UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
Commission File Number: 0-19822
LITCHFIELD FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3023928
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
430 MAIN STREET, WILLIAMSTOWN, MA 01267
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 458-1000
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
As of May 9, 1999, there were 6,891,622 shares of common stock of
Litchfield Financial Corporation outstanding.
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.................................... 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................... 22
Item 2. Changes in Securities and Use of Proceeds............ 22
Item 3. Defaults Upon Senior Securities...................... 22
Item 4. Submission of Matters to a Vote of Security Holders.. 22
Item 5. Other Information.................................... 23
Item 6. Exhibits and Reports on Form 8-K..................... 37
SIGNATURES........................................................ 38
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LITCHFIELD FINANCIAL CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
March 31, December 31
1999 1998
---------- -----------
(unaudited)
Cash and cash equivalents...................... $ 13,358 $ 10,537
Restricted cash................................ 28,118 27,898
Loans held for sale, net of allowance for loan
losses of $237 in 1999 and $549 in 1998........ 16,111 19,750
Other loans, net of allowance for loan losses of
$2,371 in 1999 and $2,477 in 1998........... 209,345 191,292
Retained interests in loan sales, net of
estimated recourse obligations of
$4,525 in 1999 and $3,681 in 1998........... 30,556 28,883
Other.......................................... 15,867 15,522
-------- --------
Total assets............................. $313,355 $293,882
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities:
Lines of credit............................. $ 66,924 $ 49,021
Accounts payable and other liabilities...... 6,887 9,812
Dealer/developer reserves................... 10,187 9,979
Deferred income taxes....................... 8,764 8,388
Long-term notes............................. 134,588 134,588
-------- --------
Total liabilities........................ 227,350 211,788
======== ========
Stockholders' equity
Preferred stock, $.01 par value; authorized
1,000,000 shares, none issued
and outstanding.......................... --- ---
Common stock, $.01 par value; authorized
12,000,000 shares, 6,886,939 shares
issued and outstanding in 1999 and
6,886,329 shares issued and outstanding
in 1998.................................. 69 69
Additional paid in capital.................. 58,046 58,040
Accumulated other comprehensive income...... 2,875 1,250
Retained earnings........................... 25,015 22,735
-------- --------
Total stockholders' equity............... 86,005 82,094
-------- --------
Total liabilities and stockholders'
equity............................... $313,355 $293,882
======== ========
See accompanying notes to unaudited consolidated financial statements.
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except share and per share amounts)
Unaudited
Three Months Ended March 31,
1999 1998
Revenues:
Interest and fees on loans.................. $ 7,887 $ 5,233
Gain on sale loans.......................... 2,617 2,227
Servicing and other income.................. 571 493
------ ------
11,075 7,953
Expenses:
Interest expense............................ 4,628 2,997
Salaries and employee benefits.............. 1,266 1,133
Other operating expenses.................... 978 953
Provision for loan losses................... 500 350
------ ------
7,372 5,433
Income before income taxes.................... 3,703 2,520
Provision for income taxes.................... 1,425 970
------ ------
Net income.................................... $ 2,278 $ 1,550
====== ======
Earnings per common share amounts:
Basic...................................... $ .33 $ .27
Diluted.................................... $ .32 $ .26
Weighted average number of shares:
Basic...................................... 6,886,559 5,659,756
Diluted.................................... 7,192,378 6,020,158
See accompanying notes to unaudited consolidated financial statements.
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statement of Stockholders' Equity
(In thousands, except share amounts)
Unaudited
<TABLE>
<S> <C> <C> <C> <C> <C>
Accumulated
Additional Other
Common Paid In Comprehensive Retained
Stock Capital Income Earnings Total
Balance, December 31,1998.. $69 $58,040 $1,250 $22,735 $82,094
Issuance of 610 shares of
common stock.......... --- 6 --- --- 6
Other comprehensive
income, net of tax... --- --- 1,625 --- 1,625
Tax benefit from stock
options exercised.... --- --- --- 2 2
Net income............... --- --- --- 2,278 2,278
------ ------ ------ ------ ------
$69 $58,046 $2,875 $25,015 $86,005
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
(In thousands)
Unaudited
Three Months Ended March 31,
1999 1998
Net income...................................... $2,278 $1,550
Unrealized gain (loss) on retained interests
in loan sales, net of tax expense of $1,017
for 1999 and tax benefit of $15 for 1998...... 1,625 (24)
----- -----
Comprehensive income............................ $3,903 $1,526
===== =====
See accompanying notes to unaudited consolidated financial statements.
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
Three Months Ended March 31,
1999 1998
Cash flows from operating activities:
Net income..................................... $ 2,278 $ 1,550
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of loans...................... (2,617) (2,227)
Amortization and depreciation............. 321 223
Amortization of retained interests in
loan sales.............................. 1,726 1,436
Provision for loan losses................. 500 350
Deferred income taxes..................... 376 339
Net changes in operating assets and
liabilities:
Restricted cash...................... (220) (885)
Loans held for sale.................. 3,877 994
Retained interests in loan sales..... (483) (563)
Dealer/developer reserves............ 208 (39)
liabilities...................... (3,550) (647)
------- ------
Net cash provided by operating activities 2,416 531
------- ------
Cash flows from investing activities:
Net originations, purchases and principal
payments on other loans..................... (31,129) (30,777)
Other loans sold............................... 13,182 ---
Collections on retained interests in
loan sales.................................. 581 931
Capital expenditures and other assets.......... (138) (860)
------- ------
Net cash used in investing activities..... (17,504) (30,706)
------- ------
Cash flows from financing activities:
Net borrowings on lines of credit.............. 17,903 23,045
Payments on term note.......................... --- (782)
Net proceeds from issuance of common stock..... 6 46
------ ------
Net cash provided by financing activities.. 17,909 22,309
Net increase (decrease) in cash and cash
equivalents.................................... 2,821 (7,866)
Cash and cash equivalents, beginning of period.... 10,537 19,295
------ ------
Cash and cash equivalents, end of period.......... $13,358 $11,429
====== ======
Supplemental Schedule on Noncash Financing and
investing Activities:
Exchange of loans for retained interests in
loan sales.................................. $ 333 $ 447
Transfers from loans to real estate acquired
through forclosure.......................... $ 573 $ 797
Supplemental Cash Flow Information:
Interest paid.................................. $ 4,825 $ 3,255
Income taxes paid.............................. $ 1,353 $ 31
See accompanying notes to unaudited consolidated financial statements.
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A. Basis of Presentation
The accompanying unaudited consolidated interim financial
statements as of March 31, 1999 and for the three month period ended
March 31, 1999 and 1998, have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1999, are not
necessarily indicative of the results expected for the year ending
December 31, 1999. For further information, refer to the consolidated
financial statements and notes thereto included in Litchfield
Financial Corporation's annual report on Form 10-K for the year ended
December 31, 1998.
In June, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("Statement No.
133"), "Accounting for Derivative Instruments and Hedging Activities."
Statement No. 133 is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999, with early adoption permitted as
of the beginning of any quarter after the date of issuance. Statement
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivatives embedded in other contracts
and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value
of a recognized asset or liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated
forecasted transaction. The accounting for changes in the fair value
of a derivative depends on the intended use of the derivative and the
resulting designation. The provisions of Statement No. 133 can not be
applied retroactively to financial statements of prior periods.
The Company plans to adopt Statement No. 133 in the fiscal quarter
beginning January 1, 2000. At the date of initial application, the
Company must recognize any freestanding derivative instruments in the
balance sheet as either assets or liabilities and measure them at fair
value. The Company shall also recognize offsetting gains and losses
on hedged assets, liabilities, and firm commitments by adjusting their
carrying amounts at that date as a cumulative effect of a change in
accounting principal. Whether such transition adjustment is reported
in net income, other comprehensive income, or allocated between both
is based on the hedging relationships, if any, that existed for that
derivative instrument and were the basis for accounting prior to the
application of Statement No. 133. The Company is evaluating the
effect that the implementation of Statement No. 133 will have on its
results of operations and financial position.
B. Gain on Sale of Loans and Retained Interests in Loan Sales
Gains on sales of loans are based on the difference between the
allocated cost basis of the assets sold and the proceeds received,
which includes the fair value of any assets or liabilities that are
newly created as a result of the transaction. The previous carrying
amount is allocated between the assets sold and any retained interests
based on their relative fair values at the date of transfer. Retained
interests in transferred assets consist primarily of subordinate
portions of the principal balance of transferred assets and interest
only strips, which are initially recorded at fair value.
The Company estimates fair value using discounted cash flow
analysis, since quoted market prices are not readily available. The
Company's analysis incorporates estimates that market participants
would be expected to use in their estimates of future cash flows,
including assumptions about interest rates, defaults and prepayment
rates. Estimates made are based on, among other things, the Company's
past experience with similar types of financial assets. The interest
rates paid to investors range from 6.5% to 9.0%. The prepayment rates
were 17.5% for Land Loan sales and 18.0% for VOI Loan sales. For the
Hypothecation Loan sales, the prepayment rates for the underlying
collateral used were 17.5% for Land Loans and 18.0% for VOI Loans.
The Company estimates default rates to be 1.9% on Land Loans, 3.0% on
VOI Loans and 0.5% on Hypothecation Loans. In valuing its retained
interests in loan sales, the Company selects discount rates
commensurate with the duration and risks embedded in the particular
assets. Specifically, the Company uses discount rates ranging from
the investor pass-through rates (for restricted cash) to the Baa
corporate bond rate plus 325 basis points (for interest only strips
and retained principal certificates) to estimate the fair value of its
retained interests.
There is no servicing asset or liability arising from loan sales,
because the Company estimates that the benefits of servicing
approximate the costs to meet its servicing responsibilities.
On a quarterly basis, the Company assesses the carrying value of
retained interests in loans sold by comparing actual and assumed
prepayment rates on a disaggregated basis reflecting factors such as
origination dates and types of loans. The Company adjusts the
carrying value of retained interests for unfavorable changes
considered other than temporary.
Since its inception, the Company has sold $545,831,000 of loans at
face value ($492,960,000 through December 31, 1998). The principal
amount remaining on the loans sold was $260,076,000 at March 31, 1999
and $238,132,000 at December 31, 1998. The Company guarantees,
through replacement or repayment, loans in default up to a specified
percentage of loans sold. Dealer/developer guaranteed loans are
secured by repurchase or replacement guarantees in addition to, in
most instances, dealer/developer reserves.
The Company's exposure to loss on loans sold in the event of
nonperformance by the consumer, the dealer/developer on its guarantee,
and the determination that the collateral is of no value was
$14,289,000 at March 31, 1999 ($12,750,000 at December 31, 1998).
Such amounts have not been discounted. The Company repurchased
$192,000 and $118,000 of loans under the recourse provisions of loan
sales during the three months ended March 31, 1999 and 1998,
respectively, and $491,000 during the year ended December 31, 1998.
In addition, when the Company sells loans through securitization
programs, the Company commits either to replace or repurchase any
loans that do not conform to the requirements thereof in the operative
loan sale documents. As of March 31, 1999, $25,913,000 of the
Company's cash was restricted as credit enhancements in connection
with certain securitization programs. To date, the Company has
participated $11,414,000 of A&D and Other Loans ($10,505,000 through
December 31, 1998).
The Company's Serviced Portfolio is geographically diversified
with collateral and consumers located in 50 states. The Serviced
Portfolio consists of the principal amount of loans serviced by or on
behalf of the Company, except loans participated without recourse to
the company. At March 31, 1999, 13.9% and 10.7% of the Serviced
Portfolio by collateral location was located in Texas and Florida,
respectively, and 15.6% and 13.5% of the Serviced Portfolio by
borrower location were located in Florida and Texas, respectively. At
December 31, 1998, 14.7%, 10.3%, 10.2% of the Serviced Portfolio by
collateral location were located in Texas, Florida and California,
respectively, and 16.1% and 14.4% of the Serviced Portfolio by
borrower location was located in Florida and Texas, respectively. No
other state accounted for more than 7.5% of the total by either
collateral or borrower location.
C. Allowance for Loan Losses and Estimated Recourse Obligations
An analysis of the total allowances for all loan losses and
recourse obligations follows:
March 31, December 31,
1999 1998
---------- -------------
Allowance for losses on loans held for sale.. $ 237,000 $ 549,000
Allowance for losses on other loans.......... 2,371,000 2,477,000
Estimated recourse obligations on retained
interests in loan sales................... 4,525,000 3,681,000
--------- ---------
$7,133,000 $6,707,000
========= =========
D. Debt
The Company finances a portion of its liquidity needs with secured
lines of credit with eight participating institutions. Interest
rates on the lines of credit range from the Eurodollar or LIBOR rates
plus 2.00% to the prime rate plus 1.25%. The Company is not required
to maintain compensating balances or forward sales commitments under
the terms of these lines of credit.
The lines of credit mature as follows:
Date Amount
---------- -------------
April 1999 $ 3,000,000
September 1999 40,000,000
March 2000 25,000,000
April 2000 68,000,000
-----------
$136,000,000
===========
Financial data relating to the Company's secured lines of credit
is as follows:
(Dollars in thousands)
March 31, December 31,
1999 1998
--------- ---------
Lines of credit available............ $136,000 $116,000
Borrowings outstanding at end
of period ......................... $66,924 $49,021
Weighted average interest rate
at end of period................... 7.3% 7.6%
Maximum borrowings outstanding
at any month end................... $76,579 $73,666
Average amount outstanding
during the period.................. $17,532 $37,485
Weighted average interest rate
during the period (determined by
dividing interest expense by
average borrowings)................ 7.2% 7.9%
As of March 31, 1999 and December 31, 1998, the Company had no
unsecured lines of credit.
The Company has an additional revolving line of credit and sale
facility as part of an asset backed commercial paper facility with a
multi-seller commercial paper issuer ("Conduit A"). In June 1998,
the Company amended the facility to increase the facility to
$150,000,000, subject to certain terms and conditions. The facility
matures in June 2001.
In connection with the facility, the Company formed a wholly-owned
subsidiary, Litchfield Mortgage Securities Corporation 1994, to
purchase loans from the Company. In October 1998, Litchfield Mortgage
Securities Corporation 1994 was merged with and into Litchfield
Mortgage Securities Company 1994, LLC ("LMSC"). LMSC either pledges
the loans on a revolving line of credit with Conduit A or sells the
loans to Conduit A. Conduit A issues commercial paper or other
indebtedness to fund the purchase or pledge of loans from LMSC.
Conduit A is not affiliated with the Company or its affiliates. As of
March 31, 1999 and December 31, 1998, the outstanding balance of the
sold or pledged loans securing this facility was $145,533,000 and
$137,532,000, respectively. Outstanding borrowings at March 31, 1999
were $65,000. There were no outstanding borrowings under the line of
credit at December 31, 1998. Interest is payable on the line of
credit at an interest rate based on certain commercial paper rates.
In March 1997, the Company closed an additional revolving line of
credit and sale facility of $25,000,000 with another multi-seller of
commercial paper conduit ("Conduit B"). The facility, which matures
in March 2000, is subject to certain terms and conditions, credit
enhancement requirements and loan eligibility criteria. The
outstanding aggregate balance of the loans pledged and sold under the
facility at any time cannot exceed $25,000,000.
In connection with the facility, the Company formed a wholly-owned
subsidiary, Litchfield Capital Corporation 1996, to purchase loans
from the Company. In October 1998, Litchfield Capital Corporation
1996, was merged with and into Litchfield Capital Company 1996, LLC
("LCC"). LCC either pledges the loans on a revolving line of credit
with Conduit B or sells the loans to Conduit B. Conduit B issues
commercial paper or other indebtedness to fund the purchase or pledge
of loans from LCC. Conduit B is not affiliated with the Company or
its affiliates. As of March 31, 1999 and December 31, 1998, the
outstanding aggregate balance of the loans sold or pledged under the
facility was $9,647,000 and $10,632,000, respectively. There were no
outstanding borrowings under the line of credit as of March 31, 1999
or December 31, 1998. Interest is payable on the line of credit at an
interest rate based on certain commercial paper rates.
The Company also finances a portion of its liquidity with
long-term debt. The following table shows the total long-term debt
outstanding at March 31, 1999 and December 31, 1998:
March 31, December 31,
1999 1998
(Dollars in thousands)
9.3% Notes............... $ 20,000 $ 20,000
8.45% Notes due 2002..... 51,282 51,282
8.875% Notes due 2003.... 15,066 15,066
8.25% Notes due 2003..... 10,000 10,000
9.25% Notes due 2003..... 20,000 20,000
10% Notes due 2004....... 18,240 18,240
------- -------
$134,588 $134,588
======= =======
The Company shall have the option to redeem all or any portion of
the long-term notes at predetermined redemption prices. The earliest
call date of each issuance is as follows:
9.3% Notes......................... April 1998
8.45% Notes due 2002...............November 1999
8.875% Notes due 2003.............. June 1996
8.25% Notes due 2003...............November 2000
9.25% Notes due 2004...............December 2000
10% Notes due 2004................. April 1998
E. Derivative Financial Instruments Held for Purposes Other than
Trading
The Company entered into two interest rate swap agreements to
manage its basis exposures. The swap agreements involve the payment of
interest to the counterparty at the prime rate on a notional amount of
$110,000,000 and the receipt of interest at the commercial paper rate
plus a spread of 277 basis points on a notional amount of $80,000,000
and the LIBOR rate plus a spread of 267 basis points on notional amount
of $30,000,000. The swap agreements expire in June 2000. There is no
exchange of the notional amounts upon which the interest payments are
based.
The differential to be paid or received as interest rates change
is accrued and recognized as an adjustment to interest income from the
excess servicing asset. The related amount receivable from or payable
to the counterparty is included in other assets or other liabilities.
The fair values of the swap agreements are not recognized in the
financial statements. The Company intends to keep the contracts in
effect until they mature in June 2000.
The Company entered into an interest rate cap agreement with a
bank in order to manage its exposure to certain increases in interest
rates. The interest rate cap entitles the Company to receive payments,
based on an amortizing notional amount, when commercial paper rates
exceed 8.0%. If payments were to be received as a result of the cap
agreement, they would be accrued as a reduction of interest expense.
The notional amount outstanding at March 31, 1999 was $3,548,000. This
agreement expires in July 2005.
The Company does not use interest rate swap agreements or other
derivative instruments for speculation. The Company is exposed to
credit loss in the event of non-performance by the swap counterparty
or the cap provider.
F. Subsequent Events
On April 14, 1999, the Company filed a Registration Statement on
Form S-3 with the Securities and Exchange Commission covering
$100,000,000 in aggregate principal amount of (i) trust preferred
securities for issuance by Litchfield Capital Trust I and Litchfield
Capital Trust II, subsidiaries of the Company and statutory business
trusts created under the laws of the state of Delaware (the "Trusts"),
(ii) junior subordinated debt securities of the Company, and (iii)
guarantee of preferred securities of the Trusts by the Company. In
connection with this offering, the Trusts will sell the preferred
securities to the public and common securities to the Company, use the
proceeds from those sales to buy an equivalent principal amount of
junior subordinated debentures issued by the Company and distribute
the interest payments it receives on the junior subordinated
debentures to the holders of preferred and common securities.
FORM 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking Statements
Except for the historical information contained or incorporated by
reference in this Form 10-Q, the matters discussed or incorporated by
reference herein are forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements
of the Company, or industry results, to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others,
the risk factors set forth under "Risk Factors" as well as the
following: general economic and business conditions; industry trends;
changes in business strategy or development plans; availability and
quality of management; and availability, terms and deployment of
capital. Special attention should be paid to such forward-looking
statements including, but not limited to, statements relating to (i)
the Company's ability to execute its growth strategies and to realize
its growth objectives and (ii) the Company's ability to obtain
sufficient resources to finance its working capital needs and provide
for its known obligations. Refer to the Company's annual report on
Form 10-K for the year ended 1998 for a complete list of factors as
discussed under "Risk Factors".
Overview
Litchfield Financial Corporation (the "Company") is a diversified
finance company that provides financing to creditworthy borrowers for
assets not typically financed by banks. The Company provides this
financing by making loans to businesses secured by consumer
receivables or other assets and by purchasing consumer loans.
The Company provides financing to rural land dealers, timeshare
resort developers and other finance companies secured by receivables
("Hypothecation Loans"). The Company also purchases consumer loans
("Purchased Loans") consisting primarily of loans to purchasers of rural
("Land Loans") and vacation properties and vacation ownership interests
("VOI Loans") popularly known as timeshare interests, and provides
loans to dealers and developers for the acquisition and development
("A&D Loans") of rural land and timeshare resorts. In addition, the
Company purchases other loans, such as consumer home equity loans,
mortgages and construction loans and tax lien certificates, and
provides financing to other businesses.
The Company extends Hypothecation Loans to land dealers, resort
developers and other finance companies secured by receivables.
Hypothecation Loans typically have advance rates of 75% to 90% of the
current balance of the pledged receivables and variable interest rates
based on the prime rate plus 2% to 4%.
The Company also purchases Land Loans and VOI Loans. Land Loans
are typically secured by one to twenty acre rural parcels. Land Loans
are secured by property located in 38 states, predominantly in the
southern United States. VOI Loans typically finance consumer purchases
of ownership interests in fully furnished vacation properties. VOI
Loans are secured by property located in 18 states, predominantly in
California, Florida and Pennsylvania. The Company requires most
dealers or developers from whom it buys loans to guarantee repayment or
replacement of any loan in default. Ordinarily, the Company retains a
percentage of the purchase price as a reserve until the loan is repaid.
The Company also makes A&D Loans to land dealers and resort
developers for the acquisition and development of rural land and
timeshare resorts in order to finance additional receivables generated
by the A&D Loans. At the time the Company makes A&D Loans, it
typically receives an exclusive right to purchase or finance the
related consumer receivables generated by the sale of the subdivided
land or timeshare interests. A&D Loans typically have loan to value
ratios of 60% to 80% and variable interest rates based on the prime
rate plus 2% to 4%.
The principal sources of the Company's revenues are interest and
fees on loans, gains on sales of loans and servicing and other income.
Gains on sales of loans are based on the difference between the
allocated cost basis of the assets sold and the proceeds received,
which includes the fair value of any assets or liabilities that are
newly created as a result of the transaction. Because a significant
portion of the Company's revenues is comprised of gains realized upon
sales of loans, the timing of such sales has a significant effect on
the Company's results of operations.
Results of Operations
The following table sets forth the percentage relationship to
revenues, unless otherwise indicated, of certain items included in the
Company's statements of income.
