of mechanics,
materialmen, warehousemen, carriers, landlords, or other like Liens;
and (iv) adverse judgments or orders on appeal for the payment of
money;
(g) Lender Liens; and
(h) Liens disclosed in the UCC Search Reports as described on
Schedule 5 that are not by the terms of Schedule 5 required to be
terminated, partially released, or amended.
8.3 Investments. Neither Parent nor any Co-Borrower shall make or
commit to make any Investments except the following (the "Permitted
Investments"):
(a) Permitted Acquisitions;
(b) Extensions of trade credit and other payables in the
ordinary course of business;
(c) Loans and advances to officers, directors, or employees of
Parent or any Co-Borrower that are (i) in the ordinary course of
business for travel, entertainment, or relocation or (ii) not in the
ordinary course and are never more than an aggregate total outstanding
of $1,000,000 for all officers, directors or employees of Parent and
all Co-Borrowers;
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(d) Loans to officers of Parent and all Co-Borrowers for the
purpose of exercising company stock options secured by the stock
purchased;
(e) Mortgage Loans and Commercial Loans originated or acquired
by Co-Borrowers in the ordinary course of their businesses;
(f) Acquisitions of securities or evidences of Debt of others
when acquired by Parent or any Co-Borrower in settlement of accounts
receivable or other Debts arising in the ordinary course of business so
long as the total of all of those securities or evidences of Debt is
not material to the financial condition of the Companies;
(g) Investments in obligations issued or unconditionally
guaranteed by (or issued by any of its agencies and backed by the full
faith and credit of) the United States of America;
(h) Demand deposit accounts maintained in the ordinary course
of business;
(i) Certificates of deposit, bankers acceptances, and
repurchase agreements issued by (i) any Lender or (ii) any other
commercial bank organized under the Governmental Requirements of the
United States of America or one of its states that has combined
capital, surplus, and undivided profits of at least $250,000,000 and a
rating of C or better by Thompson Bank Watch, Inc.;
(j) Repurchase agreements with Prudential Securities
Incorporated or similar investment banking firms;
(k) Eurodollar Investments with (i) any Lender or (ii) any
other financial institution that has (A) combined capital, surplus, and
undivided profits of at least $100,000,000 and (B) a commercial-paper
rating of at least P-1 or A-1 or (if it does not have a
commercial-paper rating) a bond rating of at least A-1 or A- by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group, a division
of the McGraw-Hill Companies, Inc., respectively;
(l) Investments in commercial paper given the highest rating
by a nationally-recognized-credit-rating agency;
(m) Investments in money market funds with asset sizes of at
least $100,000,000; and
(n) Other Investments, so long as the aggregate amount
outstanding (defined as the amount of any such loans or advances plus
the cost of any such Investments) is never more than $5,000,000 at any
one time.
8.4 Distributions. Parent shall not directly or indirectly pay or
declare any Distribution except (a) Distributions payable solely in the form of
capital stock, (b) cash Distributions, so long as no Event of Default or
Potential Default exists or would be created by such Distribution, and (c)
Distributions otherwise approved in writing by Required Lenders.
8.5 Merger or Consolidation. Neither Parent nor any Co-Borrower shall
directly or indirectly merge or consolidate with or into any other Person,
except that (i) Parent and Co-Borrowers may merge into or be consolidated with
each other so long as, if Parent is involved, it is the surviving entity and
(ii) any Person may merge into Parent or any Co-Borrower, provided such Company
shall be the surviving corporation, the management of such Company shall be
substantially unchanged, and after giving effect to such merger, Parent and each
Co-Borrower shall be in full compliance with the terms of this Credit Agreement.
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8.6 Liquidations and Dispositions of Assets. Neither Parent nor any
Co-Borrower shall directly or indirectly dissolve or liquidate or sell,
transfer, lease, or otherwise dispose of any material portion of its assets or
business, except for sales or other dispositions by any Company, in the ordinary
course of business, of (a) subject to Section 4, Mortgage Loans and Commercial
Loans that are Collateral, or (b) Mortgage Loans and Commercial Loans that are
not Collateral.
8.7 Use of Proceeds. No Co-Borrower shall directly or indirectly use
the proceeds of Borrowings (a) for any purpose other than as represented in this
agreement, (b) for the funding or acquisition of construction loans, (c) for the
funding or acquisition of Commercial Loans except to the extent permitted under
the Commercial Loan Sublimit, (d) for wages of employees, unless a timely
payment to or deposit with the United States of America of all amounts of Tax
required to be deducted and withheld with respect to such wages is also made, or
(e) in violation of Regulation U or (Section) 7 of the Securities Exchange Act
of 1934.
8.8 Transactions with Affiliates. Neither Parent nor any Co-Borrower
shall directly or indirectly enter into any transaction with any of its
Affiliates, other than transactions in the ordinary course of its or their
business and of a character set forth on Schedule 6.10 or upon fair and
reasonable terms not materially less favorable than it could obtain or could
become entitled to in an arm's-length transaction with a Person that was not its
Affiliate.
8.9 Employee Plans. Neither Parent nor any Co-Borrower, except where a
Material-Adverse Event would not result, shall directly or indirectly permit any
of the events or circumstances described in Section 6.12 to exist or occur.
8.10 Compliance with Governmental Requirements and Documents. Neither
Parent nor any Co-Borrower shall directly or indirectly (a) violate the
provisions of any Governmental Requirements applicable to it or of any Material
Agreement to which it is a party if that violation alone or with all other
violations is a Material-Adverse Event, or (b) violate the provisions of its
charter, articles of incorporation, bylaws, or partnership agreement, as
applicable, or repeal, replace or amend any provision of its charter, articles
of incorporation, bylaws, or partnership agreement, as applicable, if any such
action is a Material-Adverse Event.
8.11 Government Regulations. Neither Parent nor any Co-Borrower shall
directly or indirectly conduct its business in a way that it becomes regulated
under the Investment Company Act of 1940.
8.12 Fiscal Year Accounting. Without first obtaining Administrative
Agent's written consent, neither Parent nor any Co-Borrower shall directly or
indirectly change its fiscal year or use any accounting method other than GAAP.
