SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-4408
------
RESOURCE AMERICA, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 72-0654145
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
-----------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
--------------
(Issuer's telephone number)
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,552,060
---------
RESOURCE AMERICA, INC.
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) -
December 31, 1996, and September 30, 1996 . . . . . . . 1 & 2
Consolidated Statements of Income (Unaudited) - Three
Months Ended December 31, 1996, and 1995 . . . . . . . 3
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended December 31, 1996, and 1995 . . . . 4
Notes to Consolidated Financial Statements (Unaudited). . 5 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 13 - 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 18
<PAGE 1>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
December 31, 1996, and September 30, 1996
December 31, September 30,
1996 1996
ASSETS ------------- ------------
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . .$ 7,321,338 $ 4,154,516
Accounts and notes receivable. . . . . . . . . . . 1,163,162 1,478,702
Prepaid expenses and other current assets. . . . . 236,628 472,673
------------ ------------
Total Current Assets . . . . . . . . . . . . . 8,721,128 6,105,891
NET INVESTMENT IN DIRECT FINANCING LEASES (less
provision for possible losses of $17,167
and $7,167). . . . . . . . . . . . . . . . . . . . 2,095,118 729,446
NOTE SECURED BY EQUIPMENT RECEIVABLES. . . . . . . . 3,292,903 -
PROPERTY AND EQUIPMENT
Oil and gas properties and equipment
(successful efforts) . . . . . . . . . . . . . 24,079,309 24,034,987
Gas gathering and transmission facilities. . . . . 1,534,291 1,535,781
Other. . . . . . . . . . . . . . . . . . . . . . . 1,751,993 1,666,085
------------ ------------
27,365,593 27,236,853
Less - accumulated depreciation, depletion,
and amortization . . . . . . . . . . . . . . . . (15,173,752) (14,856,874)
------------ ------------
Net Property and Equipment. . . . . . . . . . . 12,191,841 12,379,979
INVESTMENTS IN REAL ESTATE LOANS . . . . . . . . . . 49,693,120 21,797,768
RESTRICTED CASH. . . . . . . . . . . . . . . . . . . 1,045,346 935,346
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . 3,371,408 2,010,498
------------ ------------
$ 80,410,864 $ 43,958,928
============ ============
The accompanying notes are an integral part of these financial statements.
1
<PAGE 2>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
December 31, 1996, and September 30, 1996
December 31, September 30,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ -------------
CURRENT LIABILITIES
Accounts payable - trade . . . . . . . . . . . .$ 961,625 $ 584,985
Accrued liabilities. . . . . . . . . . . . . . . 1,262,689 596,783
Accrued income taxes . . . . . . . . . . . . . . 119,947 376,946
Current portion of long-term debt. . . . . . . . 105,000 105,000
------------ ------------
Total Current Liabilities. . . . . . . . . . . 2,449,261 1,663,714
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . 22,496,418 8,966,524
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . 2,588,000 2,206,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000
authorized, none issued . . . . . . . . . . . . - -
Common stock, $.01 par value, 8,000,000
authorized shares, 3,703,238 and 2,047,209
issued and outstanding shares (including
152,353 and 152,448 treasury shares) at
December 31, 1996, and September 30, 1996,
respectively. . . . . . . . . . . . . . . . . . 37,032 20,472
Additional paid-in capital. . . . . . . . . . . . 41,401,005 21,760,695
Retained earnings . . . . . . . . . . . . . . . . 14,553,974 12,458,344
Less cost of treasury shares . . . . . . . . . . (2,696,990) (2,698,985)
Less loan receivable from ESOP. . . . . . . . . . (417,836) (417,836)
------------- ------------
Total Stockholders' Equity . . . . . . . . . . 52,877,185 31,122,690
------------- ------------
$ 80,410,864 $ 43,958,928
============= ============
The accompanying notes are an integral part of these financial statements.
2
<PAGE 3>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months Ended December 31, 1996, and 1995
Three Months
Ended December 31,
1996 1995
---- ----
REVENUES
Real estate finance . . . . . . . . . . . . . . .$ 3,218,842 $ 2,085,121
Equipment leasing . . . . . . . . . . . . . . . . 1,201,832 1,306,533
Energy: production . . . . . . . . . . . . . . . 950,412 821,991
: services . . . . . . . . . . . . . . . . 388,583 510,635
Interest . . . . . . . . . . . . . . . . . . . . 78,487 71,209
------------- ------------
5,838,156 4,795,489
COSTS AND EXPENSES
Real estate . . . . . . . . . . . . . . . . . . . 162,925 139,956
Equipment leasing . . . . . . . . . . . . . . . . 893,335 687,331
Energy: production and exploration. . . . . . . . 411,778 372,412
: services . . . . . . . . . . . . . . . . 223,916 241,951
General and administrative. . . . . . . . . . . . 591,911 480,859
Depreciation and amortization . . . . . . . . . . 379,304 409,858
Interest . . . . . . . . . . . . . . . . . . . . 408,788 214,566
Other - net . . . . . . . . . . . . . . . . . . . (6,231) (2,079)
------------- ------------
3,065,726 2,544,854
------------- ------------
INCOME FROM OPERATIONS 2,772,430 2,250,635
OTHER INCOME
Gain on sale of property . . . . . . . . . . . . 87,754 427
------------- ------------
Income before income taxes . . . . . . . . . . . . 2,860,184 2,251,062
Provision for federal income taxes . . . . . . . . 575,000 653,000
------------- ------------
NET INCOME . . . . . . . . . . . . . . . . . . .$ 2,285,184 $ 1,598,062
============= ============
NET INCOME PER COMMON SHARE - PRIMARY . . . . . . .$ .66 $ .66
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . 3,476,000 2,440,000
============= ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE 4>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months Ended December 31, 1996, and 1995
Three Months
Ended December 31,
---------------------------
1996 1995
------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 2,285,184 $ 1,598,062
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . 379,304 409,858
Amortization of discount on senior note and
deferred finance costs . . . . . . . . . . . 23,629 18,662
Property impairments and abandonments. . . . . (78) 30,663
Provision for losses . . . . . . . . . . . . . 10,000 -
Deferred income taxes. . . . . . . . . . . . . 382,000 373,000
Gain on dispositions and investments . . . . . (785,404) (1,447,454)
Change in operating assets and liabilities
net of effects from purchase of subsidiaries:
(Increase) decrease in accounts receivable . 315,540 (357,520)
Increase in prepaid expenses and other
current assets . . . . . . . . . . . . . . 236,045 (94,674)
Decrease in accounts payable . . . . . . . . 376,640 (318,992)
Increase in other current liabilities. . . . 408,907 255,721
Accretion of discount. . . . . . . . . . . . (792,528) (128,666)
-------------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . 2,839,239 338,660
INVESTING ACTIVITIES:
Cost of equipment acquired for lease . . . . . . (4,410,799) -
Capital expenditures . . . . . . . . . . . . . . (129,974) (294,287)
Proceeds from sale of assets . . . . . . . . . . 2,322,885 10,911,509
Increase in other assets . . . . . . . . . . . . (1,535,444) (17,423)
Payments received in excess of revenue
recognized on leases . . . . . . . . . . . . . 76,062 -
Increase in investments in mortgage loans. . . . (28,881,227) (7,580,827)
-------------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES . . . . . . . . . . . . . . . . . . (31,558,497) 3,018,972
FINANCING ACTIVITIES:
Long-term borrowings . . . . . . . . . . . . . . 15,570,000 -
Proceeds from issuance of common stock . . . . . 19,658,865 -
Dividends paid . . . . . . . . . . . . . . . . . (189,554) (161,155)
Principal payments on long-term debt . . . . . . (2,043,231) (6,365)
Increase in restricted cash. . . . . . . . . . . (110,000) (121,710)
Purchase of treasury stock . . . . . . . . . . . - (28,916)
-------------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES . . . . . . . . . . . . . . . . . . 32,886,080 (318,146)
INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . 3,166,822 3,039,486
CASH AT BEGINNING OF YEAR. . . . . . . . . . . . . 4,154,516 2,457,432
-------------- -----------
CASH AT DECEMBER 31. . . . . . . . . . . . . . . . $ 7,321,338 $ 5,496,918
============== ===========
The accompanying notes are an integral part of these financial statements,
including Note 2 which discloses Interest and Taxes Paid and Noncash Investing
activities.
4
<PAGE 5>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 1 - MANAGEMENT'S OPINION REGARDING INTERIM FINANCIAL STATEMENTS
In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair statement of the results of operations
for the interim period included herein have been made.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements for the fiscal year ended
September 30, 1996, included in the Company's Annual Report on Form 10-K.
NOTE 2 - CASH FLOWS STATEMENT
Total interest paid during the first quarter of fiscal 1997 and 1996
amounted to $575,000 and $389,000, respectively. Cash payments for income taxes
during the first three months of fiscal 1997 and 1996, amounted to $450,000 and
$30,000, respectively.
During the first quarter of fiscal 1997, noncash investing activities
include the sale of leases with a book value of $2.95 million in exchange for
a note with a face value of $3.26 million, resulting in a gain of $313,000 (see
Note 5).
NOTE 3 - PUBLIC OFFERING OF COMMON STOCK
In November 1996, the Company closed a public offering of 1,656,000 shares
of its Common Stock. The Company received net proceeds of $19,991,000, before
offering expenses of $335,000, from the offering.
NOTE 4 - LONG-TERM DEBT
December 31, September 30,
Long-term debt consists of the following: 1996 1996
------------ -------------
Mortgage note payable to a bank, secured by real
estate, monthly installments of approximately $4,000
including interest at 3/4% above the prime rate
through May 2002 (rate of 9% at December 31, 1996) . . $ 207,749 $ 214,779
Loan payable to a bank, secured by a certificate of
deposit, 20 equal semiannual installments of $32,143,
through February, 2003, and quarterly payments of
interest at 1/2% above the prime rate through 2003 . . 417,836 417,836
9.5% senior secured note payable, interest due semi-
annually, principal due May 2004 . . . . . . . . . . . 7,905,833 7,902,708
5
<PAGE 6>
Unsecured loan payable, monthly installments of
approximately $5,200 including interest at 2.25%
above the prime rate (but not less than 7% nor
greater than 14.25%) through April 2004 at which
time the unpaid balance shall be due. This loan was
refinanced in December 1996 with the proceeds of the
following loan . . . . . . . . . . . . . . . . . . . . - 536,201
Unsecured loan payable, monthly installments of
approximately $9,200 including interest at 10.25%
through December 2001, at which time the unpaid
balance shall be due . . . . . . . . . . . . . . . . . 700,000 -
Loan payable, secured by real estate, interest due
monthly at the greater of 8.75% or LIBOR (London
InterBank Offered Rate) plus 350 basis points,
principal due January 1999 . . . . . . . . . . . . . . 13,370,000 -
------------ -----------
22,601,418 9,071,524
Less amounts payable in one year . . . . . . . . . . . 105,000 105,000
------------ -----------
$ 22,496,418 $ 8,966,524
============ ===========
The following is the amount of long-term debt maturing during each
of the periods ending on December 31: 1997 - $105,000; 1998 - $109,000; 1999 -
$13,479,000; 2000 - $114,000 and 2001 - $120,000.
The senior secured note payable is collateralized by substantially
all of the Company's oil and gas properties and selected real estate assets.
Certain credit agreements require the Company to comply with certain restrictive
covenants. At December 31, 1996, the Company was in compliance with such
covenants.
In December 1996, a subsidiary of the Company ("FLI") entered into
a new secured revolving credit and term loan facility with a maximum borrowing
limit of $20 million with two banking institutions. FLI pays interest on the
revolving and term borrowings at a rate equal to LIBOR plus 1.75% and LIBOR plus
2.25% per annum, respectively. The initial maturity date of the credit facility
is March 31, 1998, but may be renewed annually at the lenders' discretion. FLI
incurs a commitment fee of 3/8% per annum on the unused portion of the borrowing
limit. The credit agreement is collateralized by certain leases and leased
equipment. The credit facility contains covenants which, among other things,
requires the maintenance of certain financial ratios and restricts a change in
the ownership or a key management position by FLI. At December 31, 1996, FLI
was in compliance with all covenants.
6
<PAGE 7>
NOTE 5 - INVESTMENT IN DIRECT FINANCING LEASES
Components of the net investment in direct financing leases as of
December 31, 1996, are as follows:
Total minimum lease payments receivable. . . . . . $ 2,265,072
Initial direct costs, net of amortization. . . . . 52,432
Unguaranteed residual. . . . . . . . . . . . . . . 78,046
Unearned lease income. . . . . . . . . . . . . . . (283,265)
Provision for possible losses. . . . . . . . . . . (17,167)
----------------
Net investment in direct financing leases $ 2,095,118
================
In December 1996, the Company sold leases with a net book value of
approximately $3.0 million to a special-purpose financing entity in return for
a note with a face value of approximately $3.3 million, resulting in a gain of
$313,000 (see Note 2).
NOTE 6 - INVESTMENTS IN REAL ESTATE
The Company has focused its real estate activities on the purchase
of income producing mortgages at a discount to the face value of such mortgages
and also to the appraised value of the property underlying the mortgage. Cash
received by the Company for payment on each mortgage is allocated between
principal and interest - the interest portion of the cash received is recorded
as income to the Company. Additionally, the Company records as income the
accrual of a portion of the discount to the underlying collateral value. This
"accretion of discount" amounted to $792,530 during the quarter ended December
31, 1996. As the Company sells participations or receives funds from
refinancings in such mortgages, a portion of the cash received is employed to
reduce the cumulative accretion of discount included in the carrying value of
the Company's investment in real estate loans.
7
<PAGE 8>
At December 31, 1996, the Company held real estate loans having
aggregate face values of $79,251,000, which were being carried at an aggregate
cost of $49,693,000, including cumulative accretion of $2,883,000. The following
is a summary of the changes in the carrying value of the Company's investments
in real estate loans for the quarter ended December 31, 1996:
1996
----
Balance, beginning of period . . . . . . . . . $ 21,797,768
New real estate loans. . . . . . . . . . . . . 27,866,541
Additions to existing loans. . . . . . . . . . 1,014,685
Accretion of discount. . . . . . . . . . . . . 792,530
Collections of principal . . . . . . . . . . . (183,322)
Cost of mortgages sold . . . . . . . . . . . . (1,595,082)
--------------
Balance, end of period . . . . . . . . . . . . $ 49,693,120
==============
Investments in Real Estate Loans consist of:
December 31, September 30,
1996 1996
------------ ------------
Property 001 Subordinated wraparound note, face
value of $4,500,000, secured by
residential real estate located in
Pittsburgh, PA, interest at 14.5%,
due December 31, 2002. . . . . . . . . $ 2,456,007 $ 2,410,665
Property 002 Note, face value of $1,080,000,
secured by residential real estate
located in Philadelphia, PA, interest
at 12%, due October 31, 1998 . . . . . 206,936 179,980
Property 003 Mortgage note, face value of
$1,798,000, secured by residential
real estate located in Margate, NJ,
interest at the Chase Manhattan Bank
prime rate (but not less than 9% nor
greater than 15.5%), due
January 1, 2003 . . . . . . . . . . . 700,456 694,850
8
<PAGE 9>
Property 004 Note, face value of $1,312,000,
secured by residential real estate
located in Philadelphia, PA, interest
at 2 1/2% over the monthly national
median annualized cost of funds for
SAIF-insured institutions as announced
by the Federal Deposit Insurance
Corporation, due October 31, 1998. . . 227,594 226,968
Property 005 Note, face value of $4,234,000 by
commercial real estate located in
Pittsburgh, PA, interest at 10.6%, due
February 7, 2001 . . . . . . . . . . . 1,095,294 1,086,709
Property 006 Subordinated note, face value of
$4,165,000, interest at 1/2% over the
Maryland National Bank prime rate, due
July 31, 1998 . . . . . . . . . . . . 1,569,041 1,537,546
Property 007 Note, face value of $1,776,000,
secured by a judgment lien, relating
to real estate located in St. Cloud,
MN, interest at 10%, due December 31,
2014 . . . . . . . . . . . . . . . . . 522,002 527,846
Property 008 Subordinated note, face value of
$3,559,000, secured by an unrecorded
deed relating to real estate located
in Philadelphia, PA, interest at 2%
over the yield of one-year United
States Treasury securities, due July
31, 1998 . . . . . . . . . . . . . . . 725,564 721,212
Property 009 Subordinated notes, face value of
$1,495,000 secured by residential real
estate located in Philadelphia, PA,
interest at 2% over the Mellon Bank
prime rate, due October 31, 1999 . . . 510,017 510,608
Property 010 Mortgage note, face value of
$1,211,000, secured by residential
real estate located in Philadelphia,
PA, interest at 3% over the Federal
Home Loan Bank of Pittsburgh rate, due
September 2, 1999 . . . . . . . . . . 117,838 112,467
9
<PAGE 10>
Property 011 Mortgage note, face value of $900,000,
secured by commercial real estate
located in Washington, D.C., interest
at 1 1/2% over the First Union
National Bank rate, due September
30, 1999 . . . . . . . . . . . . . . . 413,583 414,360
Property 012 Mortgage notes, face value of
$1,962,000, secured by residential
real estate located in Philadelphia,
PA, varying interest rates from 9 1/2%
to 14 1/2%, due December 2, 1999 . . . 767,496 747,640
Property 013 Mortgage note, face value of
$3,000,000, secured by commercial real
estate located in Pasadena, CA,
interest at 2.75% over the average cost
of funds to FSLIC-insured savings and
loan associations, 11th District (but
not less than 5.5% nor greater than
15.5%), due May 1, 2001 . . . . . . . 324,137 302,354
Property 014 Subordinated wraparound note, face
value of $12,000,000 consisting of a
first mortgage held by the Company of
$9,000,000 secured by commercial real
estate located in Washington, D.C.,
and a $3,000,000 second mortgage held
by the Company, interest at 12%, due
November 30, 1998. . . . . . . . . . . 5,235,877 3,170,843
Property 015 Subordinated wraparound note, face
value of $3,500,000, secured by
residential real estate located in New
Concord, NC, interest at 12%, due
August 25, 2000 . . . . . . . . . . . 489,606 356,147
Property 016 Wraparound note, face value of
$5,198,000, secured by real estate
located in Rancho Cordova, CA,
interest at 8.5%, due December 31,
2019 Company of $4,143,000 . . . . . . 410,185 428,703
10
<PAGE 11>
Property 017 Subordinated wraparound note, face
value of $3,300,000 secured by
commercial real estate located in
Elkins, WV, interest at 13.6%, due in
equal installments through December
31, 2018. In November 1996, the owner
of the property refinanced the
property with an unaffiliated party,
simultaneously paying the Company
$169,000 toward principal and interest
on this loan . . . . . . . . . . . . . 962,763 961,756
Property 018 Mortgage note, face value of
$2,271,000, secured by commercial real
estate located in Northridge, CA,
interest at 9%, due December
27, 2000 . . . . . . . . . . . . . . . 836,857 782,973
Property 019 Mortgage note, face value of
$4,627,000, secured by residential
real estate located in Philadelphia,
PA, interest at 7.75%, due December
31, 2000 . . . . . . . . . . . . . . . 906,120 900,017
Property 020 Subordinated note, face value of
$4,800,000 secured by real estate
located in Cherry Hill, NJ, interest
at 10%, due February 7, 2001 . . . . . 1,748,429 1,536,729
Property 021 Mortgage notes, face value of
$3,269,000, secured by real estate
located in Philadelphia, PA, interest
at 12%, due March and April, 2001 . . 662,763 516,036
Property 022 Subordinated participation loan, face
value of $2,038,000, secured by real
estate located in Philadelphia, PA,
interest at 85% of the 30-day rate on
$100,000 Certificates of Deposit as
published by the Wall Street Journal
plus 2.75%, due October 31, 1998 . . . 1,206,927 1,060,176
Property 023 Subordinated mortgage note, face value
of $600,000, secured by real estate
located in Philadelphia, PA, interest
at 12%, due March 28, 2001 . . . . . . 148,713 110,559
11
<PAGE 12>
Property 024 Mortgage note, face value of
$3,500,000, secured by residential
real estate located in Sharon Hill,
PA, interest at 10.5%, due December
31, 2002. In December 1996, the
Company sold a senior participation in
this mortgage for $1,980,000,
resulting in a gain of $384,919 and a
face value due the Company of
$1,694,000 . . . . . . . . . . . . . . 984,668 2,500,624
Property 025 Tax free bonds, face value of
$5,800,000, secured by
hotel/commercial real estate located
in Savannah, GA, interest at 14%, due
August 2015 . . . . . . . . . . . . . 6,157,750 -
Property 026 Subordinated mortgage note, face value
of $3,423,000, secured by commercial
real estate located in Ambler, PA,
interest at 12%, due September 2003. . 530,312 -
Property 027 Mortgage notes, face value of
$40,644,000, secured by commercial
real estate located in Philadelphia,
PA, interest at 12%,
due January 2002 . . . . . . . . . . . 19,776,185 -
------------- ------------
$ 49,693,120 $ 21,797,768
============= ============
As referenced above, in December 1996 the Company sold a senior
participation in one real estate loan to a financial institution. The financial
institution has certain recourse rights against the Company should the loan not
perform under the terms of the participation agreement.
Further, as referenced above, in November 1996 the owner of one
property on which the Company held a mortgage note refinanced that Note with an
unaffiliated party. The Company received payments of principal and interest on
the note and now holds a position which is subordinated to the new first
mortgage note placed on the property by the unaffiliated party.
12
<PAGE 13>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS.
SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD LOOKING STATEMENTS WHICH SPEAK ONLY AS OF THE DATE
HEREOF. THE CORPORATION UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO FORWARD LOOKING STATEMENTS WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS: ASSET ACQUISITION AND RESOLUTION
The following table sets forth certain information relating to the
revenue recognized on the Company's commercial real estate loan portfolio during
the periods indicated:
QUARTERS ENDED DECEMBER 31,
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
Interest . . . . . . . . . . . . . . . . . . . . . $ 634 $ 467
Accreted discount . . . . . . . . . . . . . . . . 793 167
Fees . . . . . . . . . . . . . . . . . . . . . . . 1,407 4
Gains on refinancings and sale of participations . 385 1,447
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $ 3,219 $ 2,085
======== ========
Average balance of investment, net . . . . . . . . $ 35,745 $ 17,142
Yield on net average balance . . . . . . . . . . . 36.0% 48.7%
Revenues from asset acquisition and resolution operations increased
to $3.2 million in the first quarter of fiscal 1997 from $2.1 million in the
first quarter of fiscal 1996. This increase was attributable to an increase of
$2.2 million in interest (including accretion of discount) and fees earned in
the first quarter of fiscal 1997 compared to the prior similar period. These
increases were partially offset by a decrease of $1.1 million in gains
recognized upon the refinancing and sale of participations in loans held by the
Company. Interest income, including accretion of discount increased
substantially during the first quarter of fiscal 1997 as compared to the first
quarter of fiscal 1996 due to an increase in the average amount of real estate
loans outstanding during the first quarter of fiscal 1997 as compared to the
first quarter of fiscal 1996. Gains decreased in the first quarter of fiscal
1997 as compared to the first quarter of fiscal 1996 due to a reduction in the
number of refinancings of, and sales of participations in, certain of the
Company's portfolio loans occurring during the first quarter of
13
<PAGE 14>
fiscal 1997 as compared to the first quarter of fiscal 1996. The Company
recognized gains on one and three participation interests sold during the
first quarter of fiscal years 1997 and 1996, respectively.
During the first quarter of fiscal 1997, the Company purchased or
originated four real estate loans, for a total cost of $27.9 million, as
compared to four loans for a total cost of $7.4 million in the first quarter of
fiscal 1996. In addition, the Company increased its investment in certain
existing loans by $1.0 million in the first quarter of fiscal 1997 and $195,000
in the first quarter of fiscal 1996 for purposes of paying for property
improvement costs, unpaid taxes and similar items relating to properties
underlying portfolio loans. All such items had been anticipated by the Company
at the time of loan acquisition and were included in its analysis of loan costs
and yields. Asset acquisition and resolution expenses increased 16% ($23,000)
in the first quarter of fiscal 1997 compared to the first quarter of fiscal
1996. The increase was primarily a result of higher personnel costs associated
with the expansion of these operations.
RESULTS OF OPERATIONS: EQUIPMENT LEASING
The following table sets forth certain information relating to the
revenue recognized in the Company's equipment leasing operations during the
periods indicated:
QUARTERS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)
1996 1995
---- ----
Partnership Management
Servicing . . . . . . . . . . . . . . .$ 220 $ 351
Partnership leasing . . . . . . . . . . 12 191
Reimbursement of administrative costs . 281 698
Lease brokerage . . . . . . . . . . . . 300 67
Small ticket leasing . . . . . . . . . 76 -
Gain on sale of leases . . . . . . . . 313 -
Total $ 1,202 $ 1,307
The decrease in servicing revenue, partnership leasing and
reimbursement of administrative costs was the result of the liquidation, in
accordance with the terms of the partnership agreement, of one leasing
partnership in the first quarter of fiscal 1996. The Company now acts as
general partner for six limited partnerships which held a total of $65 million
(original cost) in lease assets at December 31, 1996. Lease brokerage revenue
increased substantially in the first quarter of fiscal 1997 as compared to the
same quarter of the prior year; this revenue is transaction based and the
Company closed several large transactions in December 1996. The gain on sale
of leases resulted from the sale of leases with a book value of $2.95 million
in exchange for a note with a face value of $3.26 million.
In June 1996, the Company entered the "small ticket" leasing
business and began writing leases in August 1996. In the quarter ended December
31, 1996 the Company acquired equipment for lease with a cost of $4.4 million.
This new business segment is expected to grow significantly during the remainder
of fiscal 1997.
14
<PAGE 15>
The following table sets forth certain information relating to
expenses recognized in the Company's equipment leasing operations during the
periods indicated:
QUARTERS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)
1996 1995
---- ----
Partnership management . . . . . . . . $ 372 $ 604
Lease brokerage. . . . . . . . . . . . 158 83
Small ticket leasing . . . . . . . . . 363 -
Total $ 893 $ 687
Partnership leasing expenses decreased as a result of the
liquidation of one partnership, as discussed above. Lease brokerage expenses
increased as a result of an increase in commissions paid in association with the
higher level of revenues earned.
RESULTS OF OPERATIONS: ENERGY
Oil and gas production revenues for the quarter ended December 31,
1996 increased 16% compared to the same quarter of the previous year. A
comparison of the Company's revenues, daily production volumes, and average
sales prices follows:
QUARTER ENDED DECEMBER 31,
REVENUES (IN THOUSANDS) 1996 1995
----------------------- ------- ------
Gas $ 755 $ 680
Oil 185 134
PRODUCTION VOLUMES
------------------
Gas (Mcf/day) 3,309 3,398
Oil (Bbls/day) 91 87
AVERAGE SALES PRICE
-------------------
Gas (per Mcf) $ 2.48 $ 2.18
Oil (per Bbl) 22.19 16.70
Natural gas revenues from production sales increased 11% in the first
quarter of fiscal 1997 from the first quarter of fiscal 1996 due to a 14%
increase in the average price per mcf of natural gas partially offset by a 3%
decrease in production volumes. Oil revenues increased by 39% in the first
quarter of fiscal 1997 from the first quarter of fiscal 1996 due to a 33%
increase in the average price per barrel and a 5% increase in production
volumes.
The Company continues to experience normally declining production from
its properties located in New York State. This decline has been offset by the
acquisition of additional well interests in Ohio. The Company participated in
the drilling of three successful exploratory wells and two successful
developmental wells during fiscal 1996.
15
<PAGE 16>
Energy services revenues decreased 24% ($122,000) in the first quarter
of fiscal 1997 from the first quarter of fiscal 1996. This decrease resulted
from a decrease in the number of wells operated for partnerships managed by the
Company and a reduction in financial reporting services provided to certain
partnerships.
A comparison of the Company's production costs as a percentage of oil
and gas sales, and the production cost per equivalent unit for oil and gas for
the first quarter of fiscal 1997 and 1996, is as follows:
QUARTER ENDED DECEMBER 31,
PRODUCTION COSTS 1996 1995
---------------- ---- ----
As a percent of sales. . . . . . . 38% 42%
Gas (mcf). . . . . . . . . . . . . $1.03 $.95
Oil (bbl). . . . . . . . . . . . . $6.19 $5.70
Production costs increased 7% ($23,000) in the first quarter of
fiscal 1997 from the first quarter of fiscal 1996 as a result of an increase in
repairs and maintenance. Repairs are conducted on an as-needed basis and,
accordingly, costs incurred by the Company may vary from year to year.
Exploration costs increased 54% ($16,000) in the first quarter of
fiscal 1997 from the first quarter of fiscal 1996. This increase resulted from
an increase in geological and geophysical costs which were incurred in the
Company's Ohio field of operations in anticipation of drilling.
Depreciation, depletion and amortization consist primarily of
amortization of costs relating to oil and gas properties. Amortization of oil
and gas property costs as a percentage of oil and gas revenues was 19% in the
first quarter of fiscal 1997 and 32% in the first quarter of fiscal 1996. The
variance from year to year is directly attributable to changes in the Company's
oil and gas reserve quantities, product prices and fluctuations in the
depletable cost basis of oil and gas properties.
RESULTS OF OPERATIONS: OTHER INCOME (EXPENSE)
General and administrative expense increased 23% ($111,000) in the
first quarter of fiscal 1997 as compared to the same period in fiscal 1996
primarily as a result of higher legal and professional fees and the payment of
incentive compensation to executive officers.
Interest expense increased $194,000 in the first quarter of fiscal
1997 from the first quarter of fiscal 1996, reflecting the changes in borrowings
to fund the growth of the Company's asset acquisition and resolution operations.
In December 1996, the Company borrowed $13.4 million to fund the acquisition of
a series of mortgage loans on a property located in Philadelphia, Pennsylvania
(see Note 4 to Consolidated Financial Statements).
16
<PAGE 17>
The effective tax rate decreased to 20% in the first quarter of
fiscal 1997 from 29% in the first quarter of fiscal 1996. The fiscal 1997
decrease is the result of the investment in several real estate partnerships
which will generate tax credits and the generation of tax-free interest on
several real estate loans.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are for continued expansion
of its asset acquisition and resolution and small ticket leasing subsidiaries,
activities that are the core of the Company's growth strategy. The Company will
add to its real estate loan portfolio as, and when, economically attractive
opportunities become available and, further, expects substantial ongoing growth
in its small ticket leasing activities. In energy, while the Company does not
envision substantial cash needs, it will seek to add to its reserve base through
selected acquisition of producing properties and further development of its
mineral interests.
The Company has been able to finance each of these activities
through a variety of sources including internally generated funds, borrowings
and financings through the placement of notes and sale of equity. The Company
expects to finance its future activities in a similar manner and is exploring
several alternative public and/or private financings that would provide it with
a significant increase in liquidity and capital to permit additional growth.
Sources and (uses) of cash for the three months ended December 31,
1996 and 1995 are as follows:
QUARTER ENDED DECEMBER 31,
1996 1995
(in thousands of dollars)
Provided by operations. . . . . . . . . . . . $ 2,339 $ 338
Provided by (used in) investing activities. . (32,058) 3,019
Provided by (used in) financing activities. . 32,886 (318)
-------- -------
$ 3,167 $ 3,039
======== =======
The Company had $7.3 million in cash and cash equivalents on hand at
December 31, 1996, as compared to $4.2 million at September 30, 1996. The
Company's ratio of current assets to current liabilities was 4.5:1 at December
31, 1996 and 3.7:1 on September 30, 1996. Working capital at December 31, 1996
was $6.8 million as compared to $4.4 million at September 30, 1996.
Cash provided by operating activities increased $2.0 million in the
first quarter of fiscal 1997, as compared to the first quarter of fiscal 1996.
The fiscal 1997 increase was primarily the result of an increase in operating
income in the asset acquisition and resolution business segment.