Three Months
Ended
March 31,
----------
1999 1998
Revenues
Interest and fees on loans............. 71.2% 65.8%
Gain on sale of loans.................. 23.6 28.0
Servicing and other income............. 5.2 6.2
----- -----
100.0 100.0
----- -----
Expenses
Interest expense....................... 41.8 37.7
Salaries and employee benefits......... 11.4 14.2
Other operating expenses............... 8.9 12.0
Provision for loan losses.............. 4.5 4.4
----- -----
66.6 68.3
----- -----
Income before income taxes................. 33.4 31.7
Provision for income taxes................. 12.9 12.2
----- -----
Net income................................. 20.5% 19.5%
===== =====
Revenues increased 39.3% to $11,075,000 for the three months ended
March 31, 1999, from $7,953,000 for the same period in 1998. Net
income for the three months ended March 31, 1999 increased 47.0% to
$2,278,000 compared to $1,550,000 for the same period in 1998. Net
income as a percentage of revenues was 20.5% for the three months ended
March 31, 1999 compared to 19.5% for the three months ended March 31,
1998. Loan purchases and originations grew 45.2% to $97,991,000 for
the three months ended March 31, 1999 from $67,493,000 for the same
period in 1998. The Serviced Portfolio increased 47.8% to $500,465,000
at March 31, 1999 from $338,502,000 at March 31, 1998.
Interest and fees on loans increased 50.7% to $7,887,000 for the
three months ended March 31, 1999 from $5,233,000 for the same period
in 1998, primarily as the result of the higher average balance of other
loans during the 1999 period, which was only partially offset by a
decrease in the average rate. The average rate earned on the Serviced
Portfolio decreased to 11.5% at March 31, 1999 from 12.0% at March 31,
1998, primarily due to the reduction in the prime rate and the effect
of the growth in Hypothecation Loans as a percentage of the portfolio.
Hypothecation Loan yields are usually less than Land Loan or VOI Loan
yields, but servicing costs and loan losses are generally less as well.
Gain on the sale of loans increased 17.5% to $2,617,000 for the
three months ended March 31, 1999 from $2,227,000 in the same period in
1998. The volume of loans sold increased 185.8% to $52,871,000 for the
three months ended March 31, 1999 from $18,502,000 during the three
months ended March 31, 1998. The increase in the gain on sale of loans
was not proportionate to the increase in the loans sold volume
primarily due to the mix of loans sold during the three months ended
March 31, 1999. The yield on Hypothecation and home equity loan sales
is generally lower than the yield on Land and VOI loan sales.
Hypothecation and home equity loans sold were $36,683,000 for the three
months ended March 31, 1999. There were no Hypothecation or home
equity loans sold for the three months ended March 31, 1998. Land and
VOI loans sold were $16,188,000 for the three months ended March 31,
1999 as compared to $18,502,000 for the three months ended March 31,
1998.
Servicing and other income increased 15.8% to $571,000 for the
three months ended March 31, 1999, from $493,000 for the same period in
1998 largely due to the increase in the other fee income and prepayment
penalties from Hypothecation Loans. Although loans serviced for others
increased 41.2% to $260,075,000 as of March 31, 1999 from $184,157,000
at March 31, 1998, servicing income remained relatively constant due to
an increase in Hypothecation Loans serviced for others and a decrease
in the average servicing fee per loan.
Interest expense increased 54.4% to $4,628,000 during the three
months ended March 31, 1999 from $2,997,000 for the same period in
1998. The increase in interest expense primarily reflects an increase
in average borrowings which was only partially offset by lower rates.
During the three months ended March 31, 1999, borrowings averaged
$211,149,000 at an average rate of 8.4%, as compared to $119,195,000 at
an average rate of 8.9% during the same period in 1998. Interest
expense includes the amortization of deferred debt issuance costs.
Salaries and employee benefits increased 11.7% to $1,266,000 for
the three months ended March 31, 1999 from $1,133,000 for the same
period in 1998 because of an increase in the number of employees in
1999 and, to a lesser extent, an increase in salaries. Personnel costs
as a percentage of revenues decreased to 11.4% for the three months
ended March 31, 1999 compared to 14.2% for the same period in 1998.
Also, as a percentage of the Serviced Portfolio, personnel costs
decreased to 1.1% for the three months ended March 31, 1999 compared to
1.4% for the same period in 1998. Total salaries and employee benefits
plus other operating expensed as a percentage of revenues decreased to
20.3% for the three months ended March 31, 1999 from 26.2% for the same
period in 1998.
Other operating expenses increased 2.6% to $978,000 for the three
months ended March 31, 1999 from $953,000 for the same period in 1998.
Other operating expenses increased due to the growth in the Serviced
Portfolio that was only partially offset by the decrease in third party
servicing expenses related to bringing customer service and collections
in-house. As a percentage of revenues, other operating expenses
decreased to 8.9% for the three months ended March 31, 1999 compared to
12.0% for the corresponding period in 1998. As a percentage of the
Serviced Portfolio, other operating expenses decreased to 0.8% for the
three months ended March 31, 1999 from 1.2% for the same period in
1998.
During the three months ended March 31, 1999, the provision for
loan losses increased 42.9% to $500,000 from $350,000 for the same
period in 1998 primarily due to the growth of the Serviced Portfolio.
Liquidity and Capital Resources
The Company's business requires continued access to short and
long-term sources of debt financing and equity capital. The Company's
principal cash requirements arise from loan originations, repayment of
debt on maturity and payments of operating and interest expenses. The
Company's primary sources of liquidity are loan sales, short-term
borrowings under secured lines of credit and long-term debt and equity
offerings.
Since its inception, the Company has sold $545,831,000 of loans at
face value ($492,960,000 through December 31, 1998). The principal
amount remaining on the loans sold was $260,076,000 at March 31, 1999
and $238,132,000 at December 31, 1998. In connection with certain loan
sales, the Company commits to repurchase from investors any loans that
become 90 days or more past due. This obligation is subject to various
terms and conditions, including, in some instances, a limitation on the
amount of loans that may be required to be repurchased. There were
approximately $14,289,000 of loans at March 31, 1999 which the Company
could be required to repurchase in the future should such loans become
90 days or more past due. The Company repurchased $192,000 and
$118,000 of such loans under the recourse provisions of loan sales
during the three months ended March 31, 1999 and 1998, respectively. As
of March 31, 1999, $25,913,000 of the Company's cash was restricted as
credit enhancement for certain securitization programs. To date, the
Company has participated $11,414,000 of A&D and Other Loans
($10,505,000 through December 31, 1998).
The Company funds its loan purchases in part with borrowings under
various lines of credit. Lines are paid down when the Company receives
the proceeds from the sale of the loans or when cash is otherwise
available. These lines of credit totaled $136,000,000 and $116,000,000
at March 31, 1999 and December 31, 1998, respectively. Outstanding
borrowings on these lines of credit were $66,859,000 at March 31,
1999. Interest rates on these lines of credit range from the
Eurodollar or LIBOR rate plus 2.00% to the prime rate plus 1.25%. The
Company is not required to maintain compensating balances or forward
sales commitments under the terms of these lines of credit.
The Company also finances its loan purchases with two revolving
line of credit and sale facilities as part of asset backed commercial
paper facilities with multi-seller commercial paper issuers. Such
facilities totaled $175,000,000 at March 31, 1999 and December 31,
1998. As of March 31, 1999 and December 31, 1998, the outstanding
balances of loans sold or pledged under these facilities were
$155,180,000 and $148,164,000, respectively. Outstanding borrowings
under these lines of credit at March 31, 1999 were $65,000. There were
no outstanding borrowings under these line of credit at December 31,
1998. Interest is payable on these lines of credit based on certain
commercial paper rates.
In June 1998, the Company issued 1,000,000 shares of common stock
at $19 per share. The net proceeds of the offering were $17,717,000
and were used to pay down certain lines of credit. In connection with
the underwriters option to purchase additional shares to cover
over-allotments, the Company issued an additional 166,500 shares in
July 1998. Net proceeds of these shares totaled $2,990,000 and were
also used to pay down certain lines of credit.
The Company also finances its liquidity needs with long-term
debt. Long-term debt totaled $134,588,000 at March 31, 1999 and
December 31, 1998.
The Company entered into two interest rate swap agreements. The
swap agreements involve the payment of interest to the counterparty at
the prime rate on a notional amount of $110,000,000 and the receipt of
interest at the commercial paper rate plus a spread and the LIBOR rate
plus a spread on notional amounts of $80,000,000 and $30,000,000,
respectively. The swap agreements expire in June 2000. There is no
exchange of the notional amounts upon which interest payments are based.
The Company entered into an interest rate cap agreement with a
bank in order to manage its exposure to certain increases in interest
rates. The interest rate cap entitles the Company to receive an
amount, based on an amortizing notional amount, which at March 31, 1999
was $3,548,000, when commercial paper rates exceed 8%. This agreement
expires in July 2005.
Historically, the Company has not required major capital
expenditures to support its operations.
Credit Quality and Allowances for Loan Losses
The Company maintains allowances for loan losses and recourse
obligations on retained interests in loan sales at levels which, in the
opinion of management, provide adequately for current and estimated
future losses on such assets. Past-due loans (loans 31 days or more
past due which are not covered by dealer/developer reserves or
guarantees) as a percentage of the Serviced Portfolio as of March 31,
1999, increased to .98% from .95% at December 31, 1998. Management
evaluates the adequacy of the allowances on a quarterly basis by
examining current delinquencies, the characteristics of the accounts,
the value of the underlying collateral, and general economic conditions
and trends. Management also evaluates the extent to which
dealer/developer reserves and guarantees can be expected to absorb loan
losses. When the Company does not receive guarantees on loan
portfolios purchased, it adjusts its purchase price to reflect
anticipated losses and its required yield. This purchase adjustment is
recorded as an increase in the allowance for loan losses and is used
only for the respective portfolio. A provision for loan losses is
recorded in an amount deemed sufficient by management to maintain the
allowances at adequate levels. Total allowances for loan losses and
recourse obligations on retained interests in loan sales increased to
$7,133,000 at March 31, 1999 compared to $6,707,000 at December 31,
1998. The allowance ratio (the allowances for loan losses divided by
the amount of the Serviced Portfolio) at March 31, 1999 remained
relatively constant at 1.43% as compared to 1.44% at December 31, 1998.
As part of the Company's financing of Purchased Loans,
arrangements are entered into with dealers and resort developers,
whereby reserves are established to protect the Company from potential
losses associated with such loans. As part of the Company's agreement
with the dealers and resort developers, a portion of the amount payable
to each dealer and resort developer for a Purchased Loan is retained by
the Company and is available to the Company to absorb loan losses for
those loans. The Company negotiates the amount of the reserves with
the dealers and developers based upon various criteria, two of which
are the financial strength of the dealer or developer and credit risk
associated with the loans being purchased. Dealer/developer reserves
amounted to $10,187,000 and $9,979,000 at March 31, 1999 and December
31, 1998, respectively. The Company generally returns any excess
reserves to the dealer/developer on a quarterly basis as the related
loans are repaid by borrowers.
Year 2000 Compliance
Many currently installed computer systems and software products
are coded to accept only two-digit entries in the date code field and
cannot distinguish 21st century dates from 20th century dates. As a
result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with "Year 2000" requirements.
State of Readiness. The year 2000 readiness process consists of
the following phases: (i) identification of all IT Systems and non-IT
Systems; (ii) assessment of repair or replacement requirements; (iii)
repair or replacement; (iv) testing; (v) implementation; and (vi)
creation of contingency plans in the event of year 2000 failures. The
Company has evaluated the year 2000 readiness of the information
technology systems used in its operations ("IT Systems") and it non-IT
Systems, such as building security, voice mail and other systems.
Non-compliant IT Systems and non-IT Systems are expected to be
remedied by the end of the second quarter 1999.
The Company's current financial and accounting software was
installed in October 1998, and the supplier has informed the Company
that such software is year 2000 compliant. The Company uses a third
party servicer to perform some functions, such as receipt and posting
of loan payments and other loan related activity. The third party
servicer has represented to the Company that its systems are year 2000
compliant. In addition, the Company relies upon various vendors,
governmental agencies, utility companies, telecommunication service
companies, delivery service companies and other service providers who
are outside of its control. There is no assurance that such parties
will not suffer a year 2000 business disruption, which could have a
material adverse effect on the Companys financial condition and
results of operations.
During 1998, the Company circulated a questionnaire to vendors and
customers with whom the Company has material relationships to obtain
information about year 2000 compliance. The Company is still
receiving and evaluating this information to identify any significant
risks. We plan to require all our business partners to address any
significant risks by July 1, 1999. We plan to replace any material
non-compliant business partners by October 1, 1999.
Costs. To date, the Company has not incurred any material
expenditures in connection with identifying or evaluating year 2000
compliance issues. Most of its expenses have related to the
opportunity cost of time spent by employees of the Company evaluating
year 2000 compliance matters generally. The Company believes that
internally generated funds or available cash should be sufficient to
cover the projected costs associated with any modifications to existing
software to make it year 2000 compliant. However, no assurances can be
given that such modifications can be made in a timely and cost
effective manner. Failure to make timely modifications could, in a
worse case scenario, result in the inability to process loans and loan
related data and could have a material adverse effect on the Company.
At this time, the Company does not possess all the information
necessary to estimate the potential impact of year 2000 compliance
issues relating to its other IT-Systems, non-IT Systems, its vendors,
its customers and other parties. Such impact, including the effect of
a year 2000 business disruption, could have a material adverse effect
on the Company's financial condition and results of operations.
Contingency Plan. The Company has not yet developed a year
2000-specific contingency plan. If further year 2000 compliance issues
are discovered, the Company then will evaluate the need for one or more
contingency plans relating to such issues.
Inflation
Inflation has not had a significant effect on the Company's
operating results to date.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exposure to Market Risk
The Company performs an interest rate sensitivity analysis to
identify the potential interest rate exposures. Specific interest rate
risks analyzed include asset/liability mismatches, basis risk, risk
caused by floors and caps, duration mismatches and re-pricing lag in
response to changes in a base index.
A simulated earnings model is used to identify the impact of
specific interest rate movements on earnings per share for the next 12
months. The model incorporates management's expectations about future
origination levels, origination mix, amortization rates, prepayment
speeds, timing of loan sales, timing of capital issues, extensions
and/or increases in lines of credit, pricing of originations and cost
of debt and lines of credit.
The Company's objective in managing the interest rate exposures is
to maintain, at a reasonable level, the impact on earnings per share of
an immediate and sustained change of 100 basis points in interest rates
in either direction. The Company periodically reviews the interest
rate risk and various options such as capital structuring, product
pricing, hedging and spread analysis to manage the interest rate risk
at reasonable levels.
As of March 31, 1999, the Company had the following estimated
sensitivity profile:
Interest rate changes (in basis points) 100 (100)
Impact on earnings per share ($0.01) $0.06
Impact on interest income and
pre-tax earnings ($62,000) $417,000
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on April
23, 1999, Gerald Segel and Heather Sica were elected to serve
as directors of the Company for a term of three years. Gerald
Segel was elected by a vote of 5,194,699 shares voting for his
election and 14,604 shares withheld. Heather Sica was elected
by a vote of 5,096,991 shares voting for her election and
112,312 shares withheld.
The Company solicited proxies for the Annual Meeting pursuant
to Regulation 14 under the Securities Exchange Act of 1934.
There was no solicitation in opposition to the Company's
nominees for director, and the nominees were elected.
<TABLE>
Item 5. Other Information
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
Three Months Ended
Year Ended December 31, March 31,
Statement of Income
Data (1): 1998 1997 1996 1995 1994 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Interest and fees
on loans........... $ 25,736 $ 19,374 $ 14,789 $ 11,392 $ 5,669 $ 7,887 $ 5,233
Gain on sale of
loans.............. 10,691 8,564 7,331 5,161 4,847 2,617 2,227
Servicing and other
income............. 2,379 1,753 1,576 908 459 571 493
------- -------- ------- ------- ------- ------- -------
Total revenues.... 38,806 29,691 23,696 17,461 10,975 11,075 7,953
------- -------- ------- ------- ------- ------- -------
Expenses:
Interest expense..... 14,265 10,675 7,197 6,138 3,158 4,628 2,997
Salaries and
employee benefits.. 4,806 3,399 2,824 2,798 1,776 1,266 1,133
Other operating
expenses........... 3,834 3,480 3,147 2,120 1,164 978 953
Provision for
loan losses........ 1,532 1,400 1,954 890 559 500 350
------ ------ ------ ------ ------ ------- -------
Total expenses.... 24,437 18,954 15,122 11,946 6,657 7,372 5,433
------ ------ ------ ------ ------ ------- -------
Income before income
taxes and
extraordinary item... 14,369 10,737 8,574 5,515 4,318 3,703 2,520
Provision for
income taxes......... 5,537 4,134 3,301 2,066 1,619 1,425 970
------ ------ ------ ------ ------ ------ ------
Income before
extraordinary item... 8,832 6,603 5,273 3,449 2,699 2,278 1,550
Extraordinary item (2). ( 77) (220) --- --- (126) --- ---
------- ------- ------- ------- ------- ------- -------
Net income........ $ 8,755 $ 6,383 $ 5,273 $ 3,449 $ 2,573 $ 2,278 $ 1,550
======= ======= ======= ======= ======= ======= =======
Basic per common share amounts:
Income before
extraordinary item... $ 1.41 $ 1.19 $ .97 $ .80 $ .66 $ .33 $ .27
Extraordinary item.... (.01) (.04) --- --- (.03) --- ---
------- ------- ------- ------- ------- ------- -------
Net income per share.. $ 1.40 $ 1.15 $ .97 $ .80 $ .63 $ .33 $ .27
======= ======== ======= ======= ======= ======= =======
Basic weighted average
number of shares
outstanding.......... 6,273,638 5,572,465 5,441,636 4,315,469 4,116,684 6,886,559 5,659,756
Diluted per common
share amounts:
Income before
extraordinary item.. $ 1.34 $ 1.12 $ .93 $ .76 $ .63 $ .32 $ .26
Extraordinary item... (.01) (.04) --- --- (.03) --- ---
------- ------ ------- ------ ------- ------- -------
Net income per share. $ 1.33 $ 1.08 $ .93 $ .76 $ .60 $ .32 $ .26
======= ====== ======= ======= ======= ======= =======
Diluted weighted
average number of
shares outstanding..... 6,604,367 5,909,432 5,682,152 4,524,607 4,282,884 7,192,378 6,020,158
Cash dividends declared
per Common share...... $ .07 $ .06 $ .05 $ .04 $ .03 $ --- $ ---
Other Statement of
Income Data:
Income before
extraordinary item
as a percentage
of revenues.......... 22.8% 22.3% 22.3% 19.8% 24.6% 20.6% 19.5%
Ratio of EBITDA to
interest expense
(3)................... 2.13 2.17 2.38 2.05 2.64 2.10 2.14
Ratio of earnings
to fixed charges (4).. 2.01 2.01 2.19 1.90 2.37 1.98 2.01
Return on average
assets (5)............ 3.7% 3.8% 4.0% 3.7% 4.6% 3.0% 3.1%
Return on average
equity (5)............ 13.2% 14.1% 13.3% 16.6% 17.2% 11.0% 11.8%
</TABLE>
__________
(1) Certain amounts in the 1994 through 1996 financial information have
been restated to conform to the 1997 through 1999 presentation.
(2) Reflects loss on early extinguishment of a portion of the 1992 Notes
(as defined herein), net of applicable tax benefit of $76,000, for 1994,
of the remainder of the 1992 Notes, net of applicable tax benefit of
$138,000, for 1997, and of the term note payable, net applicable tax
benefit of $48,000, for 1998.
(3) The ratio of EBITDA to interest expense is required to be calculated
for the twelve month period immediately preceding each calculation date,
pursuant to the terms of the indentures to which the Company is subject.
EBITDA is defined as earnings before deduction of taxes, depreciation,
amortization of debt costs, and interest expense (but after deduction for
any extraordinary item).
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes and extraordinary items and
fixed charges. Fixed charges consist of interest charges and the
amortization of debt expense.
(5) Calculations are based on income before extraordinary item.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION - (Continued)
(Dollars in thousands, except per share data)
December 31, March. 31,
Balance Sheet Data (6): 1998 1997 1996 1995 1994 1999
Total assets.......... $293,882 $186,790 $152,689 $112,459 $ 63,487 $313,355
Loans held for sale(7) 19,750 16,366 12,260 14,380 11,094 16,111
Other loans (7)....... 191,292 86,307 79,996 33,613 15,790 209,345
Retained interests in
loan sales (7)........ 28,883 30,299 28,912 22,594 11,996 30,556
Secured debt.......... 49,021 5,387 43,727 9,836 5,823 66,924
Unsecured debt........ 134,588 105,347 46,995 47,401 29,896 134,588
Stockholders' equity.. 82,094 52,071 42,448 37,396 16,610 86,005
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three months
ended
Year Ended December 31, March 31,
Other Financial Data: 1998 1997 1996 1995 1994 1999
Loans purchased and
originated (8)........ $375,292 $184,660 $133,750 $121,046 $ 59,798 $ 97,991
Loans sold (8)........ 144,762 98,747 54,936 65,115 40,116 52,871
Loans participated(8). 3,569 6,936 --- --- --- 909
Serviced Portfolio (9) 466,912 304,102 242,445 176,650 105,013 500,465
Loans serviced for
others................ 238,132 179,790 129,619 111,117 72,731 260,076
Dealer/developer
reserves.............. 9,979 10,655 10,628 9,644 6,575 10,187
Allowance for loan
losses (10)........... 6,707 5,877 4,528 3,715 1,264 7,133
Allowance ratio (11).. 1.44% 1.93% 1.87% 2.10% 1.20% 1.43%
Delinquency ratio (12) 0.95% 1.20% 1.34% 1.73% .93% .98%
Net charge-off ratio
(8)(13)............... .58% .74% .94% .67% .38% .55%
Non-performing asset
ratio (14)............ .84% 1.03% 1.57% 1.35% 1.02% .90%
</TABLE>
__________
(6) In 1997 the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Consequently,
certain amounts included in the 1994 through 1996 financial
statements have been reclassified to conform with the 1997 through
1999 presentations: "Subordinated pass through certificates held to
maturity," "Excess servicing asset" and "Allowance for loans sold"
have been reclassified as "Retained interests in loan sales." In
addition, "Loans held for investment" have been reclassified as
"Other loans."
(7) Amount indicated is net of allowance for losses and recourse
obligation on retained interests in loan sales.
(8) During the relevant period.
(9) The Serviced Portfolio consists of the principal amount of loans
serviced by or on behalf of the Company, except loans participated
without recourse to the Company.
(10) The allowance for loan losses includes estimated recourse
obligations for loans sold. See Note C to financial statements.
(11) The allowance ratio is the allowances for loan losses divided by
the amount of the Serviced Portfolio.
(12) The delinquency ratio is the amount of delinquent loans divided
by the amount of the Serviced Portfolio. Delinquent loans are those
which are 31 days or more past due which are not covered by
dealer/developer reserves or guarantees and not included in other
real estate owned.