8.13 New Businesses. Neither Parent nor any Co-Borrower shall directly
or indirectly engage in any business, except the businesses in which it or any
of its Affiliates is presently engaged, and any other reasonably-related
business.
8.14 Assignment. Except as allowed in Section 12.12(a), neither Parent
nor any Co-Borrower shall directly or indirectly assign or transfer any of its
Rights, duties, or obligations under any of the Credit Documents.
8.15 Retention of Servicing Portfolio. Without the consent of
Administrative Agent, neither Parent nor any Co-Borrower shall directly or
indirectly assign or transfer any of its rights, duties or obligations under the
servicing agreements in which it acts as servicer.
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8.16 Strict Compliance. Neither Parent nor any Co-Borrower shall
indirectly do anything that it may not directly do under any covenant in any
Credit Document.
SECTION 9 FINANCIAL COVENANTS. Until all commitments by Lenders to extend
credit under this agreement have been canceled or terminated and the Obligation
is fully paid and performed, Parent and each Co-Borrower jointly and severally
covenant and agree with Administrative Agent and Lenders as follows:
9.1 Tangible Net Worth. Tangible Net Worth as of the last day of each
fiscal quarter of Borrower may never be less than $25,000,000.
9.2 Leverage Ratio. The Leverage Ratio as of the last day of each
fiscal quarter of Borrower may never exceed 4.0 to 1.0.
SECTION 10 EVENTS OF DEFAULT AND REMEDIES.
10.1 Event of Default. The term "Event of Default" means the existence
or occurrence of any one or more of the following:
(a) Obligation. Any Co-Borrower fails to pay (i) any interest
on the Obligation when due under the Credit Documents and that failure
continues for five days following receipt of notice from Administrative
Agent or any other Lender; provided, however, that notwithstanding
anything to the contrary in Section 12.2, such notice shall be deemed
received when sent by such party, or (ii) any other part of the
Obligation when due under the Credit Documents.
(b) Covenants. Any Company's failure or refusal to punctually
and properly perform, observe, and comply with any covenant (other than
in respect of payments on the Obligation) applicable to it in:
(i) Sections 7.2, 8.4, 8.5, 8.6, 8.7, 8.8, or 8.15;
(ii) Sections 7.6, 7.7, 8.1, 8.2, 8.3, 9.1, or 9.2,
if that failure or refusal was inadvertent, is susceptible of
cure, and is not cured within 20 days after the earlier of
either any Company knows of it or any Company is notified of
it by Administrative Agent or any Lender; or
(iii) Any other provision of any Credit Document, if
that failure or refusal continues for 20 days after the
earlier of either any Company knows of it or any Company is
notified of it by Administrative Agent or any Lender.
(c) Misrepresentation. Any material statement, warranty, or
representation by or on behalf of any Company in any Credit Document or
other writing authored by any Company and furnished in connection with
the Credit Documents proves to have been incorrect or misleading in any
material respect as of the date made or deemed made.
(d) Debtor Law. Parent or any Co-Borrower (i) is insolvent,
(ii) admits in writing its inability to pay its Debts generally as they
become due, (iii) voluntarily seeks, consents to, or acquiesces in the
benefit of any Debtor Law, or (iv) becomes a party to, or is made the
subject of, any proceeding provided for by any Debtor Law (other than
as a creditor or claimant) that could suspend or otherwise adversely
affect the Rights of Administrative Agent or any Lender granted in the
Credit
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Documents, unless, if the proceeding is involuntary, the applicable
petition is dismissed within 90 days after its filing.
(e) Other Debt. (i) Parent or any Co-Borrower fails to make
any payment due on any Debt or security in excess of $1,000,000 (with
respect to which it has redemption, sinking fund, or other purchase
obligations) or (ii) any event occurs or any condition exists in
respect of any Debt or security of Parent or any Co-Borrower in excess
of $1,000,000, the effect of which is (A) to cause or to permit any
holder of that Debt or security or a trustee to cause (whether or not
it elects to cause) any of that Debt or security to become due before
its stated maturity or its regularly scheduled payment dates, or (B) to
permit a trustee or the holder of any security (other than common stock
of any Company) to elect (whether or not it does elect) a majority of
the directors on the board of directors of that Company.
(f) Material Agreements. Any default or event of default under
any Material Agreement to which Parent or a Co-Borrower is a party, the
effect of which is to cause, or to permit any Person (other than a
Company) to cause, an amount in excess of $1,000,000 to become due and
payable prior to the date of payment stated in that Material Agreement,
unless such default or event of default is being contested by that
Company in good faith by appropriate proceedings and adequate reserves
have been established on the books of that Company to the extent
required by GAAP.
(g) Securitizations. In connection with any asset
securitization to which Parent or any Co-Borrower is a party or for
which it has any liability, (i) event of default occurs with respect to
such asset securitization, or (ii) any "delinquency trigger" or "loss
trigger" occurs with respect to such asset securitization.
(h) Judgments. Parent or any Co-Borrower fails to pay any
money judgment in excess of the sum of $250,000 against it at least ten
days prior to the date on which any of the assets of that Company may
be lawfully sold to satisfy that judgment.
(i) Attachments. The failure to have discharged within a
period of 30 days after the commencement of any attachment,
sequestration, or similar proceeding against any material amount of the
assets of Parent or any Co-Borrower.
(j) Unenforceability. Any material provision of any Credit
Document for any reason ceases to be in full force and effect or is
fully or partially declared null and void or unenforceable, and such
condition exists for a period of 21 days, or the validity or
enforceability of any Credit Document is challenged or denied by Parent
or any Co-Borrower.
(k) Change of Ownership of Co-Borrowers. Except as otherwise
approved by Required Lenders in writing prior to any such change,
Parent or ABC, as the case may be, fails to own, beneficially and of
record, with power to vote, 100% of the issued and outstanding shares
of capital stock of each Co-Borrower.