The Company's cash used in investing activities increased $35.1 million
in the first quarter of fiscal 1997, as compared to the first quarter of fiscal
1996. The changes resulted primarily from changes in the amount of cash used
to fund asset acquisition and resolution activities. The Company invested $27.9
million and $7.6 million in the acquisition of four loans
17
<PAGE 18>
in the first quarter of fiscal years 1997 and 1996, respectively. In addition,
the Company advanced funds on existing loans of $1.0 million and $195,000 in the
first quarter of fiscal years 1997 and 1996, respectively.
Cost of equipment acquired for lease represents the equipment cost
and initial direct costs associated with the start up of small ticket leasing
operations. The Company commenced leasing operations for its own account in
June 1996 and began to write leases in August 1996. Proceeds received upon
refinancings or the sale of participations amounted to $2.2 million and $10.9
million in the first quarters of fiscal years 1997 and 1996, respectively.
These proceeds reflect the refinancing or sale of participations in two and four
loans, of which gains were recognized on one and three of these loans in the
first quarter of fiscal 1997 and 1996, respectively. The increase in other
assets represents the investment of $1.5 million in several real estate
partnerships, some of which will generate tax credits.
The Company's cash flow provided by financing activities increased
$33.2 million during the first quarter of fiscal 1997, as compared to the first
quarter of fiscal 1996. In December 1996, the Company entered into a secured
revolving/term credit facility with a maximum credit limit of $20 million.
During the first quarter of fiscal 1997 the Company borrowed and subsequently
repaid $1.5 million under this line of credit agreement. In November 1996, the
Company completed a public offering of shares of its common stock and received
net proceeds (after all underwriting expenses) of $19.7 million. During the
first quarter of fiscal 1997, the Company also borrowed $13.4 million to fund
the acquisition of a mortgage loan on a property located in Philadelphia,
Pennsylvania. As discussed in Note 4, the Company also refinanced an unsecured
loan with a principal balance of approximately $530,000 with the proceeds of an
unsecured loan with a principal balance of $700,000.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
10.33 Credit Agreement, dated December 19, 1996, between Registrant
and Lehman Brothers Holdings, Inc.
10.34 Loan and Security Agreement, dated December 24, 1996, between
Registrant and CoreStates Bank, N.A. and First Union National
Bank
11 Calculation of Primary and Fully Diluted Earnings per share.
27 Financial Data Schedule
b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31, 1996.
18
<PAGE 19>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESOURCE AMERICA, INC.
(Registrant)
Date February 14, 1997 By /s/ Michael L. Staines
------------------------ -----------------------
Michael L. Staines
Senior Vice President and Secretary
Date February 14, 1997 By /s/ Nancy J. McGurk
------------------------ -----------------------
Nancy J. McGurk
Vice President - Finance and
Treasurer
19
Exhibit 10.33
CREDIT AGREEMENT
dated
December 19, 1996
between
RESOURCE COMMERCIAL MORTGAGES, INC.,
TUNLAW ASSOCIATES I, L.P. and
TUNLAW ASSOCIATES II, L.P.
Collectively, the Borrower
and
LEHMAN BROTHERS HOLDINGS INC.,
doing business as Lehman Capital,
a division of Lehman Brothers Holdings Inc.
Lender
TABLE OF CONTENTS
Page
----
Article 1 Definitions. . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . 1
Section 1.2 Gender, etc. . . . . . . . . . . . . . . . . 12
Section 1.3 Accounting Terms and Determinations. . . . . 12
Section 1.4 Other Defined Terms. . . . . . . . . . . . . 12
Article 2 The Loans. . . . . . . . . . . . . . . . . . . . . 13
Section 2.1 Commitment . . . . . . . . . . . . . . . . . 13
Article 3 The Note . . . . . . . . . . . . . . . . . . . . . 13
Section 3.1 Note . . . . . . . . . . . . . . . . . . . . 13
Section 3.2 Lost or Destroyed Note . . . . . . . . . . . 13
Article 4 Existing Mortgages/Debt Service Payment
Pursuant to Existing Debt Instruments. . . . . . . 14
Section 4.1 Existing Mortgages . . . . . . . . . . . . . 14
Section 4.2 Notices. . . . . . . . . . . . . . . . . . . 14
Article 5 Interest Rates . . . . . . . . . . . . . . . . . . 14
Section 5.1 Interest . . . . . . . . . . . . . . . . . . 14
Article 6 Payments and Prepayments . . . . . . . . . . . . . 15
Section 6.1 Type and Place of Payment. . . . . . . . . . 15
Section 6.2 Optional Prepayments . . . . . . . . . . . . 15
Section 6.3 Net Cash Flow Prepayments. . . . . . . . . . 15
Article 7 Additional Provisions Relating to Loan . . . . . . 15
Section 7.1 Indemnity. . . . . . . . . . . . . . . . . . 15
Section 7.2 Survival . . . . . . . . . . . . . . . . . . 16
Article 8 Representations and Warranties . . . . . . . . . . 16
Section 8.1 Authority. . . . . . . . . . . . . . . . . . 16
Section 8.2 Litigation . . . . . . . . . . . . . . . . . 18
Section 8.3 Indebtedness . . . . . . . . . . . . . . . . 18
Section 8.4 No Assignment. . . . . . . . . . . . . . . . 18
Section 8.5 Shareholders . . . . . . . . . . . . . . . . 18
Section 8.6 Organizational Documents . . . . . . . . . . 18
Section 8.7 Agreements Relating to the Premises. . . . . 18
Section 8.8 Shareholder Interests. . . . . . . . . . . . 19
Section 8.9 No Burdensome Restrictions . . . . . . . . . 19
Section 8.10 Taxes . . . . . . . . . . . . . . . . . . . 19
Section 8.11 ERISA . . . . . . . . . . . . . . . . . . . 19
Section 8.12 Collective Bargaining Agreements. . . . . . 19
Section 8.13 Judgments/Bankruptcy. . . . . . . . . . . . 20
Section 8.14 The Leases. . . . . . . . . . . . . . . . . 20
Section 8.15 Permits . . . . . . . . . . . . . . . . . . 20
Section 8.16 Documents . . . . . . . . . . . . . . . . . 20
Section 8.17 Due Diligence Reports . . . . . . . . . . . 21
Section 8.18 Federal Regulations . . . . . . . . . . . . 21
Article 9 Affirmative Covenants. . . . . . . . . . . . . . . 21
Section 9.1 Financial Statements and Reports. . . . . . 21
Section 9.2 Discussion and Further Financial
Information . . . . . . . . . . . . . . . . 22
Section 9.3 Maintenance of Records. . . . . . . . . . . 22
Section 9.4 Preservation of Assets. . . . . . . . . . . 22
Section 9.5 Taxes and Claims. . . . . . . . . . . . . . 22
Section 9.6 Utilities; Compliance with Applicable
Laws . . . . . . . . . . . . . . . . . . . 23
Section 9.7 Litigation. . . . . . . . . . . . . . . . . 23
Section 9.8 Insurance . . . . . . . . . . . . . . . . . 23
Section 9.9 Environmental Compliance. . . . . . . . . . 24
Section 9.10 Compliance with Contractual Obligations . . 24
Section 9.11 Notices . . . . . . . . . . . . . . . . . . 24
Section 9.12 Management Control. . . . . . . . . . . . . 25
Section 9.13 Tenant Estoppel Certificates. . . . . . . . 25
Section 9.14 Physical Condition of the Premises. . . . . 25
Section 9.15 Intentionally Omitted . . . . . . . . . . . 26
Section 9.16 Intentionally Omitted.. . . . . . . . . . . 26
Section 9.17 Insurance Coverage. . . . . . . . . . . . . 26
Section 9.18 Rents.. . . . . . . . . . . . . . . . . . . 26
Section 9.19 Leases. . . . . . . . . . . . . . . . . . . 26
Section 9.20 Inspections.. . . . . . . . . . . . . . . . 26
Section 9.21 Borrower as Owner.. . . . . . . . . . . . . 26
Article 10 Negative Covenants. . . . . . . . . . . . . . . . 27
Section 10.1 Same Line of Business. . . . . . . . . . . 27
Section 10.2 Merger and Consolidation . . . . . . . . . 27
Section 10.3 Corporation. . . . . . . . . . . . . . . . 27
Section 10.4 Transactions with Affiliates . . . . . . . 27
Section 10.5 Sale of Assets . . . . . . . . . . . . . . 28
Section 10.6 Debt . . . . . . . . . . . . . . . . . . . 28
Section 10.7 Liens. . . . . . . . . . . . . . . . . . . 28
Section 10.8 No Assignment. . . . . . . . . . . . . . . 28
Section 10.9 Compliance with ERISA. . . . . . . . . . . 29
Section 10.10 No Amendments/Termination. . . . . . . . . 29
Section 10.11 Intentionally Omitted. . . . . . . . . . . 29
Section 10.12 Tenant Improvements. . . . . . . . . . . . 29
Article 11 Conditions Precedent. . . . . . . . . . . . . . . 29
Section 11.1 Conditions Precedent to Purchase Loan . . . 29
Section 11.2 Conditions to the Loan. . . . . . . . . . . 32
Article 12 Events of Default . . . . . . . . . . . . . . . . 32
Section 12.1 Events of Default.. . . . . . . . . . . . . 32
Article 13 Miscellaneous 35 . . . . . . . . . . . . . . . . .35
Section 13.1 Successors and Assigns. . . . . . . . . . . 35
Section 13.2 Notices . . . . . . . . . . . . . . . . . . 36
Section 13.3 Amendment and Waiver. . . . . . . . . . . . 37
Section 13.4 Execution in Counterparts . . . . . . . . . 37
Section 13.5 Costs, Expenses, etc. . . . . . . . . . . . 37
Section 13.6 Commitment Letter . . . . . . . . . . . . . 38
Section 13.7 Usury Laws. . . . . . . . . . . . . . . . . 38
Section 13.8 Indemnity for Transfer and Gains
Taxes/Other Liabilities . . . . . . . . . . 38
Section 13.9 Limited Liability . . . . . . . . . . . . . 39
Section 13.10 Intentionally Omitted. . . . . . . . . . . 40
Section 13.11 No Reliance.. . . . . . . . . . . . . . . . 40
Section 13.12 Headings; Table of Contents.. . . . . . . . 40
Section 13.13 Severability. . . . . . . . . . . . . . . . 40
Section 13.14 Law Governing . . . . . . . . . . . . . . . 40
Section 13.15 Consent to Jurisdiction . . . . . . . . . . 40
Section 13.16 Waiver of Jury Trial. . . . . . . . . . . . 41
Section 13.17 Joint and Several Liability . . . . . . . . 41
Section 13.18 Securitization. . . . . . . . . . . . . . . 41
EXHIBITS
Exhibit A Form of Note
Exhibit B Collateral Assignment
Exhibit C Guarantee
Exhibit D Mortgage
Exhibit E Permitted Encumbrances
Exhibit F [Intentionally Omitted]
Exhibit G Existing Debt Instruments and
Other Documents
Exhibit H Assignment of Rents
Exhibit I Environmental Indemnity
Exhibit J Estoppel Certificate
Exhibit K Intentionally Omitted
Exhibit L Auction Lease Assignment
Exhibit M Auction Mortgage Assignment
Exhibit N Power of Attorney
Exhibit O Lockbox Agreement
Schedules
- ---------
Schedule I Existing Mortgages
Schedule II Material Agreements
Schedule III Violations
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of December 19, 1996 between RESOURCE
COMMERCIAL MORTGAGES, INC. ("RCMI") a Delaware corporation, TUNLAW ASSOCIATES
I, L.P., a Pennsylvania limited partnership ("Tunlaw I") and TUNLAW ASSOCIATES
II, L.P., a Pennsylvania limited partnership ("Tunlaw II") (RCMI, RP28 and RP29,
individually and collectively referred to herein as the "Borrower") each having
an office at 1521 Locust Street, Philadelphia, Pennsylvania 19102 and LEHMAN
BROTHERS HOLDINGS INC., doing business as Lehman Capital, a division of Lehman
Brothers Holdings Inc., a Delaware corporation (the "Lender") with an office at
3 World Financial Center, New York, New York 10285.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Purchase and Sale Agreement ("Purchase
Agreement") dated as of November 6, 1996 by and among RCMI, Resources Properties
XXVIII ("RP28") and Resources Properties XXIX ("RP29") (collectively as buyer),
ALI Inc., ("ALI"), Walnut I Inc. and Walnut II Inc. (Walnut I Inc. and Walnut
II Inc., collectively "Walnut") ("Walnut" and "ALI", collectively the "Seller"),
the Seller agreed to sell and assign the Partnership Interests, the Existing
Debt and the Existing Debt Instruments to the Borrower; and
WHEREAS, the Borrower has requested that Lender fund a portion of the
purchase price to be paid by the Borrower under the Purchase Agreement; and
WHEREAS, Lender has agreed to fund a portion of the purchase price
pursuant to the terms of this Credit Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Article 1
Definitions
-----------
Section 1.1 DEFINITIONS. Capitalized terms used herein shall have
the meanings set forth in this Credit Agreement and the following terms, as used
herein, shall have the following meanings:
"Affiliate" shall mean as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such Person. For purposes of this definition, a Person shall be
deemed to be "controlled by" a Person if such Person possesses, directly or
indirectly, the power either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (b) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Air Rights Parcel" shall have the meaning ascribed thereto in the
Collateral Assignment.
"Assignment of Rents" shall mean the Assignment of Rents and Leases
in the form of EXHIBIT H hereto to be executed and delivered by the RCMI and
recorded when required or permitted by the Loan Documents.
"Auction Lease Assignment" shall mean the Assignment of Sublessor's
Interest in Sublease in the form annexed hereto as EXHIBIT L to be executed and
delivered by RCMI when permitted or required by the Collateral Assignment.
"Auction Mortgage Assignment" shall mean the Assignment of Mortgagee's
Interests in the form annexed hereto as EXHIBIT M to be delivered by RCMI and
recorded when permitted or required by the Collateral Assignment.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in New York are authorized or required to be closed.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Assignment" shall mean the Collateral Assignment of Loan
Documents in the form of EXHIBIT B hereto, to be executed and delivered by RCMI
to the Lender.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect, directly or indirectly, guaranteeing
payment or collection of any indebtedness, lease, dividend or other obligation
(the "primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor or to permit the primary obligor to meet financial covenants,
(c) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d) otherwise to assure
or hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Lender in good faith.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Agreement" shall mean this Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"Default" shall mean any event or condition which with a giving of
notice and/or passage of time shall become an Event of Default.
"Designated Affiliate" shall mean any directly or indirectly wholly-
owned subsidiary, branch or agency of Lender.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Easements and Appurtenances" shall having the meaning ascribed
thereto in the Collateral Assignment.
"Environmental Indemnity" shall mean the Environmental
Representations, Covenants and Indemnity in the form of EXHIBIT I hereto.
"Environmental Liabilities" shall mean any and all claims, demands,
penalties, fines, liabilities, settlements, damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' and reasonable
consultants' fees and disbursements, remedial investigation and feasibility
study costs, clean-up costs and other response costs under the Environmental and
Safety Laws, currently in existence or which may be enacted in the future,
laboratory fees, court costs and litigation expenses) of whatever kind or
nature, known or unknown, contingent or otherwise, arising out of or in any way
related to (i) the presence, disposal or release of any Hazardous Materials
which are on, from or which affect the Premises or any part thereof, including,
without limitation, soil, water, vegetation, buildings, equipment, personal
property, or which affect Persons, animals or otherwise; (ii) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Materials or damage to wetlands whether or
not relating to Hazardous Materials; (iii) any lawsuit brought or threatened,
settlement reached, or government order or directive relating to such Hazardous
Materials; and/or (iv) any violation of any Requirement of Law or requirements
or demands of any Governmental Authority, which are based upon or in any way
related to such Hazardous Materials and which are paid or incurred by the Lender
or any other Indemnified Party.
"Environmental and Safety Laws" shall mean all Requirements of Law
relating to the environment and workplace safety including, without limitation,
the Clean Air Act ("CAA"), the Clean Water Act ("CWA"), the Toxic Substances
Control Act ("TSCA"), the Hazardous Materials Transportation Act ("HMTA"), the
Resource Conservation and Recovery Act, as amended ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), as modified
by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Emergency Planning and Community Right to Know Act ("EPCRA"), the Noise Control
Act ("NCA"), the Occupational Health and Safety Act ("OSHA"), the Safe Drinking
Water Act and the Federal Insecticide, Fungicide and Rodenticide Act, as any
such Requirements of Laws may be amended, supplemented or otherwise modified
from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower would be deemed to be a single
employer under Section 414 of the Code.
"Estoppel Certificate" shall mean (x) an Estoppel Certificate in
substantially the form of EXHIBIT J hereto or (y) if a tenant under a Major
Lease has its own form of estoppel certificate which it uses in the ordinary
course for such purposes, such tenant's form of estoppel certificate; in each
case as the same may be amended, supplemented or otherwise modified from time
to time.
"Event of Default" shall mean any one or more of the events set forth
in Section 12.1 hereof.
"Existing Debt" shall mean the indebtedness of Mutual Associates
and/or Walnut Associates evidenced by the Existing Notes together with all
accrued and unpaid interest thereon and other amounts payable with respect
thereto.
"Existing Debt Instruments" shall mean, collectively, the Existing
Mortgages, Existing Notes, and any other agreements or instruments delivered in
connection with or pursuant thereto as any of such mortgages, notes, agreements
or instruments may be amended, modified or supplemented from time to time.
"Existing Mortgages" shall mean, collectively the mortgages described
in the SCHEDULE "I" attached hereto, each, an "Existing Mortgage" as the same
may be amended, modified or supplemented from time to time.
"Existing Notes" shall mean collectively, the promissory notes secured
by the Existing Mortgages and each, an "Existing Note" as the same may be
amended, modified or supplemented from time to time.
"Final Date" shall mean the earlier of (i) January 1, 1999 or (ii) the
day on which any Person redeems the Premises following the foreclosure sale of
an Existing Mortgage.
"GAAP" shall mean generally accepted accounting principles in the
United States of America consistent with those utilized in preparing the audited
financial statements referred to in Section 9.1(a).
"Governmental Authority" shall mean any sovereign state or nation or
government, any state or district or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee" shall mean a guarantee in the form of EXHIBIT C hereto,
to be delivered by the Guarantor to the Lender.
"Guarantor" shall mean Resource Properties, Inc., a Delaware
corporation.
"Hazardous Materials" shall mean, without limitation, any flammable
material, explosives, radioactive materials, gasoline, petroleum products,
asbestos, urea formaldehyde, polychlorinated biphenyls, hazardous materials,
hazardous wastes, hazardous or toxic substances, or related materials as defined
in the Environmental and Safety Laws.
"Improvements" shall have the meaning ascribed thereto in the
Collateral Assignment.
"Indemnified Party" shall mean the Lender, each Designated Affiliate
and each of their respective successors, assigns, officers, directors, agents
and employees.
"Indemnified Liabilities" shall have the meaning ascribed thereto in
Section 13.8(b).
"Interest Payment Date" shall mean the first day of each calendar
month commencing February 1, 1997 and the Final Date or such earlier date on
which demand for payment is made by the Lender in accordance herewith.
"Land" shall have the meaning ascribed thereto in the Collateral
Assignment.
"Leases" shall mean all leases and other agreements now in effect or
hereafter made affecting the use, enjoyment or occupancy of all or any part of
the Air Rights Parcel, the Land, Improvements or Easements and Appurtenances,
together with all extensions, renewals and/or modifications of, and
substitutions for, the same.
"LIBOR" shall mean for any date the rate quoted in the most recent
issue of THE WALL STREET JOURNAL as the one month London Interbank Offered Rate
in its "Money Rate" column, or if such newspaper ceases to publish such rate,
such other public source of LIBOR Rate quotes as the Lender shall select in its
reasonable judgment.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or interest or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease, and the filing of
any UCC financing statement (but only to the extent any such financing statement
purports to record the grant of a security interest and not including any
financing statements filed for notice purposes only) under the UCC or comparable
law of any jurisdiction in respect of any of the foregoing.)
"Loan" shall mean the indebtedness evidenced by the Note and secured
by the Loan Documents.
"Loan Documents" shall mean, collectively, the Credit Agreement, the
Note, the Security Instruments, the Guaranty, the Lockbox Agreement, the Power
of Attorney, the Stock Pledge Agreement and all other documents, instruments and
agreements delivered in connection herewith and therewith, as the same may from
time to time be amended, modified, supplemented or restated.
"Loan Servicer" shall mean Equitable Real Estate Investment Management
Inc. or such other Loan Servicer as Lender may select to service the Loan.
"Lockbox Agreement" shall mean the Lockbox, Pledge and Security
Agreement in the form annexed hereto as EXHIBIT O to be executed and delivered
by the Borrower to the Lender.
"Major Lease" shall mean a lease or leases of more than 5,000 square
feet of space in any portion of the Premises to any Person and/or such Person's
Affiliate(s) and whether or not such space is contiguous.
"Management Change Date" shall mean, with respect to each portion of
the Premises, the date the Borrower or its Affiliate takes title to the Premises
or exercise Management Control.
"Management Control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction, through contract or
otherwise, of the operation of any portion of the Premises, including, without
limitation, the discretion to, with respect to the Premises or any portion
thereof, (a) employ, pay, supervise and discharge employees and personnel; (b)
supervise and maintain books and records; (c) negotiate and enter into Leases,
subleases and licenses; (d) make or cause necessary repairs or replacements; (e)
negotiate and enter into service contracts; (f) pay and discharge in the
ordinary course costs and expenses incident to the operation of the Premises;
and (g) collect Rents; provided, however, that when used in the definition of
Management Change Date, Management Control shall not be deemed to exist unless
the Borrower has each of the powers set forth in clauses (a) through (g) above
(whether exercised directly or indirectly through delegation or a management or
other agreement).
"Mortgage" shall mean the Mortgage, Assignment of Rents and Security
Agreement substantially in the form of EXHIBIT D hereto to be executed and
delivered by RCMI and recorded when required or permitted by the Loan Documents.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Mutual Associate" shall mean Mutual Associates LTD., a Pennsylvania
Limited Partnership with an address at 1845 Walnut Street, Philadelphia,
Pennsylvania 19103.
"Net Cash Flow" for a given month shall mean the Revenues for such
month minus the Operating Expenses for such month.
"Note" shall mean the secured note in the form of EXHIBIT A hereto to
be executed and delivered by the Borrower to the Lender.
"Obligations" shall mean all of the obligations (monetary or
otherwise) of the Borrower to the Lender arising under or in connection with the
Loan Documents (whether denominated as principal, interest, fees or otherwise),
including, without limitation, the Borrower's obligations under the Note.
"Operating Expenses" for a given month shall mean (x) prior to a
Management Change Date, all amounts paid by the Borrower as protective advances
to preserve its rights under the Existing Mortgages and repayment of which is
secured by the lien of the Existing Mortgages and all required interest payments
on the Loan which are actually made by the Borrower and (y) after a Management
Change Date, the amount of all expenses paid during such month by the Borrower
in respect of the ownership, repair, maintenance and operation of the Premises,
determined on a cash basis, including, without limitation and without
duplication, (a) payroll expenses and taxes, (b) prorated real estate taxes, (c)
insurance premiums, (d) water, sewer and utility charges, (e) cost of leasing
or purchase of equipment (exclusive of costs which are excluded as capital
improvements under subparagraph "(4)", below), (f) reasonable management fees,
(g) costs of repairs and maintenance, (h) leasing expenses, (i) charges under
cleaning, security and other service contracts, (k) license and permit fees, (l)
cost of supplies, and (n) scheduled payments of interest on the Note provided,
however, that Operating Expenses shall not include (1) expenses paid for
repairing damage to the Premises to the extent of insurance proceeds actually
received or receivable by the Borrower in connection with such damage; (2)
depreciation, (3) interest on or amortization of indebtedness owed by the
Borrower with respect to indebtedness other than the Note; (4) the cost of
capital improvements, and (5) the cost to remove, encapsulate or otherwise
remediate asbestos, asbestos-containing materials and lead paint at any portion
of the Premises.
"Operating Statement" shall mean a monthly statement for the Premises,
which statement shall include, without limitation, (i) a Rent Roll which
includes tenancy arrearages; (ii) a statement of income and expenses on an
accrual basis for the Premises for the most recently ended fiscal year of the
Borrower; (iii) a cash budget for the fiscal period in which such Operating
Statement is delivered; (iv) copies of all new Leases and any modifications to
any existing Leases with respect to all or any part of the Improvements
certified by the Borrower as true, complete, and correct; and (v) such other
information about the operation of the Premises as the Lender may reasonably
request. Prior to a Management Change Date, all information in each Operating
Statement shall be to the best of Borrower's knowledge and, after a Management
Change Date, shall be certified as true and correct without qualification.
"Owner" shall mean each Person which has legal or beneficial title to
any portion of the Premises.
"Partnership Interests" shall mean the general partnership interest
in Mutual Associates owned by Walnut II Inc. and the limited partnership
interest in Walnut Associates owned by Walnut I Inc.
"Payment Office" shall have the meaning ascribed thereto in Section
6.1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, and any successor to PBGC.
"Permitted Encumbrances" shall mean those outstanding liens,
easements, restrictions, security interests and other matters affecting the
Premises identified on EXHIBIT E.
"Person" shall mean an individual, corporation, limited liability
company, business trust, partnership, joint tenant or tenant-in-common, trust,
unincorporated organization, or other entity, or a federal, state or local
government or any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan which is subject to ERISA
and which covers the employees or former employees of the Borrower or an ERISA
Affiliate, or under which the Borrower or an ERISA Affiliate has any obligations
or liability, or under which the Borrower or an ERISA Affiliate has made
contributions within the preceding five years.
"Power of Attorney" shall mean the power of attorney annexed hereto
in the form of EXHIBIT N to be delivered by the Borrower.
"Premises" shall have the meaning ascribed thereto in the Collateral
Assignment.
"Purchase Loan" has the meaning ascribed thereto in Section 2.1.
"Recourse Event" shall mean the occurrence of any of the following:
(i) if the Borrower or any Guarantor commences a case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its his debts,
or (B) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or the
Borrower or any Guarantor shall make a general assignment for the benefit of its
creditors; (ii) if Borrower or Guarantor has filed against it an involuntary
petition (an "Involuntary Petition") for bankruptcy protection under the United
States Bankruptcy Code or involuntary becomes subject to any reorganization,
receivership, insolvency proceeding or other similar proceeding pursuant to any
other Federal or State law affecting debtor and creditor rights and, in the
event of an Involuntary Petition (except if such Involuntary Petition is brought
by Lender), such Involuntary Petition is not discharged within 90 days of
filing; (iii) any sale, assignment, transfer or other disposition of all or any
interest in the Existing debt, the Existing Debt Instruments, the Loan, the Loan
Documents or any direct or indirect ownership interest in Borrower, including,
without limitation, any transfer of a shareholder interest without Lender's
prior written consent; (iv) if the Borrower or any Guarantor contests the
validity or enforceability of this Credit Agreement, the Note or any of the
Security Instruments or Loan Documents (including, without limitation, the
Guaranty provided, however, nothing herein shall preclude Borrower or Guarantor
from challenging the wrongful acts of Lender or enforcing their respective
rights under the Loan Documents); (v) any amendment or modification of or
supplement to any of the Existing Debt Instruments or any waiver of the terms
thereof (or any agreement to forbear from exercising any rights thereunder shall
be given) shall be entered into voluntarily by the Borrower or become effective
with Borrower's consent without Lender's prior written consent in each instance;
(vi) Borrower, any Guarantor or any of their Affiliates (except with respect to
wrongful acts of Lender or enforcing their respective rights under the Loan
Documents) or any third party impairs Lender's rights under the Collateral
Assignment, Stock Pledge Agreement or any other Security Instrument or the
enforceability thereof or contests or challenges the validity of, or hinders
Lender's rights or remedies under any of the Loan Documents or Existing Debt
Instruments; (vii) Borrower shall fail, in any foreclosure proceeding/sale
relating to the Premises, to bid in the outstanding principal amount of the
Existing Notes and other amounts payable with respect thereto as required by
Section 3(b) of the Collateral Assignment; (viii) Borrower or any Guarantor or
any of their Affiliates takes title to the Premises or any part thereof and
fails to simultaneously mortgage such property to Lender as required by the
Credit Agreement or any other Loan Documents; (ix) Borrower, Guarantor or any
of their Affiliates fails to pay over to the Lender all proceeds of any
foreclosure or sale of the Premises as required by any of the Loan Documents
(the foregoing shall not be construed as a consent to any sale or other action
otherwise prohibited by the terms of any of the Loan Documents); (x) Borrower
shall interfere with on-site inspections or fail to deliver financial
information as required by the Loan Documents; (xi) any financial information
concerning the Borrower or any Guarantor is fraudulent in any respect, contains
any fraudulent information or misrepresents in any material respect the
financial condition of the Borrower or any Guarantor; (xii) Borrower shall fail
to obtain Lender's prior written consent to any subordinate financing; or (xiii)
Borrower or Guarantor commits, or it becomes known that either one of them has
committed, intentional willful misconduct, intentional physical waste (excluding
normal wear and tear) of the Premises or any intentional misappropriation of
funds, including but not limited to the following: (a) retention by Borrower,
Guarantor, or any affiliate of rents or other income arising with respect to the
Premises or any part thereof, which rents or other income are collected by
Borrower, Guarantor or any affiliate or property manager at the direction of the
Borrower, Guarantor or any affiliate after the Lender has given notice (in
accordance with the Loan Documents) that Borrower is in breach or default under
the Loan Documents; (b) the removal or disposition by Borrower, Guarantor any
affiliate or any property manager at the direction of the Borrower, Guarantor
or any affiliate of any equipment, fixtures or other property from the Premises,
in violation of the terms of the Loan Documents or a valid court order; (c) the
misapplication by Borrower, Guarantor, or any affiliate of any proceeds in
violation of the terms of the Loan Documents under any insurance policies or
awards resulting from condemnation or the exercise of the power of eminent
domain by reason of damage, loss or destruction of any portion of the Property
and the failure to pay any deductible amount (including but not limited to a
deductible for windstorm and related events) whether pursuant to any such
insurance policies or otherwise. If any of the foregoing events occur, in
addition to Guarantor's liability for all sums due and owing on the Note,
Guarantor shall be liable for all damages and reasonable attorney's fees
incurred by Noteholder resulting from such events, plus interest at the Default
Rate (as defined in the Note) on any such sums.
"Rent Roll" shall mean a rent roll certified by an officer of the
Borrower in a form reasonably satisfactory to the Lender as the same may be
amended, supplemented or otherwise modified from time to time and which shall
be delivered to the Lender at such dates as are required by the terms hereof and
which, in each case, shall be dated not more than thirty days before the date
of delivery thereof.
"Requirement of Law" shall mean as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law (including, without limitation, any Environmental and Safety
Law), treaty, rule, regulation, code, directive, policy, order or requirement
or determination of an arbitrator or a court or other Governmental Authority
whether now or hereafter enacted or in effect, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Revenues" for any month shall mean (x) prior to a Management Change
Date, all payments received by or for the Borrower, or subject to application
by Borrower pursuant to, the Existing Debt Instruments less all amounts required
by the Existing Debt Instruments to be paid over to Mutual Associates or Walnut
Associates or any reserve account pursuant to the Existing Debt Instruments and
(y) after a Management Change Date, the gross rental income (including, without
limitation, base rentals, revenues from escalations, electric inclusion, tenant
service income (to the extent costs of providing such services are included in
Operating Expenses)) actually received from tenants in such month pursuant to
lease agreements for space in any of the Premises, as well as any payments by
any Affiliate of the Borrower to Borrower or any Affiliate of the Borrower under
any ground or other lease of, or any concession or similar agreement relating
to, any portion of the Premises.
"Security Instruments" shall mean, collectively, (i) the Collateral
Assignment; (ii) the UCC-1 Financing Statements to be delivered by the Borrower
to the Lender; (iii) the Assignment of Rents; (iv) the Mortgage; (v) Lockbox
Agreement; (vi) Auction Mortgage Assignment; (vii) Auction Lease Assignment;
(viii) the Guarantee and (ix) the Stock Pledge Agreement.