(13) The net charge-off ratio is determined by dividing the amount of
net charge-offs for the period by the average Serviced Portfolio for
the period. The March 31, 1999 amount is calculated on an annualized
basis.
(14) The non-performing asset ratio is determined by dividing the sum
of the amount of those loans which are 91 days or more past due and
other real estate owned by the amount of the Serviced Portfolio.
BUSINESS
Overview
Litchfield Financial Corporation (the "Company") is a diversified
finance company that provides financing to creditworthy borrowers for
assets not typically financed by banks. The Company provides this
financing by making loans to businesses secured by consumer receivables
or other assets and by purchasing consumer loans.
The Company provides financing to rural land dealers, timeshare
resort developers and other finance companies secured by receivables
("Hypothecation Loans"). The Company also purchases consumer loans
("Purchased Loans") consisting primarily of loans to purchasers of rural
("Land Loans") and vacation properties and vacation ownership interests
("VOI Loans") popularly known as timeshare interests, and provides
loans to dealers and developers for the acquisition and development
("A&D Loans") of rural land and timeshare resorts. In addition, the
Company purchases other loans, such as consumer home equity loans,
mortgages and construction loans and tax lien certificates, and
provides financing to other businesses.
The principal sources of the Company's revenues are interest and
fees on loans, gains on sales of loans and servicing and other income.
Gains on sales of loans are based on the difference between the
allocated cost basis of the assets sold and the proceeds received,
which includes the fair value of any assets or liabilities that are
newly created as a result of the transaction. Because a significant
portion of the Company's revenues is comprised of gains realized upon
sales of loans, the timing of such sales has a significant effect on
the Company's results of operations.
Characteristics of the Serviced Portfolio, Loan Purchases and
Originations
The following table shows the growth in the diversity of the
Serviced Portfolio from primarily Purchased Loans to a mix of Purchased
Loans, Hypothecation Loans, A&D Loans and Other Loans:
December 31, March 31,
------------------------------------ ---------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Purchased Loans.......... 38.4% 56.6% 67.1% 81.6% 85.3% 37.1%
Hypothecation Loans...... 35.2 26.9 20.7 12.5 9.0 36.8
A&D Loans................ 11.2 13.7 8.7 3.1 3.3 12.7
Other Loans.............. 15.2 2.8 3.5 2.8 2.4 13.4
------ ------ ------ ----- ------ ------
Total......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
The following table shows the growth in the diversity of the
Company's originations from primarily Purchased Loans to a mix of
Purchased Loans, Hypothecation Loans, A&D Loans and Other Loans:
Three Months
Ended
Year Ended December 31, March 31,
-------------------------------- -----------
1998 1997 1996 1995 1994 1999 1998
---- ---- ---- ---- ---- ---- ----
Purchased Loans..... 14.9% 30.3% 49.9% 71.4% 67.6% 17.5% 25.8%
Hypothecation Loans. 48.6 37.1 29.6 20.9 22.2 50.4 58.2
A&D Loans........... 10.2 24.0 14.4 3.1 6.0 17.4 11.5
Other Loans......... 26.3 8.6 6.1 4.6 4.2 14.7 4.5
------ ------ ------ ------ ------ ------ -----
Total.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ====== ======
(1) Purchased Loans
The Company provides indirect financing to consumers through a
large number of experienced land dealers and resort developers from
which it regularly purchases Land and VOI Loans. The land dealers and
resort developers make loans to consumers generally using the Company's
standard forms and subject to the Company's underwriting criteria. The
Company then purchases such loans from the land dealers and resort
developers on an individually approved basis in accordance with its
credit guidelines.
Each land dealer and resort developer from whom the Company
purchases loans is interviewed by the Company and approved by its
credit committee. Management evaluates each land dealer's and resort
developer's experience, financial statements and credit references and
inspects a substantial portion of the land dealer's and resort
developer's inventory of land or VOIs prior to approval of loan
purchases.
In order to enhance the creditworthiness of loans purchased from
land dealers and resort developers, the Company typically requires land
dealers and resort developers to guarantee payment of the loans and
typically retains a portion of the amount payable by the Company to
each land dealer and resort developer on purchase of the loan. The
retained portion, or reserve, is released to the land dealer or resort
developer as the related loan is repaid.
Prior to purchasing Land or VOI Loans, the Company evaluates the
credit and payment history of each borrower in accordance with its
underwriting guidelines, performs borrower interviews on a sample of
loans, reviews the documentation supporting the loans for completeness
and obtains an appropriate opinion from local legal counsel. The
Company purchases only those loans which meet its credit standards.
The Company also purchases portfolios of seasoned loans primarily
from land dealers and resort developers. The land dealers or resort
developers generally guarantee the loans sold and the Company generally
withholds a reserve as described above. Management believes that the
portfolio acquisition program is attractive to land dealers and resort
developers because it provides them with liquidity to purchase
additional inventory. The Company also purchases portfolios of
seasoned loans from financial institutions and others. Sellers
generally do not guarantee such loans, but estimated loan losses are
considered in establishing the purchase price.
In evaluating such seasoned portfolios, the Company conducts its
normal review of the borrower's documentation, payment history and
underlying collateral. However, the Company may not always be able to
reject individual loans.
The Company's portfolio of Purchased Loans is secured by property
located in 40 states.
Principal Amount of Loans
------------------------------------------------
December 31, March 31,
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Southwest............... 32% 30% 26% 16% 19% 33%
South................... 30 31 31 31 37 29
West.................... 19 17 20 20 3 18
Mid-Atlantic............. 8 10 10 16 16 9
Northeast............... 11 12 13 17 25 11
---- ---- ---- ---- ---- ----
Total............. 100% 100% 100% 100% 100% 100%
==== ==== ==== ==== ==== ====
a. Land Loans
Dealers from whom the Company purchases Land Loans are typically
closely-held firms with annual revenues of less than $3.0 million.
Dealers generally purchase large rural tracts (generally 100 or more
acres) from farmers or other owners and subdivide the property into one
to twenty acre parcels for resale to consumers. Generally the
subdivided property is not developed significantly beyond the provision
of graded access roads. In recreational areas, sales are made primarily
to urban consumers who wish to use the property for a vacation or
retirement home or for recreational purposes such as fishing, hunting
or camping. In other rural areas, sales are more commonly made to
persons who will locate a manufactured home on the parcel. During the
three months ended March 31, 1999, the Company acquired approximately
$16.9 million of Land Loans. The aggregate principal amount of Land
Loans purchased from individual dealers during the three months ended
March 31, 1999 varied from a low of approximately $6,300 to a high of
approximately $3.4 million. As of March 31, 1999 and December 31, 1998,
the five largest dealers accounted for approximately 19.0% and 20.6%,
respectively, of the principal amount of the Land Loans in the Serviced
Portfolio. No single dealer accounted for more than 4.8% and 5.4% at
March 31, 1999 and at December 31, 1998, respectively.
As of March 31, 1999 and December 31, 1998, 33.7% and 34.3%,
respectively, of the Serviced Portfolio consisted of Land Loans. The
average principal balance of such Land Loans were approximately $13,400
and $13,100 at March 31, 1999 and December 31, 1998, respectively. The
following table sets forth as of March 31, 1999, the distribution of
Land Loans in the Company's Serviced Portfolio:
Percentage of Percentage of
Principal Balance Principal Principal Number of Number of
Amount Amount Loans Loans
Less than $10,000........$ 29,143,000 17.3% 5,615 44.6%
$10,000-$19,999..........$ 62,324,000 37.0 4,374 34.7
$20,000 and greater......$ 77,211,000 45.7 2,605 20.7
----------- ------ ------ ------
Total.................$168,678,000 100.0% 12,594 100.0%
=========== ====== ====== ======
As of March 31, 1999 and December 31, 1998, the weighted average
interest rate of the Land Loans included in the Company's Serviced
Portfolio was 12.0%. The weighted average remaining maturity was 12.2
and 12.0 years at March 31, 1999 and December 31, 1998, respectively.
The following table sets forth as of March 31, 1999 the distribution of
interest rates payable on the Land Loans:
Percentage of
Principal Principal
Interest Rate Amount Amount
- ------------- --------- ------------
Less than 12.0%........................ $ 59,556,000 35.3%
12.0%-13.9%............................ 85,349,000 50.6
14.0% and greater...................... 23,773,000 14.1
------------ ------
Total............................. $168,678,000 100.0%
============ ======
As of March 31, 1999 and December 31, 1998, the Company's Land Loan
borrowers resided in 50 states, the District of Columbia and nine and
two territories or foreign countries, respectively.
b. VOI Loans
The Company purchases VOI Loans from various resort developers. The
Company generally targets small to medium size resorts with completed
amenities and established property owners associations. These resorts
participate in programs that permit purchasers of VOIs to exchange
their timeshare intervals for timeshare intervals in other resorts
around the world. During the three months ended March 31, 1999, the
Company acquired approximately $292,000 of VOI Loans. As of March 31,
1999 and December 31, 1998, the five largest developers accounted for
approximately 34.3% and 35.1%, respectively, of the principal amount of
the VOI Loans in the Serviced Portfolio. No single developer accounted
for more than 9.5% and 9.4% at March 31, 1999 and December 31, 1998,
respectively.
As of March 31, 1999 and December 31, 1998, 3.4% and 4.1%,
respectively, of the Serviced Portfolio consisted of VOI Loans. The
average principal balance of such VOI Loans was approximately $3,300
and $3,400, at March 31, 1999 and December 31, 1998, respectively. The
following table sets forth as of March 31, 1999 the distribution of VOI
Loans:
Percentage of Percentage of
Principal Balance Principal Principal Number of Number of
Amount Amount Loans Loans
Less than $4,000...... $ 6,908,000 40.3% 3,392 66.2%
$4,000-$5,999......... 5,725,000 33.5 1,159 22.6
$6,000 and greater.... 4,492,000 26.2 575 11.2
----------- ------ ----- ------
Total............ $17,125,000 100.0% 5,126 100.0%
=========== ====== ===== ======
As of March 31, 1999 and December 31, 1998, the weighted average
interest rate of the VOI Loans included in the Company's Serviced
Portfolio was 14.6%, and the weighted average remaining maturity was
3.6 and 3.7 years, respectively. The following table sets forth as of
March 31, 1999 the distribution of interest rates payable on the VOI
Loans:
Percentage of
Principal Principal
Interest Rate Amount Amount
- ------------- --------- ------------
Less than 14.0%..................... $ 7,260,000 42.4%
14.0%-15.9%......................... 3,932,000 23.0
16.0% and greater................... 5,933,000 34.6
----------- ------
Total.......................... $17,125,000 100.0%
=========== ======
As of March 31, 1999 and December 31, 1998, the Company's VOI
borrowers resided in 50 states, the District of Columbia and three
territories or foreign countries.
(2) Hypothecation Loans
The Company extends Hypothecation Loans to land dealers and resort
developers and other businesses secured by receivables. The Company has
expanded its marketing of Hypothecation Loans to include loans to other
finance companies secured by other types of collateral. These loans may
be larger than the Company's average Hypothecation Loans and may
provide the Company with an option to take an equity position in the
borrower. During the three months ended March 31, 1999, the Company
extended or acquired approximately $49.4 million of Hypothecation
Loans, of which $8.9 million, or 18.0%, were secured by Land Loans,
$28.7 million, or 58.1%, were secured by VOI Loans and $11.8 million,
or 23.9%, were secured by other types of collateral such as tax lien
certificates, accounts receivable and mortgages.
The Company generally extends Hypothecation Loans based on advance
rates of 75% to 90% of the eligible receivables which serve as
collateral. The Company's Hypothecation Loans are generally made at
variable rates based on the prime rate of interest plus 2% to 4%. As of
March 31, 1999 and December 31, 1998, the Company had $184.0 million
and $164.5 million of Hypothecation Loans outstanding, none of which
were 31 days or more past due. During the three months ended March 31,
1998, the Company acquired a $17.0 million participation interest in a
Hypothecation Loan from another financial institution. As planned, in
May of 1998, the Company purchased the underlying receivables, which
the Company has reclassified as Other Loans. The proceeds of the
receivables purchased were applied to pay off the Company's
participation interest. At March 31, 1999, Hypothecation Loans ranged
in size from less than $500 to $25.0 million with an average principal
balance of $2,000,000. At December 31, 1998, Hypothecation Loans
ranged in size from less than $500 to $21.5 million with an average
balance of $1,678,000. The five largest Hypothecation Loans
represented 15.1% and 15.5% of the Serviced Portfolio at March 31, 1999
and December 31, 1998, respectively.
(3) A&D Loans
The Company also makes A&D Loans to dealers and developers for the
acquisition and development of rural and timeshare resorts in order to
finance additional receivables generated by the A&D Loans. During the
three months ended March 31, 1999, the Company made $17.0 million of
A&D Loans to land dealers and resort developers, of which $1.0 million,
or 6.0%, were secured by land and $16.0 million, or 94.0%, were secured
by resorts under development.
The Company generally makes A&D Loans to land dealers and resort
developers based on loan to value ratios of 60% to 80% at variable
rates based on the prime rate plus 2% to 4%. As of March 31, 1999 and
December 31, 1998, the Company had $63.5 million and $52.3 million,
respectively, of A&D Loans outstanding, none of which were 31 days or
more past due. At March 31, 1999 and December 31, 1998, A&D Loans were
secured by timeshare resort developments and rural land subdivisions in
17 states and one territory and 16 states and one territory,
respectively. A&D Loans ranged in size from $6,600 to $10.6 million
with an average principal balance of $1,025,000 at March 31, 1999.
A&D Loans ranged in size from $1,700 to $9.5 million with an average
principal balance of $780,000 at December 31, 1998. The five largest
A&D Loans represented 5.9% and 4.7%, of the Serviced Portfolio at March
31, 1999 and December 31, 1998, respectively.
(4) Other Loans
At March 31, 1999, Other Loans consisted primarily of consumer home
equity, mortgage and construction loans, other secured commercial
loans and tax lien certificates. Historically, the Company has made or
acquired certain other secured and unsecured loans as it has identified
additional lending opportunities or lines of business for possible
future expansion as it did with VOI Loans and Hypothecation Loans. In
May of 1998, the Company purchased 232 builder construction loans
totaling $32.7 million, a portion of which had previously been
collateral for the Hypothecation Loan in which the Company owned a
participation interest. At March 31, 1999 and December 31, 1998, the
Company had 169 and 176 of the builder construction loans totaling
$37.0 million and $33.9 million, respectively. In October 1998, the
Company began purchasing tax lien certificates. At March 31, 1999 and
December 31, 1998 the Company held $17.3 million and $21.2 million,
respectively, of such certificates. The Company had $67.2 million and
$71.0 million of Other Loans, 1.60% and 1.33% of which were 91 days or
more past due at March 31, 1999 and December 31, 1998, respectively. At
March 31, 1999, Other Loans ranged in size from less than $500 to
$891,000 with an average principal balance of $16,500. At December 31,
1998, Other Loans ranged in size from less than $500 to $875,000 with
an average principal balance of $23,200. The five largest Other Loans
represent 0.8% of the Serviced Portfolio at March 31, 1999 and December
31, 1998.
Loan Underwriting
The Company has established loan underwriting criteria and
procedures designed to reduce credit losses on its Serviced Portfolio.
The loan underwriting process includes reviewing each borrower's credit
history. In addition, the Company's underwriting staff routinely
conducts telephone interviews with a sample of borrowers. The primary
focus of the Company's underwriting is to assess the likelihood that
the borrower will repay the loan as agreed by examining the borrower's
credit history through credit reporting bureaus.
The Company's loan policy is to purchase Land and VOI Loans from
$3,000 to $50,000. On a case by case basis, the Company will also
consider purchasing such loans in excess of $50,000. As of March 31,
1999, the Company had 162 Land Loans exceeding $50,000 representing
1.3% of the number of such loans in the Serviced Portfolio, for a total
of $11.4 million. There were no VOI Loans exceeding $50,000 as of March
31, 1999. The Company will originate Hypothecation Loans up to $15
million and A&D Loans up to $10 million. From time to time, the Company
may have an opportunity to originate larger Hypothecation Loans or A&D
Loans in which case the Company would seek to participate such loans
with other financial institutions. As of March 31, 1999, the Company's
five largest Hypothecation Loan relationships had aggregate loan
balances ranging from $11.4 million to $25.0 million and its largest
A&D Loan relationship had an aggregate loan balance of $12.2 million.
Construction Loans greater than $200,000 and any other loans greater
than $100,000 must be approved by the Credit Committee which is
comprised of the Chief Executive Officer, four Executive Vice
Presidents and a Senior Vice President.
Collections and Delinquencies
Management believes that the relatively low delinquency rate for
the Serviced Portfolio is attributable primarily to the application of
its underwriting criteria, as well as to dealer guarantees and reserves
withheld from dealers and developers. No assurance can be given that
these delinquency rates can be maintained in the future.
Collection efforts are managed and delinquency information is
analyzed at the Company's headquarters. Unless circumstances otherwise
dictate, collections are generally made by mail and telephone.
Collection efforts begin when an account is seven days past due, at
which time the Company sends out a late notice. When an account is
fifteen days past due, the Company attempts to contact the borrower to
determine the reason for the delinquency and to attempt to cause the
account to become current. If the status of the account continues to
deteriorate, an analysis of the account is performed by the collection
manager to determine the appropriate action. When the loan is 90 days
past due in accordance with its original terms and it is determined
that the amounts cannot be collected from the dealer or developer
guarantees or reserves, the loan is generally placed on a non-accrual
status and the collection manager determines the action to be taken.
The determination of how to work out a delinquent loan is based upon
many factors, including the borrower's payment history and the reason
for the current inability to make timely payments. When a guaranteed
loan becomes 60 days (90 days in some cases) past due, in addition to
the Company's collection procedures, the Company generally obtains the
assistance of the dealer or developer in collecting the loan.
The Company extends a limited number of its loans for reasons the
Company considers acceptable such as temporary loss of employment or
serious illness. In order to qualify for a one to three month
extension, the customer must make three timely payments without any
intervention from the Company. For extensions of four to six months,
the customer must make four to six timely payments, respectively,
without any intervention from the Company. The Company will not extend
a loan more than two times for an aggregate six months over the life of
the loan. The Company has extended approximately 1.0% of its loans
through March 31, 1999. The Company does not generally modify any other
loan terms such as interest rates or payment amounts.
Regulations and practices regarding the rights of the mortgagor in
default vary greatly from state to state. To the extent permitted by
applicable law, the Company collects late charges and return-check fees
and records these items as additional revenue. Only if a delinquency
cannot otherwise be cured will the Company decide that foreclosure is
the appropriate course of action. If the Company determines that
purchasing a property securing a mortgage loan will minimize the loss
associated with such defaulted loan, the Company may accept a deed in
lieu of foreclosure, take legal action to collect on the underlying
note or bid at the foreclosure sale for such property.
Serviced Portfolio
The following table shows the Company's delinquencies and
delinquency rates, net of dealer/developer reserves and guarantees, for
the Serviced Portfolio:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months
Ended
Year Ended December 31, March 31,
------------------------------------------------------------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Serviced Portfolio....$466,912,000 $304,102,000 $242,445,000 $176,650,000 $105,013,000 $500,465,000
Delinquent loans (1).. 4,456,000 3,642,000 3,255,000 3,062,000 981,000 4,920,000
Delinquency as a
Percentage of
Serviced Portfolio.. .95% 1.20% 1.34% 1.73% .93% .98%
</TABLE>
__________
(1) Delinquent loans are those which are 31 days or more past due
which are not covered by dealer/developer reserves or guarantees and
not included in other real estate owned.
Land Loans
The following table shows the Company's delinquencies and
delinquency rates, net of dealer/developer reserves and guarantees, for
Land Loans in the Serviced Portfolio:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months
Ended
Year Ended December 31, March 31,
------------------------------------------------------------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Land Loans in
Serviced
Portfolio.......... $160,098,000 $142,828,000 $119,370,000 $97,266,000 $90,502,000 $168,678,000
Delinquent Land
Loans (1).......... 2,728,000 2,453,000 1,920,000 1,059,000 981,000 3,132,000
Delinquency as
a Percentage of
Land Loans in
Serviced
Portfolio............ 1.70% 1.72% 1.61% 1.09% 1.08% 1.86%
</TABLE>
__________
(1) Delinquent loans are those which are 31 days or more past due
which are not covered by dealer/developer reserves or guarantees and
not included in other real estate owned.
VOI Loans
The following table shows the Company's delinquencies and
delinquency rates, net of dealer/developer reserves and guarantees, for
VOI Loans in the Serviced Portfolio:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months
Ended
Year Ended December 31, March 31,
------------------------------------------------------------
1998 1997 1996 1995 1994 1999
VOI Loan in Serviced
Portfolio.......... $19,119,000 $29,232,000 $43,284,000 $46,700,000 $2,851,000 $17,125,000
Delinquent VOI
Loans (1).......... 350,000 739,000 1,316,000 1,958,000 --- 292,000
Delinquency as a
Percentage of
VOI Loans in
Serviced Portfolio... 1.83% 2.53% 3.04% 4.19% --- 1.70%
</TABLE>
______
(1) Delinquent loans are those which are 31 days or more past due
which are not covered by dealer/developer reserves or guarantees and
not included in other real estate owned.
Hypothecation, A&D and Other Loans
The Company did not have any delinquent Hypothecation Loans or A&D
Loans for the years ended December 31, 1994 through December 31, 1998
or for the three months ended March 31, 1999. The Company did not have
significant amounts of delinquent Other Loans for the years ended
December 31, 1994 through December 31, 1997. At December 31, 1998,
there were $71.0 million of Other Loans of which $1,378,000 or 1.94%
were 31 days or more past due and not covered by dealer/developer
reserves or guarantees and not included in other real estate owned. At
March 31, 1999, there were $67.2 million of Other Loans of which
$1,497,000 or 2.23% were 31 days or more past due and not covered by
dealer/developer reserves or guarantees and not included in other real
estate owned.
Allowance for Loan Losses and Estimated Recourse Obligations, Net
Charge-offs and Dealer Reserves
The following is an analysis of the total allowances for all loan
losses:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, March 31,
------------------------------------------------------------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Allowance beginning
of period.......... $5,877,000 $4,528,000 $3,715,000 $1,264,000 $1,064,000 $6,707,000
Net charge-offs of
uncollectible
accounts........... (2,239,000) (2,010,000) (1,965,000 (946,000) (359,000) (661,000)
Provision for
loan losses....... 1,532,000 1,400,000 1,954,000 890,000 559,000 500,000
Allocation of
purchase
adjustment(1)..... 1,537,000 1,959,000 824,000 2,507,000 --- 587,000
--------- --------- --------- --------- --------- ---------
Allowance, end of
period............. $6,707,000 $5,877,000 $4,528,000 $3,715,000 $1,264,000 $7,133,000
========== ========== ========== ========== ========== ==========
</TABLE>
__________
(1) Represents allocation of purchase adjustment related to the
purchase of certain nonguaranteed loans.