(l) Change of Management of Parent. Except as otherwise
approved by Required Lenders in writing prior to any such change, any
material change in the executive management of Parent from the
executive management of Parent as it exists on the date of this
agreement.
(m) SEC Reporting Requirements. Any Company fails to comply
with any reporting requirements of the Securities Exchange Act of 1934,
for which the failure to report would constitute a Material-Adverse
Event.
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10.2 Remedies.
(a) Debtor Law. Upon the occurrence of an Event of Default
under Section 10.1(d), and to the extent permitted by law, the
commitments of Lenders to extend credit under this agreement
automatically terminate and the full Obligation is automatically due
and payable, without presentment, demand, notice of default, notice of
the intent to accelerate, notice of acceleration, or other requirements
of any kind, all of which are expressly waived by Parent and each
Co-Borrower.
(b) Other Defaults. While an Event of Default exists -- other
than those described in clause (a) above -- Administrative Agent may
(and, upon the direction of Required Lenders, shall) declare the
Obligation to be immediately due and payable, whereupon it shall be due
and payable without presentment, demand, notice of default, notice of
the intent to accelerate, notice of acceleration, or other requirements
of any kind, all of which are expressly waived by Parent and each
Co-Borrower, and the commitments of Lenders to extend credit under this
agreement are then automatically terminated.
(c) Other Remedies. Following the termination of the
commitments of Lenders to extend credit under this agreement and the
acceleration of the Obligation, Administrative Agent may (and, at the
direction of Required Lenders, shall) do any one or more of the
following: Reduce any claim to judgment; foreclose upon, or otherwise
enforce, any Lender Liens; and exercise any other Rights in the Credit
Documents, at law, in equity, or otherwise that Required Lenders may
direct. Should any Event of Default continue that, in Administrative
Agent's reasonable opinion, materially and adversely affects the
Collateral or the interests of the Lenders under this agreement,
Administrative Agent may, in a notice to the Lenders of that Event of
Default, set forth one or more actions that Administrative Agent, in
its opinion, believes should be taken. Unless otherwise directed by
Required Lenders (excluding the Lender serving as Administrative Agent)
within ten days following the date of the notice setting forth the
proposed action or actions, Administrative Agent may, but shall not be
obligated to, take the action or actions set forth in that notice.
10.3 Right of Offset. Parent and each Co-Borrower hereby grant to
Administrative Agent and to each Lender a right of offset, to secure the
repayment of the Obligation, upon any and all monies, securities, or other
property of each such Company, and the proceeds therefrom now or hereafter held
or received by or in transit to Administrative Agent or such Lender from or for
the account of each such Company, whether for safekeeping, custody, pledge,
transmission, collection, or otherwise, and also upon any and all deposits
(general or special, time or demand, provisional or final) and credits of each
such Company, and any and all claims of any such Company against Administrative
Agent or such Lender, at any time existing. Upon the occurrence of any Event of
Default, Administrative Agent and each Lender are authorized at any time and
from time to time, without notice to any Company, to offset, appropriate, and
apply any and all of those items against the Obligation, subject to Section 3.6.
Notwithstanding anything in this section or elsewhere in this agreement to the
contrary, neither Administrative Agent nor any other Lender shall have any right
to offset, appropriate, or apply any accounts of any Company which consist of
escrowed funds (except and to the extent of any beneficial interest which any
Company has in such escrowed funds) which have been so identified by any Company
in writing at the time of deposit thereof.
10.4 Waivers. To the extent permitted by law, each Company waives any
right to require Administrative Agent to (a) proceed against any Person, (b)
proceed against or exhaust any of the Collateral, or pursue its Rights and
remedies as against the Collateral in any particular order, or (c) pursue any
other remedy in its power. Administrative Agent shall not be required to take
any steps necessary to preserve any Rights of any Company against any Person
from which any Company purchased any Mortgage Loans or Commercial Loans, or to
preserve Rights against prior parties. Each Company and each surety, endorser,
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guarantor, pledgor, and other party ever liable or whose property is ever liable
for payment of any of the Obligation jointly and severally waive presentment and
demand for payment, protest, notice of intention to accelerate, notice of
acceleration, and notice of protest and nonpayment, and agree that their or
their property's liability with respect to the Obligation, or any part thereof,
shall not be affected by any renewal or extension in the time of payment of the
Obligation, by any indulgence, or by any release or change in any security for
the payment of the Obligation, and hereby consent to any and all renewals,
extensions, indulgences, releases, or changes, regardless of the number thereof.
10.5 Performance by Administrative Agent. Should any covenant, duty, or
agreement of any Company fail to be performed in accordance with the terms of
this agreement or of any document delivered under this agreement (and any
applicable grace period shall have expired and all required notices have been
given), Administrative Agent may, at its option, after notice to Parent,
perform, or attempt to perform such covenant, duty, or agreement on behalf of
that Company and shall notify each Lender that it has done so. In such event,
Parent or any Co-Borrower shall jointly and severally, at the request of
Administrative Agent, promptly pay any amount expended by Administrative Agent
in such performance or attempted performance to Administrative Agent at its
principal place of business, together with interest thereon at the Maximum Rate
from the date of such expenditure by Administrative Agent until paid.
Notwithstanding the foregoing, it is expressly understood that Administrative
Agent does not assume and shall never have, except by express written consent of
Administrative Agent, any liability or responsibility for the performance of any
duties of any Company under this agreement or under any other document delivered
under this agreement.
10.6 No Responsibility. Except in the case of fraud, gross negligence,
or willful misconduct, neither Administrative Agent nor any of its officers,
directors, employees, or attorneys shall assume -- or ever have any liability or
responsibility for -- any diminution in the value of the Collateral or any part
of the Collateral.
10.7 No Waiver. The acceptance by Administrative Agent or any Lender at
any time and from time to time of partial payment or performance by any Company
of any of their respective obligations under this agreement or under any Credit
Document shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by Administrative Agent or any Lender shall be deemed to be
a waiver of any other then existing or subsequent Event of Default. No delay or
omission by Administrative Agent or any Lender in exercising any right under
this agreement or under any other document required to be executed under or in
connection with this agreement shall impair such right or be construed as a
waiver thereof or any acquiescence therein, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof, or
the exercise of any other right under this agreement or otherwise.