"Stock Pledge Agreement" shall mean individually and collectively:
those certain Partnership Pledge Agreements executed by the parties of Tunlaw
Associates I, L.P. and Tunlaw Associates II, L.P. in favor of Lender dated the
date hereof.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Walnut Associates" shall mean 1845 Walnut Associates, a Pennsylvania
general partnership with an address at 1845 Walnut Street, Philadelphia,
Pennsylvania 19103.
Section 1.2 GENDER, ETC. As used in this Credit Agreement, words in
the neuter gender include the masculine and feminine genders, and VICE VERSA,
where the context so requires. Words defined in the singular when used in the
plural shall have the same meanings ascribed to them.
Section 1.3 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
defined or specified herein all accounting terms shall be construed herein and
all accounting determinations hereunder shall be made in accordance with
generally accepted accounting principles consistently applied. All financial
statements required to be delivered hereunder shall be prepared, and all
financial records shall be maintained in accordance with generally accepted
accounting principles consistently applied except as otherwise specified herein.
Section 1.4 OTHER DEFINED TERMS. Unless otherwise specified, the
words "hereof", "herein", and "hereunder" and words of similar import when used
in this Credit Agreement shall refer to this Credit Agreement as a whole and not
to any particular provision of this Credit Agreement, all references to any
Article or Section without reference to a particular agreement are to an Article
or Section of this Credit Agreement, and all references to any schedule, exhibit
and the like without reference to a particular agreement are to the schedules
and exhibits attached to this Credit Agreement.
Article 2
The Loans
---------
Section 2.1 COMMITMENT. (a) Subject to the terms and conditions of
this Credit Agreement, the Lender agrees to make a loan (the "Purchase Loan")
to the Borrower in an aggregate principal amount not exceeding $13,370,000 and
such funds shall be used to fund a portion of the cash purchase price to be paid
pursuant to the Purchase Agreement.
(b) Proceeds of the Loans shall not be used for any purpose or
to fund any payment except as provided in this Section 2.1.
(c) Principal amounts of the Loan which are prepaid or repaid
may not be reborrowed.
Article 3
The Note
--------
Section 3.1 NOTE.
(a) The principal amount of the Loan shall be evidenced by the
Note. The Note shall be dated the date hereof and shall bear interest as
provided in Section 5.1 hereof.
(b) The then outstanding principal amount of the Loan evidenced
by the Note shall be repaid in full on the Final Date.
(c) The Lender shall, and is hereby authorized by the Borrower
to, endorse on any schedule forming a part of a Note, appropriate notations
evidencing the outstanding principal amount of the Loan, the date and amount of
each payment or prepayment of principal made by the Borrower with respect
thereto, and the interest rate and the amount and the date to which interest has
been paid thereon. No failure to make or error in making any such notation
shall affect the obligations of the Borrower hereunder or under the Note to pay
the Obligations, which obligation to pay is absolute and unconditional.
Section 3.2 LOST OR DESTROYED NOTE. Upon the receipt of evidence
reasonably satisfactory to the Borrower of the loss, theft, destruction or
mutilation of the Note, and in the case of any loss, theft or destruction upon
delivery to the Borrower of a bond or indemnity or in the case any such
mutilation of a note, upon surrender to the Borrower of such note, the Borrower
will issue a new note, of like tenor and principal amount and dated as of the
date to which interest has been paid on the note so lost, stolen, destroyed or
mutilated, in lieu of or in exchange for such lost, stolen, destroyed or
mutilated note, but representing the same indebtedness evidenced by the lost,
stolen, destroyed or mutilated note.
Article 4
Existing Mortgages/Debt Service Payment
Pursuant to Existing Debt Instruments
-------------------------------------
Section 4.1 EXISTING MORTGAGES. RCMI shall execute the Lockbox
Agreement, which agreement directs RCMI to notify Mutual Associates and Walnut
Associates that all required payments under the Existing Debt Instruments shall
be made directly into a lockbox account established pursuant to the Lockbox
Agreement.
Section 4.2 NOTICES. The Borrower shall promptly send to Lender's
Loan Servicer copies of all notices received by the Borrower from Mutual
Associates and/or Walnut Associates, and any successor Owner.
Article 5
Interest Rates
--------------
Section 5.1 INTEREST.
(a) INTEREST RATE. Prior to maturity, the Loan shall bear
interest on the unpaid principal balance thereof for each successive thirty day
period at a rate per annum (based upon a year of 360 days for the actual number
of days elapsed) equal to the greater of (x) LIBOR plus three hundred fifty
(350) basis points and (y) 8.75% per annum.
(b) DEFAULT RATE. If all or a portion of the principal amount
of the Loan, interest accrued thereon or any other Obligations shall not be paid
when due (whether at stated maturity, by acceleration or otherwise), such
amounts shall bear interest at the rates set forth in the Note.
(c) INTEREST PAYABLE. Interest shall be payable at the times
and in the amounts set forth in the Note, prior to maturity, at maturity, and
after maturity, on demand.
(d) DETERMINATION OF INTEREST. Each determination of an
interest rate by the Lender pursuant to any provision of this Credit Agreement
or the Note shall be conclusive and binding on the Borrower in the absence of
manifest error.
Article 6
Payments and Prepayments
------------------------
Section 6.1 TYPE AND PLACE OF PAYMENT.
All payments (including prepayments) to be made by the Borrower on
account of principal, interest and fees shall be made without setoff, deduction
or counterclaim in Dollars and in immediately available funds on the date due
hereunder and shall be made to the Lender to its account at such address as
Lender shall give notice of in writing to the Borrower (the "Payment Office").
If any payment on the Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day (and interest shall accrue for such extension of time) unless the
result of such extension would be to extend such payment into another calendar
month in which event such payment shall be made on the immediately preceding
Business Day.
Section 6.2 OPTIONAL PREPAYMENTS. The Borrower may, on any Interest
Payment Date, prepay the Loan in whole only (subject to application of Net Cash
Flow to reduce principal as set forth herein), without premium or penalty, upon
written notice to the Lender by the Borrower of at least 30 days, specifying the
date of prepayment. If any such notice is given, the Borrower shall make such
prepayment to the Lender at the Payment Office, and the payment amount specified
in such notice shall be due and payable on the date specified therein together
with accrued and unpaid interest thereon to such date.
Section 6.3 NET CASH FLOW PREPAYMENTS. Notwithstanding anything to
the contrary contained herein, the outstanding principal balance of the Note may
be prepaid in part, without premium or penalty, by the application of the
remaining Net Cash Flow to principal reduction after Borrower's permitted return
on equity in accordance with the following section.
Section 6.4 NET CASH FLOW APPLICATION. Borrower shall pay to Lender
monthly the amount of interest and any other charges then owing on the Note and
the Other Loan Document as designated by Lender in a notice or billing to
Borrower ("DEBT SERVICE"). If Net Cash Flow shall be insufficient to pay the
Debt Service, Borrower shall make payment of any shortfall amount to Lender by
payment to Lender on or prior to the date the same is due in accordance with the
Note and the other Loan Documents from sources other than the debt service
payments made by the Owner. After Debt Service is paid, provided no Event of
Default exists under any of the Loan Documents, any Net Cash Flow shall be
distributed as follows: (i) $47,750 representing the permitted return on cash
invested by Borrower ("Permitted Return") shall be retained by Borrower and (ii)
any remaining Net Cash Flow shall be paid to Lender with the Debt Service
payment and shall be used by Lender to amortize the Loan. Borrower shall
deliver to Lender monthly copies of the checks received from Owner representing
payments under the Existing Debt Instruments.
Article 7
Additional Provisions Relating to Loan
--------------------------------------
Section 7.1 INDEMNITY. The Borrower agrees to indemnify the Lender
and to hold the Lender harmless from any cost, damage, loss or expense
(including, without limitation, reasonable attorneys' fees and disbursements)
which the Lender may sustain or incur as a consequence of (a) default by the
Borrower in payment when due of the principal amount of or interest on the Loan,
(b) default by the Borrower in making any prepayment after the Borrower has
given a notice in accordance with Section 6.2 of a prepayment of the Loan
including, but not limited to, in each case, any loss, cost, damage or expense
arising from interest or fees payable by the Lender to lenders of funds obtained
by it in order to maintain the Loan hereunder or from fees payable to terminate
the deposits from which such funds were obtained. A certificate as to such
costs, losses, damages, and expenses setting forth the calculations therefor,
shall be submitted promptly by the Lender to the Borrower and shall be
conclusive and binding on the Borrower in the absence of manifest error.
Section 7.2 SURVIVAL. The covenants set forth in this Article 7
shall survive termination of this Credit Agreement and payment of the Note.
Article 8
Representations and Warranties
------------------------------
To induce the Lender to enter into this Credit Agreement and to extend
the Loan to the Borrower as contemplated herein, the Borrower makes the
following representations and warranties to the Lender:
Section 8.1 AUTHORITY.
(a) RCMI, Tunlaw I and Tunlaw II are each duly organized and
validly existing under the laws of the state of organization or incorporation.
The Borrower has the power to own and hold the properties it purports to own and
hold, and to carry on its business as now being conducted and proposed to be
conducted, and has the power to execute, deliver, and perform its obligations
under the Existing Debt Instruments, the Purchase Agreement, the Stock Pledge
Agreement and its Obligations under, this Credit Agreement, the Note, the
Security Instruments and the other Loan Documents to which it is a party.
(b) The execution, delivery and performance by the Borrower of
its obligations under this Credit Agreement, the Note, the Security Instruments,
the other Loan Documents to which the Borrower is a party and the Stock Pledge
Agreement and the performance by the Borrower of its obligations under the
Purchase Agreement, Stock Pledge Agreement and Existing Debt Instruments has
been authorized by all necessary action (including any necessary vote or consent
of the shareholders or partners of Borrower); the Credit Agreement, Note,
Security Instruments and the other Loan Documents and the Stock Pledge Agreement
have been duly executed and delivered by the Borrower for good and valuable
consideration; and the Loan Documents, the Purchase Agreement and the Existing
Debt Instruments constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms subject, in each case, to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, to
moratorium laws from time to time in effect and to general principles of equity
(regardless of whether such enforceability is considered in an action or
proceeding in equity or at law).
(c) Neither the execution and delivery of this Credit Agreement
nor the execution and delivery of the Note, the Security Instruments, the other
Loan Documents to which the Borrower is a party or the Stock Pledge Agreement,
nor consummation by the Borrower of the transactions herein or therein
contemplated, nor compliance by the Borrower with the terms, conditions and
provisions of the Existing Debt Instruments, hereof and thereof will conflict
with or result in a breach of any of the terms, conditions or provisions of (i)
the respective organizational documents of the Borrower, (ii) any Contractual
Obligation to which the Borrower is now a party or the rights under which have
been assigned to the Borrower or the obligations under which have been assumed
by the Borrower or to which the property of the Borrower is subject or
constitute a default thereunder, or result thereunder in the creation or
imposition of any Lien upon any of the properties or assets of the Borrower,
(iii) any judgment or order, writ, injunction, decree or demand of any court,
or (iv) any applicable Requirement of Law. Borrower has all necessary licenses,
permits and other consents from Governmental Authorities necessary to the
performance of the Borrower's Obligations under the Security Instruments, the
other Loan Documents and its obligations under the Existing Debt Instruments.
(d) No action of, or filing with, any public body or
Governmental Authority or any other Person is required to authorize, or is
otherwise required in connection with, the execution, delivery and performance
of this Credit Agreement, the Note, the Security Instruments, the other Loan
Documents, the Purchase Agreement, or the Stock Pledge Agreement except for the
recordation of the Security Instruments and the filing of relevant UCC financing
statements.
Section 8.2 LITIGATION. There are no actions, suits or proceedings
pending or, to the actual knowledge of the Borrower, threatened by or against
or involving the Borrower at law or in equity or before or by any Governmental
Authority or before any arbitrator of any kind. To the best knowledge of the
Borrower, there is no pending or, to the actual knowledge of the Borrower,
threatened, investigation against or involving the Borrower, Mutual Associates
and/or Walnut Associates or the Premises, or any part thereof, by or before any
Governmental Authority. The Borrower is not in default with respect to any
judgment, order, writ, injunction, decree, rule or regulation of any arbitrator
or Governmental Authority which involves a reasonable possibility of a material
adverse change in the financial condition of the Borrower or its ability to
perform its Obligations under the Loan Documents or Assignment Agreement or
Borrower Assignment.
Section 8.3 INDEBTEDNESS. The Borrower has no indebtedness for
borrowed money or Contingent Obligations except the Obligations.
Section 8.4 NO ASSIGNMENT. The Borrower has not assigned, pledged,
sold, or otherwise disposed of or otherwise encumbered, and has not entered into
any agreement purporting, or obligating the Borrower, to assign, pledge, sell
or otherwise dispose of its interest in the Premises, any Existing Debt
Instrument, the Purchase Agreement, the Partnership Interests, or any part of
any thereof or interest therein, or the Leases or any interest in one or more
of the Leases except as set forth in the Credit Agreement. No unrecorded
assignments, mortgages or other security instruments exist with respect to the
Partnership Interests or, to the best knowledge of the Borrower, the
Premises, any Existing Debt Instrument, the Purchase Agreement, or the Leases.
Section 8.5 SHAREHOLDERS. As of the date hereof, the only partners
of (i) Tunlaw Associates I, L.P. are: RP28 (general partner) and Resource
Properties, Inc. (limited partner), (ii) Tunlaw Associates II, L.P. are: RP29
(general partner) and RPI Partnership (limited partner) and (iii) RP29 are:
RESOURCE PROPERTIES, INC.
Section 8.6 ORGANIZATIONAL DOCUMENTS. The Borrower has delivered to
the Lender certified copies of its articles of incorporation and by-laws
together with all amendments thereto up to and including the date hereof.
Section 8.7 AGREEMENTS RELATING TO THE PREMISES. Except for
agreements with any trade creditor entered into in the ordinary course of
operating the Premises (or any part thereof) with respect to which, in each
case, the agreement by its terms may either be terminated without penalty upon
(i) a transfer of Premises or (ii) the giving of no more than 30 days notice of
termination thereof (including any and all renewals thereof and any substitutes
therefor), the Existing Debt Instruments, Permitted Encumbrances, Leases and the
documents listed on SCHEDULE II hereto constitute, to the best of Borrower's
knowledge, all of the material agreements binding on the Borrower, Mutual
Associates or Walnut Associates or any of their Affiliates relating to the
Premises and there are, to the best of Borrower's knowledge, no amendments or
modifications thereof except as set forth on SCHEDULE II.
Section 8.8 SHAREHOLDER INTERESTS. No Shareholder in either RCMI,
RP28 or RP29 and no partner of Tunlaw Associates I, L.P. and Tunlaw Associates
II, L.P. has assigned, pledged, sold, or otherwise disposed of or otherwise
encumbered, and has not entered into any agreement purporting, or obligating
such shareholder or the Borrower, to assign, pledge, sell or otherwise dispose
of their shareholder or partnership interest in the Borrower, except that each
partner of Tunlaw I and Tunlaw II shareholder of RP28 and RP29 has pledged its
partnership interest (the "Pledged Partnership Interest") in the Borrower to
Lender.
Section 8.9 NO BURDENSOME RESTRICTIONS. No agreement containing
Contractual Obligations of the Borrower and no Requirement of Law, materially
adversely affects the business, operations, property or financial or other
condition of the Borrower or the Premises or any part thereof or the ability of
the Borrower to perform any of its Obligations under this Credit Agreement, the
Note, the other Loan Documents to which it is a party or any of its obligations
under any of the Existing Debt Instruments. It is agreed that the existence of
the Permitted Encumbrances do not constitute a breach of this representation.
Section 8.10 TAXES. The Borrower has filed or caused to be filed all
tax returns which to the knowledge of the Borrower would be delinquent if they
had not been filed on or before the date hereof and has paid all taxes shown to
be due and payable on or before the date hereof on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it and any of its property by any Governmental
Authority; and no tax Liens have been filed and, to the knowledge of the
Borrower, no claims are being asserted with respect to any such taxes, fees or
other charges.
Section 8.11 ERISA. The Borrower has no Plans or any ERISA
Affiliates and makes no contributions to any Plans or any Multiemployer Plans.
Section 8.12 COLLECTIVE BARGAINING AGREEMENTS.
The Borrower is not a party to any collective bargaining agreements.
Section 8.13 JUDGMENTS/BANKRUPTCY.
(a) There are no judgments against the Borrower unsatisfied of
record or docketed in any court located in the United States of America and no
petition in bankruptcy has ever been filed by or against the Borrower and the
Borrower has never made any assignment for the benefit of creditors or taken
advantage of any insolvency act or any act for the benefit of debtors.
(b) No receiver, conservator, liquidating agent or similar
Person has been appointed, nor has anyone sought such a receiver, conservator,
liquidating agent or similar Person to be appointed, for all or a substantial
portion of the assets of the Borrower.
(c) The Borrower has not become, and is not presently,
financially insolvent nor will the Borrower be made insolvent by virtue of
execution of this Credit Agreement, the Note or any of the other Loan Documents,
or its obligations under the Purchase Agreement, Stock Pledge Agreement or the
Existing Debt Instruments within the meaning of the bankruptcy laws or the
insolvency laws of the United States of America or any other jurisdiction. To
the actual knowledge of the Borrower, neither Mutual Associates and/or Walnut
Associates nor any tenant of the Premises has filed or threatened to file a
petition in bankruptcy except as set forth on the Rent Roll.
Section 8.14 THE LEASES. The Borrower has made a review of each
Lease provided to the Borrower by the Seller, which relates to the Premises and,
to the best of its knowledge, there are no existing assignments of any Lease or
any portion of rents, additional rents, charges, issues or profits due and
payable, or to become due and payable, thereunder (the "Rents") which are
presently outstanding (other than in the Existing Debt Instruments and Loan
Documents).
Section 8.15 PERMITS. The Borrower has obtained all approvals or
licenses required for the performance of its Obligations under the Existing Debt
Instruments.
Section 8.16 DOCUMENTS. The Borrower has delivered to the Lender
true and complete copies of each Existing Debt Instrument, and each agreement
or instrument executed or to be executed and delivered in conjunction therewith
(other than the Loan Documents) and each such agreement is listed on EXHIBIT G
hereto.
Section 8.17 INTENTIONALLY OMITTED.
Section 8.18 FEDERAL REGULATIONS.
(a) The Borrower 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.
(b) The Borrower is not a "holding company," or a "subsidiary
company of a holding company," or an "affiliate" of either a "holding company"
or a "subsidiary company of a holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
Article 9
Affirmative Covenants
---------------------
From the date of this Credit Agreement and thereafter until all
Obligations have been paid in full:
Section 9.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will
deliver to the Lender:
(a) as soon as available, but in any event within 60 days after
the end of each fiscal year of the Borrower a copy of the balance sheet of the
Borrower as at the end of such year and the related statements of income and
retained earnings and of cash flows for such year, setting forth in each case
in comparative form the figures for the previous year, certified by an officer
of the Borrower;
(b) as soon as available, but in any event not later than 20
days after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited balance sheet of the Borrower as at the end
of such quarter and the related unaudited statements of income and retained
earnings and of cash flows of the Borrower for such quarter and the portion of
the fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by an officer of
the Borrower as being fairly stated in all material respects when considered in
relation to the financial statements of the Borrower (subject to normal year-end
audit adjustments); all such financial statements to be complete and correct in
all material respects and to be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such officers, as the case may be, and
disclosed therein);
(c) from time to time, such other information concerning the
Borrower as the Lender may reasonably request.
Section 9.2 DISCUSSION AND FURTHER FINANCIAL INFORMATION. The
Borrower will make its financial officers, or other knowledgeable personnel,
available to discuss with the Lender, upon not more than two Business Day's
prior notice to the Borrower, the affairs, finances and accounts of the Borrower
all at such reasonable times and as often as the Lender may reasonably request.
Section 9.3 MAINTENANCE OF RECORDS. The Borrower will keep, at all
times, books of record and account in which full, true, and correct entries will
be made of all dealings or transactions in relation to its business and affairs,
and the Borrower will allow the Lender to inspect and make photocopies of such
books of record and account during business hours upon one Business Days' notice
by the Lender. The Borrower will provide adequate protection against loss or
damage to such books of record and account.
Section 9.4 PRESERVATION OF ASSETS. The Borrower will keep, or use
its best efforts to cause Mutual Associates and/or Walnut Associates (in
accordance with the Existing Debt Instruments) and any subsequent Owner to keep,
the Premises in good repair, working order and condition and from time to time,
will make or use its best efforts to cause Mutual Associates (in accordance with
the Existing Debt Instruments) and/or Walnut Associates, or any subsequent Owner
to make, all needed and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto.
Section 9.5 TAXES AND CLAIMS. The Borrower will pay or use its best
efforts to cause Mutual Associates and/or Walnut Associates (in accordance with
the Existing Debt Instruments) and any subsequent Owner to, pay and discharge
all taxes, assessments and governmental charges or levies imposed upon Mutual
Associates and/or Walnut Associates or such Owner or the Premises or upon Mutual
Associates' and/or Walnut Associates' or such Owner's income or profits, or upon
any property belonging to it, prior to the date on which penalties attach
thereto and which, in the case of Mutual Associates and/or Walnut Associates,
any subsequent Owner or the Premises could become a Lien on any portion of the
Premises; provided that, subject to any more restrictive provisions contained
in the Loan Documents, the Borrower shall not be required to pay or cause to be
paid any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and for which adequate
reserves are being maintained; provided, however, the Borrower shall immediately
pay and discharge or cause to be paid and discharged any such contested taxes,
assessments and governmental changes or levies upon the commencement of any
proceeding to foreclose, sell or otherwise execute on the Lien thereof. The
Borrower shall promptly (and in no event later than 90 days after the due date
of each installment of property tax) provide the Lender with copies of all
receipted tax bills as evidence of property tax payment of such installment made
in respect of the Premises.
Section 9.6 UTILITIES; COMPLIANCE WITH APPLICABLE LAWS. The Borrower
shall use its best efforts to cause Mutual Associates and/or Walnut Associates
(in accordance with the Existing Debt Instruments) and any subsequent Owner to
cause the Land and the Improvements to be served by adequate storm sewer,
sanitary sewer, telephone, gas, electricity and water service and other
necessary utility service. The Borrower shall comply and shall use its best
efforts to cause Mutual Associates and/or Walnut Associates (in accordance with
the Existing Debt Instruments) and any subsequent Owner to comply with all
Requirements of Law affecting the Land and the Improvements, and the use and
occupancy thereof. The Borrower shall indemnify and hold the Lender harmless
from any damages arising out of the Borrower's or Mutual Associates' and/or
Walnut Associates' or such Owner's non-compliance and the Borrower shall or
shall use its best efforts to cause Mutual Associates and/or Walnut
Associates (in accordance with the Existing Debt Instruments) or any subsequent
Owner to post a bond or otherwise provide all funds necessary to avoid the
imposition of a Lien against all or any part of the Premises or any equipment
thereon. The Borrower shall permit or shall use its best efforts to cause
Mutual Associates and/or Walnut Associates (in accordance with the Existing Debt
Instruments) or any subsequent Owner to permit the Lender to enter upon the
Improvements and inspect the Improvements at all reasonable hours and upon
reasonable notice (except in case of emergency, in which case such entry and
inspection may be had at any time and without notice to the extent permitted by
the Existing Debt Instruments) subject to the rights of tenants.
Section 9.7 LITIGATION. The Borrower will promptly give the Lender
notice in writing of all litigation of which it is aware (other than personal
injury claims which are adequately insured) and all proceedings of which it is
aware before any Governmental Authority or arbitrator affecting any part of the
Premises or which singly or in the aggregate involves a claim or claims against
the Borrower, Mutual Associates and/or Walnut Associates or any subsequent Owner
or any part of the Premises in excess of $25,000 or which seeks injunctive or
other equitable relief.
Section 9.8 INSURANCE. The Borrower shall maintain the insurance
coverage as required by the Security Instruments and shall use its best efforts
to cause Mutual Associates and/or Walnut Associates (in accordance with the
Existing Debt Instruments) or any subsequent Owner to maintain the insurance
coverage required by the Existing Debt Instruments.
Section 9.9 ENVIRONMENTAL COMPLIANCE.
(a) The Borrower agrees to exercise any Management Control it
may have under the Existing Debt Instruments to, or otherwise use its best
efforts to cause Mutual Associates and/or Walnut Associates (in accordance with
the Existing Debt Instruments) or any subsequent Owner to: (x) conduct and
complete all investigations, studies, sampling and testing and all remedial,
removal and other actions necessary to clean up and remove any Hazardous
Materials on, from, or affecting the Premises (i) in accordance with all
Requirements of Law, and (ii) in accordance with the orders and directives of
all Governmental Authorities having or claiming jurisdiction. The Borrower
shall and shall exercise any Management Control it may have under the Existing
Debt Instruments to, cause Mutual Associates and/or Walnut Associates or any
subsequent Owner to defend, indemnify and hold harmless the Lender and all
Indemnified Parties from and against any and all Environmental Liabilities.
(b) The provisions of this Section 9.9 shall be in addition to
any other obligation and liability the Borrower may have to the Lender, and
shall survive the transactions contemplated herein, the termination of this
Credit Agreement and the repayment of all Obligations. The Borrower shall not
cause or permit (or pursuant to its rights under the Existing Debt Instruments,
allow Mutual Associates and/or Walnut Associates or any subsequent Owner or any
tenant or subtenant to cause or permit) (i) the Premises, or any part thereof,
to be used to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Materials, other than substances
in insignificant amounts used in the ordinary course of the business of
operating a commercial building, or (ii) any violation of the Environmental and
Safety Laws.
Section 9.10 COMPLIANCE WITH CONTRACTUAL OBLIGATIONS. The Borrower
will comply with all its Contractual Obligations except to the extent that
failure to comply therewith would not, in the aggregate, have a material adverse
effect on the Premises or any part thereof or on the business, operations,
financial or other condition of the Borrower or on the ability of the Borrower
to perform its Obligations under this Credit Agreement, the Note, the other Loan
Documents to which it is a party or the Existing Debt Instruments.
Section 9.11 NOTICES. The Borrower shall promptly give notice to the
Lender of:
(a) any litigation or proceeding affecting the Borrower, Mutual
Associates and/or Walnut Associates or any subsequent Owner or the Premises or
any part thereof of which the Borrower is aware, which, if adversely determined,
would have a material adverse effect on the Premises, or any part thereof, or
the business, operations, property or financial or other condition of the
Borrower, Mutual Associates and/or Walnut Associates or any subsequent Owner,
or which, if adversely determined, would (i) result in a judgment for monetary
damages in excess of $25,000 or (ii) if such litigation or proceeding were
aggregated with all other litigation or proceedings occurring after the date
hereof, result in judgments for monetary damages, in the aggregate, in excess
of $25,000 and in addition, will furnish to the Lender within ninety (90) days
after the end of each fiscal year of the Borrower a summary of all such
litigation;
(b) any change with respect to the Borrower, Mutual Associates
and/or Walnut Associates or any subsequent Owner or the Premises or any part
thereof of which the Borrower is aware which change could materially and
adversely affect the Premises or any part thereof; and
(c) the occurrence of any Event of Default.
Section 9.12 MANAGEMENT CONTROL. After termination of the Owner's
existing management agreement, the Borrower shall not cause or permit any Person
to exercise Management Control with respect to the Premises other than the
Borrower or any other managing agent reasonably acceptable to the Lender, in
each case (a) for management fees reasonably acceptable to the Lender and (b)
pursuant to a management agreement which shall provide that the payment of
management fees or other amounts to such managing agent shall be subordinate in
right of payment to payment of the Obligations and be terminable on not more
than 30 days prior notice and otherwise be in form and substance satisfactory
to the Lender. In the event a management company, any Affiliate of the Borrower
or any other Person becomes a managing agent, Borrower will enter into or cause
such managing agent to enter into a lockbox arrangement with respect to the
collection of all leases, rents and other proceeds of or relating to the
Premises in form and substance satisfactory to the Lender.
Section 9.13 TENANT ESTOPPEL CERTIFICATES. To the extent Borrower
may require delivery of the same pursuant to the Existing Debt Instruments, the
Borrower shall (upon the request of the Lender) demand that Mutual Associates
and/or Walnut Associates cause each tenant party to each Lease deliver an
estoppel certificate in the form of the Estoppel Certificate or other form
required by the respective Lease and use reasonable efforts to cause each tenant
to deliver same.
Section 9.14 PHYSICAL CONDITION OF THE PREMISES. The Borrower shall
remedy or use its best efforts to cause Mutual Associates and/or Walnut
Associates (in accordance with the Existing Debt Instruments) and any subsequent
Owner to remedy all of the violations set forth on Schedule III and relating to
any part of the Premises within 180 days from the date hereof. The Borrower
further agrees that, promptly after the curing of each violation, the Borrower
will diligently and expeditiously cause each such violation to be removed of
record.
Section 9.15 INTENTIONALLY OMITTED.
Section 9.16 INTENTIONALLY OMITTED.
Section 9.17 INSURANCE COVERAGE. The Borrower shall cause itself and
Lender to be named as loss payees on all insurance policies required to be
maintained by Mutual Associates and/or Walnut Associates or any subsequent Owner
pursuant to the Existing Debt Instruments (including, without limitation, all
business interruption insurance maintained by Mutual Associates and/or Walnut
Associates or any subsequent Owner). The Borrower shall maintain, or use its
best efforts to cause Mutual Associates and/or Walnut Associates (in accordance
with the Existing Debt Instruments) or any subsequent Owner to maintain, all
insurance policies required by the Existing Debt Instruments and shall promptly
furnish the Lender with true copies of such policies and evidence that all
premiums payable with respect thereto have been paid on or before the due date.
Section 9.18 RENTS. Upon a Management Change Date, the Borrower
agrees to join with the Lender in notices to all tenants at the Premises to,
effective on the next rent payment date, deposit all rents and sums payable
pursuant to such tenant's Leases at the Premises into an account established by
the Lender or its servicer (the "Lockbox Account") and Borrower shall pledge
such Lockbox Account as additional security for the Loan.
Section 9.19 LEASES. Upon a Management Change Date, Borrower will
cooperate with Lender in obtaining Subordination, Non-Disturbance and Attornment
Agreements for the benefit of the Lender from tenants at the Premises.
Section 9.20 INSPECTIONS. To the extent permitted by the Existing
Debt Instruments, the Borrower will permit the Lender's representatives to
accompany the Borrower's personnel on any inspection of the Premises or any part
thereof.
Section 9.21 BORROWER AS OWNER. In the event the Borrower becomes
an Owner and the Mortgage, Assignment of Rents, Lockbox Agreement and other Loan
Documents annexed hereto or to the Collateral Assignment have not otherwise been
executed, delivered and recorded pursuant to the Collateral Assignment, Lender
shall, and is hereby irrevocably authorized and directed by Borrower to,
complete the Mortgage, Assignment of Rents, Lockbox Agreement and other Loan
Documents annexed hereto or to the Collateral Assignment by, among other things,
dating the same; completing the description of the obligations secured thereby
by inserting a sum equal to (i) the then outstanding principal amount of the
Note; (ii) execute the same on behalf, and as the attorney in fact, of Borrower
and causing the same to be recorded in the appropriate public records. In
furtherance of such authorization and direction, Borrower hereby appoints Lender
its attorney-in-fact (with full power of substitution) to complete, execute,
deliver and record the Mortgage and all UCC-1 Financing Statements and UCC-3
Assignments and other documents contemplated thereby on behalf, and as the act
and deed, of Borrower; provided, however, Lender shall send to Borrower a copy
of any such document executed with the power of attorney; provided, further, the
failure to send such a copy to Borrower shall not result in any liability on the
part of the Lender in any manner whatsoever, nor result in any waiver or give
rise to any defense to any action taken by Lender pursuant to the terms of the
Credit Agreement. Said power of attorney, being coupled with an interest, is
irrevocable so long as any portion of the Obligations remain unpaid.
Article 10
Negative Covenants
------------------
From the date of this Credit Agreement and thereafter until all
Obligations have been paid in full:
Section 10.1 SAME LINE OF BUISNESS. The Borrower will not engage in
any other business or pursue any activity other than the ownership of the
Existing Debt Instruments or Partnership Interests, the enforcement thereof and
in the event the Borrower takes title to the Premises, the operation of the
Premises and, subject to the provisions of the Security Instruments and other
Loan Documents, the assumption of obligations in connection therewith.