The following is an analysis of net charge-offs by major loan and
collateral types experienced by the Company:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, March 31,
------------------------------------------------------------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
Land Loans............ $1,358,000 $ 986,000 $ 669,000 $ 546,000 $ 359,000 $ 344,000
VOI Loans............. 556,000 939,000 1,284,000 45,000 --- 78,000
Hypothecation Loans... --- --- --- --- --- ---
A&D Loans............. --- (2,000) (8,000) 352,000 --- ---
Other Loans........... 325,000 87,000 20,000 3,000 --- 239,000
---------- ---------- ---------- ---------- --------- ---------
Total net charge-offs. $2,239,000 $2,010,000 $1,965,000 $ 946,000 $ 359,000 $ 661,000
========== ========== ========== ========== ========= =========
Net charge-offs as a
percentage of the
average Serviced
Portfolio............ .58% .74% .94% .67% .38% .55%
</TABLE>
As part of the Company's financing of Land and VOI Loans, the
Company enters into arrangements with most land dealers and resort
developers whereby the Company retains a portion of the amount payable
to a dealer when purchasing a Land or VOI Loan to protect the Company
from potential losses associated with such loans and uses the amount
retained to absorb loan losses. The Company negotiates the amount of
the reserves with the land dealers and resort developers based upon
various criteria, two of which are the financial strength of the land
dealer or resort developer and the credit risk associated with the
loans being purchased. Dealer reserves for Land Loans were $8,219,000,
$8,321,000 and $7,555,000 at December 31, 1998, 1997 and 1996,
respectively, and $8,610,000 at March 31, 1999. Developer reserves for
VOI Loans were $1,760,000, $2,299,000 and $3,072,000 at December 31,
1998, 1997 and 1996, respectively, and $1,577,000 at March 31, 1999.
Most dealers and developers provide personal and, when relevant,
corporate guarantees to further protect the Company from loss.
Loan Servicing and Sales
The Company retains the right to service all the loans it purchases
or originates. Servicing includes collecting payments from borrowers,
remitting payments to investors who have purchased the loans,
accounting for principal and interest, contacting delinquent borrowers
and supervising foreclosure and bankruptcies in the event of unremedied
defaults. Substantially all servicing results from the origination and
purchase of loans by the Company, and the Company has not historically
purchased loan servicing rights except in connection with the purchase
of loans. Servicing rates generally approximate .5% to 2% of the
principal balance of a loan.
Historically, the Company subcontracted the servicing of its loans
to an unaffiliated third party. In July 1998, the Company resumed
certain customer service and collection functions. The unaffiliated
third party will continue to provide certain data processing and
payment processing functions. The Company retains responsibility for
servicing all loans as a master servicer.
In 1990, the Company began privately placing issues of pass-through
certificates evidencing an undivided beneficial ownership interest in
pools of mortgage loans which have been transferred to trusts. The
principal and a portion part of the interest payments on the loans
transferred to the trust are collected by the Company as the servicer
of the loans, remitted to the trust for the benefit of the investors,
and then distributed by the trust to the investors in the pass-through
certificates.
As of March 31, 1999, the Company had sold or securitized a total
of approximately $545.8 million in loans at face value. In certain of
the Company's issues of pass-through certificates, credit enhancement
was achieved by dividing the issue into a senior portion which was sold
to the investors and a subordinated portion which was retained by the
Company. In certain other of the Company's private placements, credit
enhancement was achieved through cash collateral.
If borrowers default in the payment of principal or interest on the
loans underlying these issues of pass-through certificates, losses
would be absorbed first by the subordinated portion or cash collateral
account retained by the Company and might, therefore, have to be
charged against the estimated recourse obligations to the extent dealer
guarantees and reserves are not available.
The Company also has a $150.0 million revolving line of credit and
sale facility for its Land Loans as part of an asset backed commercial
paper facility with a multi-seller commercial paper conduit. The
facility expires in June 2001. As of March 31, 1999, the outstanding
balance of the sold or pledged loans securing this facility was $145.5
million. The Company has an additional revolving line of credit and
sale facility for its VOI Loans of $25.0 million with another
multi-seller commercial paper conduit. The facility expires in March
2000. As of March 31, 1999, the outstanding aggregate balance of the
sold loans under the facility was $9.6 million.
Marketing and Advertising
The Company markets its program to rural land dealers and resort
developers through brokers, referrals, dealer and developer
solicitation, and targeted direct mail. The Company employs three
marketing executives based in Lakewood, Colorado, five marketing
executives based in Williamstown, Massachusetts and two marketing
executives based in Hoover, Alabama. In the last five years the Company
has closed loans with over 350 different dealers and developers.
Management believes that the Company benefits from name recognition
as a result of its referral, advertising and other marketing efforts.
Referrals have been the strongest source of new business for the
Company and are generated in the states in which the Company operates
by dealers, brokers, attorneys and financial institutions. Management
and marketing representatives also conduct seminars for dealers and
brokers and attend trade shows to improve awareness and understanding
of the Company's programs.
Regulation
The Company is licensed as a lender, mortgage banker or mortgage
broker in 21 of the states in which it operates, and in those states
its operations are subject to supervision by state authorities
(typically state banking or consumer credit authorities). Expansion
into other states may be dependent upon a finding of financial
responsibility, character and fitness of the Company and various other
matters. The Company is generally subject to state regulations,
examination and reporting requirements, and licenses are revocable for
cause. The Company is subject to state usury laws in all of the states
in which it operates.
The consumer loans purchased or financed by the Company are subject
to the Truth-in-Lending Act. The Truth-in-Lending Act contains
disclosure requirements designed to provide consumers with uniform,
understandable information with respect to the terms and conditions of
loans and credit transactions in order to give them the ability to
compare credit terms. Failure to comply with the requirements of the
Truth-in-Lending Act may give rise to a limited right of rescission on
the part of the borrower. The Company believes that its purchase or
financing activities are in substantial compliance in all material
respects with the Truth-in-Lending Act.
Origination of the loans also requires compliance with the Equal
Credit Opportunity Act of 1974, as amended ("ECOA"), which prohibits
creditors from discriminating against applicants on the basis of race,
color, sex, age or marital status. Regulation B promulgated under ECOA
restricts creditors from obtaining certain types of information from
loan applicants. It also requires certain disclosures by the lender
regarding consumer rights and requires lenders to advise applicants of
the reasons for any credit denial. In instances where the applicant is
denied credit or the interest rate charged increases as a result of
information obtained from a consumer credit agency, another statute,
the Fair Credit Reporting Act of 1970, as amended, requires the lenders
to supply the applicant with a name and address of the reporting agency.
Competition
The finance business is highly competitive, with competition
occurring primarily on the basis of customer service and the term and
interest rate of the loans. Traditional competitors in the finance
business include commercial banks, credit unions, thrift institutions,
industrial banks and other finance companies, many of which have
considerably greater financial, technical and marketing resources than
the Company. There can be no assurance that the Company will not face
increased competition from existing or new financial institutions or
finance companies. In addition, the Company may enter new lines of
business that may be highly competitive and may have competitors with
greater financial resources than the Company.
The Company believes that it competes on the basis of providing
competitive rates and prompt, efficient and complete service, and by
emphasizing customer service on a timely basis to attract borrowers
whose needs are not met by traditional financial institutions.
Employees
As of March 31, 1999, the Company had 102 full-time equivalent
employees. None of the Company's employees is covered by a collective
bargaining agreement. The Company considers its relations with its
employees to be good.
Facilities
The Company owns a leasehold interest in approximately 26,000
square feet of office space in Williamstown, Massachusetts, which is
used as the Company's headquarters. The initial ten year lease term
expires in May 2007 and is renewable at the Company's option for two
additional ten year periods. The initial land lease provides for an
annual rental of $20,000. The Company also occupies an aggregate of
approximately 5,100 square feet of office space in Lakewood, Colorado,
pursuant to a lease expiring in January 2001, with an option to renew
until 2004, providing for an annual rental of approximately $56,000,
including utilities and exterior maintenance expenses. A subsidiary of
the Company occupies an aggregate of approximately 6,100 square feet of
office space in Hoover, Alabama, pursuant to a lease expiring in
December 1999, providing for an annual rental of approximately $88,000.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed herewith:
10.185 Amended and Restated Loan Agreement, dated as
of March 31, 1999, among the Company, LFC Realty,
Inc., and Bank of Scotland.
10.186 Amended No. 2 to Second and Restated Security
Agreement dated January 20, 1999 among BankBoston,
N.A and the Company.
10.187 Note Purchase Agreement dated as of
March 23, 1999, among the Company, Litchfield
Hypothecation Corporation 1997-B and Union Bank.
10.188 Limited guarantee dated as of March 1, 1999
between the Company and Union Bank.
10.189 Note Purchase Agreement dated as of March 23,
1999, among the Company, Litchfield Hypothecation
Corporation 1998-A and BSB Bank & Trust.
10.190 Limited guarantee dated as of March 1, 1999 between
the Company and BSB Bank & Trust.
10.191 Note Purchase Agreement dated as of March 23,
1999, among the Company, Litchfield Hypothecation
Corporation 1998-B and Union Bank.
10.192 Limited guarantee dated as of March 1, 1999 between
the Company and Union Bank.
11.1 Statement re: computation of earnings per share
27.1 Financial Data Schedule
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1999.
Exhibit 10.185
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.
LITCHFIELD FINANCIAL CORPORATION
DATE: May 13, 1999 /s/ Richard A. Stratton
------------------------
RICHARD A. STRATTON
Chief Executive Officer,
President and Director
DATE: May 13, 1999 /s/ Ronald E. Rabidou
----------------------
RONALD E. RABIDOU
Chief Financial Officer,Executive
Vice President and Treasurer
AMENDED AND RESTATED LOAN AGREEMENT
AMENDED AND RESTATED LOAN AGREEMENT, dated as of March 31,
1999, among LITCHFIELD FINANCIAL CORPORATION, a Massachusetts
corporation ("LFC"), LFC REALTY, INC., a Delaware corporation
("Realty"), (LFC and Realty are each referred to herein as a
"Borrower, and collectively as "Borrowers") and BANK OF SCOTLAND
(the "Bank").
W I T N E S S E T H :
WHEREAS, LFC and the Bank are parties to that certain Loan
Agreement, dated as of September 13, 1996, as amended (the
"Existing Agreement") pursuant to which the Bank established a
revolving credit facility in favor of LFC; and
WHEREAS, the parties wish to amend and restate the Existing
Agreement and add Realty as a Borrower hereunder upon and subject
to the terms set forth herein.
NOW, THEREFORE, it is agreed:
DEFINITIONS.
- -----------
10.169.1 Terms used in this Agreement which are defined in
Annex I hereto shall have the meanings specified in such Annex I
(unless otherwise defined herein) and shall include in the
singular number the plural and in the plural number the singular.
10.169.2 Unless otherwise specified, each reference in this
Agreement or in any other Loan Document to a Loan Document shall
mean such Loan Document as the same may from time to time be
amended, restated, supplemented or otherwise modified.
10.169.3 All references to Sections in this Agreement or in
Annex I hereto shall be deemed references to Sections in this
Agreement unless otherwise specified.
THE LOAN FACILITIES.
- --------------------
10.170 The Loans.
-----------
10.170.1 Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche A Revolving Credit Loan"
and collectively, the "Tranche A Revolving Credit Loans") up to
its Tranche A Commitment, provided that, in no event shall the
aggregate principal amount of Tranche A Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche A
Commitment then in effect and (y) the then current Tranche A
Borrowing Base.
10.170.2 Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche B Revolving Credit Loan"
and collectively, the "Tranche B Revolving Credit Loans") up to
its Tranche B Commitment, provided that, in no event shall the
aggregate principal amount of Tranche B Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche B
Commitment then in effect and (y) the then current Tranche B
Borrowing Base.
10.170.3 Subject to the terms and conditions set forth herein,
the Bank agrees at any time and from time to time during the
Commitment Period (but excluding the last day thereof) to make
loans to the Borrowers (each a "Tranche C Revolving Credit Loan"
and collectively, the "Tranche C Revolving Credit Loans") up to
its Tranche C Commitment, provided that, in no event shall the
aggregate principal amount of Tranche C Revolving Credit Loans
outstanding at any time exceed the lesser of (x) the Tranche C
Commitment then in effect and (y) the then current Tranche C
Borrowing Base.
10.170.4 Notwithstanding anything to the contrary contained in
this Agreement, in no event shall the aggregate principal amount
of all the Revolving Credit Loans outstanding at any time exceed
the Commitment. During the Commitment Period, the Borrowers may
utilize the Commitment by borrowing, prepaying the Revolving
Credit Loans in whole or in part without premium or penalty, and
reborrowing, all in accordance with the terms and conditions
hereof.
10.170.5 No more than five (5) Eurodollar Loans may be
outstanding at any time.
10.170.6 Upon the terms and subject to the conditions of this
Agreement, the Borrowers may convert all or any part (in integral
multiples of $500,000) of any outstanding Tranche A Revolving
Credit Loan of one Type into a Tranche A Revolving Credit Loan of
another Type on any Business Day (which, in the case of a
conversion of an outstanding Eurodollar Loan shall be the last
day of the Interest Period applicable to such Eurodollar Loan).
LFC shall give the Bank prior notice of each such conversion in
accordance with Section 2.2.
10.171 Notice of Borrowing or Conversion
---------------------------------
10.171.1 Whenever the Borrowers desire to obtain a Revolving
Credit Loan hereunder, to continue an outstanding Tranche A
Revolving Credit Loan which is a Eurodollar Loan, or to convert
an outstanding Tranche A Revolving Credit Loan into a Tranche A
Revolving Credit Loan of another Type, LFC shall give irrevocable
written notice to the Bank (i) on or prior to 12:00 (noon) (New
York time) on the Business Day on which the requested Revolving
Credit Loan is to be made as or converted to a Base Rate Loan,
and (ii) on or prior to 12:00 (noon) (New York time) on the
second Business Day before the day on which the requested Tranche
A Revolving Credit Loan is to be made or continued as or
converted to a Eurodollar Loan. Such notice shall be in the
form attached hereto as Exhibit B and specify (A) the date of the
proposed borrowing, continuation, or conversion, which shall be a
Business Day during the Commitment Period (each, a "Borrowing
Date"), (B) the amount of the proposed borrowing, continuation, or
conversion ((I) each Eurodollar Loan shall be in a minimum amount
of $1,000,000, and if greater, in an integral multiples of
$500,000 in excess thereof, and (II) each Base Rate Loan shall be
in a minimum amount of $500,000 and, if greater, in an integral
multiple of $100,000 in excess thereof or, if less, equal to the
Unutilized Commitment applicable to such Class), (C) the Class of
such borrowing, and (D) the Type of borrowing and, if applicable,
the Interest Period applicable thereto. If such written notice
fails to specify the Type of Revolving Credit Loan requested,
then the Borrowers shall be deemed to have requested a Base Rate
Loan.
10.171.2 Subject to the provisions of the definition of the term
"Interest Period" herein, the duration of each Interest Period
for a Eurodollar Loan shall be as specified in the applicable
Notice of Borrowing or Conversion. If no Interest Period is
specified in a Notice of Borrowing or Conversion with respect to
a requested Eurodollar Loan, then the Borrowers shall be deemed
to have selected an Interest Period of one month's duration. If
the Bank receives a Notice of Borrowing or Conversion after the
time specified in subsection (a) above, such Notice shall not be
effective. If the Bank does not receive an effective Notice of
Borrowing or Conversion with respect to an outstanding Eurodollar
Loan, or if, when such Notice must be given prior to the end of
the Interest Period applicable to such outstanding Loan, the
Borrowers shall have failed to satisfy any of the conditions
hereof, the Borrowers shall be deemed to have elected to convert
such outstanding Loan in whole into a Base Rate Loan on the last
day of the then current Interest Period with respect thereto.
10.171.3 Subject to the terms and conditions hereof (including
without limitation Section 6 hereof), the Bank will make the
amount of any Loan available to the Borrowers in same day funds
at the Closing Office on the date properly specified in the
notice for the proposed borrowing against delivery to the Bank of
such instruments, documents and papers as are provided for
herein.
10.172 The Note
--------
10.172.1 The Borrowers' obligation (which is a joint and several
obligation of each Borrower) to pay the principal of, and
interest on, the Revolving Credit Loans shall be evidenced by the
Revolving Credit Note.
10.172.2 (i) The Revolving Credit Note shall: (A) be dated the
Closing Date; (B) be in an original principal amount equal to
$40,000,000; (C) be payable in an amount equal to the outstanding
principal amount of the Loans evidenced thereby on the last day
of the Commitment Period; (D) bear interest as provided in
Section 3; and (E) be entitled to the benefits of this Agreement
and shall be secured by the Security Documents.
10.172.3 The principal amount of all Loans outstanding from time
to time, and interest accrued thereon, shall be recorded on the
records of the Bank and, prior to any transfer of, or any action
to collect, any Revolving Credit Note, the unpaid principal
amount of the Loans evidenced by such Revolving Credit Note shall
be endorsed on the reverse side of such Revolving Credit Note,
together with the date of such endorsement and the date to which
the interest has been paid; any failure to make such endorsement
and provide such other information, however, shall not affect any
Borrower's obligations hereunder or under the Revolving Credit
Note.
10.172.4 Mandatory Prepayments of Revolving Credit Loans.
------------------------------------------------
10.172.5 The Borrowers shall immediately prepay the Revolving
Credit Loans to the extent that the aggregate outstanding
principal amount thereof on any day shall exceed the amount of
the Commitment in effect on such day.
10.172.6 The Borrowers shall immediately prepay each Class of
Revolving Credit Loan to the extent the aggregate outstanding
principal amount thereof on any day shall exceed the applicable
Class Commitment in effect on such day.
10.172.7 The Borrowers shall immediately prepay each Class of
Revolving Credit Loans to the extent that the aggregate
outstanding principal amount thereof on any day shall exceed the
applicable Class Borrowing Base on such day.
10.172.8 Subject to the terms and conditions of this Agreement,
amounts prepaid under subsection 2.4(c) of this Section 2.4 may
be reborrowed.
10.172.9 In the event Ironwood Acceptance Company, L.L.C., an
Arizona limited liability company ("Ironwood"), or any of its
successors or assignees, proposes to exercise its right under the
terms of that certain Administration Agreement, dated as of
October 7, 1998, by and among the Priority Trust, Wilmington
Trust Company, LFC and Ironwood (the "Administration Agreement"),
to purchase the beneficial interest in the Priority Trust, LFC
shall give to the Bank prompt written notice of such proposed
sale and in any event at least 15 Business Days prior to the
closing date for such sale, together with a pro forma Borrowing
Base Certificate as of the date of such proposed purchase. Such
Borrowing Base Certificate shall not include in the calculation
of the Tranche A Borrowing Base any amounts attributable to the
Priority Trust Security Value. In the event that as a result of
the sale of the beneficial interest in Priority Trust, the then
outstanding amount of any Class of Revolving Credit Loans will
exceed the applicable Class Borrowing Base at such time, then the
Borrowers shall, contemporaneously with such sale of the Priority
Trust, prepay such Class of Revolving Credit Loans in an amount
equal to such excess. Without limiting the foregoing, in the
event that at the time of such proposed sale of the beneficial
interest in the Priority Trust there is a continuing Default
under this Agreement, at the written request of the Bank, the
Borrowers shall, contemporaneously with such sale of the Priority
Trust, use all of the proceeds of such sale to repay the then
outstanding Revolving Credit Loans. Subject to the Borrowers'
compliance with the requirements set forth in the two proceeding
sentences, on the date of the consummation of the sale of the
Priority Trust in accordance with the terms hereof, the Bank
shall release its lien on the beneficial interest in the Priority
Trust and release to the Borrowers any certificate pledged to it
which represents any beneficial interest in the Priority Trust
together with any related documents reasonably requested by the
Borrowers.
10.172.10 to the extent there is no continuing Default, the
Borrowers may exercise their right to convert any of the VFNs to
another series of notes issued under the applicable indenture
pursuant to the terms of the applicable VFN Documents, provided
that the Borrowers shall give at least 10 Business Days prior
written notice thereof to the Bank together with a pro forma
Borrowing Base Certificate as of the date of such conversion
which shall reflect the reduced VFN Security Value resulting from
such conversion. In the event that as a result of such
conversion of a VFN, the then outstanding amount of any Class of
Revolving Credit Loans will exceed the applicable Class Borrowing
Base at such time, then the Borrowers shall, contemporaneously
with such conversion of such VFN, prepay such Class of Revolving
Credit Loans in an amount equal to such excess. Without limiting
the foregoing, in the event that at the time of such proposed
conversion of any VFN there is a continuing Default under this
Agreement, at the written request of the Bank, the Borrowers
shall not convert such VFN. Upon such prepayment (or upon such
conversion if no prepayment is necessary hereunder) the Bank
shall return to the Borrowers the VFN which is proposed to be
converted together with any related documents reasonably
requested by the Borrowers. The Borrowers shall, to the extent a
new VFN is issued in replacement of the VFN being converted,
pledge and deliver the original of such replacement VFN to the
Bank immediately upon its receipt of the same.
10.172.11 On the Revolving Credit Maturity Date, the Borrowers
shall pay in full the unpaid principal balance of the Loans,
together with all unpaid interest thereon and all fees and other
amounts due with respect thereto.
10.173 Voluntary Repayment of Revolving Credit Loans.
----------------------------------------------
The Borrowers shall have the right, at any time and
from time to time, upon at least one Business Day's prior notice
to the Bank in writing or by telephone (confirmed as soon as
possible thereafter in writing) to prepay any Class of the
Revolving Credit Loans, in whole, or in part in amounts equal to
$500,000 or, if greater, integral multiples of $100,000 in excess
thereof, or, if less, the aggregate outstanding principal amount
of the applicable Class, and, subject to payment of any amounts
required under Section 3.5, without premium or penalty, provided
that at the time of any such prepayment of any Class of the
Revolving Credit Loans in full, the Borrowers shall pay all
interest accrued on the amount of such prepayment. Subject to
the terms and conditions of this Agreement, amounts prepaid under
this Section 2.5 may be reborrowed.
10.174 Reduction of Commitments.
------------------------
The Borrowers shall have the right at any time and
from time to time upon at least 3 Business Days' prior written
notice to the Bank to reduce permanently in amounts equal to
$1,000,000 or integral multiples thereof or terminate the
Unutilized Commitment of any Class (after giving effect to all
pending requests for Revolving Credit Loans).