10.8 Cumulative Rights. All Rights available to Administrative Agent
and the Lenders under this agreement or under any other document delivered under
this agreement shall be cumulative of and in addition to all other Rights
granted to Administrative Agent and the Lenders at law or in equity, whether or
not the Notes are due and payable and whether or not Administrative Agent has
instituted any suit for collection, foreclosure, or other action in connection
with this agreement or any other document delivered under this agreement.
10.9 Rights of Individual Lenders. No Lender shall have any right by
virtue of, or by availing itself of, any provision of this agreement to
institute any actions or proceedings at law, in equity, or otherwise (excluding
any actions in bankruptcy), upon or under or with respect to this agreement, or
for the appointment of a receiver, or for any other remedy under this agreement,
unless (a) the Required Lenders previously shall have given to Administrative
Agent written notice of an Event of Default and the continuance thereof,
including a written request upon Administrative Agent to institute such action
or proceedings in its own name and offering to indemnify Administrative Agent
against the costs, expenses and liabilities to be incurred therein or
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thereby, (b) Administrative Agent, for ten Business Days after its receipt of
such notice, shall have failed to institute any such action or proceeding, and
(c) no direction inconsistent with such written request shall have been given to
Administrative Agent by Required Lenders. It is understood and intended, and
expressly covenanted by the taker and holder of every Note with every other
taker and holder and Administrative Agent, that no one or more holders of Notes
shall have any right in any manner whatever by virtue, or by availing itself, of
any provision of this agreement to affect, disturb or prejudice the Rights of
any other Lenders, or to obtain or seek to obtain priority over or preference to
any other such Lender, or to enforce any right under this agreement, except in
the manner herein provided and for the equal, ratable and common benefit of all
Lenders. For the protection and enforcement of the provisions of this Section
10.9, each and every Lender and Administrative Agent shall be entitled to such
relief as can be given either at law or in equity.
10.10 Notice to Administrative Agent. Should any Event of Default or
Potential Default occur and be continuing, any Lender having actual knowledge
thereof shall notify Administrative Agent and Co-Borrowers of the existence
thereof, but the failure of any Lender to provide that notice shall not
prejudice that Lender's Rights under this agreement.
10.11 Costs. All court costs, reasonable attorneys' fees, other costs
of collection, and other sums spent by Administrative Agent or any Lender in the
exercise of any Right provided in any Credit Document is payable to
Administrative Agent or that Lender, as the case may be, on demand, is part of
the Obligation, and bears interest at the Default Rate from the date paid by
Administrative Agent or any Lender to the date repaid by any Company.
SECTION 11 ADMINISTRATIVE AGENT.
11.1 Authorization and Action. Each Lender hereby appoints
Administrative Agent as administrative, collateral, and managing agent under the
Credit Documents and authorizes Administrative Agent to take such action on its
behalf and to exercise such powers and perform such duties as are expressly
delegated to Administrative Agent by the terms of the Credit Documents, together
with such powers as are reasonably incidental thereto. As to any matter not
expressly provided for by this agreement (including, without limitation,
enforcement or collection of the Notes), Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of Lenders, and those instructions
shall be binding upon all Lenders and all holders of the Notes. However,
Administrative Agent shall not be required to take any action that exposes
Administrative Agent to personal liability or that is contrary to this agreement
or applicable Governmental Requirements. Administrative Agent agrees to give to
each Lender prompt notice of each notice given to it by Parent or Co-Borrowers
pursuant to the terms of the Credit Documents. Administrative Agent also agrees
to promptly distribute to each Lender copies of the items required to be
delivered to Administrative Agent under Section 7.1.
11.2 Administrative Agent's Reliance, Etc. Notwithstanding anything to
the contrary in any Credit Document, neither Administrative Agent nor any of its
Representatives shall be liable for any action taken or omitted to be taken by
it or them under or in connection with the Credit Documents, except for its or
their own fraud, gross negligence, or willful misconduct. Without limitation of
the generality of the foregoing, Administrative Agent: (a) may treat the payee
of any Note as the holder thereof; (b) may consult with legal counsel (including
counsel for Co-Borrowers), independent public accountants and other experts
selected by it or Co-Borrowers and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
warranties, or representations made in or in connection with the Credit
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
agreement on the part
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of Co-Borrowers or to inspect the property (including the books and records) of
Co-Borrowers, except receipt of delivery of the items required under Sections
3.2, 4.1, 4.3, 5(a), 5(b), and 7.1; (e) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this agreement or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of this agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy) believed by it to be genuine
and signed or sent by the proper party or parties.
11.3 Administrative Agent and Affiliates. With respect to Borrowings
made by it, and the one or more Notes issued to it, the Lender which is
Administrative Agent shall have the same rights and powers under this agreement
and the other Credit Documents as any other Lender and may exercise the same as
though it were not the Administrative Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include the Lender which is
Administrative Agent in its individual capacity. The Lender which is
Administrative Agent and the Affiliates of such Lender may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, Co-Borrowers, any of its Affiliates and any Person who
may do business with or own securities of Co-Borrowers or any of its Affiliates,
all as if such Lender were not Administrative Agent and without any duty to
account therefor to Lenders.
11.4 Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Agent or any other
Lender, and based on the financial statements referred to in Sections 6.6 and
7.1 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter this agreement. Each Lender also
acknowledges that it will, independently and without reliance upon
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, make its own credit
decisions in taking or not taking action under this agreement.