Section 10.2 MERGER AND CONSOLIDATION. Except as otherwise permitted
by the Loan Documents, the Borrower will not enter into a transaction for the
termination, dissolution or winding up of the Borrower or to consolidate with
or merge into any other Person or permit any other Person to consolidate with
or merge into it.
Section 10.3 CORPORATION. The Borrower will not amend its articles
of incorporation or by-laws or its partnership agreements, respectively, grant
any management powers to any shareholder or other partner or permit any Person
to become a shareholder or partner of the Borrower without the prior written
consent of the Lender, except that (a) each shareholder may, with the prior
written consent of the Lender (which shall not be unreasonably withheld), sell,
assign or otherwise dispose of his shareholder interest to any of their
respective spouses or children or trust for such spouses or children and (b) a
limited partner of Tunlaw Associates I, L.P., or Tunlaw Associates II, L.P., may
transfer its limited partnership interest, provided in any such case such
transferee agrees to be bound by the provisions of this Section 10.3.
Section 10.4 TRANSACTIONS WITH AFFILIATES. Except as otherwise
permitted by this Credit Agreement or the other Loan Documents, the Borrower
will not enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business (including, without limitation, a
related management company as contemplated by Section 9.12 pursuant to a
management agreement acceptable to the Lender).
Section 10.5 SALE OF ASSETS. Except as otherwise expressly permitted
by the Loan Documents, the Borrower will not sell, transfer or otherwise dispose
of the Premises or any part thereof or interest therein or any of its rights
under any of the Existing Debt Instruments.
Section 10.6 DEBT. The Borrower will not incur or permit to exist
any indebtedness of the Borrower for borrowed money or any Contingent Obligation
other than (i) the Loan and the other Obligations, (ii) any unsecured debt of
the Borrower to its Affiliates so long as the proceeds of such indebtedness are
used in connection with the Borrower's operation of the Premises, the making of
protective advances under, or funding Borrower's obligation, if any, to pay for
tenant improvements or other costs under, the Existing Debt Instruments or
payment of the Obligations and the repayment of such indebtedness is
subordinated, in writing (in form and substance satisfactory to Lender), to the
payment in full of the Obligations, or (iii) unsecured trade indebtedness
incurred in the normal course of business. Except for protective advances
(repayment of which is secured by the Existing Mortgages) and amounts required
to be advanced by the Borrower under the Existing Debt Instruments, if any, the
Borrower will not permit the principal amount of the Existing Debt to be
increased or otherwise modified or amounts repaid in respect of the Existing
Debt to be reborrowed.
Section 10.7 LIENS. The Borrower shall not, through the exercise of
Management Control or it rights under any Existing Debt Instrument, create or
permit to exist on behalf of Mutual Associates and/or Walnut Associates or any
Owner, or permit Mutual Associates and/or Walnut Associates or any Owner to
create or permit to exist any Lien or other encumbrance on any portion of the
Premises or Improvements except for (i) Liens granted in favor of the Lender
pursuant to the Security Instruments, (ii) the Existing Debt Instruments, and
(iii) Permitted Encumbrances.
Section 10.8 NO ASSIGNMENT. Except for Leases permitted by the
Existing Debt Instruments (provided that the Borrower will not consent to the
execution of any Major Lease without the Lender's prior written consent which
shall not be unreasonably withheld) or the Loan Documents, the Borrower will
not, in the exercise of Management Control or its rights under the Existing Debt
Instruments, and will not permit Mutual Associates and/or Walnut Associates or
any Owner to, sell, assign, transfer or otherwise dispose of or pledge or
encumber, nor will Borrower enter into or permit Mutual Associates and/or Walnut
Associates or any Owner to enter into any agreement purporting to, or obligating
the Borrower or Mutual Associates and/or Walnut Associates or any Owner to,
sell, assign, or otherwise dispose of the Leases, or the Rents (as defined in
the Security Instruments) or any of their respective rights, title or interest
under the Leases, the Rents or in the Premises or any part thereof, except with
the Lender's prior written consent.
Section 10.9 COMPLIANCE WITH ERISA. The Borrower will not, in the
exercise of Management Control or its rights under the Existing Debt
Instruments, and will not permit Mutual Associates and/or Walnut Associates or
any subsequent Owner to, establish any Plan or incur any liabilities with
respect to any Plan established by any other Person.
Section 10.10 NO AMENDMENTS/TERMINATION. The Borrower will not
amend, modify or waive performance of any provision of any Existing Debt
Instrument or terminate any Existing Debt Instrument or give notice of its
intent to do so. The Borrower shall enforce the obligations of each obligor
under the Existing Debt Instruments and shall, after a default by Mutual
Associates and/or Walnut Associates or any subsequent Owner in the performance
of any of Mutual Associates' and/or Walnut Associates' or such Owner's
obligations under the Existing Debt Instruments, immediately begin foreclosure
and other proceedings as are permitted by law or the Existing Debt Instruments
unless the Lender shall consent otherwise in its sole discretion.
Section 10.11 INTENTIONALLY OMITTED.
Section 10.12 TENANT IMPROVEMENTS. The Borrower will not agree to
fund (or consent to any action by Mutual Associates and/or Walnut Associates or
any subsequent Owner which consent will obligate the Borrower to fund) any
tenant improvements unless the Lender has given its prior written consent
thereto in each case (which consent may be based (among other criteria) upon the
Lender's reasonable satisfaction with the proposed work and the Borrower's
ability to fund the cost thereof).
Article 11
Conditions Precedent
--------------------
Section 11.1 CONDITIONS PREDEDENT TO PURCHASE LOAN. The obligation
of the Lender to make the Purchase Loan hereunder is subject to the satisfaction
of the following conditions precedent on or before the date hereof:
(a) The Borrower shall have executed and delivered to the Lender
the Note.
(b) The Lender shall have received duly executed copies of this
Credit Agreement, the Security Instruments, and the other Loan Documents and
such other documents as the Lender or its counsel may reasonably require.
(c) The Lender shall have received (i) certified copies of all
action taken by the Borrower to authorize the execution, delivery and
performance, in accordance with its terms, of the Credit Agreement and the other
Loan Documents, the Purchase Agreement, the Stock Pledge Agreement, the Existing
Debt Instruments and any other documents required or contemplated hereunder or
thereunder; (ii) a certificate of incumbency with respect to the representatives
of Borrower authorized and directed to execute and deliver the Loan Documents
and the Purchase Agreement; (iii) certified copies of the certificate of
incorporation and by-laws of the Borrower, in each case amended to the date
hereof together with a list of the members of the Board of Directors and
stockholders; and (iv) certificates of good standing for Borrower from the
appropriate authority in their jurisdictions of organization.
(d) The Lender shall have received opinions of counsel for the
Borrower and Guarantor, addressing such legal issues concerning the Borrower and
Guarantor, the Purchase Agreement, the Loan, the Premises, and the Loan
Documents, and the Existing Debt Instruments as the Lender may require,
including, without limitation, the organization of the Borrower and Guarantor,
due authorization of the execution and delivery of the Purchase Agreement, the
Loan Documents, the proper execution and delivery of the Loan Documents, the
enforceability of the Loan Documents and such other matters as the Lender may
reasonably request.
(e) The Lender shall have received the Guarantee duly executed
by the Guarantor.
(f) Prior to or concurrently with the execution of this Credit
Agreement, the Borrower, at its sole cost and expense, will obtain and deliver
to the Lender a title policy issued by an insurer acceptable to the Lender,
insuring the Lender's interests under the Loan Documents in a form acceptable
to the Lender and containing only such exceptions as shall be consented to by
the Lender.
(g) [Intentionally Omitted]
(h) The Lender shall have received evidence satisfactory to it
that the Premises are or will be served by adequate storm sewer, sanitary sewer,
telephone, gas, electricity and water service and other necessary utility
service. The Borrower shall also deliver to the Lender evidence that the
Premises are not in a wetlands district and are zoned in a classification which
will permit all current and contemplated use of the improvements for all
purposes intended. The foregoing evidence may take the form of a certificate
of occupancy.
(i) The Lender shall have received such Uniform Commercial Code,
bankruptcy, judgment, federal tax Lien, building code violation and other
searches of public records as the Lender may reasonably require with respect to
the Premises, Mutual Associates and/or Walnut Associates and the Borrower and
the results of such searches shall be satisfactory to Lender.
(j) The Lender shall have received evidence that none of the
Premises is located in an area designated by the Secretary of Housing and Urban
Development as a special flood hazard area. Such evidence may take the form of
a certification in satisfactory form contained on a survey of the Premises
previously delivered to the Lender.
(k) The Lender shall have received from the Borrower evidence
that the Land and the Improvements are benefited by such easements or other
rights and vehicular and pedestrian ingress and egress, the installation and
maintenance of utilities, and other site improvements as may be necessary for
the operation of the Improvements.
(l) The Lender shall have received such other materials,
documents and papers regarding the Premises, the Borrower, Mutual Associates
and/or Walnut Associates or the Loan as the Lender may reasonably require.
(m) The Borrower shall have paid all costs and expenses incurred
to date and required to be paid by it pursuant to Section 13.5 hereof. This
condition precedent does not derogate from the Borrower's continuing obligations
under Section 13.5 hereof.
(n) The Lender shall have received copies of valid and binding
satisfactions or waivers of any Liens (in recordable form) on the Premises other
than Permitted Encumbrances and Existing Mortgages or evidence satisfactory to
the Lender that the Borrower has made provision for the payment of the
indebtedness secured by such Liens.
(o) The Lender shall have received all UCC Financing Statements
and other evidence of the Liens granted in favor of the Lender pursuant to the
Security Instruments.
(p) The Lender shall have received originals of the currently
effective form of all Existing Debt Instruments (with the Existing Notes
endorsed to Lender).
(q) Each condition to the Borrower's obligations under the
Purchase Agreement shall have been satisfied and not waived or modified.
(r) Intentionally Omitted.
(s) Lender shall have received evidence satisfactory to it that
all notices to Mutual Associates and Walnut Associates contemplated by the
Lockbox Agreement have been delivered.
(t) Notice of the assignment of the Existing Debt Instruments
to Borrower shall have been given to Mutual Associates and/or Walnut Associates
and each guarantor of the Existing Debt.
(u) Intentionally Omitted.
(v) All documents and legal matters in connection with the
transactions contemplated by this Credit Agreement shall be reasonably
satisfactory in form and substance to the Lender.
Section 11.2 CONDITIONS TO THE LOAN. The obligation of the Lender
to make the Loan requested to be made on this date is subject to the
satisfaction of the following conditions precedent:
(a) Each of the representations and warranties made by the
Borrower or Guarantor in or pursuant to the Loan Documents shall be true and
correct in all material respects.
(b) Each of the representations and warranties made by the
Borrower in the Purchase Agreement shall be true and correct in all material
respects as of the date of the Credit Agreement.
Article 12
Events of Default
-----------------
Section 12.1 EVENTS OF DEFAULT. Upon the occurrence of any of the
following events:
(a) the failure of the Borrower to pay when due the principal
amount of the Loan or any installment of interest or legal, recording or other
fees hereunder or any of the other Loan Documents or any part thereof and any
such failure continues for more than 10 days after notice to the Borrower from
the Lender; or
(b) the failure of Borrower to pay when due any costs or other
amounts due hereunder other than the amounts set forth in Section 12.1(a) and
such default continues for more than 30 days; or
(c) any representation or warranty made or deemed made by the
Borrower herein or which is contained in any other Loan Document or exhibit,
schedule, certificate, document or financial or other statement furnished at any
time under or in connection with this Credit Agreement shall prove to have been
incorrect in any material respect on or as of the date made or deemed made; or
(d) The Borrower shall default in the observance or performance
of any agreement contained in Sections 10.1, 10.2, 10.3, 10.5, 10.7, 10.8, 10.10
or 10.11 hereof or any other provision hereof or the other Loan Documents if
such default constitutes a Recourse Event; or
(e) the Borrower shall default in the observance or performance
of any agreement (other than as set forth in Sections 12.1 (a), (b), (c) and (d)
above) contained in this Credit Agreement or any of the other Loan Documents to
which such Person is a party and such default continues for more than 30 days;
or
(f) the Borrower shall default in the payment of any
indebtedness for borrowed money (other than the Note) or in the payment of any
Contingent Obligation beyond the period of grace, if any, provided in the
instrument or agreement under which such indebtedness for borrowed money or
Contingent Obligation was created, or a default shall occur in the
observance or performance of any other agreement or condition relating to any
indebtedness described above in this subsection (f) or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such indebtedness for borrowed money or beneficiary or beneficiaries
of such Contingent Obligation (or a trustee, agent or other Person acting on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such indebtedness for borrowed money to become
due prior to its stated maturity or such Contingent Obligation to become
payable; or
(g) (i) the Borrower or Guarantor shall commence a case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to such Person, or seeking to adjudicate such Person a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to such
Person or such Person's debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for such Person or for all or any
substantial part of such Person's assets, or the Borrower or Guarantor shall
make a general assignment for the benefit of such Person's creditors; or (ii)
there shall be commenced against the Borrower or Guarantor any case, proceeding
or other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed or undischarged for a period of 90 days or (iii) there
shall be commenced against the Borrower or Guarantor any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of such Person's assets,
as the case may be, which results in the entry of an order for any such relief
which shall not have been vacated, discharged or stayed pending appeal within
90 days from the entry thereof; or (iv) the Borrower or Guarantor shall take any
action in furtherance of, or indicating such Person's consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or Guarantor shall generally not, or shall be unable
to, or shall admit in writing such Person's inability to, pay such Person's
debts, as the case may be, as they become due; or
(h) (i) if Borrower or Guarantor or any ERISA Affiliate shall
engage in any "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan, or (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Plan, which
Reportable Event or institution of proceedings or appointment of a trustee is
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, and, in the case of a Reportable Event, the continuance of such
Reportable Event unremedied for ten days after notice of such Reportable Event
pursuant to Section 4043(a), (c) or (d) of ERISA is given and, in the case of
the institution of proceedings, the continuance of such proceedings for ten days
after commencement thereof, (iv) any Plan shall terminate for purposes of Title
IV of ERISA, (v) any one or more of the Owners or Borrower or any ERISA
Affiliate incur a partial or complete withdrawal from a Multiemployer Plan or
(vi) any other event or condition shall occur or exist, with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could subject
Borrower or Guarantor to any tax, penalty or other liabilities in the aggregate,
which is material in relation to the business, operations, property or financial
or other condition of the Borrower or Guarantor; or
PER one or more judgments, decrees, arbitration awards or
rulings shall be entered against the Borrower involving in the aggregate a
liability (not paid or fully covered by insurance) of $25,000 or more and all
such judgments, decrees, awards and rulings shall not have been vacated, paid,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(j) the Borrower or Guarantor shall breach any of their
respective covenants or agreements contained in the other Loan Documents or
Existing Debt Instruments or an Event of Default or similar event occurs under
(and as defined in) any of the other Loan Documents; or
(k) any Recourse Event occurs; or
(l) if any of the outstanding stock of Borrower is transferred
or sold in violation of this Agreement; or
(m) if the Borrower shall change the account or depositary
established pursuant to Section 11.1(s) without the Lender's prior written
consent; or
(n) if the Certificate of Incorporation or by-laws of the
Borrower shall be amended without the Lender's prior written consent;
then, and in any such event, (A) if such event is an Event of Default specified
in subsection (g) above, automatically the Loans (with accrued interest thereon)
and all other amounts owing under this Credit Agreement, the Note and the other
Loan Documents shall immediately become and be due and payable without the
giving of any notice of any kind and (B) if such event is any other Event of
Default, the Lender may, by notice to the Borrower, declare the Loans hereunder
(with accrued interest thereon) and all other amounts owing under this Credit
Agreement, the Note and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become and be due and payable.
Except as expressly provided above in this Article 12, presentment, demand,
protest and all other notices of any kind are hereby expressly waived by the
Borrower.
Article 13
Miscellaneous
-------------
Section 13.1 SUCCESSORS AND ASSIGNS.
(a) All covenants, agreements, representations and warranties
made herein or in certificates delivered in connection herewith by or on behalf
of the Borrower shall survive the issuance and delivery of the Note to the
Lender and shall continue in full force and effect so long as the Note is
outstanding and unpaid or any amounts due to the Lender under this Credit
Agreement or the other Loan Documents have not been paid, and shall bind and
inure to the benefit of the successors and permitted assigns of the Borrower,
whether so expressed or not, and all such covenants, agreements, representations
and warranties shall inure to the benefit of the Lender's successors and
assigns. Except as set forth in this Credit Agreement, no right or privilege
is extended to any third party by the provisions hereof.
(b) The Borrower may not assign its rights or delegate its
obligations hereunder without the prior written consent of the Lender.
Section 13.2 NOTICES. Unless otherwise specified herein, all
notices, requests, consents, approvals, demands or other communications to or
from the parties hereto shall be in writing and shall be delivered by hand or
sent by Federal Express or other nationally recognized courier, expenses prepaid
or charged to the sender. All such communications shall be deemed delivered
when received. Any such notice, request, demand or other communication shall
be delivered or addressed as follows: (i) if to the Borrower to it at 1521
Locust Street, Philadelphia, Pennsylvania 19102, Attention: Scott F. Schaeffer,
with copies to: (a) Jeffrey F. Brotman, Esq., at Ledgewood Law Firm, 1521 Locust
Street, Philadelphia, Pennsylvania 19102, and (b) RESOURCE PROPERTIES, INC.,
1521 Locust Street, Philadelphia, Pennsylvania 19102, Attention: Scott F.
Schaeffer, (ii) if to the Lender to its office located at 3 World Financial
Center, New York, New York 10285, Attn: Ms. Marguerite Brogan, with copies to
Equitable Real Estate Investment Management Inc. ("Equitable"), 1735 Market
Street, Suite 4200, Philadelphia, Pennsylvania 19103, Attn: Steve Perricone,
or at such other address as either party hereto may designate by written notice
to the other party hereto. Until receipt of written notice to the Borrower from
the Lender confirming the termination of Equitable's authority to act on
Lender's behalf, Borrower may rely on all consents, approvals and notices given
by Equitable under the Loan Documents in addition to consents, approvals and
notices given by the Lender.
Section 13.3 AMENDMENT AND WAIVER. No provision of this Credit
Agreement, the Note, or the other Loan Documents may be waived, changed or
modified, or the discharge thereof acknowledged orally, but only by an agreement
in writing signed by the party against whom the enforcement of any waiver,
change, modification or discharge is sought and then such waiver, change,
modification or discharge shall be effective only in the specific instance and
for the specific purpose for which it was given.
Section 13.4 EXECUTION IN COUNTERPARTS. This Credit Agreement may
be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.
Section 13.5 COSTS, EXPENSES, ETC. The Borrower agrees to pay upon
demand all reasonable costs and expenses incurred by the Lender in connection
with the preparation, execution, delivery, amendment, proposed amendment, and
enforcement of this Credit Agreement, the Note, all other Loan Documents and the
other documents to be delivered hereunder or otherwise in connection with the
transactions contemplated hereby or thereby, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto and with respect to advising the Lender as to its rights and
responsibilities hereunder and thereunder and all recording, filing and
registration fees, title insurance charges of the title insurer, all appraisal
fees, the Lender's costs and fees, survey fees and charges, all insurance
premiums and if the Loans, Note or any portion thereof is not paid in full when
and as due, all costs and expenses of the Lender (including, without limitation,
court costs and reasonable counsels' fees and disbursements) incurred in
attempting to enforce payment of the Loans and all costs and expenses of the
Lender incurred (including, without limitation, court costs and reasonable
counsels' fees and disbursements) in attempting to realize on any security
(including, without limitation, the Collateral Assignment) or incurred in
connection with the sale or disposition (or preparation for sale or disposition)
of any security; provided, however, the Borrower is not liable for Seller's
costs or expenses in connection with the sale of the Existing Debt Instruments
to the Purchaser. The Borrower agrees to pay all brokerage, finder or similar
fees or commissions payable in connection with the transactions contemplated
hereby and shall indemnify and hold the Lender harmless against all claims,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses and court costs) arising out of or relating to any
claim by any broker, finder or similar person. The Borrower agrees that all of
its Obligations under this Section 13.5 shall survive the termination of this
Credit Agreement and the other Loan Documents and the repayment of the
Obligations.
Section 13.6 COMMITMENT LETTER. This Credit Agreement supersedes any
term sheet delivered to the Borrower or any Person acting on behalf of the
Borrower and any such term sheet is hereby merged into this Credit Agreement.
Section 13.7 USURY LAWS. This Credit Agreement and the other Loan
Documents are each subject to the express condition that at no time shall the
Borrower be obligated or required to pay interest on the principal balance due
under any of the Loan Documents at a rate which could subject the obligee under
any Loan Documents to either civil or criminal liability as a result of being
in excess of the maximum interest rate which the Borrower is permitted by the
law of the jurisdiction stated to govern such Contractual Obligation to contract
or agree to pay. If by the terms of this Credit Agreement or any of the Loan
Documents, the Borrower is at any time required or obligated to pay interest on
any amounts due on any of the Loan Documents at a rate in excess of such maximum
rate, the rate of interest under such Loan Document shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate (provided, however, that the total amount of such
interest shall be amortized, prorated and allocated over the period commencing
from the date hereof until payment in full of all of the Obligations).
Notwithstanding the foregoing, it is agreed the fees and interest to be paid
pursuant hereto were set with reference to New York General Obligations Law
Section 5-501.6.b.
Section 13.8 INDEMNITY FOR TRANSFER TAXES/OTHER LIABILITIES.
(a) In the event any real property transfer tax ("RPT Tax"), any
transfer tax ("Transfer Tax") or any similar or successor tax is assessed
against the Lender or any part of the Premises as a result of (x) the
consummation of the transactions contemplated hereunder and under the other Loan
Documents (including, without limitation, the Security Instruments) or (y) the
exercise by the Lender of any of its rights, powers or remedies under this
Credit Agreement, the Security Instruments or any of the other Loan Documents,
the Borrower shall be liable to pay such assessments and shall indemnify, defend
and hold the Lender harmless from and against any and all RPT Tax and Transfer
Tax or any similar or successor tax levied, assessed or payable, together with
any interest or penalty thereon with respect thereto.
(b) In consideration of the execution and delivery of this
Credit Agreement by the Lender, the Borrower hereby indemnifies, exonerates and
holds the Lender and each of the other Indemnified Parties free and harmless
from and against any and all actions, causes of action, suits, losses, costs
(including, without limitation, reasonable attorneys' fees and disbursements and
allocated costs of staff counsel), liabilities and damages, and expenses
actually incurred in connection with this Credit Agreement and the other Loan
Documents (irrespective of whether such Indemnified Party is a party to the
action for which indemnification hereunder is sought) (collectively, the
"Indemnified Liabilities"), including, without limitation, any Indemnified
Liabilities incurred by the Indemnified Parties or any of them as a result of,
or arising out of, or relating to any suits commenced by Borrower or Guarantor
against the Lender or by Mutual Associates and/or Walnut Associates or any
subsequent Owner or any other Person in connection with the agreements made
hereunder and under the other Loan Documents, or the transactions contemplated
hereunder and under the other Loan Documents and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
(c) The indemnities and agreements set forth in this Section
13.8 shall survive the termination of this Credit Agreement and the other Loan
Documents and the repayment of the Obligations and shall, notwithstanding any
other provision hereof, be full recourse, personal obligations of the Borrower.
Section 13.9 LIMITED LIABILITY.
Notwithstanding anything herein to the contrary, except as set forth
in Section 13.5, 13.8 and this Section 13.9, the Borrower shall have no personal
liability for the Obligations hereunder or under any other Loan Documents.
Except as otherwise specifically provided for herein, no deficiency or other
money judgement will be sought, obtained or enforced hereunder or under the
other Loan Documents or other instrument securing the Obligations against the
Borrower in any action to recover any sums not paid by the Borrower to the
Lender or not recovered by the Lender from the proceeds of the sale of
collateral.
Nothing contained herein shall (i) release or impair the validity of
the principal indebtedness, (ii) in any way affect or impair any Lien granted
pursuant to the Security Instruments, or any other Loan Documents or (iii) in
any way affect or impair the right of the Lender to foreclose the Security
Instruments, or enforce any other Loan Documents pursuant to the terms thereof.
Notwithstanding anything contained herein to the contrary, the
Borrower shall be fully personally liable to the Lender for all of the
Obligations if any Recourse Event shall occur.
Section 13.10 INTENTIONALLY OMITTED.
Section 13.11 NO RELIANCE. Borrower represents and acknowledges to
the Lender that it has, independently of the Lender, and based on the Existing
Debt Instruments and such other documents, information and investigations as it
has deemed appropriate, made its own credit decision to enter into the Borrower
Assignment, this Agreement and to purchase the Existing Debt.
Section 13.12 HEADINGS; TABLE OF CONTENTS. The Sections and other
headings contained in this Credit Agreement and the Table of Contents which
precedes this Credit Agreement are for reference purposes only and shall not
control or affect the construction of this Credit Agreement or the
interpretation hereof in any respect.
Section 13.13 SEVERABILITY. Any provision of this Credit Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 13.14 LAW GOVERNING. THIS CREDIT AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
THIS CHOICE OF LAW IS MADE PURSUANT TO GENERAL OBLIGATIONS LAW SECTION 5-1401.
Section 13.15 CONSENT TO JURISDICTION. The Borrower hereby
irrevocably submits to the jurisdiction of any court of the State of New York
or federal court sitting in the State of New York in any action or proceeding
arising out of or relating to this Credit Agreement or any other Loan Document.
The undersigned hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such court of the State of
New York or, to the extent permitted by law, in such federal court. The
undersigned hereby irrevocably waives, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. To the extent permitted by law, the undersigned also
irrevocably consents to the service of any and all process in any such action
or proceeding arising out of or in connection with this Credit Agreement or any
other Loan Document by the mailing (certified mail, return receipt requested and
postage prepaid) of copies of such process to the undersigned at the address set
forth in Section 13.2 hereof. The undersigned agrees that a final and non-
appealable judgment (or a judgment whose time to appeal has expired) in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
This consent to jurisdiction is made pursuant to General Obligations Law Section
5-1402.
Section 13.16 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM,
WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, WITH RESPECT TO, IN CONNECTION
WITH OR ARISING OUT OF OR IN ANY WAY RELATED TO THIS CREDIT AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR THE VALIDITY, PROTECTION, INTERPRETATION,
ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF, OR ANY CLAIM OR
DISPUTE HEREUNDER OR THEREUNDER.
Section 13.17 JOINT AND SEVERAL LIABILITY. In the event that this
Agreement is executed by more than one party as Borrower, the liability and
Obligations of such parties under the Loan Documents are joint and several.
Section 13.18 SECURITIZATION. The Note may, at the option of the
Lender, at any time until the same shall be fully paid and satisfied, be split
or divided into two or more notes. To that end, Borrower, upon written request
of Lender, shall execute and deliver to Lender and/or its designee or designees
substitute notes in such principal amounts, aggregating not more than unpaid
principal amount of the Note and containing terms, provisions and clauses
similar to those contained therein and such other documents and instruments as
may be required by Lender. Borrower acknowledges that Lender may securitize the
Note or any replacement notes, or otherwise sell, assign, transfer or convey,
by pledge or otherwise, the Note or any replacement notes and all or any portion
of its interest therein or in the Loan to third parties. In such event, in
order to maximize the proceeds of such securitization or other sale, assignment,
transfer or conveyance, Borrower shall fully cooperate with Lender.
IN WITNESS WHEREOF, the parties hereto have duly executed this Credit
Agreement as of the date first above written.
RESOURCE COMMERCIAL MORTGAGES, INC.
a Delaware corporation
By: /S/ Scott Schaeffer
----------------------------
Name: Scott Schaeffer
Title: President
TUNLAW ASSOCIATES I, L.P.,
a Pennsylvania limited partnership
By: RESOURCE PROPERTIES XXVIII,
General Partner
By: /s/ Scott Schaeffer
------------------------------
Name: Scott Schaeffer
Title: President
TUNLAW ASSOCIATES II, L.P.,
a Pennsylvania limited partnership
By: RESOURCE PROPERTIES XXIX
General Partner
By: /s/ Scott Schaeffer
------------------------------
Name: Scott Schaeffer
Title: President
LEHMAN BROTHERS HOLDINGS INC., doing
business as Lehman Capital, a division
of Lehman Brothers Holdings Inc.
By: /s/ Marguerite Brogan
------------------------------
Marguerite Brogan
------------------------------
Authorized Signatory
STATE OF Pennsylvania
------------ :
: ss.:
COUNTY OF Philadelphia
------------ :
On this 19th day of December 1996, before me personally came
Scott Schaeffer, to me known to be the person who executed the foregoing
instrument, and who, being by me duly sworn, did depose and say that (s)he is
the President of RESOURCE COMMERCIAL MORTGAGES, INC., the corporation
described in and who executed the foregoing instrument; and that (s)he signed
his/her name thereto by order of the Board of Directors of said
corporation.
WITNESS MY HAND AND OFFICIAL SEAL.
Lisa D. Shermer
______________________
Notary Public
STATE OF Pennsylvania
____________ :
: ss.:
COUNTY OF Philadelphia
_____________ :
On this 19th day of December 1996, before me personally came
Scott Schaeffer, to me known to be the person who executed the foregoing
instrument, and who, being by me duly sworn, did depose and say that (s)he is
the President of the G.P. of TUNLAW ASSOCIATES I, L.P., the corporation
described in and who executed the foregoing instrument; and that (s)he signed
his/her name thereto by order of the Board of Directors of said corporation.
WITNESS MY HAND AND OFFICIAL SEAL.
Lisa D. Shermer
______________________
Notary Public
STATE OF Pennsylvania
__________ :
: ss.:
COUNTY OF Philadelphia
_____________ :
On this 19th day of December 1996, before me personally came
Scott Schaeffer, to me known to be the person who executed the foregoing
instrument, and who, being by me duly sworn, did depose and say that (s)he is
the President of the G.P. of TUNLAW ASSOCIATES II, L.P., the corporation
described in and who executed the foregoing instrument; and that (s)he signed
his/her name thereto by order of the Board of Directors of said corporation.
WITNESS MY HAND AND OFFICIAL SEAL.
Lisa D. Shermer
______________________
Notary Public
STATE OF NEW YORK :
: ss.:
COUNTY OF NEW YORK :
On this 18th day of December 1996, before me personally came
Marguerite M. Brogan, to me known to be the person who executed the foregoing
instrument, and who, being by me duly sworn, did depose and say that (s)he is
an authorized signatory of Lehman Brothers Holdings Inc., the corporation
described in and who executed the foregoing instrument; and that (s)he signed
his/her name thereto by order of the Board of Directors of said corporation.
WITNESS MY HAND AND OFFICIAL SEAL.