10.175 Borrowers' Representative.
--------------------------
Realty hereby appoints LFC as its agent with respect
to the receiving and giving of any notices, requests,
instructions, reports, schedules, revisions, financial statements
or any other written or oral communications hereunder. LFC shall
keep complete, correct and accurate records of all Revolving
Credit Loans and the application of proceeds thereof and all
payments in respect of the Revolving Credit Loans and other
amounts due hereunder. LFC shall determine the allocation of
proceeds of Revolving Credit Loans among the Borrowers. The Bank
is hereby entitled to rely on any communication given or
transmitted by LFC as if such communication were given or
transmitted by each and every Borrower; provided however, that
any communication given or transmitted by any Borrower other than
LFC shall be binding with respect to such Borrower. Any
communication given or transmitted by Bank to LFC shall be deemed
given and transmitted to each and every Borrower.
Notwithstanding the foregoing, all Obligations of the Borrowers
hereunder shall be joint and several.
INTEREST.
- ---------
10.176 Rate of Interest
----------------
10.176.1 Each Borrower agrees, on a joint and several basis, to
pay interest in respect of the unpaid principal amount of (i)
each Tranche A Revolving Credit Loan which is a Base Rate Loan,
(ii) each Tranche B Revolving Credit Loan, and (iii) each Tranche
C Revolving Credit Loan from time to time outstanding until
maturity (whether by acceleration or otherwise), at a rate per
annum equal (subject to the provisions of Section 3.3) to the
Base Rate, which interest rate shall automatically change as and
when the Base Rate changes.
10.176.2 Each Borrower agrees, on a joint and several basis, to
pay interest with respect to unpaid principal amount of each
Tranche A Revolving Credit Loan which is a Eurodollar Loan, for
each Interest Period applicable thereto, at a rate per annum
equal (subject to provisions of Section 3.3) to the Eurodollar
Rate plus 2.625%.
10.177 Interest Payment Dates
----------------------
10.177.1 Accrued interest in respect of each Base Rate Loan,
prior to maturity, shall be payable in arrears on each Quarterly
Payment Date, on the date of each prepayment, at maturity
(whether by acceleration or otherwise) and, after maturity, upon
demand.
10.177.2 Accrued interest in respect of each Eurodollar Loan,
prior to maturity, shall be payable in arrears, on the last day
of the Interest Period applicable to such Eurodollar Loan, and if
such Interest Period is longer than three months, at intervals of
three months after the first day thereof. Accrued interest in
respect of each Eurodollar Loan, at maturity (whether by
acceleration or otherwise) and, after maturity, shall be payable
upon demand.
10.178 Overdue Payment of Principal and Interest.
------------------------------------------
Each Loan and each other amount due under this
Agreement or any other Loan Document shall bear interest for each
day on which an Event of Default exists under Section 9.1 or
Section 9.7 hereof (after as well as before judgment or
commencement of any bankruptcy or insolvency proceedings),
payable on demand, at a rate per annum (the "Past-Due Rate")
equal to the sum of (x) the rate of interest otherwise payable on
such date, plus (y) 2% per annum.
10.179 Capital Adequacy.
-----------------
If the Bank shall have determined that the
applicability after the date hereof of any law, rule, regulation
or guideline adopted pursuant to or arising out of the July 1988
report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards", or the adoption after
the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing
or in the enforcement or interpretation or administration of any
of the foregoing by any court, Government Authority, central bank
or comparable agency charged with the enforcement or
interpretation or administration thereof, or compliance by the
Bank (or any lending office of the Bank) or any holding company
of the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on the Bank's capital
or on the capital of the Bank's holding company, if any, as a
consequence of its Loans, Commitments or other obligations
hereunder to a level below that which the Bank or the Bank's
holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration the
Bank's policies and the policies of the Bank's holding company
with respect to capital adequacy) by an amount deemed by the Bank
to be material, then, upon demand by the Bank, the Borrowers
shall pay to the Bank from time to time such additional amount or
amounts as will compensate the Bank or the Bank's holding company
for any such reduction suffered, together with interest on each
such amount from the date demanded until payment in full thereof
(after as well as before judgment) at the Base Rate. A
certificate of the Bank to the Borrowers as to any such
additional amount or amounts (including calculations thereof in
reasonable detail) shall be submitted by the Bank to the
Borrowers, which certificate, in the absence of manifest error,
shall be conclusive and binding on the Borrowers. In determining
such amount or amounts, the Bank may use any method of averaging
and attribution as it (in its sole and absolute discretion) shall
deem applicable.
10.180 Eurodollar Indemnity.
--------------------
If the Borrowers for any reason (including, without
limitation, pursuant to Sections 2.4, 5.1 and 9 hereof) make any
payment of principal with respect to any Eurodollar Loan on any
day other than the last day of an Interest Period applicable to
such Eurodollar Loan, or fail to borrow or continue or convert to
a Eurodollar Loan after giving a Notice of Borrowing or
Conversion thereof pursuant to Section 2.2, or fail to prepay a
Eurodollar Loan after having given notice thereof, the Borrowers
shall pay to the Bank any amount required to compensate the Bank
for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment or failure,
including, without limitation, any loss (including loss of
anticipated profits), costs or expense incurred by reason of the
liquidation or re-employment of deposits or other funds required
by the Bank to fund or maintain such Eurodollar Loan. The
Borrowers shall pay such amount upon presentation by the Bank of
a statement setting forth the amount and the Bank's calculation
thereof pursuant hereto, which statement shall be deemed true and
correct absent manifest error.
10.181 Changed Circumstances, Illegality.
----------------------------------
Notwithstanding any other provision of this
Agreement, in the event that:
10.181.1 on any date on which the Eurodollar Rate would
otherwise be set the Bank shall have determined in good faith
(which determination shall be final and conclusive) that adequate
and fair means do not exist for ascertaining the Eurodollar Rate,
or
10.181.2 at any time the Bank shall have determined in good
faith (which determination shall be final and conclusive) that:
10.181.2.1 the making or continuation of or
conversion of any Loan to a Eurodollar Loan
has been made impracticable or unlawful by
(1) the occurrence of a contingency that
materially and adversely affects the
interbank Eurodollar market or (2) compliance
by the Bank in good faith with any applicable
law or governmental regulation, guideline or
order or interpretation or change thereof by
any governmental authority charged with the
interpretation or administration thereof or
with any request or directive of any such
governmental authority (whether or not having
the force of law); or
10.181.2.2 the Eurodollar Rate shall no longer
represent the effective cost to the Bank for
U.S. dollar deposits in the interbank market
for deposits in which it regularly
participates;
then, and in any such event, the Bank shall forthwith
so notify LFC thereof. Until the Bank notifies LFC that the
circumstances giving rise to such notice no longer apply, the
obligation of the Bank to allow selection by the Borrowers of
Eurodollar Loans shall be suspended. If, at the time the Bank so
notifies LFC, the Borrowers have previously given the Bank a
Notice of Borrowing or Conversion with respect to one or more
Eurodollar Loans but such Loans have not yet gone into effect,
such notification shall be deemed to be a request for Base Rate
Loans.
10.181.3 In the event of a determination of illegality pursuant
to subsection 3.6(b)(i) above, the Borrowers shall, with respect
to the outstanding Eurodollar Loans, prepay the same, together
with interest thereon and any amounts required to be paid
pursuant to Section 3.5, on such date as shall be specified in
such notice (which shall not be earlier than the date such notice
is given) and may, subject to the conditions of this Agreement,
borrow a Base Rate Loan in accordance with Section 2.1 hereof by
giving a Notice of Borrowing or Conversion pursuant to Section
2.2 hereof.
10.182 Increased Costs.
---------------
In case any change in law, regulation, treaty or
official directive or the interpretation or application thereof
by any court or by any governmental authority charged with the
administration thereof or the compliance with any guideline or
request of any central bank or other governmental authority
(whether or not having the force of law):
10.183 subjects the Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder
by the Borrowers or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income
of the Bank imposed by the United States of America or any
foreign country, any political subdivision thereof or any other
governmental authority), or
10.183.1 imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the account of, or
loans by, the Bank (other than such requirements as are already
included in the determination of the Eurodollar Rate), or
10.183.2 imposes upon the Bank any other condition with respect
to its obligations or performance under this Agreement,
and the result of any of the foregoing is to increase
the cost to the Bank, reduce the income receivable by the Bank or
impose any expense upon the Bank with respect to any Loans or its
obligations under this Agreement, the Bank shall notify LFC
thereof. The Borrowers agree, on a joint and several basis, to
pay to the Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon presentation by the Bank
of a statement in the amount and setting forth in reasonable
detail the Bank's calculation thereof and the assumptions upon
which such calculation was based, which statement shall be deemed
true and correct absent manifest error.
FEES.
- ----
10.184 Facility Fee.
-------------
The Borrowers agree, on a joint and several basis,
to pay to the Bank a facility fee with respect to this Agreement
for the period commencing on the Closing Date to and including
the Revolving Credit Maturity Date, computed at a rate per annum
equal to 0.375% of the Commitment (as the same may be reduced
from time to time hereunder) during the period for which payment
is made. Such facility fee shall be payable quarterly in arrears
on each Quarterly Payment Date commencing on the last day of the
quarter ending March 31, 1999, on each date that the Commitment
is reduced or terminated, and on the Revolving Credit Maturity
Date.
10.185 Arrangement Fee.
----------------
The Borrowers agree, on a joint and several basis,
to pay to the Bank, on or prior to the Closing Date, an
arrangement fee of $37,500 the prior receipt of which the Bank
hereby acknowledges.
10.186 PAYMENTS, ETC
Subject to the limitations set forth in the
definition of the term "Interest Period", whenever any payment to
be made hereunder or under the Note shall be stated to be due on
a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest shall
be payable at the applicable rate during such extension.
Interest on Base Rate Loans and the facility fee hereunder and
under the other Loan Documents shall be calculated on the basis
of actual number of days elapsed in a year of 365 days.
Interest on Eurodollar Loans shall be calculated on the basis of
actual number of days elapsed in a year of 360 days. If for any
reason a Loan is repaid on the same day on which it is made, one
day's interest (subject to the other provisions of this
Agreement) shall be paid on that Loan. The Borrowers hereby
authorize and direct the Bank to charge any account of any
Borrower maintained at any office of the Bank with the amount of
any principal, interest or fee when the same becomes due and
payable under the terms hereof or of the Note; provided, however,
that the Bank shall not be under any obligation to charge any
such account.
10.187 Net Payments; Application.
--------------------------
10.187.1 All payments hereunder and under the other Loan
Documents shall be made by the Borrowers to the Bank in freely
transferable U.S. dollars and in same day funds at the Closing
Office without setoff or counterclaim and in such amounts as may
be necessary in order that all such payments (after (i)
withholding for or on account of any present or future taxes,
levies, imposts, duties or other similar charges of whatsoever
nature imposed on the amounts described above by any government
or political subdivision or taxing authority thereof or therein,
other than any tax (other than such taxes referred to in clause
(ii) below) imposed on the Bank pursuant to the income tax laws
of the jurisdiction where the Bank's principal or lending office
or offices are located, and (ii) deduction of an amount equal to
any taxes on or measured by the net income payable to the Bank
with respect to the amount by which the payments required to be
made by this Section 5.2 exceed the amount otherwise specified to
be paid under this Agreement and the Note) shall not be less than
the amounts otherwise specified to be paid under this Agreement
and the Note. With respect to each such deduction or
withholding, the Borrowers shall promptly (and in no event later
than 30 days thereafter) furnish to the Bank such certificates,
receipts and other documents as may be required to establish any
tax credit, exemption or reduction in rate to which the Bank or
holder of the Note may be entitled. The Bank agrees to furnish
to the Borrowers, as soon as practicable after any written
request of the Borrowers to such effect, any executed form
reasonably requested by the Borrowers such as Internal Revenue
Service Form 4224 or 1001, and any other applicable form as to
the Bank's entitlement, if any, to exemption from, or a reduced
rate of, or its subjection to, United States withholding tax on
amounts payable to it hereunder or under the Note and the Bank
undertakes to use its best efforts promptly to notify LFC of any
material change in any information, statement or form so
furnished to the Borrowers; provided, however, that any failure
on the part of the Bank to furnish any such information,
statements or forms shall in no way affect the obligations of the
Borrowers or the rights of the Bank under the terms of this
Agreement or of the Note.
10.187.2 Unless otherwise specifically provided herein, all
payments under or pursuant to, or in satisfaction of, any of the
Borrowers' obligations under this Agreement or under the Note
(including any received in connection with the foreclosure upon
or other realization on any Collateral) will be applied in the
following order of priority: (i) to any amounts not otherwise
listed in this Section 5.2(b) then due and payable under this
Agreement, the Note or the Security Documents, including, without
limitation, any amounts due under Section 12.3, (ii) to any fees
then due and payable pursuant to Section 4.1 or 4.2 of this
Agreement (in such order as the Bank may elect), (iii) to any
interest on the Note then due and payable (in such order with
respect to Class as the Bank may elect), (iv) to any principal
amount of the Revolving Credit Loans then due (in such order with
respect to Class as the Bank may elect), and (v) to reduce the
unpaid principal amount of the Revolving Credit Loans (in such
order with respect to Class as the Bank may elect).
CONDITIONS PRECEDENT TO INITIAL LOAN.
-------------------------------------
The Bank shall not be obligated to make the initial
Revolving Credit Loan hereunder unless on the date of such
Revolving Credit Loan (unless otherwise specifically indicated)
the following conditions have been fulfilled to the satisfaction
of the Bank or waived:
10.188 Default, etc.
-------------
On the date of such Revolving Credit Loan (and after
giving effect to all Revolving Credit Loans requested to be made
on such date), there shall exist no Default or Event of Default
and all representations and warranties made by the Borrowers
herein or in the other Loan Documents or otherwise made by the
Borrowers in writing in connection herewith or therewith shall be
true and correct in all material respects with the same effect as
though such representations and warranties have been made at and
as of such time.
10.189 Note.
-----
On the date of such Loan, the Bank shall have
received the Revolving Credit Note, duly executed and completed
by the Borrowers.
10.190 [Intentionally deleted]
10.191 Supporting Documents of the Borrowers.
--------------------------------------
There shall have been delivered to the Bank, such
information and copies of documents, approvals (if any) and
records (certified where appropriate) of corporate and legal
proceedings as the Bank may have reasonably requested relating to
the Borrowers' entering into and performance of the Loan
Documents or the transactions contemplated by this Agreement.
Such documents shall, in any event, include:
10.191.1 to the extent requested by the Bank, certified copies
of the Charter Documents of each of the Borrowers, LTSC, LMSC,
LHCs, the Priority Trust and LCC;
10.191.2 certificates of authorized officers of each of the
Borrowers, certifying the corporate resolutions of such Borrower
relating to the entering into and performance of the Loan
Documents by such Borrower and the transactions contemplated
thereby;
10.191.3 certificates of authorized officers of each of the
Borrowers, with respect to the incumbency and specimen signatures
of its officers or representatives authorized to execute such
documents and any other documents and papers, and to take any
other action, in connection therewith; and
10.191.4 a certificate of an authorized officer of each of the
Borrowers certifying with respect to such Borrower, as of the
Closing Date, compliance with the conditions of Section 6.1,
6.10, 6.12(b) and 6.18 and also the absence of any material
adverse changes of the type referred to in Section 6.8.
10.191.5 Security Documents.
-------------------
There shall have been delivered to the Bank:
10.191.6 An Amended and Restated Security Agreement executed by
the Borrowers, substantially in the form of Exhibit C hereto (as
further amended, supplemented or otherwise modified from time to
time, the "Security Agreement"), covering all of the Borrowing
Base Collateral.
10.191.7 An Amended and Restated Pledge Agreement executed by
the Borrowers, substantially in the form of Exhibit D hereto (as
the same may from time to time be amended, restated, supplemented
or otherwise modified, the "Pledge Agreement") covering (i) the
Subordinated Interest Certificate, (ii) the certificate
representing 100% of the beneficial interest in the Priority
Trust, (iii) the VFNs, and (iv) the Class B Certificates;
together with undated powers of transfer, duly executed in blank
by the Borrowers;
10.191.8 Two Amended and Restated Collateral Assignment of
Membership Interests, each substantially in the form of Exhibit E
hereto (as the same may from time to time be amended, restated,
supplemented or otherwise modified, the "Membership Assignment"),
executed by the Borrowers, covering 100% of the membership
interest in LMSC and LCC, respectively;
10.191.9 One or more control agreements with banks or other
financial institutions relating to deposit accounts containing
proceeds of the Collateral, as the Bank may request.
10.191.10 Copies of such consents of third parties as are
required or as the Bank may reasonably request, including,
without limitation, with respect to the conveyance to any of the
Borrowers of (i) the Uncertificated Residual Rights, and (ii) the
Subordinated Interest Certificate, and evidence of such
conveyance.
10.192 UCC.
----
The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of all filings of financing
statements under the applicable Uniform Commercial Code,
satisfactory Lien search requests on Form UCC-11 confirming the
absence of any Liens (except those in favor of or consented to by
the Bank) on any Collateral and evidence satisfactory to the Bank
of all other action with respect to the Liens created by the
Security Documents necessary or appropriate to perfect such Liens.
10.193
10.194 Financial Statements.
---------------------
10.194.1 LFC shall have delivered to the Bank a copy of its
consolidated audited financial statements for the year ending
December 31, 1997, and a copy of its quarterly report on Form
10-Q for the fiscal quarter ended September 30, 1998, in each
case, satisfactory in form and substance to the Bank and, with
respect to the quarterly report on Form 10-Q, certified by the
CFO of each of the Borrowers as having been prepared in
accordance with GAAP, consistently applied and as fairly
presenting the financial condition and results of operation as at
the dates and for the periods indicated.The computations of the
ratios required by Sections 8.18-8.22 for the most recent
applicable period shall have been delivered to the Bank,
certified by each Borrower's chief financial officer.
10.195 Adverse Change.
---------------
There shall have been, in the Bank's opinion, no
Material Adverse Change since December 31, 1997 with respect to
the Consolidated Group taken as a whole or with respect to any of
the Borrowers, any LHC, the Priority Trust, LMSC, LTSC or LCC.
10.196 Insurance.
----------
There shall have been delivered to the Bank a
certificate of an authorized officer of LFC that all insurance
policies referred to in Section 7.4 are in full force and effect
and that all premiums required to be paid thereon have been paid
in full.
10.197 Approvals and Consents.
-----------------------
All orders, permissions, consents, approvals,
licenses, authorizations and validations of, and filings,
recordings and registrations with, and exemptions by, any
Government Authority, or any other Person, required to authorize
or required in connection with the execution, delivery and
performance of this Agreement or the other Loan Documents and the
transactions contemplated hereby and thereby by the Borrowers,
each LHC, the Priority Trust, LMSC, LTSC and LCC shall have been
obtained (and, if so requested, furnished to the Bank).
10.198 Legal Opinions.
--------------
The Bank shall have received legal opinions in form
and substance satisfactory to it, addressed to the Bank and dated
the Closing Date, of the General Counsel of LFC.
10.199 Change in Law.
--------------
10.199.1 On the date of such Loan, no change shall have occurred
in applicable law, or in applicable regulations thereunder or in
interpretations thereof by any Government Authority which, in the
opinion of the Bank, would make it illegal for the Bank to effect
the Loan required to be made on such date.
10.199.2 No suit, action or proceeding shall be pending or
threatened by or before any Government Authority seeking to
restrain or prohibit the consummation of the transactions
contemplated by this Agreement.
10.200 All Proceedings to be Satisfactory.
-----------------------------------
All corporate, partnership (if any), business trust
and legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement and the other
documents referred to herein shall be satisfactory in form and
substance to the Bank, and the Bank shall have received all
information and copies of all documents which the Bank may
reasonably have requested in connection herewith, such documents
where appropriate to be certified by proper corporate officials
or governme. The legal fees and expenses (through the Closing
Date) of the Bank's special counsel in connection with the
transactions contemplated by this Agreement shall (to the extent
demand for payment thereof shall have been made) have been paid
in full.
10.201 Other Agreements.
-----------------
The Borrowers shall have delivered to the Bank
copies and, if required hereunder, originals of the Borrowing
Base Collateral Documents and such agreements and instruments
ancillary thereto as the Bank may request, certified by the
Borrowers as true, correct, complete and in full force and
effect. Notwithstanding the foregoing, with respect to the
Required Consumer Loan Documents, upon the written request of the
Bank, the Borrowers shall have segregated, marked (to indicate
the lien of the Bank thereon) and stored in a place designated by
the Bank, a portion of or all of the Required Consumer Loan
Documents, provided that, upon the written request of the Bank,
all such segregated, marked or stored Required Consumer Loan
Documents shall forthwith be delivered to the Bank.
10.202 Borrowing Base.
---------------
The Bank shall have received a Borrowing Base
Certificate, dated the date of the Loans, together with such
supplemental or supporting documentation as the Bank may
reasonably request.
10.203 Borrowing Base Collateral.
--------------------------
The terms of the Borrowing Base Collateral shall be
satisfactory to the Bank.
10.204 Troubled Loan Certificate.
-------------------------
The Bank shall have received a Troubled Loan
Certificate as of February 28, 1999 evidencing compliance with
Section 8.21.
10.205 Extraordinary Assets.
---------------------
The Bank shall have received an Extraordinary Asset
Certificate as of February 28, 1999 evidencing compliance with
Section 8.22.
10.206 Transfer of Class B Certificate.
--------------------------------
The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of the irrevocable and
unconditional sale to LFC by LTSC of the Class B Certificate in
consideration of an unsecured promissory note not in excess of
$10,557,005.19, which promissory note shall be absolutely and
fully subordinated to the Obligations and shall be satisfactory
to the Bank in all respects.
All documents and papers required by this Section 6
shall be in form and substance satisfactory to the Bank and
delivered to the Bank at its Closing Office or as the Bank may
otherwise direct.
Section 6A. CONDITIONS PRECEDENT TO SUBSEQUENT LOANS
----------------------------------------
The Bank shall not be obligated to make any Loan after
the Closing Date unless, at the time of such Loan (except as
hereinafter indicated) the following conditions (unless waived in
writing by the Bank) have been satisfied:
6A.1 Certain Conditions.
------------------
At the time of such Loan, and immediately after
giving effect thereto, (a) all deficiencies, if any, with respect
to conditions precedent to any prior Loan or to the effectiveness
of this Agreement shall have been corrected, (b) all of the
conditions specified in Sections 6.1, 6.12, 6.13, 6.14, 6.15,
6.16 and 6.17 shall be satisfied in full (with any reference in
any of such Sections to Loans effected on the Closing Date to be
deemed a reference to the Loans then requested), (c) each of the
documents specified in Section 6.2, 6.4, 6.5, 6.6, 6.9, 6.10 or
6.20 of this Agreement shall be in full force and effect and no
party thereto shall have failed to perform in any material
respect any of its obligations thereunder, (d) no issuer thereof
shall have rescinded or qualified any of the statements,
certificates, letters, reports or opinions referred to in Section
6 hereof, and (e) there shall have been, in the Bank's opinion,
no Material Adverse Change since the Closing Date in respect of
the Consolidated Group or the Borrowers, any LHC, the Priority
Trust, LMSC, LTSC or LCC.