11.5 INDEMNIFICATION. LENDERS SHALL INDEMNIFY ADMINISTRATIVE AGENT (TO
THE EXTENT NOT REIMBURSED BY PARENT OR CO-BORROWERS), RATABLY ACCORDING TO THEIR
RESPECTIVE COMMITMENT PERCENTAGES, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED
BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY ADMINISTRATIVE AGENT
UNDER THIS AGREEMENT (INCLUDING ANY OF SAME WHICH MAY RESULT FROM THE
NEGLIGENCE, BUT NOT GROSS NEGLIGENCE, OF ADMINISTRATIVE AGENT). HOWEVER, NO
LENDER SHALL BE LIABLE FOR ANY PORTION OF THOSE LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS RESULTING FROM ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER SHALL REIMBURSE
ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY
OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY ADMINISTRATIVE AGENT
IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THIS AGREEMENT, TO THE EXTENT THAT ADMINISTRATIVE AGENT
IS NOT REIMBURSED FOR SUCH EXPENSES BY PARENT OR CO-BORROWERS.
11.6 Successor Administrative Agent. Administrative Agent (i) may
resign at any time by giving written notice thereof to Lenders and Co-Borrowers
and (ii) may be removed at any time with or without cause by 100% of Lenders
(other than the Lender which is Administrative Agent) and with Parent's consent,
not to be unreasonably withheld. Upon any such resignation or removal, 100% of
Lenders, with the consent of Parent not to be unreasonably withheld, shall have
the right to appoint a successor Administrative Agent in the capacity of
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by 100% of Lenders and reasonably approved by Parent, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent's giving of notice of resignation or the Lenders' removal of the
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retiring Administrative Agent, then the retiring Administrative Agent may, on
behalf of Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank or savings bank organized under the laws of the United States of
America or of any state thereof which has a combined capital and surplus of at
least $200,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges, and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from any further duties,
and obligations under this agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this agreement. The
appointment of a successor Administrative Agent shall not release the retiring
Administrative Agent from any liability it may have for any actions taken or
omitted to be taken by it while it was Administrative Agent under this
agreement.
11.7 Inspection. Administrative Agent shall permit any officer,
employee, or agent of Co-Borrowers, or any Lender which may so request, to visit
and inspect the premises on which the custodial duties of Administrative Agent
hereunder are performed, examine the books and records of Administrative Agent
which pertain to such custodial duties, take copies and extracts therefrom, and
discuss the performance of such custodial duties with the officers, accountants
and auditors of Administrative Agent that are responsible therefor, all at such
reasonable times and as often as Co-Borrowers or any Lender may desire.
SECTION 12 MISCELLANEOUS.
12.1 Nonbusiness Days. Any action that is due under any Credit Document
on a non-Business Day may be delayed until the next Business Day. However,
interest accrues on any payment until it is made.
12.2 Communications. Unless otherwise stated, a communication under any
Credit Document to a party to this agreement must be written to be effective and
is deemed given:
o For Borrowing Requests, Collateral Delivery-Notices, Shipping
Requests, and Release Requests, only when actually received by
Administrative Agent.
o Otherwise, if by fax, when transmitted to the appropriate fax
number -- but, without affecting the date deemed given, the fax
must be promptly confirmed by telephone.
o Otherwise, if by mail, on the third Business Day after enclosed
in a properly addressed, stamped, and sealed envelope deposited
in the appropriate official postal service.
o Otherwise, when actually delivered.
Until changed by written notice to each other party to this agreement, the
address and fax number are stated for (a) Co-Borrowers, Administrative Agent,
and each initial Lender beside their names on the signature pages below, and (b)
each other Lender, beside its name on Schedule 2.
12.3 Form and Number of Documents. The form, substance, and number of
counterparts of each writing to be furnished under the Credit Documents must be
satisfactory to Administrative Agent and its counsel.
12.4 Exceptions to Covenants. An exception to any Credit Document
covenant does not permit violation of any other Credit Document covenant.
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12.5 Survival. All Credit Document provisions survive all closings and
are not affected by any investigation made by any party.
12.6 Governing Law. Unless otherwise stated, each Credit Document must
be construed (and its performance enforced) under the laws of the State of Texas
and the United States of America.
12.7 Invalid Provisions. If any provision of a Credit Document is
judicially determined to be unenforceable, all other provisions of it remain
enforceable. If the provision determined to be unenforceable is a material part
of that Credit Document, then, to the extent lawful, it shall be replaced by a
judicially-construed provision that is enforceable but otherwise as similar in
substance and content to the original provision as the context of it reasonably
allows.
12.8 Conflicts Between Credit Documents. The provisions of this
agreement control if in conflict (i.e., the provisions contradict each other as
opposed to a Credit Document containing additional provisions not in conflict)
with the provisions of any other Credit Document.
12.9 Discharge and Certain Reinstatement. The Companies' obligations
under the Credit Documents remain in full force and effect until no Lender has
any commitment to extend credit under the Credit Documents and the Obligation is
fully paid (except for provisions under the Credit Documents which by their
terms expressly survive payment of the Obligation and termination of the Credit
Documents). If any payment under any Credit Document is ever rescinded or must
be restored or returned for any reason, then all Rights and obligations under
the Credit Documents in respect of that payment are automatically reinstated as
though the payment had not been made when due.
12.10 Amendments, Consents, Conflicts, and Waivers. An amendment of --
or an approval, consent, or waiver by Administrative Agent or by one or more
Lenders under -- any Credit Document must be in writing and must be:
(a) Executed by Parent, Co-Borrowers, and Administrative Agent
if it purports to reduce or increase any fees payable to Administrative
Agent by Co-Borrowers.
(b) Executed by Parent, Co-Borrowers, Administrative Agent and
the particular existing or new Lender if it purports (subject to
Section 2.6) to increase that Lender's Commitment or add that Lender
with a new Commitment and is accompanied, as applicable, by a new
Warehouse Note for that Lender in the stated amount of its increased or
new Commitment, as the case may be.