Dora M. Enriquez
______________________
Notary Public
Schedule I
Existing Mortgages
------------------
Schedule II
Material Agreements
-------------------
Schedule III
Violations
----------
Exhibit 10.34
LOAN AND SECURITY AGREEMENT
Fidelity Leasing, Inc.
with
CoreStates Bank, N.A., as Agent,
First Union National Bank, as Co-Agent
and
Each of the Financial Institutions Now or Hereafter
Shown on the Signature Pages hereof as Lenders
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . 1
1.1 Terms Defined. . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Principles. . . . . . . . . . . . . . . 10
SECTION 2. THE LOANS. . . . . . . . . . . . . . . . . . . . . 10
2.1 Credit Facility - Description. . . . . . . . . . . 10
2.2 Advances, Conversions and Payments . . . . . . . . 12
2.3 Preconditions to Advances and Assignment of
Leases and Leased Property . . . . . . . . . . . . 13
2.4 Credit Facility Interest . . . . . . . . . . . . . 15
2.5 Additional Interest Provisions.. . . . . . . . . . 18
2.6 Fees . . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Prepayments. . . . . . . . . . . . . . . . . . . . 20
2.8 Use of Proceeds. . . . . . . . . . . . . . . . . . 21
2.9 Capital Adequacy . . . . . . . . . . . . . . . . . 21
SECTION 3. COLLATERAL . . . . . . . . . . . . . . . . . . . . 22
3.1 Description. . . . . . . . . . . . . . . . . . . . 22
3.2 Lien Documents . . . . . . . . . . . . . . . . . . 22
3.3 Other Actions. . . . . . . . . . . . . . . . . . . 22
3.4 Searches . . . . . . . . . . . . . . . . . . . . . 23
3.5 Filing Security Agreement. . . . . . . . . . . . . 23
3.6 Power of Attorney. . . . . . . . . . . . . . . . . 23
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES . . . 24
4.1 Resolutions, Opinions, and Other Documents . . . . 24
4.2 Absence of Certain Events. . . . . . . . . . . . . 25
4.3 Warranties and Representations at Closing. . . . . 25
4.4 Compliance with this Agreement . . . . . . . . . . 25
4.5 Officers' Certificate. . . . . . . . . . . . . . . 25
4.6 Closing. . . . . . . . . . . . . . . . . . . . . . 26
4.7 Non-Waiver of Rights . . . . . . . . . . . . . . . 26
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 26
5.1 Corporate Organization and Validity. . . . . . . . 26
5.2 Places of Business . . . . . . . . . . . . . . . . 27
5.3 Pending Litigation . . . . . . . . . . . . . . . . 27
5.4 Title to Collateral. . . . . . . . . . . . . . . . 27
5.5 Governmental Consent . . . . . . . . . . . . . . . 27
5.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Financial Statements . . . . . . . . . . . . . . . 28
5.8 Full Disclosure. . . . . . . . . . . . . . . . . . 28
5.9 Subsidiaries . . . . . . . . . . . . . . . . . . . 28
5.10 Guarantees . . . . . . . . . . . . . . . . . . . . 28
5.11 Government Regulations, etc. . . . . . . . . . . . 29
5.12 Names. . . . . . . . . . . . . . . . . . . . . . . 29
5.13 Other Associations . . . . . . . . . . . . . . . . 30
5.14 Environmental Matters. . . . . . . . . . . . . . . 30
5.15 Capital Stock. . . . . . . . . . . . . . . . . . . 30
5.16 Solvency . . . . . . . . . . . . . . . . . . . . . 31
5.17 Leases and Leased Property . . . . . . . . . . . . 31
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS . . . . . . . . . 34
6.1 Payment of Taxes and Claims. . . . . . . . . . . . 34
6.2 Maintenance of Properties and Corporate
Existence. . . . . . . . . . . . . . . . . . . . . 34
6.3 Business Conducted . . . . . . . . . . . . . . . . 36
6.4 Litigation . . . . . . . . . . . . . . . . . . . . 36
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . 36
6.6 Bank Accounts. . . . . . . . . . . . . . . . . . . 36
6.7 Warranties for Future Advances . . . . . . . . . . 36
6.8 Financial Covenants. . . . . . . . . . . . . . . . 37
6.9 Change of Ownership Interests. . . . . . . . . . . 38
6.10 Financial and Business Information . . . . . . . . 38
6.11 Officers' Certificates . . . . . . . . . . . . . . 39
6.12 Inspection . . . . . . . . . . . . . . . . . . . . 40
6.13 Tax Returns and Reports. . . . . . . . . . . . . . 40
6.14 Material Adverse Developments. . . . . . . . . . . 40
6.15 Places of Business . . . . . . . . . . . . . . . . 40
6.16 Sale of Collateral . . . . . . . . . . . . . . . . 40
SECTION 7. BORROWER'S NEGATIVE COVENANTS: . . . . . . . . . . 41
7.1 Merger, Consolidation, Dissolution or
Liquidation. . . . . . . . . . . . . . . . . . . . 41
7.2 Liens and Encumbrances . . . . . . . . . . . . . . 41
7.3 Negative Pledge. . . . . . . . . . . . . . . . . . 41
7.4 Transactions With Affiliates or Subsidiaries . . . 42
7.5 Guarantees . . . . . . . . . . . . . . . . . . . . 42
7.6 Indebtedness . . . . . . . . . . . . . . . . . . . 42
7.7 Use of Lenders' Name . . . . . . . . . . . . . . . 42
SECTION 8. DEFAULT. . . . . . . . . . . . . . . . . . . . . . 43
8.1 Events of Default. . . . . . . . . . . . . . . . . 43
8.2 Cure . . . . . . . . . . . . . . . . . . . . . . . 45
8.3 Rights and Remedies on Default . . . . . . . . . . 45
8.4 Nature of Remedies . . . . . . . . . . . . . . . . 47
8.5 Set-Off. . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9. AGENT. . . . . . . . . . . . . . . . . . . . . . . 47
9.1 Appointment and Authorization. . . . . . . . . . . 48
9.2 General Immunity . . . . . . . . . . . . . . . . . 48
9.3 Consultation with Counsel. . . . . . . . . . . . . 48
9.4 Documents. . . . . . . . . . . . . . . . . . . . . 48
9.5 Rights as a Bank . . . . . . . . . . . . . . . . . 49
9.6 Responsibility of Agent/Co-Agent . . . . . . . . . 49
9.7 Collections and Disbursements. . . . . . . . . . . 50
9.8 Indemnification. . . . . . . . . . . . . . . . . . 51
9.9 Expenses . . . . . . . . . . . . . . . . . . . . . 51
9.10 No Reliance. . . . . . . . . . . . . . . . . . . . 51
9.11 Reporting. . . . . . . . . . . . . . . . . . . . . 52
9.12 Removal of Agent/Co-Agent. . . . . . . . . . . . . 52
9.13 Action on Instructions of Lenders. . . . . . . . . 53
9.14 Several Obligations. . . . . . . . . . . . . . . . 53
9.15 Consent of Banks . . . . . . . . . . . . . . . . . 53
9.16 Participations and Assignments . . . . . . . . . . 54
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 56
10.1 GOVERNING LAW. . . . . . . . . . . . . . . . . . . 56
10.2 Integrated Agreement . . . . . . . . . . . . . . . 56
10.3 Waiver . . . . . . . . . . . . . . . . . . . . . . 56
10.4 Time . . . . . . . . . . . . . . . . . . . . . . . 57
10.5 Expenses of Agent. . . . . . . . . . . . . . . . . 57
10.6 Brokerage. . . . . . . . . . . . . . . . . . . . . 57
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . 57
10.8 Headings . . . . . . . . . . . . . . . . . . . . . 58
10.9 Survival . . . . . . . . . . . . . . . . . . . . . 58
10.10 Successors and Assigns . . . . . . . . . . . . . . 59
10.11 Counterparts . . . . . . . . . . . . . . . . . . . 59
10.12 Modification . . . . . . . . . . . . . . . . . . . 59
10.13 Signatories. . . . . . . . . . . . . . . . . . . . 59
10.14 Third Parties. . . . . . . . . . . . . . . . . . . 59
10.15 Discharge of Taxes, Borrower's Obligations,
Etc. . . . . . . . . . . . . . . . . . . . . . . . 59
10.16 Most Favored Lenders . . . . . . . . . . . . . . . 60
10.17 Consent to Jurisdiction. . . . . . . . . . . . . . 60
10.18 Waiver of Jury Trial . . . . . . . . . . . . . . . 60
10.19 Information to Participant . . . . . . . . . . . . 60
EXHIBIT LIST
Exhibit 2.1(b) -- Form of Revolving Credit Note
Exhibit 2.1(c) -- Form of Term Note
Exhibit 2.1(e) -- Form of Borrowing Base Certificate
Exhibit 2.3(b)(ii) -- Form of Assignment Agreement
Exhibit 5.1 -- Borrower's States of Qualifications
Exhibit 5.2 -- Places of Business
Exhibit 5.3 -- Judgments, Proceedings, Litigation and
Orders
Exhibit 5.9 -- Subsidiaries and Affiliates
Exhibit 5.10 -- Existing Guaranties, Investments and
Borrowings, Leases and Employment
Agreements
Exhibit 5.12(a) -- Schedule of Names
Exhibit 5.12(b) -- Trademarks, Patents and Copyrights
Exhibit 5.13 -- Other Associations
Exhibit 5.14 -- Environmental Matters
Exhibit 5.15 -- Capital Stock
Exhibit 5.17 -- Form of Lease
Exhibit 6.11 -- Officers' Certificates
SCHEDULES
Schedule A -- Schedule and Addresses of Lenders
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated this ____ day of
________, 199_, by and among Fidelity Leasing, Inc., a Pennsylvania corporation
("Borrower"), CoreStates Bank, N.A., a national banking association in its
capacity as agent ("Agent") and as lender, First Union National Bank, a national
banking association in its capacity as co-agent ("Co-Agent") and as lender, and
the financial institutions listed on Schedule A attached hereto and made a part
of this Agreement (as such Schedule may be amended, modified or replaced from
time to time), in their capacity as lenders (singly, each is a "Lender" and
collectively, all are "Lenders").
BACKGROUND
A. Borrower wishes, from time to time, to obtain advances from Lenders up
to the Maximum Credit Limit. Lenders are willing to continue to make loans and
grant extensions of credit to Borrower under the terms and provisions
hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED: As used in this Agreement, the following terms have
the following respective meanings:
ACCOUNT - Any right to payment for goods sold or leased or for
services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance.
ADDITIONAL FACILITY FEE - Section 2.6(b).
ADJUSTED DEBT TO TANGIBLE NET WORTH RATIO - At any time means the
ratio of (i) total Liabilities less Nonrecourse Debt to (ii) Borrower's Tangible
Net Worth less an amount equal to fifty percent (50%) of all restricted cash,
restricted receivables and other collateral pledged or sold in connection with
Securitization Transactions(s) and less fifty (50%) percent of Borrower's
Subordinated Indebtedness.
ADJUSTED LIBOR RATE - As applied to a LIBOR Based Rate Loan, for any
LIBOR Interest Period, the rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) determined pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR RATE
------------------------
(1 - Reserve Percentage)
For purposes hereof, "LIBOR Rate" shall mean the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary to the next 1/16 of 1%) at
which the Agent is offered deposits of United States dollars in the London
Interbank market on or about eleven o'clock (11:00) a.m. London time two (2)
Business Days prior to the commencement of such LIBOR Interest Period on amounts
substantially equal to such LIBOR Based Rate Loan as to which the Borrower may
elect the LIBOR Based Rate to be applicable with a maturity of comparable
duration to the LIBOR Interest Period selected by the Borrower for such LIBOR
Based Rate Loan.
ADMINISTRATION FEE - Section 2.6(c).
ADVANCE(S) - Any monies advanced or credit extended to Borrower by any
Lender under the Credit Facility.
AFFILIATE - As to any Person, each other Person that directly, or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person in question.
AGREEMENT - This Amended and Restated Loan and Security Agreement, as
it may hereafter be amended, supplemented or replaced from time to time.
ASSIGNMENT AGREEMENT - Section 2.3(b)(ii).
AUTHORIZED OFFICER - Any officer or partner of Borrower authorized by
specific resolution of Borrower to request Advances as set forth in the
incumbency certificate referred to in Section 4.1(d) of this Agreement.
BASE RATE - On any date of determination, a per annum rate of interest
which is 225 basis points (in the case of Term Loans) or 175 basis points (in
the case of Revolving Credit Loans) in excess of the CD Rate, on such date.
BASE RATE LOANS - Any portion of Loans on which interest accrues at
the Base Rate.
BOOKS AND RECORDS - All of Borrower's original ledger cards, payment
schedules, credit applications, Contract Rights, liens, security instruments,
guarantees and other General Intangibles relating in any way to the Leases or
Leased Property.
BORROWING BASE - As of any date of determination, an amount equal to
the lesser of:
(i) the Maximum Credit Limit, and
(ii) 85% of the Present Value of the sum of the Lease Receivables
corresponding to each Eligible Lease.
BUSINESS DAY - Any day that is not a Saturday or Sunday or day on
which Agent or any Lender is required or permitted to close.
CD RATE - On any date of determination, that rate quoted in the Money
Rate Section of THE WALL STREET JOURNAL on such date, as the average of top
rates given by major New York banks on primary new issues of certificates of
deposit with a maturity of six (6) months. If for any reason THE WALL STREET
JOURNAL is unavailable, a CD Rate shall be as quoted in another publication of
comparable standing.
CLOSING - Section 4.6.
CLOSING DATE - Section 4.6.
COLLATERAL - All now or hereafter existing Leases and Leased Property,
Books and Records and all cash and noncash proceeds, thereof, including
insurance proceeds.
CONTRACT RIGHTS - All rights under contracts not yet earned by
performance.
CREDIT FACILITY - Section 2.1(a).
CURRENT TERM - The Initial Term during the period of the Initial Term,
and any renewal or extended term during the term thereof, if Lenders elect, in
their sole discretion, to renew or extend the Credit Facility.
DEFAULTED LEASE - Any Lease where the Lease or Leased Property
associated therewith fails, at any time, to comply with all of the
representations and warranties set forth in Section 5.17 below.
DEFAULTING LENDER - Section 2.2(b)(iii)(C).
DEFAULT RATE - Section 2.5(b).
DISTRIBUTION -
(1) Dividends or other distributions on capital stock of Borrower;
and
(2) The redemption, repurchase or acquisition of such stock or of
warrants, rights or other options to purchase such stock.
ELIGIBLE LEASE(S) - Each Lease which meets all of the following
specifications: (1) is not subject to any Lien, security interest or prior
assignment other than Agent's security interest for the benefit of Lenders and
the rights of the Lessees thereunder; (2) is a valid and enforceable Lease,
representing the undisputed obligation of the Lessee, with rentals due
thereunder not more than 61 days contractually past due; (3) is not subject to
any defense, set off, counterclaim, deduction, or allowance or adjustment; (4)
unless otherwise agreed to in writing by Agent and Co-Agent, provides for the
lease of Leased Property with an aggregate invoice price of less than $150,000,
(5) provides for the lease of Leased Property which has not been returned,
rejected, lost or damaged; (6) arose in the ordinary course of Borrower's
business; (7) Borrower has not received notice of bankruptcy, receivership,
reorganization, insolvency or material adverse change in the financial condition
of the Lessee; (8) the Lessee is not a Subsidiary or Affiliate of Borrower; (9)
is not a Defaulted Lease and complies with all general warranties set forth in
Section 5.17 hereof; (10) does not have an initial stated term in excess of
sixty (60) months, provided, however, that lease(s) with an initial stated term
of up to 72 months may be considered Eligible Leases so long as the aggregate
Lease Receivable(s) of all such Lease(s) shall, at no time, exceed an amount
which is ten (10%) percent of the outstanding principal balance of the Loans;
(11) has not, in the case of Revolving Credit Loans, been pledged to Agent
and/or Lenders for a period of more than eighteen (18) months; (12) contains a
provision whereby the Lessee agrees not to assert any claim or reduction,
counterclaim, setoff, recoupment, or any other claim, allowance or adjustment
against any assignee of Borrower; (13) is a Lease with a Lease Receivable, which
together with all other Lease Receivables owed by the same Lessee, does not
exceed $250,000 in the aggregate.
EQUIPMENT - The meaning ascribed thereto in the Pennsylvania Uniform
Commercial Code.
ERISA - The Employee Retirement Income Security Act of 1974, as the
same may be amended, from time to time.
EVENT OF DEFAULT - Section 8.1.
EXPENSES - Section 10.5.
FACILITY FEE - Section 2.6(b).
FEDERAL FUNDS RATE - means on any day, the effective rate of interest
charged by the Federal Reserve Bank of Philadelphia for overnight Federal Funds
in Philadelphia as reported by the Federal Reserve Bank in Philadelphia for such
day.
FINANCIAL STATEMENTS - The financial statements of Borrower prepared
in accordance with GAAP.
FIXED CHARGE COVERAGE RATIO - The ratio of Borrower's operating cash
flow (income before taxes, depreciation, amortization and extraordinary items,
plus interest expense) to the sum of (i) interest expense; (ii) mandatory
principal payments and (iii) an amount equal to twenty-five (25%) percent of the
average daily outstanding principal balance of the Revolving Credit Loans.
GAAP - Generally accepted accounting principles as in effect on the
Closing Date, as may be amended from time to time.
GENERAL INTANGIBLES - The meaning ascribed thereto in the Pennsylvania
Uniform Commercial Code and shall include, but not be limited to, all contract
rights (including without limitation, all rights under remarketing agreements),
chattel paper, documents, instruments, books, records, ledgers, journals, check
books, print outs, blue prints, designs, computer programs, computer tapes,
punch cards, formulae, drawings, customer lists, choses in action, claims,
goodwill, designs and plans, licenses, license agreements, tax and all other
types of refunds, returned and unearned insurance premiums, rights and claims
under insurance policies, patents, patent application, trademarks, trade names,
trade styles, trademark applications and copyrights.
GOOD BUSINESS DAY - Any Business Day when banks in Philadelphia,
Pennsylvania and London, England are open for business.
GUARANTORS - Resource America, Inc., Resource Leasing, Inc., FL
Partnership Management, Inc. and FL Financial Services, Inc.
GUARANTY - Section 4.1(l).
HAZARDOUS SUBSTANCE - Section 5.14.
INITIAL TERM - Section 2.1(d).
INVENTORY - The meaning ascribed thereto in the Pennsylvania Uniform
Commercial Code and shall include all additions, improvements, accessions,
attachments, upgrades, replacements and substitutions thereto or therefor.
LEASE(S) - All of Borrower's Accounts, Documents, General Intangibles,
Instruments and Chattel Paper arising in connection with each and every
equipment lease (whether a "true lease" or a lease intended as security) and/or
schedule to a master lease agreement, assigned to Lenders and/or Agent for the
benefit of Lenders, or now or hereafter designated on any schedule as being
assigned to Lenders and/or Agent for the benefit of Lenders. The term "Lease"
includes (i) all payments to be made thereunder, (ii) all rights of Borrower
therein, and (iii) any and all amendments, renewals, extensions or guarantees
thereof.
LEASE RECEIVABLE(S) - With respect to each Lease, the gross value of
the contractual firm term lease payments plus the absolute and unconditional
obligation, if any, of the corresponding Lessee to make a payment(s) at the end
of the stated Lease term.
LEASED PROPERTY - Any personal property leased or to be leased or
financed by Borrower pursuant to a Lease; the term "Leased Property" includes
all of Borrower's Inventory or Equipment so leased and any and all additions,
improvements, accessions, attachments, upgrades, replacements and substitutions
thereto and therefor.
LESSEE - The lessee(s) or obligor(s) responsible for payment and/or
performance under a Lease.
LIABILITIES - All liabilities of every kind of Borrower and its
Subsidiaries as would be shown on a consolidated financial statement of Borrower
prepared in accordance with GAAP, and all contingent and unmatured obligations
of Borrower and its Subsidiaries pursuant to any and all guarantee, surety or
similar type agreements relating to the debts of Persons outside of the
consolidated group.
LIBOR BASED RATE - A rate of interest determined by reference to the
Adjusted LIBOR Rate.
LIBOR BASED RATE LOAN - Any portion of the Revolving Credit Loans or
any Term Loan on which interest accrues at the LIBOR Based Rate.
LIBOR BASED REVOLVING LOAN RATE - The Adjusted LIBOR Rate plus 175
basis points.
LIBOR BASED TERM LOAN RATE - The Adjusted LIBOR Rate plus 225 basis
points.
LIBOR INTEREST PERIOD - Section 2.4(c)(i).
LIEN - Any interest of any kind or nature in property securing an
obligation owed to, or a claim of any kind or nature in property by, a Person
other than the owner of the Property, whether such interest is based on the
common law, statute, regulation or contract, and including, but not limited to,
a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a lease, consignment or bailment for security
purposes, a trust, or an assignment.
LOANS - All Revolving Credit Loans and Term Loans.
LOAN DOCUMENTS - This Agreement, the Revolving Credit Notes, the Term
Notes, the Guaranty and all agreements, instruments and documents executed
and/or delivered from time to time in connection therewith, as amended or
replaced from time to time.
MATURITY DATE - The later of (i) March 31, 1998 or (ii) the last day
of the then Current Term.
MAXIMUM CREDIT LIMIT - The sum of the Pro Rata Shares which at the
time of Closing equals Twenty Million Dollars ($20,000,000).
NET INCOME - The consolidated net income after taxes of Borrower as
such would appear on Borrower's consolidated statement of income, prepared in
accordance with GAAP.
NET WORTH - At any time means the amount of stockholders equity on a
consolidated basis plus Borrower's Subordinated Indebtedness (excluding the
current portion of such Indebtedness) with a maturity of at least five (5) years
and an interest rate which is no greater than the market rate of interest for
similar debt.
NONRECOURSE DEBT - All Liabilities of Borrower which are non-recourse
in nature and treated as non-recourse obligations on Borrower's Financial
Statements. Non-recourse Debt shall not include any Liabilities which are
partially recourse and may be off balance sheet.
OBLIGATIONS - All existing and future liabilities and obligations of
every kind or nature at any time owing by Borrower to Lenders (or any of them),
Co-Agent and/or to Agent, whether joint or several, related or unrelated,
primary or secondary, matured or contingent, due or to become due, and whether
principal, interest, fees or Expenses, including, without limitation,
obligations in respect of the Revolving Credit Loans and Term Loans and any
extensions, modifications, substitutions, increases and renewals thereof, and
the payment of all reasonable amounts advanced by Agent (or any Lender after the
occurrence of an Event of Default) to preserve, protect and enforce rights
hereunder and in the Collateral and all Expenses incurred by Agent (or any
Lender after the occurrence of an Event of Default) in connection therewith.
PENNSYLVANIA UNIFORM COMMERCIAL CODE OR UCC - The Uniform Commercial
Code as enacted in Pennsylvania, as the same shall be amended from time to time.
PERSON - An individual, partnership, corporation, limited liability
corporation, trust, unincorporated association or organization, joint venture
or any other entity.
PRESENT VALUE - The value, from time to time, as of the date of
determination, of the remaining Lease Receivables due under a Lease, discounted
using the applicable interest rate as set forth herein.
PRO RATA PERCENTAGE - Section 2.1(a)(iii).
PRO RATA SHARE - Section 2.1(a)(iii).
PROPERTY - Any interest of Borrower in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
REGULATION D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations,
as amended, and any successor thereto.
RESERVE PERCENTAGE - For a Lender, on any day, that percentage
(expressed as a decimal) which is in effect on such day, prescribed by the Board
of Governors of the Federal Reserve System (or any successor or any other
banking authority to which a Lender is subject, including any board or
governmental or administrative agency of the United States or any other
jurisdiction to which a Lender is subject), for determining the maximum reserve
requirement (including without limitation any basic, supplemental, marginal or
emergency reserves) for (a) deposits of United States dollars or (b)
Eurocurrency liabilities as defined in Regulation D, in each case used to fund
a LIBOR Based Rate Loan subject to a LIBOR Based Rate. The Adjusted LIBOR Rate
shall be adjusted automatically on and as of the effective day of any change in
the Reserve Percentage.
REVOLVING CREDIT LOANS - Section 2.1(a).
REVOLVING CREDIT NOTES - Section 2.1(b).
SECURITIZATION TRANSACTION - Any transaction for which Agent has
received 30 days prior written notice, using, in part, leases or leased property
to secure notes issued by Borrower or a special purpose subsidiary of Borrower
and in connection with which, Borrower will be subject to no recourse or limited
recourse arising out of a servicing agreement.
STOCK PLEDGE AGREEMENTS - Section 4.1(m).
SUBORDINATED INDEBTEDNESS - All indebtedness which is subordinate in
all respects to the Obligations pursuant to a subordination agreement acceptable
to Agent and Co-Agent in their sole discretion.
SUBORDINATION AGREEMENT - Section 4.1(n).
SUBSIDIARY - Any corporation more than fifty percent (50%) of whose
voting stock is legally and beneficially owned by Borrower or owned by a
corporation more than fifty percent (50%) of whose voting stock is legally and
beneficially owned by Borrower.
SUPERMAJORITY LENDERS - At any time, Lenders holding Pro Rata
Percentages aggregating at least sixty-six and two-thirds (66-2/3%) percent of
the aggregate amount outstanding under the Credit Facility at such time;
provided, however, that if there is no outstanding amount under the Credit
Facility, the SuperMajority Lenders shall be determined by those Lenders holding
sixty-six and two-thirds (66-2/3%) percent of the Maximum Credit Limit.
TANGIBLE NET WORTH - Borrower's Net Worth less assets which would be
classified as intangible on a balance sheet prepared in accordance with GAAP
including, without limitation, trademarks, goodwill, deferred closing costs,
loans to shareholders and Affiliates and "start-up" costs except Borrower may
include up to $300,000 worth of intangible assets representing certain
organizational costs and deferred taxes paid for by Borrower prior to September
30, 1996.
TERM LOAN - Section 2.1(a).
UNMATURED EVENT OF DEFAULT - An event or condition which, with the
passage of time, the giving of notice, or both, would become an Event of
Default.
UNUSED LINE FEE - Section 2.6(a).
1.2 ACCOUNTING PRINCIPLES: Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
SECTION 2. THE LOANS
2.1 CREDIT FACILITY - DESCRIPTION:
(a) (i) Subject to the terms and conditions of this Agreement, each
Lender, severally, hereby establishes for the benefit of Borrower, a credit
facility (collectively referred to as "Credit Facility") which shall include
Advances extended by Lenders to or for the benefit of Borrower from time to time
hereunder in the form of revolving credit loans ("Revolving Credit Loans") or
term loans ("Term Loans"). The aggregate outstanding principal amount of all
Loans, at any time, shall not exceed the Borrowing Base. Subject to such
limitation, the outstanding balance of all Revolving Credit Loans may fluctuate
from time to time, to be reduced by repayments made by Borrower and to be
increased by future Revolving Credit Loans which may be made by Lenders. If the
aggregate outstanding amount of all Loans at any time exceeds the Maximum Credit
Limit, Borrower shall immediately repay such excess in full. If the aggregate
outstanding amount of all Loans exceeds the Borrowing Base, Borrower shall
within ten (10) days of such occurrence, either (x) repay such excess in full
or (y) pledge additional Eligible Leases in accordance with the terms hereof.
The obligations of Borrower under the Credit Facility and this Agreement shall
at all times be absolute and unconditional.
(ii) Subject to the terms and conditions of this Agreement, and
provided that no Event of Default or Unmatured Event of Default has occurred
hereunder, Borrower shall have the option to have any Advance under the Credit
Facility initially be a Revolving Credit Loan or a Term Loan and Borrower may
at any time, in accordance with the terms hereof, convert a Revolving Credit
Loan to a Term Loan. In no event shall the initial principal amount of any Term
Loan be less than $2,000,000 or any Revolving Credit Loan be less than $500,000.
At no time shall Borrower have more than five (5) Term Loans outstanding.
(iii) Subject to the terms and conditions of this Agreement, each
Lender severally agrees to lend to Borrower an amount equal to such Lender's
respective percentage (as to each Lender, the percentage of the Credit Facility
set forth opposite its name on Schedule "A" attached hereto and made a part
hereof and referred to as its "Pro Rata Percentage") of the Advance requested
by Borrower. The aggregate outstanding Loans by each Lender shall not exceed
the respective amounts ("Pro Rata Shares") set forth opposite such Lender's name
on Schedule "A".
(b) At Closing, Borrower shall execute and deliver its promissory
note to each Lender for the total principal amount of such Lender's Pro Rata
Share (collectively as may be amended, modified or replaced from time to time,
the "Revolving Credit Notes"). The Revolving Credit Notes shall evidence
Borrower's absolute and unconditional obligation to repay such Lender(s) for all
Revolving Credit Loans made by such Lender(s) under the Credit Facility, with
interest as herein and therein provided. Each and every Revolving Credit Loan
under the Credit Facility shall be deemed evidenced by the Revolving Credit
Notes, which are deemed incorporated herein by reference and made a part hereof.
All Revolving Credit Notes shall be substantially in the form set forth in
Exhibit "2.1(b)" attached hereto and made a part hereof.
(c) (i) In the event Borrower requests any Advance to initially be
a Term Loan, or at any time a Revolving Credit Loan is converted to a Term Loan,
Borrower shall execute and deliver its promissory note to each Lender for the
total principal amount of such Lender's Pro Rata Percentage of such Term Loan
(collectively as may be amended, modified or replaced from time to time, the
"Term Notes"). The Term Notes shall evidence Borrower's absolute and
unconditional obligation to repay such Lender for the Term Loan made by such
Lender under the Credit Facility, with interest as herein and therein provided.
Each and every Term Loan under the Credit Facility shall be evidenced by
separate Term Notes, which shall be deemed incorporated herein by reference and
made a part hereof. All Term Notes shall be substantially in the form set forth
in Exhibit "2.1(c)" attached hereto and made a part hereof.
(d) The term ("Initial Term") of the Credit Facility shall expire on
March 31, 1998. The Credit Facility may, nonetheless, be renewed annually in
Lenders' sole discretion, for additional twelve (12) month periods. Borrower's
request for such renewal must be made at least 60 days prior to the expiration
of the then Current Term. After the Maturity Date, no further Advances shall
be available from Lenders.
(e) Borrower shall deliver, at least monthly on the first Business
Day of each month, and with each borrowing request, unless Agent requests more
frequent delivery, a Borrowing Base Certificate in the form of Exhibit 2.1(e)
attached hereto and made a part hereof, executed by an Authorized Officer,
evidencing the availability under the Borrowing Base and compliance with the
respective sublimits.
2.2 ADVANCES, CONVERSIONS AND PAYMENTS:
(a) Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Credit Facility, the Unused Line
Fee, the Facility Fee, the Administration Fee, the Expenses, and all other
charges and any other Obligations of Borrower hereunder, shall be made to Agent
at its main Philadelphia banking office CoreStates Bank, N.A., 1339 Chestnut
Street, Philadelphia, Pennsylvania, in United States dollars, in immediately
available funds. Agent, on behalf of all Lenders, shall have the unconditional
right and discretion to make an Advance under the Credit Facility in the form
of a Revolving Credit Loan (whether or not availability exists under the
Borrowing Base) to pay, and/or to charge Borrower's operating account with any
such respective institution for, all of Borrower's Obligations as they become
due from time to time under this Agreement including, without limitation,
interest, principal, fees and reimbursement of Expenses.
(b) (i) Advances which may be made by Lenders from time to time
under the Credit Facility shall be made available by crediting such proceeds to
Borrower's operating account with Agent.
(ii) All Advances requested by Borrower and all requests by
Borrower to convert Revolving Credit Loans to Term Loans must be requested by
11:00 A.M. Eastern time, three (3) Business Days prior to the date of such
requested Advance or conversion. All requests or confirmation of requests for
an Advance or conversion are to be in writing and may be sent by telecopy or
facsimile transmission provided that Agent shall have the right to require that
receipt of such request not be effective unless confirmed via telephone with
Agent.
(iii) A. Upon receiving a request for an Advance or conversion
in accordance with subparagraph (ii) above, as soon as reasonably practical
thereafter, Agent shall notify all Lenders of the request. Each Lender shall
advance its applicable Pro Rata Percentage of the requested Advance to Agent by
remitting federal funds, immediately available, to Agent pursuant to Agent's
instructions prior to 11:00 A.M. Eastern Time on the scheduled date of the
Advance. Subject to satisfaction of the terms and conditions hereof, Agent
shall make the requested Advance available to Borrower by crediting such amount
to Borrower's operating account with Agent as soon as is reasonably practical
thereafter on the day the requested Advance is to be made. In lieu of the
foregoing, Agent may, in its discretion, fund the Pro Rata Percentage of such
Advance on behalf of any one or more Lenders (unconditionally and absolutely
obligating such affected Lender(s) to reimburse Agent in full without deduction
or setoffs for its portion of such Advance) with a settlement of the pro rata
percentages of such Advances of each Lender on the following Business Day under
such procedures as Agent may establish.