6A.2 Subsequent Opinions of Counsel.
-------------------------------
If reasonably requested by the Bank, the Bank shall
have received from counsel referred to in Section 6.11 or other
counsel satisfactory to the Bank such favorable supplemental
legal opinions addressed to the Bank and dated the date of such
Loan and covering such matters incidental to the transactions
contemplated by this Agreement as the Bank in its reasonable
judgment believes required to confirm, as of such Borrowing Date
(and after giving effect to the events occurring, and the passing
of time since, the Closing Date), any opinions given on the
Closing Date, each of which opinions shall be in form and
substance satisfactory to the Bank.
6A.3 Officer's Certificate.
----------------------
a) If requested by the Bank, the Bank shall have
received a certificate of authorized officers of each of the
Borrowers certifying, as of the date of the Loan then being
requested, compliance with the provisions of Section 6.1 (with
the reference therein to Loans being deemed a reference to the
Loans then being requested on the date of said certificate) and
further to the effect that the conditions specified in Section
6A.1 are satisfied at such time.
(b) The making of each Loan subsequent to the
Closing Date shall constitute a representation and warranty by
each of the Borrowers to the Bank that, at the time of said
subsequent Loan (and after giving effect thereto), (i) all
representations and warranties contained herein or in the other
Loan Documents or otherwise made by the Borrowers in connection
herewith or therewith are true and correct in all material
respects with the same effect as though such representations and
warranties were being made at and as of such time; provided,
however, to the extent any assets of LFC have been transferred to
Realty in accordance with Section 8.9 hereof and the Security
Documents, all representations and warranties of the Borrowers
shall be interpreted to reflect such change in ownership, (ii) no
Default or Event of Default exists, and (iii) the conditions
specified in Section 6A.1 are satisfied at such time.
6A.4 Borrowing Base
--------------
On the date of such Loan (and after giving effect
thereto), the Bank shall have received the Borrowing Base
Certificate dated the date of such Loan, together with such
supplemental and supporting documentation as the Bank may
reasonably request.
6A.5 Fees and Expenses.
-------------------
To the extent demand therefor shall have been made,
all legal fees and expenses of the Bank's special counsel in
connection with the transactions contemplated by this Agreement
shall have been paid in full.All of the documents, agreements,
certificates, financial statements, legal opinions, analyses,
reports and other papers referred to in this Section 6A shall be
in form and substance satisfactory to the Bank and shall be
delivered to the Bank at its Closing Office, or at such other
office as the Bank may from time to time specify to the Borrowers.
AFFIRMATIVE COVENANTS.
----------------------
Each of the Borrowers covenants and agrees hereby that,
so long as this Agreement is in effect and until the Commitment
is terminated and all of the Loans, together with interest,
commissions, fees and all other obligations incurred hereunder
are paid in full, it will perform, and will cause each of its
Subsidiaries to perform, the obligations set forth in this
Section 7.
10.207 Financial Statements.
---------------------
The Borrowers will furnish to the Bank:
10.207.1 As soon as practicable and in any event within 45 days
after the close of each quarter of each Fiscal Year, as at the
end of and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such quarter, as the case
may be, an unaudited consolidated balance sheet of the
Consolidated Group and a consolidated statement of income and
change in retained earnings of the Consolidated Group, together
with a quarterly cash flow statement, such statements to be
accompanied by separate balance sheets and income statements for
each of Realty, each LHC, the Priority Trust, LMSC, LTSC and
LCC, all in reasonable detail and certified by the CFO subject to
normal year-end audit and adjustments and setting forth in
comparative form the corresponding figures as of one year prior
thereto or for the appropriate periods of the preceding fiscal
year, as the case may be (which balance sheet and statements may,
if the Borrower wishes, be provided on quarterly reporting Form
10-Q), each such delivery of financial statements to be
accompanied by a certificate signed by the CFO of LFC, in form
and substance satisfactory to the Bank, setting forth
calculations (together with appropriate supporting information)
with respect to compliance with each of Sections 8.18-8.22;
10.207.2 As soon as practicable and in any event within ninety
(90) days after the close of each Fiscal Year, as at the end of
and for the Fiscal Year just closed, a consolidated balance sheet
of the Consolidated Group, and a consolidated statement of income
and retained earnings of the Consolidated Group for such Fiscal
Year, setting forth the corresponding figures of the previous
annual audit in comparative form, all in reasonable detail and
accompanied by the Auditors' opinion (without any qualification
unacceptable to the Bank) that such financial statements have
been prepared in accordance with GAAP consistently applied and
fairly present the financial condition and results of operations
of the Consolidated Group at Fiscal Year-End and for the Fiscal
Year indicated, such financial statements to be accompanied by
separate balance sheets and income statements for each of Realty,
each LHC, the Priority Trust, LMSC, LTSC and LCC, and further
accompanied by a certificate of the CFO or CEO of LFC that no
Event of Default or Default exists or, if in the opinion of such
CFOs or CEOs, any Event of Default or Default exists, specifying
the nature thereof, the period of existence thereof, and what
action the Borrowers propose to take with respect thereto and
further accompanied by a certificate of the CFO of LFC, in form
and substance satisfactory to the Bank, setting forth the
calculations (together with appropriate supporting information)
with respect to compliance with each of Sections 8.18-8.22;
10.207.3 As soon as practicable and in any event within 25 days
after the end of each month, a certificate in form and substance
satisfactory to the Bank signed by the CEO or the CFO of LFC
stating (i) that a review of the activities of the Consolidated
Group during such month has been made under their supervision
with a view to determining whether the Borrowers have observed,
performed and fulfilled all of its obligations under this
Agreement and the other Loan Documents, and (ii) that there
exists no Event of Default or Default, or if any Event of Default
or Default exists, specifying the nature thereof, the period of
existence thereof and what action the Borrowers propose to take
with respect thereto;
10.207.4 Promptly upon receipt thereof, copies of all detailed
financial reports and management letters, if any, submitted to
any member of the Consolidated Group by the Auditors, in
connection with each annual or interim audit of their respective
books by such Auditors;
10.207.5 As soon as possible and in any event (A) within 30 days
after any Borrower or any of its ERISA Affiliates knows that any
Termination Event described in clause (i) of the definition of
Termination Event with respect to any Pension Plan has occurred
or is expected to occur and (B) within 10 days after any Borrower
or any of its ERISA Affiliates knows that any other Termination
Event with respect to any Pension Plan has occurred or is
expected to occur, a statement of the CFO of LFC describing such
Termination Event and the action, if any, which the Borrowers or
such ERISA Affiliate propose to take with respect thereto;
10.207.6 Promptly and in any event within five Business Days
after receipt thereof by any Borrower or any of its ERISA
Affiliates from the PBGC, copies of each notice received by such
Borrower or any such ERISA Affiliate of the PBGC's intention to
terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, any notice of noncompliance issued
by the PBGC with respect to a proposed standard termination of a
Pension Plan, and any notice issued by the PBGC with respect to a
proposed distress termination of a Pension Plan;
10.207.7 Promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Pension Plan;
10.207.8 Promptly and in any event within five Business Days
after receipt thereof by any Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor, a copy of each
notice received by such Borrower or any of its ERISA Affiliates
concerning (x) the imposition or amount of withdrawal liability
under Subtitle E of Title IV of ERISA or (y) any determination by
a Multiemployer Plan sponsor that such Multiemployer Plan is, or
is expected to be, in "reorganization" (within the meaning of
Section 4241 of ERISA) or "insolvent" (within the meaning of
Section 4245 of ERISA), or has incurred or is expected to incur
an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code);
10.207.9 Copies of each material notice, including notice of
default, early amortization event or non-compliance or similar
events, received by any Borrower or any of its Subsidiaries
relating to any VFN, the Uncertificated Residual Rights, the
Class B Certificates, the EagleFunding Residual Rights, the
Primary Assignment Assets, the financing facilities related to
such Borrowing Base Collateral, or the Borrowing Base Collateral
Documents (other than any notice relating to defaults under the
Required Consumer Loan Documents which occur in the ordinary
course of business and are not material to the value of Eligible
Consumer Loans in the aggregate); and
10.207.10 with reasonable promptness, such other information
respecting the business, properties, operations, prospects or
condition (financial or otherwise) of the Consolidated Group or
any member thereof, or relating to any Collateral, as the Bank
may from time to time reasonably request.
10.208 Notice of Litigation
---------------------
LFC will promptly give written notice to the Bank of
(i) any action or proceeding or, to the extent either Borrower
may have any notice thereof, any claim which may reasonably be
expected to be commenced or asserted against any Borrower or any
Subsidiary, in which the amount involved is $150,000 or more, or
(ii) any dispute which may exist between any Borrower or any
Subsidiary and any Government Authority (including, without
limitation, any audit by the IRS) or (iii) any dispute which may
exist between any Borrower or any Subsidiary and any employees of
such Borrower or such Subsidiary or any union representing,
claiming to represent or seeking to represent any such employees,
which dispute may substantially affect the normal business
operations of the Consolidated Group or any member thereof, or
any of their respective properties and assets. The Borrowers
will give written notice to the Bank of the following promptly
after obtaining knowledge thereof: (i) any action, proceeding or
claim commenced or asserted, or reasonably likely to be commenced
or asserted, against Ironwood; (ii) any dispute which may exist
between Ironwood or any Government Authority (including, without
limitation, any audit by the IRS); or (iii) any dispute which may
substantially affect the normal business operations or expected
services to be provided by Ironwood.
10.209 Payment of Charges
Each of the Borrowers will duly pay and discharge,
and will cause each of its Subsidiaries to duly pay and discharge
(i) all taxes, assessments and governmental charges or levies
imposed upon or against it or its property or assets, or upon any
property leased by it, prior to the date on which penalties
attach thereto, unless and to the extent only that such taxes,
assessments and governmental charges or levies are being
contested in good faith and by appropriate proceedings diligently
conducted and such Borrower or such Subsidiary has set aside on
its books adequate reserves therefor in accordance with GAAP, and
(ii) all lawful claims, whether for labor, materials, supplies,
services or anything else, which might or could, if unpaid,
become a lien or charge upon such property or assets, unless and
to the extent only that the validity thereof is being contested
in good faith and by appropriate proceedings diligently
conducted, and (iii) all its trade bills when due in accordance
with their original terms, including any applicable grace
periods, unless and to the extent only that such trade bills are
being contested in good faith and by appropriate proceedings
diligently conducted.
10.210 Insurance.
Each of the Borrowers will keep, and will cause each
of its Subsidiaries to keep, (i) its insurable property insured
at all times with financially sound and responsible insurance
carriers against loss or damage by fire and other risks,
casualties and contingencies in such manner and to the extent
that like properties are customarily so insured by other
corporations engaged in the same or similar business similarly
situated, and (ii) adequate insurance at all times with
financially sound and responsible insurance carriers against
liability on account of damage to persons and properties and
under all applicable workmen's compensation laws, in such manner
and to the extent that like properties are customarily so insured
by other corporations engaged in the same or similar business
similarly situated.
10.211 Maintenance of Records.
Each of the Borrowers will keep, and will cause each
of its Subsidiaries to 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 each of the Borrowers will provide, and will cause
each of its Subsidiaries to provide, adequate protection against
loss or damage to such books of record and account.
10.212 Preservations of Corporate Existence.
Each of the Borrowers will maintain and preserve its
corporate existence and right to carry on its business and duly
procure all necessary renewals and extensions thereof, and
maintain, preserve and renew all rights, powers, privileges and
franchises which in the opinion of the Board of Directors of such
Borrower continue to be advantageous to it and comply in all
material respects with all applicable Legal Requirements, and, in
each such case, cause each of its Subsidiaries so to do. Without
limiting the generality of the foregoing, each Borrower agrees to
(and to cause each Subsidiary to) qualify to do business as a
foreign corporation in each jurisdiction where the nature of its
business and the operations conducted by it therein require it to
be so qualified.
10.213 Preservation of Assets.
Each of the Borrowers will keep and will cause each
of its Subsidiaries so to keep, its property in good repair,
working order and condition and from time to time make all
needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, so that the
business carried on by it may be properly and advantageously
conducted at all times in accordance with prudent business
management.
10.214 Inspection of Books and Assets.
10.214.1 Upon three Business Days' notice, each Borrower will
allow any representative, officer or accountant of the Bank,
during normal business hours, to visit and inspect any of its
property, to examine its books of record and account, and to
discuss its affairs, finances and accounts with its officers, and
at such reasonable time and as often as the Bank may request and,
in each such case, cause each of its Subsidiaries so to do.
10.214.2 Upon three Business Days' notice and the prior
submission by the Bank to any Borrower of its proposed agenda
therefor, such Borrower will allow any representative, officer or
accountant of the Bank from time to time to discuss the Financial
Statements, the other financial information from time to time
delivered hereunder and the financial condition of members of the
Consolidated Group (collectively, the "Financial Information")
with the Auditors; provided, however, that if no Default or Event
of Default then exists the Bank shall not have the right to
require such discussions more than once per year. The Borrowers
hereby irrevocably authorize the Auditors to discuss all of the
foregoing with all such Persons. The Borrowers shall have the
right to have one or more of its officers present at any such
discussions.
10.214.3 Upon three Business Days notice, the Borrowers shall
cause Ironwood to allow the Bank or any representative, officer,
accountant or other auditor of or for the Bank to visit and
inspect any of the property of Ironwood, to examine Ironwoods
books of record and account, and to discuss its affairs and
procedures relating to Tax Certificates or any Collateral;
provided however, that if no Default or Event of Default then
exists, the Borrowers shall not be obligated to cause Ironwood to
permit such visits and inspections more than once per year; and
provided further, that, if Borrowers request, Borrowers shall be
permitted to accompany Bank on such visits. In connection with
any visit or inspection referred to in subsection (a) above, the
Bank or its representatives, officers, accountants or other
auditors shall be permitted to make such verifications and tests
of the Collateral as the Bank shall deem appropriate.
10.215 Payment of Indebtedness.
The Borrowers will duly and punctually pay, or cause
to be paid, the principal of and the interest on all Indebtedness
for Borrowed Money heretofore or hereafter incurred or assumed by
any Borrower or any of its Subsidiaries, or in respect of which
any Borrower or any of its Subsidiaries shall otherwise be
liable, when and as the same shall become due and payable, unless
such Indebtedness for Borrowed Money shall be renewed or
extended, and will (and will cause each Subsidiary to) faithfully
observe, perform and discharge all the covenants, conditions and
obligations which are imposed on any Borrower or any of its
Subsidiaries by any and all indentures and other agreements
securing, relating to, or evidencing such Indebtedness for
Borrowed Money or pursuant to which such Indebtedness for
Borrowed Money is incurred, and no Borrower will permit (and will
ensure that none of its Subsidiaries permit) any act or omission
to occur or exist which is or may be declared to be a default
thereunder.
10.216 Further Assurances.
Each of the Borrowers will, and will cause each of
its Subsidiaries to, make, execute or endorse, and acknowledge
and deliver or file, all such vouchers, invoices, notices, and
certifications and additional agreements, undertakings,
conveyances, transfers, assignments, or further assurances, and
take any and all such other action, as the Bank may from time to
time deem necessary or proper in connection with this Agreement,
the obligations of the Borrowers hereunder or under the Note or
any of the other Loan Documents, or for the better assuring and
confirming unto the Bank all or any part of the security for the
Loans.
10.217 Notice of Default.
Forthwith upon any officer of any Borrower obtaining
knowledge of the existence of an Event of Default, LFC will
deliver to the Bank a certificate signed by an officer of LFC
specifying the nature thereof, the period of existence thereof,
and what action the Borrowers propose to take with respect
thereto.
10.218 Reserves.
Each of the Borrowers will set up, and will cause
each of its Subsidiaries to set up, on its books from its
earnings, reserves for bad debt in accordance with GAAP and in an
aggregate amount deemed adequate in the judgment of the Borrowers
and accepted by the Auditors in their annual audits.
10.219 Arms-length Transactions.
Each of the Borrowers will conduct, and cause each
of its Subsidiaries to conduct, all transactions with any of its
Affiliates on an arms-length basis.
10.220 Environmental Matters.
With respect to any Property for which any Borrower
or any Subsidiary may be responsible, LFC will promptly notify
the Bank (with a description in reasonable detail) of:
(i) the receipt by any Borrower or any Subsidiary
of any material Environmental Claim;
(ii) the discovery of any Contaminant or Release on,
in, under or emanating from any Properties or operations of any
of the Borrowers or any of their respective Subsidiaries
liability for which might have a Material Adverse Effect;
(iii) (x) the material violation of, or any condition
which might result in a material violation of, any Environmental
Law or (y) any change in any Environmental Law or in the
administration or interpretation thereof, which in either case
might subject any member of the Consolidated Group material
Environmental Costs;
(iv) the commencement of any judicial or
administrative proceeding or investigation alleging a violation
of any Environmental Law; or
(v) any material change in the representations and
warranties in Section 10.12;
and each of the Borrowers will, and will cause each of
its respective Subsidiaries to, commence within 90 days after any
such request, and diligently prosecute to completion, such
Remedial Action as the Bank may request in respect of any of the
matters addressed in such notice. As used in this Section 7.14
in relation to any Environmental Claim or any violation of
Environmental Law or any change in the representations and
warranties in Section 10.12 hereof, the term "material" shall
mean that such Environmental Claim, violation or change (i)
involves, or might reasonably be expected to involve
Environmental Costs in excess of $250,000, or (ii) occurs outside
the ordinary course of business, or (iii) gives rise, or might
reasonably be expected to give rise, to a Default or Event of
Default, or (iv) would otherwise be of concern to a prudent
lender. In addition, LFC will give the Bank prompt notice of any
Environmental Claim relating to any Collateral, any property
which secures any Collateral or any property to which any Tax
Certificate relates, of the discovery of any contaminant or
release on, in or emanating from any Collateral or any such other
property, or any other liability or potential liability under any
Environmental Law which in any way relates to, or could be
imposed on, the owner of the Collateral or any such other
property, in each case, promptly obtaining knowledge thereof.
10.221 Solvency.
Each of the Borrowers will continue to be Solvent
and ensure that each of its Subsidiaries will continue to be
Solvent.
10.222 Borrowing Base Certificate.
LFC will furnish the Bank (a) within 25 days of the
end of each month and, if a Default or Event of Default then
exists, from time to time upon the Bank's request, a Borrowing
Base Certificate as of the close of business on the last Business
Day of such month (or, if a Default or Event of Default exists,
as of such date specified by the Bank), (b) on or prior to the
twenty-fifth (25th) day of each month (and, if a Default or Event
of Default then exists, from time to time upon the Bank's
request), computer print-outs as of the end of the immediately
preceding month (or, if a Default or Event of Default exists, as
of such date specified by the Bank) of all loans and other
Receivables which support, underlie or are components of the
Borrowing Base Collateral, in the same form required by (i)
Section 6.10(a) and Section 6.10(b) of the Receivables Purchase
Agreement and Section 6.10(a) and Section 6.10(b) of the
Receivables Loan Agreement (in the case of Borrowing Base
Collateral consisting of Uncertificated Residual Rights), (ii)
Section 3.1(b) of the Class B Servicing Agreement (in the case of
Borrowing Base Collateral consisting of the Class B
Certificates), (iii) Section 2.06(a) of the Asset Purchase
Agreement (in the case of Borrowing Base Collateral consisting of
EagleFunding Residual Rights), and (iv) Section 3.1 of each VFN
Servicing Agreement (in the case of Borrowing Base Collateral
consisting of the VFNs), (c) on or prior to the twenty-fifth
(25th) day of each month (and, if a Default or Event of Default
then exists, from time to time upon the Bank's request), computer
print-outs of the end of the immediately preceding month (or, if
a Default or Event of Default exists, as of such date specified
by the Bank) of (A) the Eligible TLCs, the Purchase Price of such
Eligible TLCs and the applicable Coupon Rate and any additional
information reasonably requested by the Bank, and (B) the Dealer
Loan Collateral and any additional information reasonably
requested by the Bank, and (d) within 25 days of the end of each
month, a report in form and substance satisfactory to the Bank as
to the existence, Primary Assignment Asset Book Value and aging
of, and payments made on, the Primary Assignment Assets. If at
any time the Bank reasonably determines that the Borrowing Base
overstates the value of any item of Borrowing Base Collateral
(whether due to what the Bank has determined to be a mistake in
valuation by the Borrowers, due to any property related to any
item of Borrowing Base Collateral ceasing to provide the basis
for valuation of such item reflected in such certificate, due to
a mistake by the Borrowers in treating an item as eligible for
inclusion in the relevant Class Borrowing Base, or otherwise),
the value of such item shall be such amount as the Bank shall
reasonably determine or such item shall be eliminated from the
computation of the applicable class Borrowing Base, as
appropriate.
10.223 Extraordinary Asset Certificate.
LFC will furnish to the Bank within 25 days after
the end of each month (and, if a Default or Event of Default
exists, more frequently if the Bank so requests) an Extraordinary
Asset Certificate substantially in the form of Exhibit F setting
forth, as of close of business on the last day of such month (or,
if a Default or Event of Default exists, as of such date
specified by the Bank) (i) the Portfolio Amount; and (ii) all
Extraordinary Loans (specifying in reasonable detail each such
asset and the principal amount or, as appropriate, book value
thereof).
10.224 Notification of Account Debtors.
Upon request of the Bank made at any time when a
Default or Event of Default exists, promptly notify (in manner,
form and substance satisfactory to the Bank) all Persons who are
at any time obligated with respect to the Dealer Loan Collateral,
Primary Assignment Assets and, if any Receivables are distributed
to the Bank, all Persons who are obligated thereunder, that the
Bank possesses a security interest in (or assignment of the
proceeds of) such Dealer Loan Collateral, Primary Assignment
Assets or Receivables (as the case may be) and that all payments
in respect thereof are to be made to such account as the Bank
directs.
10.225 Troubled Loan Certificate.
LFC will furnish to the Bank (i) within 15 days
after the end of each fiscal quarter, (ii) whenever the amount
calculated pursuant to clause (A) of Section 8.21 hereof exceeds
9% of LFC's consolidated Tangible Net Worth, within 15 days after
the end of each month, and (iii) if a Default or Event of Default
exists, from time to time upon the Bank's request, a Troubled
Loan Certificate substantially in the form of Exhibit G hereto
setting forth, as of the last day of such quarter or month, as
the case may be (or, if a Default or Event of Default exists, as
of such date specified by the Bank), (x) LFC's consolidated
Tangible Net Worth and (y) the amount of Receivables specified in
Sections 8.21 (A)(i), A(ii), and A(iii), respectively, and the
amount of Dealer Recourse and Dealer Reserve specified in Section
8.21(A)(iv).