(c) Executed by Parent, Co-Borrowers, and Administrative Agent
and executed or approved in writing by all Lenders if action of all
Lenders is specifically provided in any Credit Document or if it
purports to (i) except as otherwise stated in Section 12.10(a), extend
the due date or decrease the scheduled amount of any payment under --
or reduce the rate or amount of interest, fees, or other amounts
payable to Administrative Agent or any Lender under -- any Credit
Document, (ii) change the definition of "Borrowing Base" (or any
component of it), "Commitment", "Eligible-Mortgage
Loan","Eligible-Commercial Loan", "Eligible-Seasoned Loan",
"Eligible-High LTV Loan", "Market Value", "Required Lenders",
"Stated-Termination Date", or "Termination Percentage", (iii) change
the Swing Sublimit, the Wet Sublimit, the Second-Lien Sublimit, the
Seasoned Sublimit, the High LTV Sublimit, or the Commercial Loan
Sublimit, (iv) amend Schedule 4.1, or (v) partially or fully release
any Guaranty or any Collateral, except releases of Collateral
contemplated in this agreement.
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(d) Otherwise (i) for this agreement, executed by Parent,
Co-Borrowers, Syndication Agent, Administrative Agent, and Required
Lenders, or (ii) for other Credit Documents, approved in writing by
Required Lenders and executed by Parent, Co-Borrowers, Syndication
Agent, Administrative Agent, and any other party to that Credit
Document.
No course of dealing or any failure or delay by Administrative Agent, any
Lender, or any of their respective Representatives with respect to exercising
any Right of Administrative Agent or any Lender under the Credit Documents
operates as a waiver of that Right. An approval, consent, or waiver is only
effective for the specific instance and purpose for which it is given. The
Credit Documents may only be supplemented by agreements, documents, and
instruments delivered according to their respective express terms.
12.11 Multiple Counterparts. Any Credit Document may be executed in any
number of counterparts with the same effect as if all signatories had signed the
same document, and all of those counterparts shall be construed together to
constitute the same document. This agreement is effective when counterparts of
it have been executed and delivered to Administrative Agent by each Lender,
Administrative Agent, Parent, and Co-Borrowers, or, in the case only of those
Lenders, when Administrative Agent has received faxed or other evidence
satisfactory to it that each Lender has executed and is delivering to
Administrative Agent a counterpart of it.
12.12 Parties. This agreement binds and inures to Parent, Co-Borrowers,
each Lender, Administrative Agent, and their respective successors and permitted
assigns. Only those Persons may rely upon or raise any defense about this
agreement.
(a) Assignment by Companies; Assumptions by New Companies. No
Company may assign any Rights or obligations under any Credit Document
without first obtaining the written consent of Lenders.
(b) Assignment by Lender. Any Lender may assign, pledge, and
otherwise transfer all or any of its Rights and obligations under the
Credit Documents either (i) to a Federal Reserve Bank without the
consent of any party to this agreement, so long as that Lender is not
released from its obligations under the Credit Documents, or (ii) in
the ordinary course of its lending business and in accordance with all
Governmental Requirements and with Section 12.13 or 12.14, so long as
(A) except for assignments, pledges, and other transfers by a Lender to
its Affiliates, the written consent of Parent, Co-Borrowers, and
Administrative Agent, which may not be unreasonably withheld, must be
first obtained, (B) the assignment or transfer (other than a pledge)
does not involve a purchase price that directly or indirectly reflects
a discount from face value unless that Lender first offered that
assignment or transfer to the other Lenders on a ratable basis
according to their Commitment Percentages, (C) neither Parent,
Co-Borrowers, nor Administrative Agent are required to incur any cost
or expense incident to any assignment, pledge, or other transfer by any
Lender, all of which are for the account of the assigning, pledging, or
transferring Lender and its assignee, pledgee, or transferee as they
may agree, and (D) if the Participant or Purchaser is organized under
the Governmental Requirements of any jurisdiction other than the United
States of America or any of its states, it complies with Section 3.13.
(c) Otherwise Void. Any purported assignment, pledge, or other
transfer in violation of this section is void from the beginning and
not effective.
12.13 Participations. Subject to Section 12.12(b) and this section, a
Lender may at any time sell to one or more Persons (each a "Participant")
participating interests in its Commitment and its share of the Obligation.
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(a) Additional Conditions. For each participation (i) the
selling Lender must remain -- and the Participant may not become -- a
"Lender" under this agreement, (ii) the selling Lender's obligations
under the Credit Documents must remain unchanged, (iii) the selling
Lender must remain solely responsible for the performance of those
obligations, (iv) the selling Lender must remain the holder of its one
or more Notes and its share of the Obligation for all purposes under
the Credit Documents, and (v) Parent, Co-Borrowers and Administrative
Agent may continue to deal solely and directly with the selling Lender
in connection with those Rights and obligations.
(b) Participant Rights. The selling Lender may obtain for each
of its Participants the benefits of the Credit Documents related to
participations in its share of the Obligation, but Co-Borrowers are
never obligated to pay any greater amount than would be due to the
selling Lender under the Credit Documents calculated as though no
participation had been made. Otherwise, Participants have no Rights
under the Credit Documents, except certain permitted voting Rights
described below.
(c) Participation Agreements. An agreement for a participating
interest (i) may only provide to a Participant voting Rights in respect
of any amendment of or approval, consent, or waiver under any Credit
Document related to the matters in Section 12.10(c) if it also provides
for a voting mechanism that a majority of that selling Lender's
Commitment Percentage or Termination Percentage, as the case may be
(whether directly held by that selling Lender or participated),
controls the vote for that selling Lender, and (ii) may not permit a
Participant to assign, pledge, or otherwise transfer its participating
interest in the Obligation to any Person, except any Lender or its
Affiliates.
12.14 Transfers. Subject to Section 12.12(b) and this section, a Lender
may at any time sell to one or more financial institutions (each a "Purchaser")
all or part of its Rights and obligations under the Credit Documents.
(a) Additional Conditions. The sale (i) must be accomplished
by the selling Lender and Purchaser executing and delivering to
Administrative Agent and Co-Borrowers an Assignment and Assumption
Agreement, (ii) must be in an amount not less than $5,000,000 (unless
such sale is an assignment of all of a Lender's Rights and obligations
under the Credit Documents, and (iii) may not occur until the selling
Lender pays to Administrative Agent an administrative-transfer fee of
$3,500.