B. Neither Agent nor any other Lender shall be obligated,
for any reason whatsoever, to advance the share of any other Lender. If such
corresponding amount is not made available to Agent by such Lender on the date
the Advance is made and Agent elects (at its discretion, without any obligation
to do so) to make such Lender's Pro Rata Percentage of the Advance, Agent shall
be entitled to recover such amount on demand from such Lender together with
interest at the per annum rate equal to the Federal Funds Rate in respect of the
first two days and at the Base Rate in respect of each day thereafter during the
period commencing 2:00 P.M. Eastern Time on the date of such Advance and ending
on (but excluding) the date Agent recovers such amount. Agent shall also be
entitled to recover any and all losses and damages (including, without
limitation, attorneys' fees and costs) from any Lender failing to so advance
upon demand of Agent. Agent may set off the obligations of a Lender under this
paragraph against any distributions or payments of the Obligations which Agent
would otherwise make available to such Lender.
C. To the extent and during the time period in which any
Lender fails to provide or delays providing its respective payment to Agent
pursuant to subsections A or B above (any such Lender being referred to, during
such period, as a "Defaulting Lender"), such Lender's percentage of all payments
of the Obligations (but not its Pro Rata Percentage of future Advances required
to be funded by such Lender) shall decrease to reflect the actual percentage
which its actual outstanding Loans bear to the total outstanding Loans of all
Lenders. In addition, notwithstanding any definition or other provision of this
Agreement to the contrary, during any period in which a Lender is a Defaulting
Lender, all calculations for voting purposes among the Lenders shall be made as
if the Defaulting Lender were not a Lender and not a party to this Agreement.
2.3 PRECONDITIONS TO ADVANCES AND ASSIGNMENT OF LEASES AND LEASED PROPERTY
(a) Before Lenders will make any Advance:
(i) Borrower will deliver to Agent the following (dated and
signed) in form and substance satisfactory to Agent and its counsel:
A. A borrowing request setting forth the requested date
of the Advance (but no sooner than three (3) Business Days after Agent receives
the request), the requested advance amount, and whether the request is for a
Term Loan or a Revolving Credit Loan, a Borrowing Base Certificate in the form
attached hereto as Exhibit "2.1(e)" setting forth the availability under the
Borrowing Base, any information required by this Agreement and such other
information as Agent shall reasonably request. A borrowing request may be made
orally, provided that Borrower confirms the request in writing within two (2)
days thereafter, provided further however, that Lenders need not make any
Advances until Agent receives actual written confirmation and a Borrowing Base
Certificate,
B. Such financial information concerning any of the
Leases, Borrower or any Lessee as Agent may reasonably request, and
C. Such other instruments, agreements and documents as
Agent reasonably requests to carry out the intent of the parties to this
Agreement.
(ii) No Event of Default or Unmatured Event of Default shall have
occurred hereunder.
(b) In order to increase the Borrowing Base, Borrower shall deliver
to Agent for the benefit of Lenders the following items:
(i) A description of the collateral package, which shall
include, identification of the Lessee, a description of the Leased Property, the
net cost of the Leased Property, the net remaining principal balance under the
Lease(s), and the terms of and rentals owed under each Lease, and such other
information which Agent or Lenders shall reasonably request,
(ii) An Assignment Agreement signed by Borrower assigning
Borrower's right, title and interest in and to the Leased Property and Leases
to Agent for the benefit of Lenders, in the form attached hereto as Exhibit
"2.3(b)(ii)" ("Assignment Agreement"),
(iii) Invoices showing the true cost of the Leased Property net
of any servicing or maintenance charges, brokers' fees or similar types of "soft
costs",
(iv) If requested by Agent, additional Uniform Commercial Code
("UCC") financing statements covering, INTER ALIA, the Leased Property and the
Leases listing Agent for the benefit of Lenders, as secured party and Borrower
as debtor, to be filed in locations reasonably required by Agent,
(v) Copies of all UCC-1 financing statements filed by Borrower
against Lessee(s) and any acknowledgment copies or recording information
Borrower has received back from the recording offices, provided, however, that
Borrower shall not be required to furnish evidence of the filing of UCC-1
financing statements covering Leased Property leased pursuant to Lease(s) having
an outstanding Lease Receivable value of under $16,000.
(vi) The sole original of each Lease along with all schedules
duly assigned to Agent for the benefit of Lenders,
(vii) For each item of Leased Property with a Lease Receivable
in excess of $20,000, evidence that such item of Leased Property is insured
against such risks, in such amounts, with such insurance, and on such terms and
conditions as shall be satisfactory to Lenders ("Insurance Coverage"),
(viii) A certificate of acceptance or other document evidencing,
or other evidence of oral confirmation, that the Lessee has received and
accepted the Leased Property,
(ix) Where the initial cost of the Leased Property is in excess
of $100,000 and such Leased Property is to be affixed to real estate in such a
manner as, under applicable law, to become a fixture, a landlord or mortgagee
waiver from all persons having an interest in the real estate on which the
Leased Property will be located, and
(x) An undated notice signed by the Borrower directing each
Lessee to pay all sums due or to become due under each Lease directly to Agent
for the benefit of Lenders ("Lessee Notice") to be used only following the
occurrence of an Event of Default. Agent will hold the Lessee Notices in escrow
and will not release them, unless and until a Default shall have occurred.
2.4 CREDIT FACILITY INTEREST:
(a) REVOLVING CREDIT LOANS: The unpaid principal balance of all or
a portion of the Revolving Credit Loans shall bear interest at the LIBOR Based
Revolving Loan Rate.
(b) TERM LOANS: The unpaid principal balance of all or a portion of
the Term Loans shall bear interest at the LIBOR Based Term Loan Rate. In
addition Borrower may request that a Term Loan be converted to a fixed rate loan
at a rate quoted at the time of request by Agent and Co-Agent and acceptable to
Lenders.
(c) (i) LIBOR BASED RATE LOANS: LIBOR Based Rate Loans shall be
selected for a period of either one (1), two (2), or three (3) months' duration,
as Borrower may elect, during which a LIBOR Based Rate is applicable ("LIBOR
Interest Period"); provided, however, that (a) if the LIBOR Interest Period
would otherwise end on a day which shall not be a Good Business Day, such LIBOR
Interest Period shall be extended to the next succeeding Good Business Day,
unless such Good Business Day falls in another calendar month, in which case
such LIBOR Interest Period shall end on the next preceding Good Business Day
subject to clause (c) below; (b) interest shall accrue from and including the
first day of each LIBOR Interest Period to, but excluding, the day on which any
LIBOR Interest Period expires; and (c) with respect to any LIBOR Interest Period
which begins on the last Good Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period), the LIBOR Interest Period shall end on the last
Good Business Day of a calendar month. All accrued and unpaid interest on a
LIBOR Based Rate Loan must be paid in full on the day the applicable LIBOR
Interest Period expires. No LIBOR Interest Period may end after the Maturity
Date. Subject to all of the terms and conditions applicable to a request that
a new Advance be a LIBOR Based Rate Loan, Borrower may extend LIBOR Based Rate
Loans as of the last day of the applicable LIBOR Interest Period to a new LIBOR
Based Rate Loan. If Borrower does not notify Agent of its desire to extend a
LIBOR Based Rate Loan or repay such Advance prior to the expiration of the
applicable LIBOR Interest Period, such Advance shall automatically be extended
as a LIBOR Based Rate Loan with the same LIBOR Interest Period as the Advance
had prior to such extension (unless such LIBOR Interest Period would extend
beyond the Maturity Date, in which case, the LIBOR Interest period shall be a
period which will not extend beyond the Maturity Date).
(ii) The Adjusted LIBOR Rate may be automatically adjusted by
Agent or Co-Agent on a prospective basis to take into account the additional or
increased cost of maintaining any necessary reserves for Eurodollar deposits or
increased costs due to changes in applicable law or regulation or the
interpretation thereof occurring subsequent to the commencement of the then
applicable LIBOR Interest Period, including but not limited to changes in tax
laws and changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), excluding any such changes
that have resulted in a payment pursuant to Section 2.9 hereof, that increase
the cost to Lenders of funding the LIBOR Based Rate Loan. Agent or Co-Agent,
as the case may be, shall promptly give the Borrower and each Lender notice of
such a determination and adjustment, which determination shall be conclusive,
absent manifest error, as to the correctness of the fact and the amount of such
adjustment. Agent or Co-Agent, as the case may be, shall furnish to Borrower
a statement setting forth the basis for adjusting such LIBOR Based Rate and the
method for determining the amount of such adjustment.
(iii) In the event that Agent shall have reasonably determined
that Eurodollar deposits equal to the amount of the principal of the requested
LIBOR Based Rate Loan and for the LIBOR Interest Period specified are
unavailable, impractical or unlawful, or a LIBOR Based Rate will not adequately
and fairly reflect the cost of making or maintaining the principal amount of the
requested LIBOR Based Rate Loan specified by Borrower during the LIBOR Interest
Period specified, or that by reason of circumstances affecting Eurodollar
markets, adequate and reasonable means do not exist for ascertaining the rate
based on the Adjusted LIBOR Rate applicable to the specified LIBOR Interest
Period, Agent shall promptly give notice of such determination to the Borrower
that rates based on the Adjusted LIBOR Rate are not available. A determination
by Agent hereunder shall be prima facie evidence of the correctness of the fact
and amount of such additional costs or unavailability. Upon such a
determination, (i) the right of Borrower to select, convert to, or maintain a
LIBOR Based Rate Loan at the rate based on the Adjusted LIBOR Rate shall be
suspended until Agent shall have notified the Borrower that such conditions
shall have ceased to exist, and (ii) the LIBOR Based Rate Loans shall accrue
interest at the Base Rate.
(iv) In the event that, as a result of any changes in applicable
law or regulation or the interpretation thereof, it becomes unlawful for a
Lender to maintain Eurodollar liabilities sufficient to fund any LIBOR Based
Rate Loan subject to the LIBOR Based Rate, then such Lender shall immediately
notify Agent who shall immediately notify the other Lenders and Borrower
thereof, and such Lender's obligation to make, convert to, or maintain a LIBOR
Based Rate Loan at a LIBOR Based Rate shall be suspended until such time as such
Lender may again cause the LIBOR Base Rate to be applicable to its share of any
LIBOR Based Rate Loans and such Lender's share of the Loans subject to the LIBOR
Based Rate shall accrue interest at the Base Rate. If it becomes unlawful for
a Lender to maintain a LIBOR Based Rate Loan, such Lender may require that
Borrower immediately prepay such Lender's LIBOR Based Rate Loans or convert such
Loans to Base Rate Loans. Promptly after becoming aware that it is no longer
unlawful for such Lender to maintain such Eurodollar liabilities, such Lender
shall notify Agent who will notify Borrower thereof and such suspension shall
cease to exist. In the event it becomes unlawful for a Lender to maintain
Eurodollar liabilities, Borrower may seek to have such Lender replaced with a
lender for whom maintenance of Eurodollar liabilities is not unlawful so long
as such replacement lender is satisfactory to Agent and the SuperMajority
Lenders (without giving effect to the potentially replaced Lender), in their
sole and absolute discretion.
(v) In the event Borrower prepays (voluntarily or involuntarily)
or converts a LIBOR Based Rate Loan prior to the last day of the applicable
Interest Period, Borrower shall also pay to Agent for the account of Lenders,
on demand, the additional amount, as specified by Agent in a certificate setting
forth the basis of such computation, equal to the amount of any reasonable fees,
costs, expenses or other charges, PLUS the present value of an amount which is
the difference (if a positive number) between (y) the aggregate interest which
would have been payable to the last day of such Interest Period on such prepaid
amount, and (z) the aggregate interest the Lenders could expect to earn on such
prepaid amount if such amount were invested for the period from the date of such
prepayment to the last day of such Interest Period in United States Treasury
obligations maturing on or closest to the last day of such Interest Period.
Such certificate shall be conclusive except for manifest error.
2.5 ADDITIONAL INTEREST PROVISIONS.
(a) CALCULATION OF INTEREST: Interest on the Loans, regardless of
the applicable interest rate, shall be based on a three hundred sixty (360) day
year and charged for the actual number of days elapsed.
(b) DEFAULT RATE: After the occurrence and during the continuance
of an Event of Default hereunder and following notice from Agent to Borrower of
the Lenders' intention to apply the Default Rate to the Loans, the per annum
effective rate of interest on all Loans outstanding under the Credit Facility
shall be increased to a per annum rate equal to two (2%) percentage points in
excess of the applicable interest rate ("Default Rate").
(c) CONTINUATION OF INTEREST CHARGES: All contractual rates of
interest chargeable on outstanding Loans, regardless of the then applicable
interest rate, shall continue to accrue and be paid even after default,
maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind
or the happening of any event or occurrence similar or dissimilar.
(d) APPLICABLE INTEREST LIMITATIONS: In no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder and
charged or collected pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall,
in a final determination, deem applicable hereto. In the event that such court
determines Lenders have charged or received interest hereunder in excess of the
highest applicable rate, Agent, on behalf of Lenders, shall in its sole
discretion, apply and set off such excess interest received by Lenders against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.
(e) LIMITATION ON LIBOR BASED RATE LOANS: Upon the occurrence of an
Event of Default, and following written notice from Agent to Borrower, Agent may
in its sole discretion, or upon the instructions of Supermajority Lenders Agent
shall, eliminate the availability of LIBOR Based Rate Loans.
2.6 FEES:
(a) Unused Line Fee: So long as the Credit Facility is outstanding
and has not been terminated, Borrower shall unconditionally pay to Agent, for
the benefit of Lenders in accordance with their respective Pro Rata Percentages,
a non-refundable fee ("Unused Line Fee") equal to three-eights of one percent
(3/8%) per annum of the average daily unused portion of the Credit Facility
(which shall be calculated as the Maximum Credit Limit minus the average daily
outstanding balance of all Loans during the quarter for which such calculation
is made). The Unused Line Fee shall be computed and paid on a quarterly basis,
in arrears, on the first day of each January, April, July and October for the
previous quarter for which such computation is made by Agent, beginning on the
first day of January, 1997.
(b) Facility Fee: As of the Closing, Agent and Co-Agent shall have
fully earned, and Borrower shall have paid to Agent, a facility fee ("Facility
Fee") in an amount equal to one-quarter percent (1/4%) of Twenty Million Dollars
($20,000,000). In the event that Lenders and Agent, in their sole discretion
(after a request by Borrower), agree from time to time to increase the Maximum
Credit Limit, Borrower shall at the time of any such increases (as a condition
thereof), pay to Agent, for the ratable benefit of Agent and Co-Agent an
additional facility fee ("Additional Facility Fee(s)") in an amount equal to
one-quarter of one percent (1/4%) of the applicable increase. Notwithstanding
the increase the Maximum Credit Limit, such decisions being left to the sole
and absolute discretion of Agent and Co-Agent.
(c) ADMINISTRATION FEE: So long as the Credit Facility is
outstanding and has not been terminated, Borrower shall unconditionally pay to
Agent, for Agent's account, a non-refundable fee ("Administration Fee") equal
to three eighths of one percent (3/8%) per annum of the average daily
outstanding principal balance of all Loans during the quarter for which such
calculation is made). The Administration Fee shall be computed and paid on a
quarterly basis, in arrears, on the first day of each January, April, July and
October for the previous quarter for which such computation is made by Agent,
beginning on the first day of January, 1997.
2.7 PREPAYMENTS:
(a) (i) BASE RATE LOANS: Base Rate Loans may be prepaid at any time
and from time to time, in whole or in part, without premium or penalty. All
partial prepayments shall be applied first to accrued and unpaid interest, fees
and Expenses related to such prepaid Loan and then to the outstanding principal
balance of the Base Rate Loan so prepaid.
(ii) LIBOR BASED RATE LOANS: LIBOR Based Rate Loans may not be
prepaid on any date other than the last day of the selected Interest Period
unless Borrower gives Agent written notice of such intention prior to 1:00 p.m.
on a Business Day which is no less than two (2) Business Days prior to the date
it intends to make such prepayment (unless such prepayment must be immediate
because of the illegality of LIBOR Based Rate Loans as set forth in Section
2.4(c)(iv) hereof, in which case Borrower shall not be required to provide such
notice) and pays a prepayment fee in accordance with Section 2.4(c)(v) above.
All such prepayments must be of the full amount of the applicable LIBOR Based
Rate Loan plus all accrued but unpaid interest, fees and Expenses related to
such prepaid Loan. Borrower agrees that this fee is an estimate of Lender's
damages and not a penalty.
(iii) FIXES RATE TERM LOANS: Term Loans bearing interest at a
fixed rate pursuant to Section 2.4(b) hereof may not be prepaid unless Borrower
pays a prepayment fee equal to (the amount of any applicable fees, costs,
Expenses or other charges, PLUS the present value of an amount which is the
difference (if a positive number) between (y) the aggregate interest which would
have been payable to the last day of such Term Loan on such prepaid amount, and
(z) the aggregate interest Lenders could expect to earn on such prepaid amount
if such amount were invested for the period from the date of such prepayment to
the maturity date of the Term Loan in United States Treasury obligations
maturing on or closest to such maturity date. Borrower agrees that this fee is
our estimate of Lenders' damages and not a penalty. All such prepayments shall
be applied to the prepaid Term Loan, first against all accrued and unpaid
interest, fees and Expenses related to such prepaid Term Loan and then to
installments of the outstanding principal balance of the Term Loan so prepaid
in the inverse order of Maturity.
(b) PROCEEDS OF COLLATERAL: Prior to the occurrence of an Event of
Default, proceeds from Collateral comprising a portion of the Borrowing Base to
the extent that the aggregate outstanding amount of all Loans exceeds the
Borrowing Base, shall promptly be paid to Agent for the benefit of Lenders and
be first applied to accrued but unpaid interest, fees, costs and Expenses
related to the Credit Facility, and then to the outstanding balance of the
Revolving Credit Loans, the Term Loan and then to Borrower's other Obligations
in such order as Agent may elect in its sole discretion. Following the
occurrence of an Event of Default, all proceeds from the Collateral shall be
immediately delivered to Agent and Agent may apply such proceeds to any of
Borrower's Obligations in such order as Agent may decide in its sole discretion.
(c) MANDATORY PREPAYMENT: In the event the aggregate outstanding
amount of all Loans at any time exceeds the Maximum Credit Limit, Borrower shall
immediately repay such excess in full and if the aggregate outstanding amount
of all Revolving Credit Loans exceeds the Borrowing Base, Borrower shall within
ten (10) days either (i) repay such excess in full or (ii) pledge additional
Eligible Leases in accordance with the terms hereof. Any such payments shall
first be applied to accrued but unpaid interest, fees, costs and Expenses
related to the Credit Facility, and then to the outstanding balance of the
Revolving Credit Loans, the Term Loan and then to Borrower's other Obligations
in such order as Agent may elect in its sole discretion.
2.8 USE OF PROCEEDS: The extensions of credit under and proceeds of the
Credit Facility shall be used to enable Borrower to purchase Leased Property and
finance Leases associated with such Leased Property.
2.9 CAPITAL ADEQUACY: If any present or future law, governmental rule,
regulation, policy, guideline, directive or similar requirement (whether or not
having the force of law) imposes, modifies, or deems applicable any capital
adequacy, capital maintenance or similar requirement which affects the manner
in which Commercial banks generally allocate capital resources to their
commitments (including any commitments hereunder), and as a result thereof, in
the opinion of a Lender, the rate of return on such Lender's capital with regard
to the Loans is reduced to a level below that which such Lender could have
achieved but for such circumstances, then in such case and upon notice from
Agent and/or such Lender to Borrower, from time to time, Borrower shall pay such
Lender such additional amount or amounts as shall compensate such Lender for
such reduction in its rate of return. Such notice shall contain the statement
of such Lender with regard to any such amount or amounts which shall, in the
absence of manifest error, be binding upon Borrower. In determining such
amount, such Lender may use any reasonable method of averaging and attribution
that it deems applicable.
SECTION 3. COLLATERAL
3.1 DESCRIPTION: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents, Borrower hereby grants to Agent, for the
benefit of Lenders, a continuing first lien on and security interest in, upon
and to the Collateral.
3.2 LIEN DOCUMENTS: At Closing and thereafter as Agent deems necessary,
Borrower shall execute and deliver to Agent, or have executed and delivered (all
in form and substance reasonably satisfactory to Agent):
(a) FINANCING STATEMENTS - Financing statements pursuant to the UCC,
which Agent, on behalf of Lenders, may file in any jurisdiction where any
Collateral is or may be located and where Borrower maintains its chief executive
office; and
(b) OTHER AGREEMENTS - Any other agreements, documents, instruments
and writings, including, without limitation, security agreements and Assignment
Agreements, reasonably required by Agent to evidence, perfect or protect Agent's
and/or Lenders' liens and security interest in the Collateral or as Agent may
reasonably request from time to time.
3.3 OTHER ACTIONS: In addition to the foregoing, Borrower shall do
anything further that may be lawfully and reasonably required by Agent to secure
Lenders and effectuate the intentions and objects of this Agreement, including,
but not limited to, the execution and delivery of lockbox agreements,
continuation statements, amendments to financing statements, security
agreements, contracts and any other documents required hereunder. Borrower
shall also immediately deliver (with execution by Borrower of all necessary
documents or forms to reflect Agent's Lien for the benefit of Lenders thereon)
to Agent as bailee for Lenders, all items for which Agent and/or Lenders must
or may receive possession to obtain a perfected security interest, including
without limitation, all Leases, notes, certificates and documents of title,
chattel paper, warehouse receipts, instruments, and any other similar
instruments constituting Collateral.
3.4 SEARCHES: Agent shall, prior to or at Closing, and thereafter as
Agent may determine from time to time, at Borrower's sole expense, obtain the
following searches (the results of which are to be consistent with the
warranties made by Borrower in this Agreement):
(a) UCC SEARCHES: UCC searches with the Secretary of State and local
filing office of each state where Borrower maintains its executive office, a
place of business, or assets;
(b) JUDGMENTS, ETC.: Judgment, federal tax lien and corporate tax
lien searches, in all applicable filing offices of each state searched under
subparagraph (a) above.
Borrower shall, prior to or at Closing and at its expense, obtain and
deliver to Agent good standing certificates showing Borrower to be in good
standing in its state of incorporation and in each other state or foreign
country in which it is doing and presently intends to do business for which
Borrower's failure to be so qualified might have material adverse effect on
Borrower's business, financial condition, Property or Agent's and/or Lenders'
rights hereunder.
3.5 FILING SECURITY AGREEMENT: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.6 POWER OF ATTORNEY: Each of the officers of Agent is hereby
irrevocably made, constituted and appointed (such appointment being coupled with
an interest) the true and lawful attorney for Borrower (without requiring any
of them to act as such) with full power of substitution to do the following:
(1) endorse the name of Borrower upon any and all checks, drafts, money orders
and other instruments for the payment of monies that are payable to Borrower and
constitute collections on the Collateral; (2) execute in the name of Borrower
any financing statements, schedules, assignments, instruments, documents and
statements that Borrower is obligated to give Agent hereunder or is necessary
to perfect Agent's and/or Lenders' security interest or Lien in the Collateral,
including without limitation, execute in its own name or in the name of
Borrower, all documentation necessary to have Agent's Lien for the benefit of
Lenders noted on all vehicle titles, to prepare and sign any and all
applications for vehicle titles relating to Leased Property and any registration
documentation with respect to such Leased Property; (3) to verify validity,
amount or any other matter relating to the Collateral by mail, telephone,
telecopy or otherwise; and (4) upon the occurrence of an Event of Default, do
such other and further acts and deeds in the name of Borrower that Agent may
reasonably deem necessary or desirable to enforce any Account or perfect its
liens on, or to protect its interest in, any other Collateral.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Agent, Co-
Agent and their counsel):
4.1 RESOLUTIONS, OPINIONS, AND OTHER DOCUMENTS: Borrower shall have
delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes all properly
executed;
(b) each document and agreement required to be executed under any
provision of this Agreement or any related agreement;
(c) certified copies of (i) resolutions of Borrower's board of
directors authorizing the execution of this Agreement, the Revolving Credit
Notes to be issued hereunder and each document, instrument and agreement
required to be delivered by any Section hereof and resolutions of each
Guarantor's board of directors authorizing the execution and delivery of the
Guarantee and (ii) Borrower's and each Guarantor's Articles of Incorporation and
By-laws;
(d) an incumbency certificate identifying all Authorized Officers of
Borrower and each signatory of the Guarantee on behalf of each Guarantor
authorizing the execution and delivery of the Guarantee, with specimen
signatures;
(e) a written opinion of Borrower's and Guarantors' independent
counsel addressed to Agent for the benefit of all Lenders;
(f) certification by Borrower's chief financial officer that there
has not occurred any material adverse change in the operations and condition
(financial or otherwise) of Borrower since June 30, 1996;
(g) payment by Borrower of all Expenses associated with the Credit
Facility incurred to the Closing Date and the Facility Fee;
(h) Uniform Commercial Code, judgment, federal and state tax lien
searches against Borrower, at Borrower's expense, showing that the Collateral
is not subject to any Liens, together with Good Standing and Corporate Tax Lien
Search Certificates showing no tax Liens on Borrower's Property and showing
Borrower to be in good standing in each jurisdiction where the failure to so
qualify might have a material adverse affect on Borrower's business, financial
condition, Property or Agent's and/or Lenders' rights hereunder;
(j) An initial borrowing base certificate dated the Closing Date
evidencing Borrower's minimum borrowing availability under the Borrowing Base
as of the Closing Date;
(k) UCC-1 Financing Statements naming Borrower as debtor and Agent
as secured party, to be filed in all locations satisfactory to Agent;
(l) A Guaranty Agreement executed by each of the Guarantors
("Guaranty");
(m) Stock Pledge Agreements for the shares of Borrower and Resource
Leasing, Inc. executed by Resource Leasing, Inc. and Resource America, Inc.
respectively (collectively "Stock Pledge Agreements); and
(n) A subordination agreement ("Subordination Agreement") among
Resource Leasing, Inc., Agent and Borrower whereby Resource Leasing, Inc. agrees
to subordinate all indebtedness owing from Borrower to Resource Leasing, Inc.,
on terms and conditions satisfactory to Agent.
4.2 ABSENCE OF CERTAIN EVENTS: At the Closing Date, no Event of Default
or Unmatured Event of Default hereunder shall have occurred and be continuing.
4.3 WARRANTIES AND REPRESENTATIONS AT CLOSING: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of that date. Borrower shall not
have taken any action or permitted any condition to exist which would have been
prohibited by any Section hereof.
4.4 COMPLIANCE WITH THIS AGREEMENT: Borrower shall have performed and
complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 6 and 7 hereof, which
are required to be performed or complied with by Borrower before or at the
Closing Date.
4.5 OFFICERS' CERTIFICATE: Agent shall have received a certificate dated
the Closing Date and signed by an Authorized Officer of Borrower certifying that
all of the conditions spec-ified in this Section have been fulfilled.
4.6 CLOSING: Subject to the conditions of this Section 4, the Credit
Facility shall be made available on the date ("Closing Date") this Agreement is
executed and all of the conditions contained in Section 4.1 hereof are completed
(the "Closing").
4.7 NON-WAIVER OF RIGHTS: By completing the Closing here-under, or by
making advances hereunder, Agent and Lenders do not thereby waive a breach of
any warranty, representation or covenant made by Borrower hereunder or any
agreement, document, or instrument delivered to Agent or otherwise referred to
herein, including without limitation, the Existing Loan Documents, and any
claims and rights of Agent and/or Lenders resulting from any breach or
misrepresentation by Borrower are specifically reserved by Agent for the benefit
of Lenders.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the initial Advances
under the Credit Facility to Borrower, Borrower warrants and represents to Agent
and Lenders that:
5.1 CORPORATE ORGANIZATION AND VALIDITY:
(a) Borrower is a corporation duly organized and validly existing
under the laws of its state of incorporation, is duly qualified, is validly
existing and in good standing and has lawful power and authority to engage in
the business it conducts in each state and other jurisdiction where the nature
and extent of its business requires qualification, except where the failure to
so qualify would not have a material adverse effect on Borrower's business,
financial condition, Property or prospects. A list of all states and other
jurisdictions where Borrower is qualified to do business is attached hereto as
Exhibit "5.1" and made a part hereof.
(b) The making and performance of this Agreement and related
agreements, and each document required by any Section hereof will not violate
any law, government rule or regulation, or the charter, minutes or bylaw
provisions of Borrower or violate or result in a default (immediately or with
the passage of time) under any contract, agreement or instrument to which
Borrower is a party, or by which it is bound. Borrower is not in violation of,
nor has knowingly caused any Person to violate, any term of any agreement or
instrument to which it or such Person is a party or by which it may be bound or
of its charter, minutes or bylaws which violation could have a material adverse
effect on Borrower's business, financial condition, Property or prospects.
(c) Borrower has all requisite corporate power and authority to enter
into and perform this Agreement and to incur the obligations herein provided
for, and has taken all proper and necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and the documents and
related agreements required hereby.
(d) This Agreement, the Revolving Credit Notes to be issued
hereunder, and all related agreements and documents required to be executed and
delivered by Borrower hereunder, when delivered, will be valid and binding upon
Borrower and enforceable in accordance with their respective terms.
5.2 PLACES OF BUSINESS: The only places of business of Borrower, and the
places where it keeps and intends to keep copies of the Leases and its Books and
Records concerning the Collateral, are at the addresses listed in Exhibit "5.2"
attached hereto and made a part hereof. The name of the record owner of each
property is also set forth on Exhibit "5.2".
5.3 PENDING LITIGATION: There are no judgments or judicial or
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of Borrower, threatened, against Borrower in any
court or before any governmental author-ity or arbitration board or tribunal
except as shown in Exhibit "5.3" attached hereto and made a part hereof, none
of which may materially and adversely affect the business, financial condition,
Property or prospects of Borrower, or the ability of Borrower to perform under
this Agreement. Borrower is not in default with respect to any order of any
court, governmental authority, regulatory agency or arbitration board or
tribunal, the effect of which would materially and adversely affect the
business, financial condition, Property or prospects of Borrower. No
shareholder or executive officer of Borrower has been indicted or convicted in
connection with or is engaging in any criminal conduct, or is currently subject
to any lawsuit or proceeding or under investigation in connection with any anti-
racketeering or other conduct or activity.
5.4 TITLE TO COLLATERAL: Borrower has good and marketable title in fee
simple (or its equivalent under applicable law) to all the Collateral it
respectively purports to own, free from Liens, except those of Agent for the
benefit of Lenders and free from the claims of any other Person other than the
leasehold interests of the Lessees.
5.5 GOVERNMENTAL CONSENT: Neither the nature of Borrower or of its
business or Property, nor any relationship between Borrower and any other
Person, nor any circumstance affecting Borrower in connection with the issuance
or delivery of the Revolving Credit Notes, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of Borrower in connection with the execution
and delivery of this Agreement or the issuance or delivery of the Revolving
Credit Notes or other documents contemplated hereby.
5.6 TAXES: All tax returns required to be filed by Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon Borrower, or upon any of its Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those taxes being contested in good faith with due diligence
by appropriate proceedings for which appropriate reserves have been maintained
under GAAP.
5.7 FINANCIAL STATEMENTS: Borrower's annual consolidated audited balance
sheet as of September 30, 1996 and the related income statements and statements
of cash flows as of such dates, all accompanied by reports thereon from
Borrower's independent certified public accountants with respect to the annual
statements (complete copies of which have been delivered to Agent), have been
prepared in accordance with GAAP and present fairly, accurately and completely
the financial position of the Borrower as of such dates and the results of its
operations for such periods. The fiscal year for Borrower currently ends on
September 30. Borrower's federal tax identification number is 23-2842671.
5.8 FULL DISCLOSURE: Neither the financial statements referred to in
Section 5.7, nor this Agreement or related agreements and documents or any
written statement furnished by Borrower to Agent in connection with the
negotiation of the Credit Facility and contained in any financial statements or
documents relating to Borrower contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein or
herein not misleading.
5.9 SUBSIDIARIES: Borrower has no Subsidiaries or Affiliates, except as
listed on Exhibit "5.9" attached hereto and made a part hereof.
5.10 GUARANTEES:
Borrower does not own nor hold equity or long term debt investments
in, has any outstanding advances to, or serves as guarantor, surety or
accommodation maker for the obligations of, or has any outstanding borrowings
from, any Person except as described in Exhibit "5.10", attached hereto and a
made part hereof.