10.226 Receivable Deliquencies.
LFC will furnish to the Bank, within 10 days after
the end of each month, a report in the form of Exhibit H hereto
showing delinquent Receivables.
10.227 LFC's Duties as Servicer; LFC's and LMSC's Rights and
Obligations.
10.227.1 LFC, as Servicer under the Receivables Purchase
Agreement and the Receivables Loan Agreement, will give the
directions which it is required to give under Section 2.05(c) of
each of those Agreements as in effect on the date hereof.
10.227.2 The Borrowers will ensure that LFC is at all times the
Servicer under each of the Receivables Loan Agreement and
Receivables Purchase Agreement.
10.227.3 (i) LFC shall perform and abide by, and shall ensure
that LMSC performs and abides by, each of its respective
obligations, covenants and agreements under the Receivables Loan
Agreement and Receivables Purchase Agreement; (ii) at the request
of the Bank, LFC shall enforce its rights, and shall ensure that
LMSC enforces its rights, under the Receivables Purchase
Agreement; (iii) without the prior written consent of the Bank,
LFC will not, and shall ensure that LMSC does not, in any manner
waive any of its or LMSC's rights or release any other party from
its obligations to any Borrower or LMSC, under or in respect of
the Receivables Loan Agreement and Receivables Purchase
Agreement; and (iv) upon request of the Bank, the Borrowers will
send to the Bank copies of notices, documents and other papers
furnished and received by any Borrower or by LMSC with respect to
the Receivables Purchase Agreement or Receivables Loan Agreement.
10.228. Special Purpose Nature of LMSC
10.228.1 The Borrowers will ensure that LMSC engages in no
activities other than activities incident to and required by (i)
the Receivables Purchase Agreement as in effect on the date
hereof (without giving effect to any amendment, supplement or
other modification thereof after the date hereof); (ii) the
Receivables Loan Agreement as in effect on the date hereof
(without giving effect to any amendment, supplement or other
modification thereof after the date hereof); and (iii) the
Pooling and Servicing Agreement, dated as of June 1, 1994, among
LFC, LMSC, and The Chase Manhattan Bank (National Association),
as Trustee (the "P/S Trustee"), and the agreements executed and
delivered by LMSC in connection with the transactions
contemplated thereby, (iv) the Series Trust Agreement, dated as
of June 1, 1994, among LFC, LMSC, and the P/S Trustee in
connection with the Litchfield Mortgage Trust 1994-1, and the
agreements executed and delivered by LMSC in connection with the
transactions contemplated thereby and (v) the Series Trust
Agreement, dated as of September 27, 1994, among LFC, LMSC, and
the P/S Trustee in connection with the Litchfield Mortgage Trust
1994-2, and the agreements executed and delivered by LMSC in
connection with the transactions contemplated thereby. In
addition, the Borrowers shall ensure that (x) other than pursuant
to the agreements specified in the immediately preceding
sentence, LMSC will not incur any indebtedness or liabilities,
and, (y) other than as necessary to preserve its corporate status
and franchises, LMSC will incur no obligations.
10.228.2 The Borrowers will ensure that LMSC does not engage in
any transaction in violation of its Charter Documents.
10.229. Separate and Independent Existence of LMSC
10.229.1 The Borrowers shall (i) cause LMSC to comply with all
covenants and agreements made by LMSC in Section 5.01(a)-(h) and
5.01(j) and (n) of the Receivables Loan Agreement as in effect on
the date hereof (without giving effect to any amendment,
supplement or other modification thereof after the date thereof
or of the Receivables Purchase Agreement or any termination of
the Receivables Loan Agreement or the Receivables Purchase
Agreement), and (ii) cause LFC to comply with all covenants and
agreements made by LFC in the sections of the Receivables Loan
Agreement listed in (i) above. The Borrowers' obligations
pursuant to this Section 7.23(a) shall not be affected or
diminished by any waiver to or consent to departure from or
relating to any such covenant or agreement set forth in the
Receivables Loan Agreement given by any Person, and shall as
fully and absolutely be binding upon the Borrowers as if the
covenants and agreements referred to therein were made expressly
for the benefit of the Bank and set forth in full herein.
10.229.2 The Borrowers shall not permit LMSC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the Receivables Loan Agreement or Receivables
Purchase Agreement, in each case as in effect on the date hereof
(without giving effect to any amendment, supplement or other
modification thereof after the date hereof.)
10.229.3 The Borrowers will ensure that LMSC does not amend,
supplement or otherwise modify or waive any term or condition of
the Mortgage Purchase Agreement dated September 29, 1995 between
LMSC and LFC without the prior written consent of the Bank.
10.229.4 The Borrowers shall ensure that LMSC does not nullify
or circumvent any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).
10.230 LFC's Duties as Servicer; LFC's and LCC's Rights and
Obligations
10.230.1 LFC, as Servicer under the Asset Purchase Agreement,
will perform all of its obligations under the Asset Purchase
Agreement and other EagleFunding Documents.
10.230.2 The Borrowers will ensure that LFC is at all times the
Servicer under the Asset Purchase Agreement.
10.230.3 (i) LFC shall perform and abide by, and shall ensure
that LCC performs and abides by, each of its respective
obligations, covenants and agreements under the Asset Purchase
Agreement and other EagleFunding Documents; (ii) at the request
of the Bank, LFC shall enforce its rights, and shall ensure that
LCC enforces its rights, under the Asset Purchase Agreement and
other EagleFunding Documents; (iii) without the prior written
consent of the Bank, LFC will not, and shall ensure that LCC does
not, in any manner waive any of its or LCC's rights or release
any other party from its obligations to any Borrower or LCC,
under or in respect of the Asset Purchase Agreement or other
EagleFunding Documents; and (iv) upon request of the Bank, the
Borrowers will send to the Bank copies of notices, documents and
other papers furnished and received by any Borrower or by LCC
with respect to the Asset Purchase Agreement or other
EagleFunding Documents.
10.231. Special Purpose Nature of LCC
10.231.1 The Borrowers will ensure that LCC engages in no
activities other than activities incident to and required by the
Asset Purchase Agreement or other EagleFunding Documents, as
they are in effect on the date hereof (without giving effect to
any amendment, supplement or other modification thereof after the
date hereof). In addition, the Borrowers shall ensure that (x)
other than pursuant to the Asset Purchase Agreement and other
EagleFunding Documents, as in effect on the date hereof, LCC will
not incur any indebtedness or liabilities, and, (y) other than as
necessary to preserve its corporate status and franchises, LCC
will incur no obligations.
10.231.2 The Borrowers will ensure that LCC does not engage in
any transaction in violation of its Charter Documents.
10.232 Separate and Independent Existence of LCC
10.232.1 The Borrowers shall (i) cause LCC to comply with all
covenants and agreements made by LCC in the Asset Purchase
Agreement and other EagleFunding Documents (without giving effect
to any amendment, supplement or other modification thereof after
the date thereof), and (ii) cause LFC to comply with all
covenants and agreements made by LFC in the Asset Purchase
Agreement and other EagleFunding Documents. The Borrowers'
obligations pursuant to this Section 7.26(a) shall not be
affected or diminished by any waiver to or consent to departure
from or relating to any such covenant or agreement set forth in
the Asset Purchase Agreement or other EagleFunding Document given
by any Person, and shall as fully and absolutely be binding upon
the Borrowers as if the covenants and agreements referred to
therein were made expressly for the benefit of the Bank and set
forth in full herein.
10.232.2 The Borrowers shall not permit LCC to convey, transfer,
lease or otherwise dispose of any of its assets except for any
such conveyance, transfer, lease or other disposition required by
the Asset Purchase Agreement or other EagleFunding Documents, in
each case as in effect on the date hereof (without giving effect
to any amendment, supplement or other modification thereof after
the date hereof) and except for the transfer of the Subordinated
Interest Certificate to LFC.
10.232.3 The Borrowers will ensure that LCC does not amend,
supplement or otherwise modify or waive any term or condition of
the Asset Sale and Contribution Agreement, dated March 21, 1997,
by and between LFC and LCC without the prior written consent of
the Bank.
10.232.4 The Borrowers shall ensure that LCC does not nullify or
circumvent any provision as to its special and limited nature set
forth in its Charter Documents (as in effect on the date hereof).
10.233. Priority Trust
10.233.1 The Borrowers will ensure that the Priority Trust
engages in no activities other than activities set forth in
Section 1.3 of the Trust Agreement, dated October 7, 1998,
between LFC and Wilmington Trust Company (without giving effect
to any amendment, supplement or other modification thereof after
the date hereof). In addition, the Borrowers shall ensure that
the Priority Trust will not incur any indebtedness, liabilities,
or obligations, other than as incidental to carrying out its
purpose set forth in Section 1.3 of the Trust Agreement
referenced in this Section 7.27(a).
10.233.2 The Borrowers will ensure that the Priority Trust does
not engage in any transaction in violation of its Charter
Documents (as in effect on the date hereof without giving effect
to any amendment, supplement or other modification thereof after
the date hereof).
10.233.3 The Borrowers shall ensure that the Priority Trust does
not, without the prior written consent of the Bank, amend the
Administration Agreement or waive any of its rights under the
Administration Agreement. The Borrowers shall cause the Priority
Trust to enforce all of its rights under the Administration
Agreement.
10.234 LFC's Duties as Servicer; LFC's and LHC's Rights and
Obligations.
10.234.1 LFC, as Master Servicer under each of the VFN Servicing
Agreements will perform all of its obligations under such
agreements.
10.234.2 The Borrowers will ensure that LFC is at all times the
Master Servicer under the agreements referenced in Section
7.28(a).
10.234.3 (i) LFC shall perform and abide by, and shall ensure
that each LHC performs and abides by, each of its respective
obligations, covenants and agreements under the VFN Documents
applicable to it; (ii) at the request of the Bank, LFC shall
enforce its rights, and shall ensure that each LHC enforces its
rights, under the applicable VFN Documents; (iii) without the
prior written consent of the Bank, the Borrowers will not, and
shall ensure that no LHC will, in any manner waive any of its or
such LHC's rights or release any other party from its obligations
to any Borrower or such LHC, under or in respect of the
applicable VFN Documents; and (iv) upon request of the Bank, the
Borrowers will send to the Bank copies of notices, documents and
other papers furnished and received by any Borrower or by any LHC
with respect to the VFN Documents.
10.235. Special Purpose Nature of each LHC
10.235.1 The Borrowers will ensure that no LHC engages in any
activities other than activities incident to and required by the
VFN Documents, as they are in effect on the date hereof (without
giving effect to any amendment, supplement or other modification
thereof after the date hereof). In addition, the Borrowers shall
ensure that (x) other than pursuant to the VFN Documents, as in
effect on the date hereof, no LHC will incur any indebtedness or
liabilities, and, (y) other than as necessary to preserve its
corporate status and franchises, no LHC will incur any
obligations.
10.235.2 The Borrowers will ensure that no LHC engages in any
transaction in violation of its Charter Documents.
10.236 Separate and Independent Existence of each LHC
10.236.1 The Borrowers shall (i) cause each LHC to comply with
all covenants and agreements made by such LHC in the VFN
Documents to which it is a party (without giving effect to any
amendment, supplement or other modification thereof after the
date thereof), and (ii) cause LFC to comply with all covenants
and agreements made by LFC in any of the VFN Documents. The
Borrowers' obligations pursuant to this Section 7.30(a) shall not
be affected or diminished by any waiver to or consent to
departure from or relating to any such covenant or agreement set
forth in the applicable VFN Document given by any Person, and
shall as fully and absolutely be binding upon the Borrowers as if
the covenants and agreements referred to therein were made
expressly for the benefit of the Bank and set forth in full
herein.
10.236.2 The Borrowers shall not permit any LHC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the VFN Documents, in each case as in effect on the
date hereof (without giving effect to any amendment, supplement
or other modification thereof after the date hereof).
10.236.3 The Borrowers will ensure that no LHC amends,
supplements or otherwise modifies or waives any term or
condition of the VFN Documents which are applicable to it without
the prior written consent of the Bank.
10.236.4 The Borrowers shall ensure that no LHC nullifies or
circumvents any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).
10.237 LFC's Duties as Servicer; LFC's and LTSC's Rights and
Obligations.
10.237.1 LFC, as Servicer under the Class B Servicing Agreement,
will perform all of its obligations under Class B Servicing
Agreement and other Class B Certificate Agreements.
10.237.2 The Borrowers will ensure that LFC is at all times the
Servicer under the Class B Certificate Agreements.
10.237.3 (i) LFC shall perform and abide by, and shall ensure
that LTSC performs and abides by, each of its respective
obligations, covenants and agreements under the Class B Servicing
Agreement and other Class B Certificate Agreements; (ii) at the
request of the Bank, LFC shall enforce its rights, and shall
ensure that LTSC enforces its rights, under the Class B
Certificate Agreements; (iii) without the prior written consent
of the Bank, the Borrowers will not, and shall ensure that LTSC
does not, in any manner waive any of LFC's or LTSC's rights or
release any other party from its obligations to any Borrower or
LTSC, under or in respect of any of the Class B Certificate
Agreements; and (iv) upon request of the Bank, the Borrowers will
send to the Bank copies of notices, documents and other papers
furnished and received by any Borrower or by LTSC with respect to
any of the Class B Certificate Agreements.
0.1 Special Purpose Nature of LTSC
10.237.4 The Borrowers will ensure that LTSC engages in no
activities other than activities incident to and required by the
Class B Certificate Agreements, as they are in effect on the
date hereof (without giving effect to any amendment, supplement
or other modification thereof after the date hereof). In
addition, the Borrowers shall ensure that (x) other than pursuant
to the Class B Certificate Agreements, as in effect on the date
hereof, LTSC will not incur any indebtedness or liabilities, and,
(y) other than as necessary to preserve its corporate status and
franchises, LTSC will incur no obligations.
10.237.5 The Borrowers will ensure that LTSC does not engage in
any transaction in violation of its Charter Documents.
10.238 Separate and Independent Existence of LTSC
10.238.1 The Borrowers shall (i) cause LTSC to comply with all
covenants and agreements made by LTSC in the Class B Certificate
Agreements (without giving effect to any amendment, supplement or
other modification thereof after the date thereof), and (ii)
comply with all covenants and agreements made by LFC in the Class
B Certificate Agreements. The Borrowers' obligations pursuant to
this Section 7.33(a) shall not be affected or diminished by any
waiver to or consent to departure from or relating to any such
covenant or agreement set forth in the Class B Certificate
Agreements given by any Person, and shall as fully and absolutely
be binding upon the Borrowers as if the covenants and agreements
referred to therein were made expressly for the benefit of the
Bank and set forth in full herein.
10.238.2 The Borrowers shall not permit LTSC to convey,
transfer, lease or otherwise dispose of any of its assets except
for any such conveyance, transfer, lease or other disposition
required by the Class B Certificate Agreements, in each case as
in effect on the date hereof (without giving effect to any
amendment, supplement or other modification thereof after the
date hereof).
10.238.3 The Borrowers will ensure that LTSC does not amend,
supplement or otherwise modify or waive any term or condition of
any of the Class B Certificate Agreements without the prior
written consent of the Bank.
10.238.4 The Borrowers shall ensure that LTSC does not nullify
or circumvent any provision as to its special and limited nature
set forth in its Charter Documents (as in effect on the date
hereof).
NEGATIVE COVENANTS
Each of the Borrowers covenants and agrees that so long as
this Agreement is in effect and until the Commitment is
terminated and all of the Loans, together with interest,
commissions, fees and all other obligations incurred hereunder,
are paid in full, each of the Borrowers will perform, and will
cause each of its Subsidiaries to perform, the obligations set
forth in this Section 8 (unless it shall first have procured the
written consent of the Bank to do otherwise).
10.239 Engage in Same Type of Business.
None of the Borrowers will (i) enter into, or permit any
of its Subsidiaries to enter into, any business which is
substantially different from the business of the Borrowers and
its Subsidiaries as set forth on Schedule 10.19, or (ii) make or
acquire loans other than loans of the type and as otherwise
described on Schedule 10.19; provided however, that the Borrowers
and their Subsidiaries (other than LHCs, the Priority Trust, LCC,
LTSC and LMSC) shall be permitted to make and acquire loans which
are different from those described on Schedule 10.19 (each such
loan, a "New Business Loan") so long as the aggregate outstanding
principal amount of New Business Loans held by the Borrowers and
its Subsidiaries does not at any time exceed 25% of the Portfolio
Amount.
10.240 Liens.
10.240.1 The Borrowers will not contract, create, incur, assume
or suffer to exist any Lien upon or with respect to, or by
transfer or otherwise subject to the prior payment of any
indebtedness (other than the Loans), any of the Collateral (or
any proceeds of any of the foregoing) whether now owned or
hereafter acquired, or permit any of their respective
Subsidiaries so to do, other than Liens in favor of the Bank.
10.240.2 The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LMSC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
Receivables Loan Agreement (as amended by Amendment No. 1 thereto
dated as of December 18, 1995, and Amendment No. 2 thereto dated
as of September 27, 1996, the "Current Receivables Loan
Agreement") or under the Receivables Purchase Agreement (as
amended by Amendment No. 1 thereto dated as of December 18, 1995,
and Amendment No. 2 thereto dated as of September 27, 1996, the
"Current Receivables Purchase Agreement")) any of the Pledged
Assets (as defined in the Current Receivables Loan Agreement) or
any of the Purchased Assets (as defined in the Current
Receivables Purchase Agreement), or, except as required by the
Current Receivables Loan Agreement or Current Receivables
Purchase Agreement, any other asset of LMSC.
10.240.3 The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LCC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
Asset Purchase Agreement and related documents (as in effect on
the date hereof)) any of the Purchased Interests (as defined in
the Asset Purchase Agreement, as in effect on the date hereof),
or except as required by the Asset Purchase agreement, any other
asset of LCC.
10.240.4 The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that the Priority Trust does
not contract, incur, assume or suffer to exist) any Lien upon or
with respect to, or by transfer or otherwise subject to the prior
payment of any indebtedness (other than the Loans) any of the
Trust Estate (as defined in the Trust Agreement, dated October 7,
1998, between LFC and Wilmington Trust Company, as in effect on
the date hereof), or any other asset of LCC.
10.240.5 The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that no LHC contracts,
incurs, assumes or suffers to exist) any Lien upon or with
respect to, or by transfer or otherwise subject to the prior
payment of any indebtedness (other than the Loans, or
indebtedness under the applicable VFN Documents (as in effect on
the date hereof)) any of the trust estate which serves as
collateral security for the VFNs and the other notes issued under
the VFN Documents, or any other asset of any LHC.
10.169.1
10.240.6 The Borrowers will not contract, create, incur, assume
or suffer to exist (and shall ensure that LTSC does not contract,
incur, assume or suffer to exist) any Lien upon or with respect
to, or by transfer or otherwise subject to the prior payment of
any indebtedness (other than the Loans, or indebtedness under the
applicable Class B Certificate Agreements (as in effect on the
date hereof)) any of the Trust Estate (as defined in the Class B
Trust Agreement), or any other asset of LTSC.
10.240.7 The Borrowers will not contract, create, incur, assume
or suffer to exist any lien upon or with respect to the capital
stock of Realty.
10.241 Other Indebtedness; Prepayment of Long Term Debt.
10.241.1 The Borrowers will not contract, create, incur, assume
or suffer to exist any Indebtedness for Borrowed Money or permit
any of their respective Subsidiaries so to do; except
(i) indebtedness of the Borrowers represented by the Loans;
(ii) indebtedness existing on the Closing Date and
indicated on Schedule 8.3 to this Agreement;
(iii) trade payables incurred in the ordinary course of
business; provided that such trade payables (except to the extent
being contested in good faith by appropriate proceedings
diligently conducted and for which appropriate reserves have been
established in accordance with GAAP) are not more than 60 days
past due;
(iv) other indebtedness incurred by the Borrowers or their
respective Subsidiaries (other than any LHC, the Priority Trust,
LMSC, LTSC and LCC) after the Closing Date but only if no Default
or Event of Default shall have occurred and is continuing on the
date such indebtedness is incurred or would result therefrom; and
(v) indebtedness of any LHC permitted under Section
7.29(a) hereof.
10.241.2 Borrowers will not (i) amend the terms of any notes,
documents, instruments or agreements related to Long Term Debt
that would shorten the maturity date of any portion of principal
at any time payable thereunder to a date which is earlier than
the date (the "Post-Termination Date") which is 91 days after
the Revolving Credit Maturity Date, or (ii) make any payment on
account of the principal of or retire (by acquisition, purchase,
payment, prepayment, redemption or otherwise) all or any part of
any Long Term Debt, other than (a) the amounts specified in
Section 10.17 with respect to the Long Term Debt so specified
therein on the dates specified therein, (b) in addition to the
amounts specified in clause (a) preceding and clause (c)
following, $4,700,000 in the aggregate of Long Term Debt and (c)
with the proceeds of any loan which refinances such Long Term
Debt, provided that, no such refinancing loan shall require that
any amount of principal (other than principal to be repaid
thereunder after the Post- Termination Date) be repaid sooner (or
in any greater amount) than was required under the Long Term Debt
which it refinances.
10.242. Activity of the Borrowers.
LFC shall remain the primary operating company as among
the Borrowers, their respective Subsidiaries and other Affiliates
and LFC shall remain the sole primary servicer, purchaser and
originator of Receivables owned, directly or indirectly, by any
of the Borrowers, any of their Subsidiaries, or any trust, pool
or similar entity created or capitalized by any of the Borrowers,
any Subsidiary or any Affiliate of any of the Borrowers (it being
understood that LFC shall be permitted to retain sub-servicers
consistent with past practice). Realty shall remain a real
estate investment trust (in accordance with all applicable Legal
Requirements) whose primary business is to purchase real estate
related assets from LFC.
10.243 Servicing and Originating
10.243.1 LFC shall service the Receivables included in the
Portfolio Amount in accordance with each agreement relating
thereto to which it is a party and in accordance with customary
and normal standards of practice for the prudent servicing of
assets of such type.
10.243.2 Without the prior written consent of the Bank (such
consent not to be unreasonably withheld), the Borrowers will not
make or permit any of their respective Subsidiaries to make any
material change in any of its or their credit or lending policies
or procedures as in effect on the date hereof.
10.244 [intentionally deleted]
10.245 Accounting Changes
10.245.1 The Borrowers will not make or permit any of their
respective Subsidiaries to make any significant change in
accounting treatment and reporting practices, except as permitted
or required by GAAP.
10.245.2 The Borrowers will not change their respective Fiscal
Years or permit any of their respective Subsidiaries to change
its Fiscal Year.