(b) Procedures. Upon satisfaction of the foregoing conditions
and as of the Effective Date in the Assignment and Assumption
Agreement, which may not be before delivery of that document to
Administrative Agent and Co-Borrowers, then (i) a Purchaser is for all
purposes a Lender party to -- with all the Rights and obligations of a
Lender under -- this agreement, with a Commitment as stated in the
Assignment and Assumption Agreement, (ii) the selling Lender is
released from its obligations under the Credit Documents to a
corresponding extent, (iii) Schedule 2 is automatically deemed to
reflect the name, address, and Commitment of the Purchaser and the
reduced Commitment of the selling Lender, and Administrative Agent
shall deliver to Co-Borrowers and Lenders an amended Schedule 2
reflecting those changes, (iv) Co-Borrowers shall execute and deliver
to each of the selling Lender and the Purchaser a Warehouse Note, each
based upon their respective Commitments following the transfer, (v)
upon delivery of the one or more Warehouse Notes under clause (iv)
above, the selling Lender shall return to Co-Borrowers all Warehouse
Notes previously delivered to it under this agreement, and (vi) the
Purchaser is subject to all the provisions in the Credit Documents, the
same as if it were a Lender that executed this agreement on its
original date.
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12.15 VENUE, SERVICE OF PROCESS, AND JURY TRIAL. PARENT AND
CO-BORROWERS, FOR THEMSELVES AND THEIR SUCCESSORS AND ASSIGNS, IRREVOCABLY (A)
SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
TEXAS, (B) WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT
THEY MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY LITIGATION
ARISING OUT OF OR IN CONNECTION WITH ANY CREDIT DOCUMENT AND THE OBLIGATION
BROUGHT IN THE DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, (C) WAIVE
ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE FOREGOING COURTS HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM OR ANY OBJECTION TO VENUE, (D) CONSENT TO THE
SERVICE OF PROCESS OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF
COPIES OF THAT PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, BY HAND DELIVERY, OR BY DELIVERY BY A NATIONALLY-RECOGNIZED COURIER
SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS
AT ITS ADDRESS FOR PURPOSES OF THIS AGREEMENT, (E) AGREE THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY TO ANY CREDIT DOCUMENT ARISING OUT OF OR IN
CONNECTION WITH THE CREDIT DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF
THE FOREGOING COURTS, AND (F) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW,
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY CREDIT DOCUMENT. The scope of each of the foregoing
waivers is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. PARENT AND CO-BORROWERS
ACKNOWLEDGE THAT THESE WAIVERS ARE A MATERIAL INDUCEMENT TO ADMINISTRATIVE
AGENT'S AND EACH LENDER'S AGREEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
ADMINISTRATIVE AGENT AND EACH LENDER HAVE ALREADY RELIED ON THESE WAIVERS IN
ENTERING INTO THIS AGREEMENT, AND THAT ADMINISTRATIVE AGENT AND EACH LENDER WILL
CONTINUE TO RELY ON EACH OF THESE WAIVERS IN RELATED FUTURE DEALINGS. PARENT AND
CO-BORROWERS FURTHER WARRANT AND REPRESENT THAT THEY HAVE REVIEWED THESE WAIVERS
WITH THEIR LEGAL COUNSEL, AND THAT THEY KNOWINGLY AND VOLUNTARILY AGREE TO EACH
WAIVER FOLLOWING CONSULTATION WITH LEGAL COUNSEL. The waivers in this section
are irrevocable, meaning that they may not be modified either orally or in
writing, and these waivers apply to any future renewals, extensions, amendments,
modifications, or replacements in respect of the applicable Credit Document. In
connection with any Litigation, this agreement may be filed as a written consent
to a trial by the court.
12.16 Limitation of Liability. Neither Administrative Agent nor any
Lender shall be liable to any Company for any amounts representing indirect,
special, or consequential damages suffered by any Company, except where such
amounts are based substantially on fraud, gross negligence, or willful or
unlawful misconduct by Administrative Agent or any Lender, but then only to the
extent any damages resulting from such willful misconduct are covered by
Administrative Agent's and the other Lenders' fidelity bond or other insurance.
12.17 Confidentiality.
(a) Confidential Information. As used in this section, the
term "confidential information" (i) includes all written, verbal, and
electronic information provided by Parent or any Co-Borrower to
Administrative Agent or any Lender pertaining to Parent's or any
Co-Borrower's business plans and practices, financial condition,
operations, trade secrets, customer lists, studies, analyses,
compilations, or operations, but (ii) excludes (A) information that at
the time of disclosure has been published or otherwise in the general
public domain through no breach of this section by the applicable
party, (B) information that is independently developed by or for
Administrative Agent or any Lender without the use of any Confidential
Information provided by Parent or a Co-Borrower, (C) information
required to be disclosed pursuant to a valid and proper requirement of
a Governmental Authority so long as, if not prohibited, Parent or a
Co-Borrower is notified before disclosure.
53
<PAGE>
(b) Permitted Disclosures. Notwithstanding anything to the
contrary in this Section 12.17, Confidential Information may be
disclosed (i) to regulators, or pursuant to subpoena or other legal
process as to which (A) neither Co-Borrowers nor Parent has pending an
objection to production or such objection has been granted and
production prohibited or (B) such production has not been stayed, (ii)
as may be required under applicable law, (iii) to a Lender's counsel,
auditors, accountants and affiliates and (iv) to transferees who agree
to maintain confidentiality with respect to such Confidential
Information to the same extent provided for in this Section 12.17. Any
such disclosure shall not require any investigation or examination by
any Lender as to whether that disclosure is pursuant to a valid and
proper requirement and a Lender shall not be in breach of this Section
12.17 if any such disclosure should be determined to not be pursuant to
a valid and proper requirement. Notwithstanding the notification
requirements contained in this Section 12.17, notification of any
disclosure of Confidential Information shall not be required if such
disclosure is to a regulator or in the event such notification is
prohibited.
(c) Non-Disclosure. Administrative Agent and each Lender shall
hold the Confidential Information in accordance with its customary
procedures for holding confidential information of this nature and in
accordance with safe and sound banking practices and, except as
described below or above, shall not disclose, publish or disseminate
the Confidential Information to any third party without prior written
consent of an officer of Parent. Administrative Agent and each Lender
may disclose the Confidential Information to any of its Representatives
or Affiliates with a need to know that Confidential Information.