5.11 GOVERNMENT REGULATIONS, ETC.:
(a) The use of the proceeds of and Borrower's issuance of the
Revolving Credit Notes will not directly or indirectly violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended,
Regulations U, T, G and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. Borrower does not own or intend to carry or
purchase any "margin stock" within the meaning of said Regulation U.
(b) Borrower has obtained all licenses, permits, franchises or other
governmental authorizations necessary for the ownership of its Property and for
the conduct of its business, where the failure to obtain would have a material
adverse effect on the business, financial condition, Property or prospects of
Borrower or Agent's and/or Lenders' rights with respect to the Collateral.
(c) Borrower is not in violation of, has not received written notice
that it is in violation of, or has knowingly caused any Person to violate, any
applicable statute, regulation or ordinance of the United States of America, or
of any state, city, town, municipality, county or of any other jurisdiction, or
of any agency, or department thereof, (including without limitation,
environmental laws and regulations), which may materially and adversely affect
its business, financial condition, Property or prospects or Agent's and/or
Lenders' rights with respect to the Collateral.
(d) Borrower is current with all reports and documents required to
be filed with any state or federal securities commission or similar agency and
is in full compliance in all material respects with all applicable rules and
regulations of such commissions.
5.12 NAMES:
(a) Within five (5) years prior to the Closing Date, Borrower has not
conducted business under or used any other name (whether corporate or assumed)
except for the names shown on Exhibit "5.12(a)", attached hereto and made a
part hereof. Borrower is the sole owner of all names listed on such Exhibit
"5.12(a)" and any and all business done and all invoices issued in such trade
names are Borrower's sales, leases, business and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate
corporate subsidiary or affiliate or independent entity.
(b) All trademarks, patents or copyrights which Borrower uses, plans
to use or has a right to use are listed on Exhibit "5.12(b) attached hereto and
made a part hereof. Borrower is the sole owner of such Property except to the
extent any other Person has claims or rights in such Property, as such claims
and rights are described on such Exhibit "5.12(b)." To the best of Borrower's
knowledge, Borrower is not in violation of any rights of any other Person with
respect to such Property.
5.13 OTHER ASSOCIATIONS: Borrower is not engaged and has no interest in
any joint venture or partnership with any other Person except as described on
Exhibit "5.13" hereto and made a part hereof.
5.14 ENVIRONMENTAL MATTERS: Except as disclosed on Exhibit "5.14" attached
hereto and made a part hereof, Borrower has no knowledge:
(a) of the presence of any Hazardous Substances on any of the real
property where Borrower conducts operations or has its personal property, or
(b) of any on-site spills, releases, discharges, disposal or storage
of Hazardous Substances that have occurred or are presently occurring on any of
such real property or where any Collateral is located, or
(c) of any spills, releases, discharges or disposal of Hazardous
Substances that have occurred, are presently occurring on any other real
property as a result of the conduct, action or activities of Borrower.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to such
real property.
5.15 CAPITAL STOCK: The authorized and outstanding shares of capital stock
of Borrower is as set forth on Exhibit "5.15" attached hereto and made a part
hereof. All of the capital stock of Borrower has been duly and validly
authorized and issued and is fully paid and non-assessable and has been sold and
delivered to the holders thereof in compliance with, or under valid exemption
from, all Federal and state laws and the rules and regulations of all regulatory
bodies thereof governing the sale and delivery of securities. Except for the
rights and obligations set forth in Exhibit "5.15", there are no subscriptions,
warrants, options, calls, commitments, rights or agreements by which Borrower
or any of the shareholders of Borrower is bound relating to the issuance,
transfer, voting or redemption of shares of its capital stock or any pre-emptive
rights held by any Person with respect to the shares of capital stock of
Borrower. Except as set forth in Exhibit "5.15", Borrower has not issued any
securities convertible into or exchangeable for shares of its capital stock or
any options, warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares.
5.16 SOLVENCY: Borrower is solvent, able to pay its debts as they become
due, and has capital sufficient to carry on its business and all business in
which it is about to engage, and now owns Property having a value both at fair
valuation and at present fair salable value greater than the amount required to
pay its debts. Borrower will not be rendered insolvent by the execution and
delivery of this Agreement or any of the other documents executed in connection
with this Agreement or by the transactions contemplated hereunder or thereunder.
5.17 LEASES AND LEASED PROPERTY: Each Lease reported to Agent and Lenders
as an Eligible Lease and the Leased Property associated therewith shall, at all
times when such Leases are included in the Borrowing Base calculation, be in
compliance with all of the following representations:
(a) Each Lease is in substantially the same form as that attached as
Exhibit 5.17 hereto or has been otherwise approved by Agent in its reasonable
discretion and is genuine, based on contracts that are enforceable in accordance
with its terms against the Lessee and the Leased Property named and referenced
therein, constitutes the entire agreement for the leasing of the Leased Property
thereby covered, has not been altered or amended, except as set forth in the
related schedules, and Borrower's Books and Records relating thereto are
accurate, complete and genuine;
(b) The sole original of each Lease has been delivered to Agent, and
all other counterparts of each Lease shall contain a legend stating that the
Lease has been assigned to CoreStates Bank, N.A., As Agent, pursuant to that
certain Loan and Security Agreement dated _______ __, 1996, or contain similar
language specifying that such counterpart is not an original for "chattel paper"
purposes under the UCC;
(c) Where the Lease consists of a Master Lease Agreement and specific
schedules which describe the terms of any specific items to be leased pursuant
to such schedule, the sole original schedule shall constitute the sole original
Lease, provided that the terms of the Master Lease Agreement and the schedule
make it clear that the sole original schedule is a separate lease for "Chattel
Paper" purposes under the UCC and that possession of such schedule constitutes
possession of "Chattel Paper" under the UCC;
(d) Except as otherwise consented to by Agent and Co-Agent in
writing, the aggregate amount of Leases with the same Lessee (or its Affiliates)
is not in excess of $250,000;
(e) The original amount and unpaid balance of each Lease shown on
Borrower's Books and Records and on any statement or schedule delivered to Agent
in connection therewith is the true and correct amount actually owed to
Borrower, no portion of which, except as specifically provided for in the Lease,
has been prepaid;
(f) The amount due under each Lease is not subject to, and the terms
of the Lease provide that the Lessee may not assert, any claim or reduction,
counterclaim, setoff, recoupment, or any other claim, allowance or adjustment
and no Lease has been re-negotiated, restructured or compromised except as
renewed in the ordinary course of business;
(g) All security agreements, title retention instruments and other
documents and instruments which are security for any Lease, and/or each Lease,
contain a correct and sufficient description of the Leased Property covered
thereby and all security interests granted therein to Borrower (either directly
or as assignee), if applicable, have been properly perfected and assigned to
Agent for the benefit of Lenders;
(h) Borrower has not and will not enter into any agreement with a
Lessee of any Leased Property which provides, directly or indirectly, for the
crediting of any obligation or liability of Borrower to such Lessee against
future rentals accruing under the Lease;
(i) Each item of Leased Property has been delivered to and, in all
instances, accepted by the Lessee and is in good condition, ordinary wear and
tear excepted, has not been returned, rejected, lost, stolen, destroyed or
damaged and has not been removed from service;
(j) Each Lease has been duly executed by Borrower and each Lessee,
is a valid, legal and binding obligation of Borrower, and such Lessee, and is
enforceable against Borrower and such Lessee in accordance with its terms.
Borrower is the sole owner of each of the Leases and has the authority to assign
all of its right, title and interest therein upon the terms herein set forth;
(k) Each of the Leases and all Leased Property which is the subject
matter thereof at the time of its assignment to Agent for the benefit of Lenders
and at all times thereafter, will be free and clear of any and all assignments,
options, rights, or other Liens whatsoever except Lenders' and/or Agent's and
residual sharing arrangements;
(l) Borrower has made its usual credit investigation of each Lessee
and has determined that the credit is satisfactory;
(m) All costs, fees, and expenses incurred in making and closing each
of the Leases has been paid and each Lease is and will be current at the time
of the assignment thereof to Lenders. No default exists or event exists which
with the giving of notice or the passage of time or both, will result in the
occurrence of a default of any obligation, as expressed in any Lease;
(n) All rentals, fees, costs, expenses and charges paid or payable
by the Lessee under any Lease, including without limitation, any brokerage and
other fees paid to Borrower do not violate any laws relating to the maximum
fees, costs, expenses or charges that can be charged in any state in which any
Leased Property is located or in which the corresponding Lessee is located, or
in which a transaction was consummated, or in any other state which may have
jurisdiction with respect to any such Leased Property, Lease or Lessee;
(o) Agent, for the benefit of Lenders, has a first perfected lien and
security interest in the Collateral (including without limitation each Lease and
the Leased Property) subject to no other Lien. Borrower has taken and in the
future, shall take all steps necessary to maintain Agent's first perfected lien
and security interest in the Collateral, including, if required, perfecting
Borrower's security interest (in the event the Lease is not a "true lease")
through filing financing statements, amendments thereto, or assignments and/or
continuations thereof and recording of the documentation necessary to perfect
Borrower's lien;
(p) For each Lease, with a Lease Receivable in excess of $16,000,
Borrower has either (i) listed Agent for the benefit of Lenders, as assignee on
the UCC-1 Financing Statement so filed, or (ii) after Borrower has received
acknowledgment copies of UCC-1s, deliver to Agent executed UCC-3 Financing
Statements naming Agent for the benefit of Lenders as assignee of Borrower's
security interest. Agent agrees not to file the UCC-3 Financing Statements
until such time as an Event of Default or Unmatured Event of Default occurs
under this Agreement, and Agent will return such UCC-3 Financing Statements to
Borrower if such Leases are ultimately sold or refinanced on a permanent basis
with another lender;
(q) Each Lease is valid and enforceable and presents the undisputed
obligation of the Lessee named therein and is not more than sixty-one (61) days
contractually past due;
(r) Each item of Leased Property leased pursuant to a Lease with a
Lease Receivable in excess of 20,000 has been insured in the ordinary course of
Borrower's or the corresponding Lessee's business;
(s) Borrower has not received notice of a bankruptcy, receivership,
reorganization or insolvency of any Lessee;
(t) No Lessee is a Subsidiary or Affiliate of Borrower, or is an
officer or employee of Borrower;
(u) Each Lease contains a provision whereby the Lessee agrees not to
assert any claim or reduction, counterclaim, setoff, recoupment or any other
claim, allowance or adjustment against any assignee of Borrower; and
(v) The Lessee is not otherwise in default under the corresponding
Lease.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that until all of Borrower's Obligations under or in
connection with this Agreement to Lenders and Agent are paid and satisfied in
full and the Revolving Credit has been terminated:
6.1 PAYMENT OF TAXES AND CLAIMS: Borrower shall pay, before they become
delinquent, all taxes, assessments and governmental charges or levies imposed
upon it or upon Borrower's Property, except for those taxes being contested in
good faith with due diligence by appropriate proceedings for which appropriate
reserves have been maintained pursuant to GAAP.
6.2 MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE:
(a) PROPERTY INSURANCE - Borrower shall maintain or caused to be
maintained insurance on the Collateral against fire, flood, casualty and such
other hazards in such amounts, with such deductibles and with such insurers as
are customarily used by companies operating in the same industry as Borrower or
the corresponding Lessee. At or prior to Closing, Borrower shall furnish Agent
with copies of original insurance binders certified as true and correct and
being in full force and effect as of the Closing Date or such other evidence of
insurance as Agent may require. In the event Borrower fails to procure or cause
to be procured any such insurance or to timely pay or cause to be paid the
premium(s) on any such insurance, Agent (on behalf of Lenders) may do so for
Borrower, but Borrower shall continue to be liable for the same. The policies
of all such casualty insurance shall contain standard Lender's Loss Payable
Clauses issued in favor of Agent (on behalf of Lenders) under which all losses
thereunder shall be paid to Agent (on behalf of Lenders) as Agent's interest may
appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Agent and shall insure Lenders notwithstanding the act or neglect of Borrower.
Borrower hereby appoints Agent as Borrower's attorney-in-fact, exercisable at
Agent's option to endorse any check which may be payable to Borrower in order
to collect the proceeds of such insurance and any amount or amounts collected
by Agent pursuant to the provisions of this paragraph may be applied by Agent
to Borrower's Obligations. Borrower further covenants that all insurance
premiums owing under its current casualty policy have been paid. Borrower also
agrees to notify Agent, promptly, upon Borrower's receipt of a notice of
termination, cancellation, or non-renewal from its insurance company of any such
policy.
(b) PUBLIC AND PRODUCTS LIABILITY INSURANCE - Borrower shall
maintain, and shall deliver to Agent upon Agent's request evidence of, public
liability, products liability and business interruption insurance in such
amounts as is customary for companies in the same or similar businesses located
in the same or similar area.
(c) FINANCIAL RECORDS - Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
Borrower shall not change its respective fiscal year end date without the prior
written consent of Agent.
(d) CORPORATE EXISTENCE AND RIGHTS - Borrower shall do (or cause to
be done) all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises.
(e) COMPLIANCE WITH LAWS - Borrower shall be in compliance with any
and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including without limitation environmental or environmental-related
laws, statutes, ordinances, rules, regulations and notices and all applicable
consumer sale and/or leasing laws and regulations), and shall obtain and
maintain any and all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its Property or to the conduct of
its businesses, which violation or failure to obtain may materially adversely
affect the business, Property, financial conditions or prospects of Borrower.
6.3 BUSINESS CONDUCTED: Borrower shall continue in the business presently
operated by it using its best efforts to maintain its customers and goodwill.
Borrower shall not engage, directly or indirectly, in any material respect in
any line of business substantially different from the businesses conducted by
it immediately prior to the Closing Date, unless such line of business is
reasonably related to such business so conducted prior to the Closing Date.
6.4 LITIGATION: Borrower shall give prompt notice to Agent of any
litigation claiming in excess of $100,000 from Borrower, or which may otherwise
have a material adverse effect on the business, financial condition, Property
or prospects of Borrower.
6.5 TAXES:
(a) Borrower shall pay all taxes (other than taxes based upon or
measured by any Lender's income or revenues), if any, in connection with the
Loans and/or the recording of any Lien Documents. The obligations of Borrower
under this section shall survive the payment of Borrower's Obligations under
this Agreement and the termination of this Agreement. Borrower shall cause to
be paid all taxes incurred in connection with any of the Leases or the
acquisition, sale or lease of any of the Leased Property.
6.6 BANK ACCOUNTS: Borrower shall maintain its major depository
account(s) with Agent and its major disbursement account(s) with Co-Agent.
6.7 WARRANTIES FOR FUTURE ADVANCES: Each request by Borrower for an
Advance under the Credit Facility in any form following the Closing Date shall
constitute an automatic representation and warranty by Borrower to the effect
that:
(a) There has been no material adverse change in Borrower's
operations or condition (financial or otherwise) since the date of delivery of
Borrower's most recent Financial Statements.
(b) No Event of Default which has not been cured or waived, or
Unmatured Event of Default, then exists;
(c) Each Advance is within and complies with the terms and conditions
of this Agreement including without limitation the notice provisions contained
in Section 2.3 hereof;
(d) No Lien, including, without limitation, any federal tax Lien, has
been imposed on Borrower which may, in any way, take priority over Agent's
and/or Lenders' security interests in or Liens on any Collateral; and
(e) Each representation and warranty set forth in Section 5 of this
Agreement is then true and correct in all material respects.
6.8 FINANCIAL COVENANTS: Borrower shall maintain and comply with the
following financial covenants as reflected on and computed from their Financial
Statements:
(a) ADJUSTED DEBT TO TANGIBLE NET WORTH RATIO: Borrower shall have
and maintain at all times an Adjusted Debt to Tangible Net Worth Ratio on a
consolidated basis, measured quarterly as of the last day of each fiscal quarter
during each fiscal year, of not more than 4.5 to 1.
(b) TANGIBLE NET WORTH: Borrower shall have and maintain a Tangible
Net Worth of not less than $5,000,000 as of December 31, 1996. As of the last
day of each fiscal quarter thereafter, Borrower shall have a Tangible Net Worth
of not less than the amount required hereby for the immediately preceding fiscal
quarter plus an amount equal to 75% of the Borrower's Net Income for the
immediately preceding fiscal quarter (for the purposes of such step-up, Net
Income shall never be less than zero). (c) FIXED CHARGE COVERAGE
RATIO: Borrower shall have and maintain as of the end of each fiscal quarter,
based on financial information for the twelve-month period ending as of the end
of such fiscal quarter, on a consolidated basis, a Fixed Charge Coverage Ratio
of not less than 1.15 to 1 on September 30, 1997 and at all times through
December 31, 1997 and 1.5 to 1 at all times thereafter.
6.9 CHANGE OF OWNERSHIP INTERESTS/MANAGEMENT: Guarantor and Abraham
Bernstein shall at all times own 100% of the aggregate voting interests of all
classes of capital stock of Borrower entitled to vote generally and Abraham
Bernstein at all times remain as President of Borrower and have a substantial
equity interest (including options) in Borrower.
6.10 FINANCIAL AND BUSINESS INFORMATION: Borrower shall deliver to Agent
(and Lenders if so indicated) the following:
(a) FINANCIAL STATEMENTS AND COLLATERAL REPORTS: such data, reports,
statements and information, financial or other-wise, as Agent may reasonably
request, including, without limita-tion:
(i) within one hundred twenty (120) days after the end of each
fiscal year of Borrower, deliver to Agent and each Lender, Financial Statements
of Borrower for such year including the balance sheet of Borrower as at the end
of such fiscal year and a statement of cash flows and income statement for such
fiscal year, all on a consolidated and consolidating basis, setting forth in the
consolidated statements in comparative form, the corresponding figures as at the
end of and for the previous fiscal year, all in reasonable detail, including all
supporting schedules, and audited and certified by independent public
accountants of recognized standing, selected by Borrower and satisfactory to the
Agent (Grant Thornton being deemed satisfactory to Agent), to have been prepared
in accordance with GAAP, and such independent public accountants shall also
provide an unqualified opinion that the Financial Statements present fairly the
Borrower's financial condition. Such independent accountants shall also provide
a statement certifying that nothing has come to their attention to cause them
to believe that calculations contained in the compliance certificate are
inaccurate.
(ii) within fifteen (15) days of the end of each calendar month,
deliver to Agent for the benefit of Lenders, Borrower's Lease receivables aging
report, covenant compliance certificate and such other reports as Agent
reasonably deems necessary, certified by Borrower's chief financial officer or
other officer acceptable to Agent as true and correct, all in form and substance
satisfactory to Agent;
(iii) within fifteen (15) days after the end of each month,
deliver to Agent and each Lender, Borrower's internally prepared monthly
consolidated and consolidating Financial Statements, including balance sheet,
income statement and statements of cash flows.
(b) NOTICE OF EVENT OF DEFAULT - promptly upon becoming aware of the
existence of any condition or event which constitutes a default or an Event of
Default or Unmatured Event of Default under this Agreement, a written notice
specifying the nature and period of existence thereof and what action Borrower
is taking (and proposes to take) with respect thereto;
(c) NOTICE OF CLAIMED DEFAULT - promptly upon receipt by Borrower,
notice of default, oral or written, given to Borrower by any creditor for
borrowed money in excess of $50,000;
(d) SECURITIES AND OTHER REPORTS - if Borrower or any Affiliate shall
be required to file reports with the Securities and Exchange Commission pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
promptly upon its becoming available, one copy of each financial statement,
report, notice or proxy statement sent by Borrower or such Affiliate to
stockholders generally, and, a copy of each regular or periodic report, and any
registration statement, or prospectus in respect thereof, filed by Borrower with
any securities exchange or with federal or state securities and exchange
commissions or any successor agency.
6.11 OFFICERS' CERTIFICATES: Along with the set of Financial Statements
delivered to Agent for the benefit of Lenders at the end of each fiscal quarter
and fiscal year pursuant to Section 6.9(a) hereof, deliver to Agent a
certificate (in the form of Exhibit "6.11" attached hereto and made a part
hereof) from the chief financial officer or other officer of Borrower acceptable
to Agent (and as to certificates accompanying the annual statements of Borrower,
also certified by Borrower's independent certified public accountant) setting
forth:
(a) COVENANT COMPLIANCE - the information (including detailed
calculations) required in order to establish whether Borrower is in compliance
with the requirements of Sections 6.8 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.10; and
(b) EVENT OF DEFAULT - that the signer, in his capacity as an officer
of Borrower, has reviewed the relevant terms of this Agreement, and has made (or
caused to be made under his supervision) a review of the transactions and
conditions of Borrower from the beginning of the accounting period covered by
the Financial Statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrower
has taken or proposes to take with respect thereto.
6.12 INSPECTION: Borrower will permit any of Agent's officers or other
representatives to visit and inspect any of Borrower's locations or where any
Collateral is kept during regular business hours, to examine and audit all of
Borrower's books of account, records, reports and other papers, to make copies
and extracts therefrom and to discuss its affairs, finances and accounts with
its officers, employees and independent certified public accountants. Agent
will notify Lenders within a reasonable time of each scheduled field examination
and to the extent reasonably practicable, representatives of each Lender may
accompany Agent during each such field examination. Prior to the occurrence of
an Event of Default, up to two (2) such (and after the occurrence of an Event
of Default, all such) examinations shall be at Borrower's expense at the
standard rates charged by the Agent or an outside firm engaged to perform such
services, for such activities (plus the Agent's or such outside firm's out-
of-pocket expenses).
6.13 TAX RETURNS AND REPORTS: At Agent's request from time to time,
Borrower shall promptly furnish Agent with copies of the annual federal and
state income tax returns of Borrower.
6.14 MATERIAL ADVERSE DEVELOPMENTS: Borrower agrees that immediately upon
becoming aware of any development or other information which would reasonably
be expected to materially and adversely affect its businesses, financial
condition, Property, prospects or its ability to perform under this Agreement,
it shall give to Agent telephonic or telegraphic notice specifying the nature
of such development or information and such anticipated effect. In addition,
such verbal communication shall be confirmed by written notice thereof to Agent
on the next business day after such verbal notice is given.
6.15 PLACES OF BUSINESS: Borrower shall give thirty (30) days prior
written notice to Agent of any changes in the location of any of its respective
places of business, of the places where Books and Records are kept, or the
establishment of any new, or the discontinuance of any existing place of
business.
6.16 SALE OF COLLATERAL: Borrower shall mark its Books and Records to
indicate Agent's security interest in the Collateral for the benefit of Lenders,
including the Leases and Leased Property and, unless Agent consents otherwise
in writing, Borrower shall retain title at all times to the Leased Property;
provided however, that so long as no Event of Default or Unmatured Event of
Default has occurred, Borrower may, subject to the prepayment provisions set
forth herein, sell (i) Leases and Leased Property pursuant to Securitization
Transactions or other Nonrecourse Financing of Borrower. So long as no Event
of Default or Unmatured Event of Default has occurred, upon receipt of the
proceeds (if required) from the sale of such Leases and/or Leased Property,
Agent shall execute such documentation as is reasonably necessary to release its
security interest in such Leases and/or Leased Property.
SECTION 7. BORROWER'S NEGATIVE COVENANTS:
Borrower covenants that until all of Borrower's Obligations under or in
connection with this Agreement to Lenders are paid and satisfied in full and the
Credit Facility has been terminated, that:
7.1 MERGER, CONSOLIDATION, DISSOLUTION OR LIQUIDATION:
(a) Borrower shall not sell, lease, license, transfer or otherwise
dispose of more than 10% of Borrower's aggregate assets during any 12
consecutive month period except in the ordinary course or ordinary operation of
Borrower's business and in Securitization Transactions or other non-recourse
financing.
(b) Borrower shall not enter into any merger, consolidation,
reorganization or recapitalization or acquire all or substantially all of the
assets of any other Person or entity except for a merger, consolidation or
acquisition in which properties and assets of Borrower are transferred to or
combined with, as a single entity, any one Person, so long as (A) no Event of
Default or Unmatured Event of Default has occurred hereunder and that after
giving effect to such merger, consolidation or acquisition, no Event of Default
or Unmatured Event of Default shall have occurred, and (B) Borrower shall be the
surviving corporation.
7.2 LIENS AND ENCUMBRANCES: Borrower shall not: (i) execute a negative
pledge agreement with any Person covering any of the Collateral, or (ii) cause
or permit or agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien;
7.3 NEGATIVE PLEDGE: Borrower shall not pledge, grant or permit any Lien
to exist on the common stock of its Subsidiaries nor on any Leases or Leased
Property (except those liens and assignments granted to Agent for the benefit
of Lenders).
7.4 TRANSACTIONS WITH AFFILIATES OR SUBSIDIARIES:
(a) Borrower shall not enter into any transaction with any Subsidiary
or other Affiliate including, without limitation, the purchase, sale, lease or
exchange of Property, or the loaning or giving of funds to any Affiliate or any
Subsidiary (other than a sale to a special purpose Subsidiary in connection with
a Securitization Transaction or other non-recourse sale), unless (i) such
Subsidiary or Affiliate is engaged in a business substantially related to the
business conducted by Borrower and the transaction is in the ordinary course of
and pursuant to the reasonable requirements of Borrower's business and upon
terms substantially the same and no less favorable to Borrower as it would
obtain in a comparable arm's-length transactions with any Person not an
Affiliate or a Subsidiary, and (ii) so long as such transaction is not otherwise
prohibited hereunder.
(b) Subject in any event to the limitations of Section 7.4(a) above,
Borrower shall not create or acquire any Subsidiary unless such Subsidiary
engages in a business substantially related to the business of Borrower as
conducted immediately prior to the Closing Date.
7.5 GUARANTEES: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, Borrower shall not
become or be liable, directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker,
or otherwise, for the existing or future indebtedness of any kind of any Person.
7.6 INDEBTEDNESS: Borrower shall not incur or assume any indebtedness for
money borrowed or become a surety, guarantor of, or otherwise responsible or
liable in any manner with respect to, directly or indirectly, the indebtedness
of any Person except for: (i) Subordinated Indebtedness; (ii) trade debt
incurred in the ordinary course of Borrower's business; and (iii) Non- Recourse
Debt.
7.7 USE OF LENDERS' NAME: Borrower shall not use any Lender's name (or
the name of any of any Lender's Affiliates) or Agent's name in connection with
any of its business operations except to identify the existence of the Credit
Facility and the names of the Lenders and Agent in the ordinary course of
Borrower's business. Nothing herein contained is intended to permit or
authorize Borrower to make any contract on behalf of any Lender or Agent.
SECTION 8. DEFAULT
8.1 EVENTS OF DEFAULT: Each of the following events shall constitute an
event of default ("Event of Default") and Agent and/or Co-Agent shall thereupon
have the option, and the SuperMajority Lenders shall have the right to cause
Agent and Co-Agent, to declare the Obligations immediately due and payable, all
without demand, notice, presentment or protest or further action of any kind (it
also being understood that the occurrence of any of the events or conditions set
forth in subparagraphs (j), (k) or (l) shall automatically cause an acceleration
of the Obligations):
(a) PAYMENTS - if Borrower fails to make any payment of principal or
interest under the Credit Facility within two days after Agent has given notice
that such payment was due; or
(b) OTHER CHARGES - if Borrower fails to pay any other charges, fees,
Expenses or other monetary obligations owing to any Lender or Agent arising out
of or incurred in connection with this Agreement within two days after Agent has
given notice that such payment is due and payable; or
(c) PARTICULAR COVENANT DEFAULTS - if Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement,
provided, however, that in the case of Borrower's failure to perform, comply
with or observe the covenants contained in Sections 6.1, 6.2, 6.5, 6.10 or 6.11
("Curable Covenant"), Borrower shall have five (5) days from the date on which
Borrower became aware or should have become aware of its failure to perform,
comply with or observe any such Curable Covenant to cure such nonperformance or
compliance to the satisfaction of Agent; or
(d) FINANCIAL INFORMATION - if any statement, report, financial
statement, or certificate made or delivered by Borrower or any of its officers,
employees or agents, to Agent or any Lender, is not true and correct, in all
material respects, when made; or
(e) UNINSURED LOSS - if there shall occur any uninsured damage to or
loss, theft, or destruction in excess of $100,000 with respect to any portion
of any Collateral; or
(f) WARRANTIES OR REPRESENTATIONS - if any warranty, representation
or other statement by or on behalf of Borrower or any Guarantor or pledgor
contained in or pursuant to this Agreement, or in any document, agreement or
instrument furnished in compliance with, relating to, or in reference to this
Agreement, is false, erroneous, or misleading in any material respect when made;
or
(g) AGREEMENTS WITH OTHERS - if Borrower shall default beyond any
grace period under any agreement with any creditor for borrowed money and (i)
such default consists of the failure to pay any principal, premium or interest
with respect to such indebtedness or (ii) such default consists of the failure
to perform any covenant or agreement with respect to such indebtedness, if the
effect of such default is to cause Borrower's obligations which are the subject
thereof to become due prior to its maturity date or prior to its regularly
scheduled date of payment or would entitle such creditor to accelerate such
obligations; or
(h) OTHER AGREEMENTS WITH LENDERS - if Borrower breaches or violates
the terms of, or if a default or an Event of Default, occurs under, any other
existing or future agreement (related or unrelated) between or among Borrower
and Agent or any Lender or all Lenders, except with respect to Non-Recourse
Debt; or
(i) JUDGMENTS - if any final judgment for the payment of money in
excess of $100,000 which is not fully and unconditionally covered by insurance
shall be rendered; or
(j) ASSIGNMENT FOR BENEFIT OF CREDITORS, ETC. - if Borrower makes or
proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by
Borrower which might materially and adversely affect Borrower; or
(k) BANKRUPTCY, DISSOLUTION, ETC. - upon the commencement of any
action for the dissolution or liquidation of Borrower, or the commencement of
any proceeding to avoid any transaction entered into by Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of
Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against Borrower; provided, however, that Borrower shall have sixty (60) days
to obtain the dismissal or discharge of involuntary proceedings filed against
it, it being understood that during such sixty (60) day period, no Lender shall
be obligated to make Advances hereunder and Agent may seek adequate protection
in any bankruptcy proceeding; or
(l) RECEIVER - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for any of
Borrower's Property; or
(m) EXECUTION PROCESS, SEIZURE, ETC. - the issuance of any execution
or distraint process against Borrower, or any Property of Borrower is seized
by any governmental entity, federal, state or local; or
(n) TERMINATION OF BUSINESS - if Borrower ceases any material portion
of its business operations as presently conduct-ed; or
(o) PENSION BENEFITS, ETC. - if Borrower fails to comply with ERISA,
so that grounds exist to permit the appointment of a Trustee under ERISA to
administer Borrower's employee plans or to allow the pension benefit guarantee
corporation to institute a proceeding to appoint a trustee to administer such
plan(s), or to permit the entry of a Lien to secure any deficiency or claim; or
(p) INVESTIGATIONS - any indication or evidence received by Agent or
any Lender that reasonably leads it to believe Borrower may have directly or
indirectly been engaged in any type of activity which, would be reasonably
likely to result in the forfeiture of any Property of Borrower to any
governmental entity, federal, state or local; or
(q) GUARANTOR DEFAULT - Any Guarantor shall default under, terminate,
or disclaim liability under its Guaranty Agreement; or
(r) STOCK PLEDGOR DEFAULT - Resource Leasing, Inc. or Resource
America, Inc. shall, default under their respective Stock Pledge Agreement; or
(s) MINIMUM STOCKHOLDERS' EQUITY - Resource America, Inc. shall,
after the earlier of December 31, 1996 or the date on which Resource America,
Inc. receives the proceeds of a proposed secondary offering of its stock, fail
to maintain a minimum stockholders' equity of $40,000,000; or
(t) DEFAULT UNDER SUBORDINATION AGREEMENT - Resource Leasing, Inc.
or Borrower shall default under the terms of the Subordination Agreement.
8.2 CURE - Nothing contained in this Agreement or the Loan Documents shall
be deemed to compel Agent and/or Lenders to accept a cure of any Event of
Default hereunder.
8.3 RIGHTS AND REMEDIES ON DEFAULT:
(a) In addition to all other rights, options and remedies granted or
available to Agent, Co-Agent or Lenders under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time after
the occurrence and during the continuance of an Event of Default or Unmatured
Event of Default, Agent may, in its discretion, and the SuperMajority Lenders
or Co-Agent shall have the right to cause Agent to, withhold or cease making
Advances under the Credit Facility.
(b) In addition to all other rights, options and remedies granted or
available to Agent and Co-Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, in its discretion, and
Co-Agent or the SuperMajority Lenders shall have the right to cause Agent to,
upon or at any time after the occurrence and during the continuance of an Event
of Default, terminate the Credit Facility.
(c) In addition to all other rights, options and remedies granted or
available to Agent under this Agreement or the Loan Documents (each of which is
also then exercisable by Agent), Agent may, upon or at any time after the
occurrence of an Event of Default, exercise all rights under the UCC and any
other applicable law or in equity, and under all Loan Documents permitted to be
exercised after the occurrence of an Event of Default, including the following
rights and remedies (which list is given by way of example and is not intended
to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, and notify all Lessees of
the Agent's, Co-Agent's and Lenders' security interest in the Collateral and
require payment under the Leases to be made directly to Agent for the benefit
of Lenders and Agent may, in its own name or in the name of Borrower, exercise
all rights of lessor under the Leases and collect, sue for and receive payment
on all Leases, and settle, compromise and adjust the same on any terms as may
be satisfactory to Agent and Co-Agent, in their sole and absolute discretion for
any reason or without reason and Agent may do all of the foregoing with or
without judicial process (including without limitation notifying the United
States postal authorities to redirect mail addressed to Borrower to an address
designated by Agent); or
(ii) By its own means or with judicial assistance, subject to the
rights of the Lessees, enter Borrower's premises or location of Collateral and
take possession of the Collateral, or render it unusable, or dispose of the
Collateral on such premises in compliance with subsection (e) below, without any
liability for rent, storage, utilities or other sums, and Borrower shall not
resist or interfere with such action; or
(iii) Require Borrower, at Borrower's sole expense, subject to the
rights of the Lessees, to assemble all or any part of the Collateral and make
it available to Agent at any place designated by Agent; or
(iv) The right to reduce or modify the Maximum Credit Limit,
Borrowing Base or any portion thereof or the advance rates or to modify the
terms and conditions upon which Agent, on behalf of Lenders, may be willing to
consider making Advances under the Credit Facility or to take additional
reserves in the Borrowing Base for any reason.
(e) Borrower hereby agrees that a notice received by it at least five
(5) days before the time of any intended public sale or of the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any Collateral which threatens to speedily decline in value
or which is sold on a recognized market may be sold immediately by Agent without
prior notice to Borrower. Borrower covenants and agrees not to interfere with
or impose any obstacle to Agent's or Co-Agent's exercise of its rights and
remedies with respect to the Collateral, after the occurrence of an Event of
Default hereunder.
8.4 NATURE OF REMEDIES: All rights and remedies granted Agent, Co-Agent
or Lenders hereunder and under the Loan Documents, or otherwise available at law
or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Agent may proceed with any number of remedies at the same time
until all Obligations under or in connection with this Agreement are satisfied
in full. The exercise of any one right or remedy shall not be deemed a waiver
or release of any other right or remedy, and either Agent or Co-Agent, upon or
at any time after the occurrence of an Event of Default, may proceed against
Borrower, at any time, under any agreement, with any available remedy and in any
order.
8.5 SET-OFF: If any bank account of Borrower with Agent, Co-Agent or any
Lender or any participant is attached or otherwise liened or levied upon by any
third party, Agent, Co-Agent or such Lender, as applicable, (and such
participant) as agent for Lenders shall have and be deemed to have, without
notice to Borrower, the immediate right of set-off and may apply the funds or
amount thus set-off against any of Borrower's Obligations hereunder.
SECTION 9. AGENT/CO-AGENT
As between the Agent and Co-Agent, on one hand, and the Lenders, on the
other hand, the Agent and Co-Agent and each of the Lenders, who are now or shall
become parties to this Agreement, agree as follows (with the consent and
approval of Borrower):
9.1 APPOINTMENT AND AUTHORIZATION. Each Lender, and each subsequent
holder of any of the Revolving Credit Notes by its acceptance thereof, hereby
irrevocably appoints and authorizes the Agent and Co-Agent to take such action
on its behalf and to exercise such powers under this Agreement as are delegated
to the Agent or Co-Agent as applicable by the terms hereof, together with such
powers as are reasonably incidental thereto. Except as may be otherwise
expressly provided herein, Borrower is hereby authorized by the Lenders to deal
solely with the Agent in all transactions which affect the Lenders under this
Agreement and the Loan Documents. Provided, however, nothing herein shall
prohibit Co-Agent or any Lender from communicating directly with Borrower
concerning any matters related to the Loans or Loan Documents. The rights,
privileges and remedies accorded to the Agent hereunder shall be exercised by
the Agent on behalf of all of the Lenders.
9.2 GENERAL IMMUNITY. Subject to the provisions of this Agreement, the
Agent and/or Co-Agent, as applicable will handle all transactions relating to
the Loans and all other Obligations, including, without limitation, all
transactions with respect to this Agreement, the Loan Documents and all related
documents in accordance with their usual banking practices. In performing their
duties as Agent and Co-Agent hereunder, the Agent and Co-Agent will either take
the same care as it takes in connection with loans in which either of them alone
is interested. However, neither the Agent, Co-Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them hereunder or in connection herewith except for its or
their own gross negligence or willful misconduct.
9.3 CONSULTATION WITH COUNSEL. The Agent and Co-Agent may consult with
legal counsel and any other professional advisors or consultants deemed
necessary or appropriate and selected by Agent and Co-Agent and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
9.4 DOCUMENTS. Neither the Agent nor the Co-Agent shall be under a duty
to examine into or pass upon the effectiveness, genuineness or validity of this
Agreement or any of the Revolving Credit Notes, Term Notes, or any other
instrument or document furnished pursuant hereto or in connection herewith, and
the Agent and Co-Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be. In addition, neither the
Agent nor the Co-Agent shall be liable for failing to make any inquiry
concerning the accuracy, performance or observance of any of the terms,
provisions or conditions of such instrument or document.
9.5 RIGHTS AS A BANK. With respect to its applicable Pro Rata Percentage
of the Credit Facility, the Agent and Co-Agent shall each have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
were not the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent and Co-Agent in their individual
capacity. Subject to the provisions of this Agreement, the Agent and Co-Agent
each may accept deposits from, lend money to and generally engage in any kind
of banking or trust business with Borrower and its Affiliates as if it were not
the Agent or Co-Agent respectively.
9.6 RESPONSIBILITY OF AGENT/CO-AGENT. It is expressly understood and
agreed that the obligations of the Agent and Co-Agent hereunder are only those
expressly set forth in this Agreement and that neither the Agent nor the Co-
Agent shall be entitled to assume that no Event of Default and no Unmatured
Event of Default has occurred and is continuing, unless the Agent has actual
knowledge of such fact. Except to the extent Agent or Co-Agent is required by
the Lenders pursuant to the express terms hereof to take a specific action,
neither the Agent nor the Co-Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions that it may be able to take under or in respect of, this Agreement
and the Loan Documents. Neither the Agent nor the Co-Agent shall incur any
liability under or in respect of this Agreement and the Loan Documents by acting
upon any notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party
or parties, or with respect to anything that either of them may do or refrain
from doing in the reasonable exercise of its judgment, or that may seem to them
to be necessary or desirable under the circumstances. It is agreed among the
Agent, Co-Agent and the Lenders that neither the Agent nor the Co-Agent shall
have any responsibility to carry out field examinations or otherwise examine the
books and records or properties of Borrower, except as the Agent and Co-Agent
in either of their sole discretion deems appropriate. The relationship between
the Agent, the Co-Agent and each Lender is and shall be that of agent and
principal only and nothing herein shall be construed to constitute the Agent or
the Co-Agent a joint venturer with any Lender, a trustee or fiduciary for any
of the Lenders or for the holder of a participation therein nor impose on the
Agent or the Co-Agent duties and obligations other than those set forth herein.
9.7 COLLECTIONS AND DISBURSEMENTS.
(a) The Agent will have the right to collect and receive all payments
of the Obligations, together with all fees, charges and other amounts due under
this Agreement and the Loan Documents, and the Agent will remit to each Lender
according to applicable Pro Rata Percentages all such payments actually received
by Agent (subject to any required clearance procedures) on the same Business Day
of receipt thereof (but if such payments shall not have been received by the
Agent prior to 12:00 noon Eastern Time on such Business Day then, on the next
Business Day).
(b) On the Business Day for which notice is given Lenders by Agent
with respect to requested Advances (which notice shall state the date and amount
of such payment), each Lender shall remit to the Agent its Pro Rata Percentage
of the payment in respect to such Advance. The obligations of Lenders hereunder
are unconditional, not subject to set-off, and irrevocable and may not be
terminated at any time.
(c) If any such payment received by the Agent is rescinded,
determined to be unenforceable or invalid or is otherwise required to be
returned for any reason at any time, whether before or after termination of this
Agreement and the Loan Documents, each Lender will, upon written notice from the
Agent, promptly pay over to the Agent its Pro Rata Percentage of the amount so
rescinded, held unenforceable or invalid or required to be returned, together
with interest and other fees thereon if also required to be rescinded or
returned.
(d) All payments by the Agent and the Lenders to each other hereunder
shall be in immediately available funds. The Agent will at all times maintain
proper books of account and records reflecting the interest of each Lender in
the Credit Facility, in a manner customary to the Agent's keeping of such
records, which books and records shall be available for inspection by each
Lender at reasonable times during normal business hours, at such Lender's sole
expense. In the event that any Lender shall receive any payments in reduction
of the Obligations in an amount greater than its applicable Pro Rata Percentage
in respect of indebtedness to the Lenders evidenced hereby (including, without
limitation amounts obtained by reason of setoffs), such Lender shall hold such
excess IN TRUST for Agent (on behalf of all other Lenders) and shall promptly
remit to the Agent such excess amount so that the amounts received by each
Lender hereunder shall at all times be in accordance with its applicable Pro
Rata Percentage. To the extent necessary for each Lender's actual percentage
of all outstanding Loans to equal its applicable Pro Rata Percentage, the Lender
having a greater share of any payment(s) than its applicable Pro Rata Percentage
shall acquire a participation in the applicable outstanding balances of the Pro
Rata Shares of the other Lenders as determined by Agent.
9.8 INDEMNIFICATION. The Lenders hereby each indemnify the Agent and Co-
Agent ratably according to their respective Pro Rata Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by the Agent under or related to this
Agreement or the other Loan Documents or the Loans, provided that no Lender
shall be liable to Agent or Co-Agent as the case may be, for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's or Co-Agent's
gross negligence or willful misconduct. Agent and Co-Agent shall each have the
right to deduct, from any amounts to be paid by Agent to any Lender hereunder,
any amounts owing to Agent or Co-Agent by such Lender by virtue of this
paragraph. Provided all of the Obligations have been satisfied in full, if
Agent and/or Co-Agent shall have received any sums from any of the Lenders
pursuant to the terms of this Section and the indemnified Agent and/or Co-Agent,
as applicable, receives additional payments from the Collateral or elsewhere
which could be used by such party pursuant to the terms of this Agreement, the
other Loan Documents, at law or in equity to satisfy the liability, for which
such party was indemnified, such additional payments shall be applied against
the liabilities for which such party was reimbursed and an equal amount shall
be reimbursed to the Lenders on a pro-rata basis based on the respective amounts
of their payments to the Agent and/or Co-Agent, as applicable, made under this
Section.
9.9 EXPENSES.
(a) All out-of-pocket costs and out-of-pocket expenses incurred by
Agent or Co-Agent and not reimbursed on demand by Borrower, in connection with
the creation, amendment, administration, termination and enforcement of the
Loans (including, without limitation, field examination expenses, counsel fees
and expenditures to protect, preserve and defend Agent's, Co-Agent's and any
Lender's rights and interest under the Loan Documents) shall be shared and paid
on demand by Lenders pro rata, based on their applicable Pro Rata Percentage.
(b) Agent may deduct from payments or distributions to be made to
Lenders such funds as may be necessary to pay or reimburse Agent or Co-Agent for
such costs or expenses.
9.10 NO RELIANCE. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent or Co-Agent.
Each Lender shall continue to make its own analysis and evaluation of Borrower.
Neither Agent nor Co-Agent makes any representation or warranty nor assumes any
responsibility with respect to the financial condition or Property of Borrower,
any Lessee or any Collateral; the accuracy, sufficiency or currency of any
information concerning the financial condition, prospects or results of
operations of Borrower; or for sufficiency, authenticity, legal effect, validity
or enforceability of the Loan Documents. Neither Agent nor Co-Agent assumes any
responsibility or liability with respect to the collectibility of the
Obligations or the performance by Borrower of any obligation under the Loan
Documents.
9.11 REPORTING. During the term of this Agreement, Agent will promptly
furnish each Lender such financial statements and reports as any Lender may
reasonably request. Agent and Co-Agent will notify Lenders within a reasonable
period of time (not to exceed ten (10) Business Days) after it receives actual
knowledge of any Event of Default under the Loan Documents.
9.12 REMOVAL OF AGENT/CO-AGENT.
(a) The Agent may resign at any time upon giving thirty (30) days
prior written notice thereof to Lenders and Borrower. The Agent may be removed
as Agent hereunder upon the written direction of all Lenders exclusive of the
Agent upon the following: (i) willful misconduct in the performance of Agent's
duties or responsibilities under this Agreement; or (ii) if a receiver, trustee
or conservator is appointed for Agent or any state or federal regulatory
authority assumes management or control of Agent or if, under applicable law,
the administrative or discretionary duties and responsibilities of Agent
hereunder become controlled by or subject to the approval of any state or
federal regulatory authority. Upon any resignation or permitted removal of
Agent, Co-Agent shall become the Agent. If Co-Agent is unwilling to serves as
Agent, the Lenders shall have the right to appoint a successor Agent by majority
vote of the other Lenders (based upon the percentages of the total Pro Rata
Shares of the Lenders other than the Lender which is the Agent). Upon the
acceptance of the appointment as a successor Agent hereunder by such successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all rights, powers, obligations and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
(b) The Co-Agent may resign at any time upon giving thirty (30) days
prior written notice thereof to Agent, Lenders and Borrower. The Co-Agent may
be removed as Co-Agent hereunder upon the written direction of all Lenders
exclusive of the Co-Agent upon the following: (i) willful misconduct in the
performance of Co-Agent's duties or responsibilities under this Agreement; or
(ii) if a receiver, trustee or conservator is appointed for Co-Agent or any
state or federal regulatory authority assumes management or control of Co-Agent
or if, under applicable law, the administrative or discretionary duties and
responsibilities of Co-Agent hereunder become controlled by or subject to the
approval of any state or federal regulatory authority. So long as Agent
continues to serve as agent or a successor Agent has been appointed pursuant to
Section 9.12(a), no successor Co-Agent shall become Co-Agent upon the
resignation or removal of the Co-Agent.
9.13 ACTION ON INSTRUCTIONS OF LENDERS. With respect to any provision of
this Agreement, or any issue arising thereunder, concerning which the Agent is
authorized to act or withhold action by direction of one or more Lenders, the
Agent and Co-Agent shall in all cases be fully protected in so acting, or in so
refraining from acting, hereunder in accordance with written instructions signed
by the requisite Lenders. Such instructions and any action taken or failure to
act pursuant thereto shall be binding on all Lenders and on all holders of the
Revolving Credit Notes and Term Notes.
9.14 SEVERAL OBLIGATIONS. The obligation of each Lender is several, and
neither the Agent, Co-Agent nor any other Lender shall be responsible for any
obligation or commitment hereunder of any other Lender.
9.15 CONSENT OF BANKS.
(a) Subject to this Section 9.15, Agent shall have the sole and
exclusive right to service, administer and monitor the Loans and the Loan
Documents, including without limitation, the right to exercise all rights,
remedies, privileges and options under the Loan Documents, provided, however,
the determination as to whether Advances should be made under this Agreement and
the determination as to the basis on which and extent to which Advances shall
be jointly made by Agent and Co-Agent.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent and Co-Agent shall not, without the prior written
consent of all Lenders: (i) extend or renew the Current Term or, any payment
date under the Credit Facility, (ii) decrease any interest rate on the Credit
Facility, (iii) compromise or settle all or a portion of the Obligations, (iv)
release any obligor from the Obligations except in connection with termination
of the Credit Facility and full payment and satisfaction of all Obligations, (v)
increase the Borrowing Base advance rate, (vi) modify Section 9.15(b) or (c),
or (vii) increase the Maximum Credit Limit; provided however that Agent and Co-
Agent may increase the Maximum Credit Limit by first offering the amount of any
such increase to each of the Lenders in accordance with their respective Pro
Rata Percentage. To the extent any Lender(s) may choose not to increase
its/their respective Pro Rata Shares by the amount attributable to its/their Pro
Rata Percentage of such increase, such amount will be offered to the other
Lenders on such sharing basis as Agent and Co-Agent may reasonably establish.
After each Lender choosing to increase its Pro Rata Share has agreed to do so,
and in conjunction with the modification of this Agreement to reflect such
increase executed by those Lenders sharing in the increase of the Credit
Facility, the Lenders' Pro Rata Percentages will be adjusted accordingly and all
Lenders (whether or not sharing in such increase) shall be bound by such
modification.
(c) Notwithstanding anything to the contrary contained in
subparagraph (a) above and subject to the terms of subparagraph (b) above,
neither Agent nor Co-Agent shall, without the prior written consent of the
other: (i) enter into any written amendment to any of the Loan Documents; (ii)
waive Borrower's compliance with the terms and conditions of the Loan Documents
or any Event of Default hereunder or thereunder; (iii) consent to Borrower
taking any action which, if taken, would constitute an Event of Default under
this Agreement or under any of the Loan Documents; or (iv) release any
Collateral other than Collateral which Borrower seeks to have released from the
Agent's lien (for the benefit of Lenders) in the ordinary course of Borrower's
business.
(d) After an acceleration of the Obligations, Agent and Co-Agent
shall have the sole and exclusive right, with communication (to the extent
reasonably practicable under the circumstances) with all Lenders, to exercise
or refrain from exercising any and all rights, remedies, privileges and options
under the Loan Documents and available at law or in equity to protect and
enforce the rights of the Lenders and collect the Obligations, including,
without limitation, instituting and pursuing all legal actions against Borrower
or to collect the Obligations, or defending any and all actions brought by
Borrower or other Person; or incurring Expenses or otherwise making expenditures
to protect the Loans, the Collateral or Lenders' rights or remedies.
(e) To the extent Agent or Co-Agent is required to obtain or
otherwise elects to seek the consent of the other or Lenders to an action Agent
or Co-Agent desires to take, if Agent or Co-Agent or any Lender fails to notify
such Person, in writing, of its consent or dissent to any request of Agent or
Co-Agent hereunder within seven (7) Business Days of such Person's actual
receipt of such request, the Person whose consent is sought, shall be deemed to
have given its consent thereto.
(f) No provision in Section 9 of this Agreement may be amended
without Agent's prior written consent.
9.16 PARTICIPATIONS AND ASSIGNMENTS: Borrower hereby acknowledges and
agrees that a Lender may at any time:
(a) grant participations in up to forty-nine percent (49%) (up to 100%
to an Affiliate of such Lender) of its Pro Rata Percentage and Pro Rata Share
or of its right, title and interest therein or in or to this Agreement
(collectively, "Participations") or to any other bank, lending institution or
other entity which the granting Lender reasonably determines has the requisite
sophistication to evaluate the merits and risks of investments in participations
("Participants"); provided, however, that: (i) all amounts payable by the
Borrower to each Lender hereunder shall be determined as if such Lender had not
granted such Participation; and (ii) any agreement pursuant to which any Lender
may grant a Participation: (A) shall provide that such Lender shall retain the
sole right and responsibility to enforce the obligations of the Borrower
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provisions of this Agreement; (B) such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participant if such amendment, modification or waiver would reduce the principal
of or rate of interest on the Loans, increase the amount of the Maximum Credit
Limit, postpone the date fixed for any scheduled payment of principal of or
interest on the Loans or release Collateral for the Loans, subject to Section
9.15 hereof; and (C) shall not relieve such Lender from its obligations, which
shall remain absolute, to make Advances hereunder; and
(b) assign all or any portion of its Pro Rata Share (together with its
rights and obligations with respect thereto), and its right, title and interest
therein or in and to this Agreement and the other Loan Documents to a Lender or
any affiliate of a Lender; or to any other bank or financial institution, in
each case with thirty (30) days prior written notice to Agent and subject to the
prior written consent of the Agent which consent shall not be unreasonably
withheld; provided however that (i) such assignment shall not result in either
the assigning or acquiring Lender having a Pro Rata Share of less than
$5,000,000 and (ii) the parties to such assignment shall execute such assignment
or other documents reasonably requested by Agent and Borrower shall execute such
replacement Revolving Credit Notes as may be requested by Agent, and (iii) the
parties to the assignment shall pay Agent a processing fee of $2,500 in
conjunction with such assignment. All Participations and assignments hereunder
shall be of the Pro Rata Percentage or Pro Rata Share of the Lender making the
assignment or granting the Participation. Notwithstanding the foregoing or
anything else contained in this Agreement or any of the other Loan Documents,
any Lender may assign or pledge all or any portion of its Pro Rata Share
(including, without limitation, its rights with respect thereto), and its right,
title and interest therein or in and to this Agreement and the other Loan
Documents to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN
ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
10.2 INTEGRATED AGREEMENT: The Revolving Credit Notes, the other Loan
Documents, all related agreements, and this Agreement shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Lenders' and Agent's rights and remedies. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Agreement shall
constitute an amendment thereto and shall control.
10.3 WAIVER:
(a) No omission or delay by Agent, Co-Agent or Lenders in exercising
any right or power under this Agreement or any related agreements and documents
will impair such right or power or be construed to be a waiver of any default,
or Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and as to Borrower no waiver will
be valid unless in writing and signed by Agent and then only to the extent
specified.
(b) Borrower releases and shall indemnify, defend and hold harmless
Agent, Co-Agent and Lenders, and their respective officers, employees and
agents, of and from any claims, demands, liabilities, obligations, judgments,
injuries, losses, damages and costs and expenses (including, without limitation,
reasonable legal fees) resulting from (i) acts or conduct of Borrower or under,
pursuant or related to this Agreement and the other Loan Documents, (ii)
Borrower's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (iii)
Borrower's failure to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees, (including without limitation
environmental laws, etc.) and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting solely from acts or conduct of
Lenders constituting wilful misconduct or gross negligence.
10.4 TIME: Whenever Borrower shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day. Time is of
the essence in Borrower's performance under all provisions of this Agreement and
all related agreements and documents.
10.5 EXPENSES OF AGENT AND LENDERS: At Closing and from time to time
thereafter, Borrower will pay all reasonable expenses of Agent (and after the
occurrence of an Event of Default, all expenses of Lenders Agent and Co-Agent,
or any of them) on demand (including, without limitation, search costs, audit
fees, appraisal fees, environmental fees and the fees and expenses of legal
counsel for Agent, Co-Agent and Lender(s), if applicable) relating to this
Agreement, and all related agreements and documents, including, without
limitation, expenses incurred in the analysis, negotiation, preparation,
closing, administration and enforcement of this Agreement and the other Loan
Documents, the enforcement, protection and defense of the rights of Agent, Co-
Agent and Lenders in and to the Loans and Collateral or otherwise hereunder, and
any expenses relating to extensions, amendments, waivers or consents pursuant
to the provisions hereof, or any related agreements and documents or relating
to agreements with other creditors, or termination of this Agreement
(collectively, the "Expenses").
10.6 BROKERAGE: This transaction was brought about and entered into by
Agent, Lenders and Borrower acting as principals and without any brokers, agents
or finders being the effective procuring cause hereof. Borrower represents that
it has not committed Agent or any Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction.
10.7 NOTICES:
(a) Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed given if delivered in person or if sent
by telecopy or by nationally recognized overnight courier, or via first class,
Certified or Registered mail, postage prepaid, as follows, unless such address
is changed by written notice hereunder:
If to Agent to: CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101
Attn: David D'Antonio
Telecopy No.: 215/768-7744
If to Co-Agent to: First Union National Bank
123 South Broad Street
Philadelphia, PA 19109
Attn: Grainne Pergolini
Vice President
Telecopy No.: 215/985-3555
In either case:
with copies to: Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Lawrence F. Flick, II, Esquire
Telecopy No.: 215/569-5555
If to Borrower to: Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, PA 19002
Attn:
Telecopy No.:
With copies to: Richard Abt, Esquire
Ledgwood Law Firm, P.C.
1521 Locust Street, 4th Floor
Philadelphia, PA 19102
Telecopy No.: 215/735-2513
If to Lenders: to the addresses set forth on Schedule A
(b) Any notice sent by Agent, any Lender or Borrower by any of the
above methods shall be deemed to be given when so received.
(c) Agent shall be fully entitled to rely upon any facsimile
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
10.8 HEADINGS: The headings of any paragraph or Section of this Agreement
are for convenience only and shall not be used to interpret any provision of
this Agreement.
10.9 SURVIVAL: All warranties, representations, and covenants made by
Borrower herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Agent and Lenders,
and shall survive the delivery to Lenders of the Revolving Credit Notes,
regardless of any investigation made by Lenders or on their behalf. All
statements in any such certificate or other instrument prepared and/or delivered
for the benefit of Agent and any and all Lenders shall constitute warranties and
represen-tations by Borrower hereunder. Except as otherwise expressly provided
herein, all covenants made by Borrower hereunder or under any other Loan
Document shall be deemed continuing until all Obligations under or in connection
with this Agreement are satisfied in full.
10.10 SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
Borrower may not transfer, assign or delegate any of its duties or obligations
hereunder.
10.11 COUNTERPARTS: Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall constitute an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed in counterparts, all of which counterparts taken together shall
constitute one completed fully executed document.
10.12 MODIFICATION: No modification hereof or any agree-ment referred to
herein shall be binding or enforceable unless in writing and signed by Borrower,
Agent and the Lenders and except as provided in Section 9 hereof. Any
modification in accordance with the terms hereof shall be binding on all parties
hereto, whether or not each is a signatory thereto.
10.13 SIGNATORIES: Each individual signatory hereto repre-sents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
10.14 THIRD PARTIES: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental benefi-ciary of Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Agent or any Lender of
Borrower's duty of performance, including, without limitation, Borrower's duties
under any Lease, account or contract with any other Person.
10.15 DISCHARGE OF TAXES, BORROWER'S OBLIGATIONS, ETC.: Agent, in its
sole discretion, shall have the right at any time, and from time to time, with
prior notice to Borrower, if Borrower fails to do so five (5) Business Days
after requested in writing to do so by Agent, to: (a) pay for the performance
of any of Borrower's obligations hereunder, and (b) discharge taxes or Liens,
at any time levied or placed on any of Borrower's Property in violation of this
Agreement unless Borrower is in good faith with due diligence by appropriate
proceedings contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP. Expenses and advances shall be added to the
Revolving Credit, bear interest at the same rate applied to the Revolving
Credit, until reimbursed to Agent. Such payments and advances made by Agent
shall not be construed as a waiver by Agent or Lenders of an Event of Default
under this Agreement.
10.16 MOST FAVORED LENDERS: Borrower agrees to promptly notify Agent in
writing if any agreement for borrowed money to which Borrower is a party,
contains or is amended to contain, financial or performance covenants more
restrictive than those contained herein and upon Agent's request, Borrower
agrees to amend this Agreement accordingly so that covenants contained herein
are substantially the same as those contained in such other agreements for
borrowed money so long as such covenants remain applicable to Borrower pursuant
to such other agreements.
10.17 CONSENT TO JURISDICTION: Borrower and each Lender hereby
irrevocably consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia, Commonwealth of Pennsylvania or the United States District Court
for the Eastern District of Pennsylvania in any and all actions and proceedings
whether arising hereunder or under any other agreement or undertaking and
irrevocably agree to service of process by certified mail, return receipt
requested to the address of the appropriate party set forth herein.
10.18 WAIVER OF JURY TRIAL: EACH OF BORROWER, LENDERS AND AGENT HEREBY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY
LITIGATION COMMENCED BY OR AGAINST AGENT OR ANY LENDER OR LENDERS WITH RESPECT
TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS.
10.19 INFORMATION TO PARTICIPANT: Agent and each Lender may divulge to
any participant, co-lender or assignee or prospective participant, co-lender or
assignee it may obtain in the Credit Facility, or any portion thereof, all
information, and furnish to such Person copies of any reports, financial state-
ments, certificates, and documents obtained under any provision of this
Agreement, or related agreements and documents; provided, however that any
potential participant, co-lender or assignee agrees to hold in confidence all
confidential or proprietary information provided to them by Borrower, Agent or
such Lender except (a) to the extent that the production of such information is
required pursuant to any statute, ordinance, regulation, rule or order or any
subpoena or any governmental inquiry or by reason of any bank regulation in
connection with any bank examination, and (b) such potential participant, co-
lender or assignee shall not be prohibited from disclosing any such information
to any of their agents, officers, employees, attorneys, accountants or
consultants who shall be informed of this provision.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
FIDELITY LEASING, INC.
By: /s/ Abraham Bernstein
________________________________
Title: President
Attest:____________________________
(Corporate Seal)
CORESTATES BANK, N.A., as Agent and
Lender
By: /s/ Carmel C. Albano
________________________________
Title:
FIRST UNION NATIONAL BANK, as Co-Agent
and Lender
By: /s/ Patrick A. McGovern
________________________________
Title:
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
PRIMARY EARNINGS PER SHARE
Computation for Statement of Operations
December 31,
Reconciliation of net income per statement of
operations to amount used in primary 1996 1995
earnings per share computation: ---- ----
Net income $ 2,285,184 $ 1,598,062
Add-Interest on short-term debt, net of tax
effect, on application of assumed proceeds
from exercise of options and warrants in
excess of 20% limitation - 7,835
----------- -----------
Net income, as adjusted $ 2,285,184 $ 1,605,897
Additional Primary Computation
Net income, as adjusted per primary
computation above $ 2,285,184 $ 1,605,897
Additional adjustment to weighted average
number of shares outstanding:
Weighted average number of shares
outstanding 2,506,800 1,868,600
Add-Dilutive effect of outstanding options
and warrants (as determined by the
application of the treasury stock method) 969,200 571,400
Weighted average number of shares
outstanding 3,476,000 2,440,000
Primary earnings per share, as adjusted $.66 $.66
FULLY DILUTED EARNINGS PER SHARE (a)
Computation for Statement of Operations
Reconciliation of net income per statement of
operations to amount used in fully diluted
earnings per share computation:
Income before extraordinary items $ 2,285,184 $ 1,598,062
Add-Interest on short-term debt, net of tax
effect, on application of assumed proceeds
from exercise of options and warrants in
excess of 20% limitation - 1,105
Net income, as adjusted $ 2,285,184 $ 1,599,167
Additional Primary Computation
Net income, as adjusted per primary
computation above $ 2,285,184 $ 1,599,167
Additional adjustment to weighted average
number of shares outstanding:
Weighted average number of shares
outstanding 2,506,800 1,868,600
Add-Dilutive effect of outstanding options
and warrants (as determined by the
application of the treasury stock method) 1,016,700 571,400
Weighted average number of shares
outstanding 3,523,500 2,440,000
Fully diluted earnings per share, as adjusted $.65 $.66
(a) This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 7,321,338
<SECURITIES> 0
<RECEIVABLES> 1,163,162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,721,128
<PP&E> 27,365,593
<DEPRECIATION> 15,173,752
<TOTAL-ASSETS> 80,410,864
<CURRENT-LIABILITIES> 2,449,261
<BONDS> 22,496,418
0
0
<COMMON> 37,032
<OTHER-SE> 52,840,153
<TOTAL-LIABILITY-AND-EQUITY> 80,410,864
<SALES> 950,412
<TOTAL-REVENUES> 5,838,156
<CGS> 411,778
<TOTAL-COSTS> 3,065,726
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 408,788
<INCOME-PRETAX> 2,860,184
<INCOME-TAX> 575,00084
<INCOME-CONTINUING> 2,285,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,285,184
<EPS-PRIMARY> .66
<EPS-DILUTED> .65
</TABLE>