(d) Use of Information. Administrative Agent and each Lender
shall use Confidential Information solely in connection with the Credit
Documents and all transactions related to them.
12.18 ENTIRE AGREEMENT. THE CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THE CREDIT
DOCUMENTS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
54
<PAGE>
EXECUTED as of the date first stated in this agreement.
(address)
American Business Credit, Inc. AMERICAN BUSINESS CREDIT, INC.,
BalaPointe Office Centre as a Co-Borrower
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004
Attn: Amedeo G. Piccioni By /s/ Anthony J. Santilli, Jr.
Treasurer ----------------------------------
Tel: 610/617-4942 Anthony J. Santilli, Jr., Chairman
Fax: 610/668-1132
(address)
HomeAmerican Credit, Inc. HOMEAMERICAN CREDIT, INC.,
BalaPointe Office Centre as a Co-Borrower
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004
Attn: Amedeo G. Piccioni By /s/ Anthony J. Santilli, Jr.
Treasurer ----------------------------------
Tel: 610/617-4942 Anthony J. Santilli, Jr., Chairman
Fax: 610/668-1132
(address)
American Business Financial NEW JERSEY MORTGAGE AND
Services, Inc. INVESTMENT CORP., as a Co-Borrower
BalaPointe Office Centre
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004 By /s/ Anthony J. Santilli, Jr.
Attn: Amedeo G. Piccioni ----------------------------------
Treasurer Anthony J. Santilli, Jr., Chairman
Tel: 610/617-4942
Fax: 610/668-1132
(address)
American Business Financial AMERICAN BUSINESS FINANCIAL
Services, Inc. SERVICES, INC., as Parent
BalaPointe Office Centre
111 Presidential Boulevard, Suite 215
Bala Cynwyd, Pennsylvania 19004 By /s/ Anthony J. Santilli, Jr.
Attn: Amedeo G. Piccioni ----------------------------------
Treasurer Anthony J. Santilli, Jr., Chairman
Tel: 610/617-4942
Fax: 610/668-1132
Signature Page to
Amended and Restated Credit Agreement
<PAGE>
<TABLE>
<CAPTION>
(address)
<S> <C>
Chase Bank of Texas, National Association CHASE BANK OF TEXAS, NATIONAL
717 Travis Street ASSOCIATION, as Administrative Agent
P.O. Box 2558 and a Lender
Houston, Texas 77002
Attn: Michael W. Nicholson
Tel: 713/216-5335 By: /s/ Michael W. Nicholson
Fax: 713/216-2082 ------------------------------------
Michael W. Nicholson, Vice President
(address)
The Bank of New York THE BANK OF NEW YORK
One Wall Street, 17th Floor
New York, New York 10286
Attn: Patricia Dominus By: /s/ Patricia M. Dominus
Tel: (212) 635-6467 ------------------------------------
Fax: (212) 635-6468 Patricia M. Dominus, Vice President
(address)
Colonial Bank COLONIAL BANK
201 East Pine Street
Orlando, Florida 32801
Attn: Catherine L. Kissick
Tel: (407 648-2186 By: /s/ David E. Clark
Fax: (407) 648-1849 ----------------------------------------
David E. Clark, Executive Vice President
(address)
National City Bank of Kentucky NATIONAL CITY BANK OF KENTUCKY
421 West Market Street
Louisville, Kentucky 40202
Attn: Robert Ogburn
Tel: (502) 581-6455 By: /s/ Robert J. Ogbum
Fax: (502) 581-4154 --------------------------------
Robert J. Ogburn, Vice President
(address)
First Union National Bank FIRST UNION NATIONAL BANK (successor in
1-8-11-24 interest by merger to CoreStates Bank, N.A.)
1339 Chestnut Street
Philadelphia, Pennsylvania 19101
Attn: Joseph Romano By: /s/ Joseph A. Romano
Tel: (215) 973-7038 ------------------------------------
Fax: (215) 786-7704 Joseph A. Romano, Commercial Officer
</TABLE>
Signature Page to
Amended and Restated Credit Agreement
<PAGE>
<TABLE>
<CAPTION>
(address)
<S> <C>
Hibernia National Bank HIBERNIA NATIONAL BANK
313 Carondelet Street, 11th Floor
New Orleans, Louisiana 70130
Attn: Angela Bentley By: /s/ Angela Bentley
Tel: (504) 533-2319 --------------------------------
Fax: (504) 533-5344 Angela Bentley,
National Accounts Representative
(address)
Firstrust Bank FIRSTRUST BANK
1931 Cottman Avenue
Philadelphia, Pennsylvania 19111
Attn: John Hollingsworth By: /s/ John Hollingsworth
Tel: (215) 728-8449 ----------------------------------
Fax: (215) 728-8767 John Hollingsworth, Vice President
</TABLE>
Signature Page to
Amended and Restated Credit Agreement
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of American Business Financial Services, Inc.
and Subsidiaries as of September 30, 1998 and for the three months ended
September 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,028,261
<SECURITIES> 0
<RECEIVABLES> 89,336,375
<ALLOWANCES> 1,244,816
<INVENTORY> 0
<CURRENT-ASSETS> 121,909,148
<PP&E> 13,699,660
<DEPRECIATION> 4,853,141
<TOTAL-ASSETS> 283,223,051
<CURRENT-LIABILITIES> 167,438,461
<BONDS> 0
0
0
<COMMON> 3,523
<OTHER-SE> 46,106,031
<TOTAL-LIABILITY-AND-EQUITY> 283,223,051
<SALES> 0
<TOTAL-REVENUES> 19,608,640
<CGS> 0
<TOTAL-COSTS> 14,426,459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,470,207
<INTEREST-EXPENSE> 4,802,908
<INCOME-PRETAX> 5,182,181
<INCOME-TAX> 1,761,942
<INCOME-CONTINUING> 3,420,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,420,239
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.94
</TABLE>