10.246 Consolidation and Merger
No Borrower will wind up, liquidate or dissolve its affairs
or enter into any transaction of merger or consolidation or
permit any of its Subsidiaries so to do (or agree to do any of
the foregoing at any future time) except that (i) any
wholly-owned Subsidiary (other than the Priority Trust, LMSC, LCC,
LTSC and any LHC) of any Borrower may merge into any Borrower if
both before and after giving effect thereto no Default or Event
of Default has occurred or would result therefrom; provided that
the Borrower shall at all times be the continuing corporation,
and (ii) any wholly-owned Subsidiary of any Borrower may merge
into any other wholly-owned Subsidiary of a Borrower; provided
that the Borrowers shall not permit the Priority Trust, LMSC,
LCC, LTSC or any LHC to merge with or into any other wholly-owned
Subsidiary of any Borrower. Written notice of any merger
permitted by this Section 8.8, however, shall be given by the
Borrowers to the Bank before the effective date of such merger or
within five Business Days thereafter.
10.247 Sale of Assets
10.247.1 The Borrowers will not convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future
time) or permit any of their respective Subsidiaries so to do,
(i) all or a substantial part of its property or assets or any
part of such property or assets material to the conduct of its
business substantially as now conducted or as conducted after the
Closing Date, or (ii) any of its assets (other than equipment
which is obsolete or no longer used or useful in the conduct of
its business)), except in the ordinary course of business
(including, without limitation, in securitization or whole loan
sale transactions).
10.247.2 As long as no Event of Default has occurred and is
continuing hereunder, LFC may, from time to time, pursuant to and
in accordance with the terms of the Participation Agreement,
transfer to Realty some or all of its interest in certain of the
Collateral or a participation interest therein, provided, that:
(i) LFC shall give written notice to the Bank of any proposed
transfer at least 10 days prior to the date of such proposed
transfer; (ii) on about the effective date of such transfer, LFC
shall provide to the Bank a certificate of its CFO to the effect
that (A) such transfer will not be in violation of or give rise
to a default or event of default under the documentation relating
the Collateral to be transferred, (B) no Event of Default has
occurred and is continuing hereunder or would arise as a result
of such transfer; and (C) and the representations and warranties
of the Borrowers contained herein or in the other Loan Documents
are true and correct in all material respects with the same
effect as though such representations were being made at and as
of such time; (iii) any such transfer shall be subject to the
first priority security interest of the Bank in such Collateral
and LFC and Realty shall comply with the terms of the Loan
Documents to ensure that the Bank continues to have a first
priority security interest in such Collateral (subject to any
Permitted Liens which may have priority) proposed to be
transferred; and (iv) LFC and Realty shall execute and file any
and all documents, certificates and financing statements which
the Bank determines to be necessary or desirable for the
continuation of the Bank's first priority security interest in
such Collateral (subject to any Permitted Liens which may have
priority). Any such transfer from LFC to Realty pursuant to the
Participation Agreement which satisfies all the foregoing
conditions shall be referenced to as a "Permitted Realty
Transfer."
10.248[intentionally deleted]
10.249. Compliance with ERISA
No Borrower will (i) terminate, or permit any of its
Subsidiaries to terminate, any Pension Plan so as to result in
any material (in the opinion of the Bank) liability of such
Borrower or any such Subsidiary to the PBGC, (ii) permit to exist
the occurrence of any Reportable Event (as defined in Section
4043 of ERISA), or any other event or condition, which presents a
material (in the opinion of the Bank) risk of such a termination
by the PBGC of any Pension Plan, (iii) allow, or permit any such
Subsidiary to allow, the aggregate amount of "benefit
liabilities" (within the meaning of Section 4001(a)(16) of ERISA)
under all Pension Plans of which any Borrower or any ERISA
Affiliate is a "contributing sponsor" (within the meaning of
Section 4001(a)(13) of ERISA) to exceed $100,000, (iv) allow, or
permit any such Subsidiary to allow, any Plan to incur an
"accumulated funding deficiency" (within the meaning of Section
302 of ERISA or Section 412 of the Code), whether or not waived,
(v) engage, or permit any such Subsidiary or any Plan to engage,
in any "prohibited transaction" (within the meaning of Section
406 of ERISA or Section 4975 of the Code) resulting in any
material (in the opinion of the Bank and considered by itself or
together with all other such liabilities of any Borrower and all
ERISA Affiliates) liability to any Borrower or any ERISA
Affiliate, (vi) allow, or permit any such Subsidiary to allow,
any Plan to fail to comply with the applicable provisions of
ERISA and the Code in any material respect, (vii) fail, or permit
any such Subsidiary to fail, to make any required contribution to
any Multiemployer Plan, or (viii) completely or partially
withdraw, or permit any such Subsidiary to completely or
partially withdraw, from a Multiemployer Plan, if such complete
or partial withdrawal will result in any material (in the opinion
of the Bank) withdrawal liability under Title IV of ERISA.
10.250 Related Transactions
10.250.1 The Borrowers will not enter into any transaction with
any of their respective Subsidiaries or other member of the
Consolidated Group or any Affiliate of any of their respective
Subsidiaries or other member of the Consolidated Group (or with
any relative of such Affiliate) or any Person with which any
officer or director of any such Subsidiaries or other member of
the Consolidated Group has a financial interest on more favorable
terms than if such Person was totally unrelated, or permit any of
their respective Subsidiaries so to do.
10.250.2 The Borrowers will not make, or cause any of their
respective Subsidiaries to make, any payments, directly or
indirectly, to any of their Subsidiaries or Affiliate or any
officer, director or principal stockholder of any of the
Borrowers or any Affiliate, except as permitted by Sections
8.9(b), 8.12(a) and 8.16.
10.251. Subsidiaries.
LFC will not sell, assign, transfer or otherwise dispose
of, or in any way part with control of, any shares of capital
stock of or membership interest in or beneficial ownership
interest in, as applicable, Realty, any LHC, the Priority Trust,
LMSC, LTSC or LCC or any indebtedness or obligations of any
character of any of its Subsidiaries, or permit Realty, any LHC,
the Priority Trust, LMSC, LTSC or LCC so to do with respect to
any shares of capital stock of any other Subsidiary or any
indebtedness or obligations of any character of any Borrower or
any of its other Subsidiaries, or issue, or permit Realty, any
LHC, the Priority Trust, LMSC, LTSC or LCC to issue any
additional shares of capital stock, beneficial ownership interest
or membership interest; provided that, LFC may sell its
beneficial interest in the Priority Trust to Ironwood in
accordance with the Administration Agreement subject to LFC's
compliance with the terms of Section 2.4(e) hereof.
10.252. Borrowing Base
The Borrowers will not permit the principal amount of
outstanding Tranche A Revolving Credit Loans, Tranche B Revolving
Credit Loans and Tranche C Revolving Credit Loans to exceed the
amount of the Tranche A Borrowing Base, Tranche B Borrowing Base
and Tranche C Borrowing Base, respectively, at any time.
10.169
10.253. Investments
The Borrowers will not invest in (by capital
contribution or otherwise), or acquire for investment or purchase
or make any commitment to purchase the obligations or stock of,
any Person or permit any of their respective Subsidiaries so to
do, if at the time of such investment (both before and after
giving effect thereto) a Default or Event of Default has occurred
or would have occurred had such investment been made on the last
day of the most recently ended fiscal quarter. The Bank hereby
acknowledges and agrees that the foregoing provisions of this
Section 8.15 shall not legally prohibit the Borrowers or any of
their respective Subsidiaries from taking any of the actions
required pursuant to a binding agreement relating to a
securitization or whole loan transaction of the Borrowers or such
Subsidiary entered into by the Borrowers or such Subsidiary;
however, the Borrowers acknowledge that, notwithstanding the
foregoing provisions of this sentence, if the Borrowers or any of
their respective Subsidiaries takes any such action or makes any
investment in violation of the first sentence of this Section
8.15, same shall nonetheless be an Event of Default for all
purposes of this Agreement and the other Loan Documents.
10.254. Dividends, Distributions and Purchases of Capital Stock
The Borrowers will not declare or pay any dividends
(other than dividends payable in shares of its common stock), or
return any capital to its stockholders as such or authorize or
make any other distribution, payment or delivery of property or
cash to their respective stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a
consideration (otherwise than in exchange for, or from the
proceeds of the substantially concurrent sale of, other shares of
the same type of capital stock or of common stock of the
Borrowers), any shares of any class of their respective capital
stock now or hereafter outstanding, or any warrants or other
securities (now or hereafter outstanding) convertible into or
exercisable for any equity or other securities of the Borrowers
or a Subsidiary thereof, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any
subordinated debt or make any payments on account of the
principal thereof, or set aside any funds for any of the
foregoing purposes; provided, however, that (x) the Borrowers may
pay dividends on their respective common stock and (y) LFC may
make payments to repurchase up to an aggregate amount of 5% of
its common stock from the date hereof until the Revolving Credit
Maturity Date if, at the time of each such payment referred to in
clause (x) and (y) above (both before and after giving effect
thereto), no Default or Event of Default (i) has occurred and is
continuing or (ii) would have occurred had such dividend been
paid or such repurchase payment been made (as the case may be) on
the last day of the most recently ended fiscal quarter.
10.255. Leasebacks
The Borrowers will not enter into, or permit any of its
Subsidiaries to enter into, any arrangement with any bank,
insurance company or other lender or investor providing for the
leasing to any Borrower or any of its Subsidiaries of real
property (i) which at the time has been or is to be sold or
transferred by any Borrower or any of its Subsidiaries to such
lender or investor, or (ii) which has been or is being acquired
from another person by such lender or investor or on which one or
more buildings or facilities have been or are to be constructed
by such lender or investor for the purpose of leasing such
property to a Borrower or any Subsidiary of a Borrower.
10.256. Tangible Net Worth
The Borrowers will not permit the consolidated Tangible
Net Worth of LFC, at any time to be less than $30,000,000 plus
50% of the cumulative amount of LFC's consolidated positive net
income (determined in accordance with GAAP) for each fiscal year
commencing with the Fiscal Year ending December 31, 1996.
10.257. Debt: Net Worth Ratio
The Borrowers will not permit the ratio (expressed as a
percentage) of (x) the sum of all liabilities of the Consolidated
Group (including, without limitation, all Indebtedness for Money
Borrowed of the Consolidated Group other than any such
indebtedness consisting of recourse made available by any
Borrower or any Subsidiary of any Borrower consistent with past
practices to Persons to which such Borrower or such Subsidiary
conveyed Receivables pursuant to a securitization or whole loan
sale transaction) to (y) the LFC's consolidated Tangible Net
Worth at any time to be more than 500% as at the end of any
fiscal quarter of LFC.
10.258. Interest Coverage Ratio
10.258.1 The Borrowers will not permit the Interest Coverage
Ratio of the Consolidated Group for any Four Quarter Period to be
less than 1.8:1.0.
10.258.2 In the event that Borrowers does not deliver any
financial statement or certificate required to be delivered after
the end of any month or fiscal quarter pursuant to Section
7.1(a), 7.1(c), 7.16 or 7.17 within 10 days after the date
required therefor pursuant to said clause, the Borrowers shall be
deemed to be in default of Sections 8.18-8.22 (inclusive) for
purposes of Section 9.3 hereof.
10.259. Limit on Troubled Loans
The Borrowers will not permit at any time the sum of (A)
(i) the aggregate principal amount of Receivables which are 90 or
more days past due from their Due Date in payment of any amount
payable with respect thereto plus (without duplication) (ii) the
aggregate principal amount of all Receivables which are on
non-accrual status or which pursuant to LFC's servicing
guidelines should be on non-accrual status plus (without
duplication) (iii) the aggregate book value of all REO Properties
minus (iv) the amount at such time of Dealer Recourse and Dealer
Reserve in respect of any such Receivables to exceed (B) 10% of
the LFC's consolidated Tangible Net Worth at such time.
Exposure to Extraordinary Transactions.
The Borrowers will not permit, at any time, (x) the aggregate
principal amount of Extraordinary Loans that the Borrowers or any
of their respective Subsidiaries holds or services, or in respect
of which any Person has recourse (contingent or otherwise) to the
Borrowers or any of their respective Subsidiaries to exceed (y)
15% of the Portfolio Amount at such time.
10.261. Ammendments to Documents
The Borrowers will not (A) amend, supplement, or
otherwise modify, directly or indirectly, (i) any of their
respective Charter Documents (or permit any of the Priority
Trust, LMSC, any LHC, LTSC or LCC to amend, supplement or
otherwise modify, directly or indirectly, its respective Charter
Documents) or (ii) any agreement or provision which subordinates
any obligation to any of the Obligations or (B) amend,
supplement, otherwise modify, waive, or terminate, or agree to,
consent to or otherwise permit there to be (or permit any
Subsidiary of any Borrower to agree to consent to or otherwise
permit there to be) any amendment, modification, supplement,
waiver or termination of any provision of, the Receivables
Purchase Agreement, the Receivables Loan Agreement, the VFN
Documents, the EagleFunding Documents, the Administration
Agreement, the Class B Certificate Agreements, the Participation
Agreement or any agreement or other instrument relating to any of
the foregoing except for, in the case of any such amendment,
supplement, modification or waiver, any such amendment,
modification, supplement or waiver of any agreement referred to
in this clause (B) which does not and will not, directly or
indirectly reduce, delay or otherwise have any adverse effect
upon (and does not and will not have the direct or indirect
effect of reducing, delaying or otherwise adversely affecting)
any payment required in respect of the Uncertificated Residual
Rights or VFNs or EagleFunding Residual Rights or the Class B
Certificate or the Eligible TLCs or any other right of any
Borrower or any Subsidiary of any Borrower or the Bank with
respect to any such agreement, Uncertificated Residual Right,
VFN, Eagle Funding Residual Right, the Class B Certificate or the
Eligible TLCs.
EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events
(each an "Event of Default"):
10.262. Principal and Interest
The Borrowers shall default in the due and punctual
payment of (i) any principal due on any Loan; or (ii) any
interest on any Loan or in the due and punctual payment of the
facility fee, arrangement fee or any other amount due hereunder;
provided that failure to duly and punctually make an interest
payment shall not be an Event of Default under this Section 9.1
if such interest payment is paid within five days after the date
it is due and the Borrowers have not been late in making an
interest payment on the Note more than once in the preceding 12
months; or
10.263. Representations and Warranties
Any representation, warranty or statement made by any
Borrower in any Loan Document or otherwise in writing by any
Borrower in connection with any of the foregoing, or in any
certificate or other statement furnished pursuant to or in
connection with any of the foregoing, shall be breached or shall
prove to be untrue in any material respect on the date as of
which made; or
10.264 Certain Covenants
Any Borrower or any Subsidiary of any Borrower shall
default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to Section 7.1, Section 7.11, Section 7.16, Section
7.17, Section 7.18, Section 7.19 or Section 8; or
10.265 Other Covenants
Any Borrower or any Subsidiary of any Borrower shall
default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of this Agreement (other than
those referred to in Sections 9.1, 9.2 or 9.3) and such default
(if capable of cure) shall continue unremedied for a period of 30
days after the earlier of the date on which the Bank gives the
Borrowers notice of such default or the date an officer of any
Borrower or any Subsidiary of any Borrower becomes aware thereof;
or
10.266 Other Obligations
(i) Any indebtedness of any Borrower or any Subsidiary of
any Borrower in aggregate principal amount in excess of $500,000
shall be duly declared to be or shall become due and payable
prior to the stated maturity thereof, or (ii) any obligation of
any Borrower or any Subsidiary of any Borrower in respect of
indebtedness in excess of $500,000 in aggregate principal amount
shall not be paid as and when the same becomes due and payable
including any applicable grace period, or there shall occur and
be continuing any event which constitutes an event of default
under any instrument, agreement or evidence of indebtedness
relating to any indebtedness of any Borrower or any Subsidiary of
any Borrower in excess of $500,000 in aggregate principal amount,
the effect of which is to permit (with or without the giving of
notice, the passage of time or both) the holder or holders of
such instrument, agreement or evidence of indebtedness, or a
trustee, agent or other representative on behalf of such holder
or holders, to cause the indebtedness evidenced thereby to become
due prior to its stated maturity; or
10.267. A Change of Control Event shall occur; or
10.268. Insolvency
Any Borrower or any Subsidiary of any Borrower shall
dissolve or suspend or discontinue its business, or shall make an
assignment for the benefit of creditors or a composition with
creditors, shall be unable or admit in writing its inability to
pay its debts as they mature, shall file a petition in
bankruptcy, shall become insolvent (howsoever such insolvency may
be evidenced), shall be adjudicated insolvent or bankrupt, shall
petition or apply to any tribunal for the appointment of (or
there shall be appointed pursuant to contract) any administrator,
receiver, liquidator or trustee of or for it or any substantial
part of its property or assets, shall commence any proceedings
relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in
effect; or there shall be commenced against any Borrower or any
Subsidiary of any Borrower any such proceeding which shall remain
undismissed for a period of 60 days or more, or any order,
judgment or decree approving the petition in any such proceeding
shall be entered; or any Borrower or any Subsidiary of any
Borrower shall by any act or failure to act indicate its consent
to, approval of or acquiescence in, any such proceeding or in the
appointment of any receiver, liquidator or trustee of or for it
or any substantial part of its property or assets, or shall
suffer any such appointment to continue undischarged or unstayed
for a period of 60 days or more; or any Borrower or any
Subsidiary of any Borrower shall take any action for the purpose
of effecting any of the foregoing; or any court of competent
jurisdiction shall assume jurisdiction with respect to any such
proceeding or a receiver or trustee or other officer or
representative of a court or of creditors, or any court,
governmental officer or agency, shall under color of legal
authority, take and hold possession of any substantial part of
the property or assets of any Borrower or any Subsidiary of any
Borrower; or there shall happen or exist under the laws of any
applicable jurisdiction, with respect to any member of the
Consolidated Group, any event analogous to and having a
substantially similar effect to any of the foregoing events; or
10.269 Security Documents
The breach by any Borrower of any term or provision of
any Security Document, which default in the judgment of the Bank
is material; or any Security Document is at any time not in full
force and effect; or any of the Security Documents shall fail to
grant to the Bank the Lien and security interest purported to be
created thereby; or
10.270 Judgments
10.270.1 Any final non-appealable judgment for the payment of
money in excess of $500,000 shall be rendered against any
Borrower or any Subsidiary of any Borrower; or
10.270.2 Final judgment for the payment of money in excess of
$500,000 shall be rendered against any Borrower or any Subsidiary
of any Borrower, and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively
stayed or contested in good faith; or
10.271. Change in Management
Any two of the following individuals shall cease to be
senior officers of LFC with an active management role: Richard
Stratton, Heather Sica, James Shippee, and Ron Rabidou; or
10.272 Environmental Problems
Any Borrower or any Subsidiary of any Borrower incurs or
(in the opinion of the Bank) is reasonably likely to incur,
Environmental Costs in excess of $500,000 in the aggregate during
any 18-month period;
then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing the Bank may by written
notice to LFC; (i) declare the principal of and accrued interest
on the Loans to be, whereupon the same shall forthwith become,
due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrowers; and/or (ii) declare the Commitment, including each
Class Commitment, of the Bank terminated, whereupon the
Commitment and each Class Commitment of the Bank shall forthwith
terminate immediately; provided that if any Event of Default
described in Section 9.7 shall occur with respect to the
Borrowers, the result which would otherwise occur only upon the
giving of written notice by the Bank to the Borrowers as herein
described shall occur automatically, without the giving of any
such notice.
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and
to make the Loans provided for herein, each of the Borrowers
makes the following representations, covenants and warranties,
both as of the date hereof and (after giving effect to the
transactions contemplated hereby to occur on the Closing Date) as
of the Closing Date (unless such representation, covenant or
warranty is expressly made as of a specified date, in which case
the same shall be made as of such date), which representations,
covenants and warranties shall survive the execution and delivery
of this Agreement and the other documents and instruments
referred to herein:
10.273 Status; Validity.
10.273.1 LFC and Realty are duly organized and validly existing
corporations in good standing under the laws of Massachusetts and
Delaware, respectively, and have the corporate power and
authority to own or hold under lease their respective properties
and assets, to transact the businesses in which each is engaged,
to enter into and perform this Agreement and the other Loan
Documents and to borrow hereunder. Each Borrower is duly
qualified or licensed as a foreign corporation in good standing
in each jurisdiction where failure to so qualify would have a
Material Adverse Effect. The chief executive office of each of
the Borrowers, each LHC, the Priority Trust, LMSC, LTSC and LCC
is located in Williamstown, Massachusetts.
10.273.2 Each LHC is a duly organized and validly existing
corporation in good standing under the laws of Delaware and has
the corporate power and authority to own or hold under lease its
property and assets, and to transact the business in which it is
engaged, and is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction where failure
so to qualify would have a Material Adverse Effect.
10.273.3 Each of LMSC, LTSC and LCC is a duly organized and
validly existing limited liability company in good standing under
the laws of Delaware and has the corporate power and authority to
own or hold under lease its property and assets, and to transact
the business in which it is engaged, and is duly qualified or
licensed as a foreign limited liability company in good standing
in each jurisdiction where failure so to qualify would have a
Material Adverse Effect.
10.273.4 The Priority Trust is a duly organized and validly
existing business trust in good standing under the laws of
Delaware and has the corporate power and authority to own or hold
under lease its property and assets, and to transact the business
in which it is engaged, and is duly qualified or licensed as a
foreign business trust in good standing in each jurisdiction
where failure so to qualify would have a Material Adverse Effect.
10.273.5 The execution, delivery and performance by each
Borrower of this Agreement and the other Loan Documents and the
other documents, agreements or instruments provided for therein,
the consummation of the transactions contemplated thereunder and
the use of the proceeds of the Loans have been duly authorized by
all necessary corporate and stockholder action on the part of
such Borrower and each relevant Subsidiary of such Borrower.
This Agreement and the other Loan Documents and the other
documents, agreements or instruments provided for therein are the
legal, valid and binding obligations of each Borrower,
enforceable in accordance with their respective terms subject, as
to enforceability, to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).
10.273.6 LFC is the primary operating company as among the
Borrowers, its Subsidiaries and any other Affiliate of any
Borrower, and is the sole primary servicer, purchaser and
originator of Receivables owned, directly or indirectly, by any
of the Borrowers, any Subsidiary, any Affiliate of any Borrower
or any trust or pool or similar entity created or capitalized by
any of the Borrowers, any Subsidiary or any Affiliate of any
Borrower, it being understood that LFC shall be permitted to
retain subservicers consistent with past practice. Realty is a
real estate investment trust (in compliance with all applicable
Legal Requirements) whose primary business is to purchase real
estate related assets from LFC.
10.274. Compliance with Other Instruments
No Borrower and no Subsidiary of any Borrower is in
material default under any Material Agreement to which it is a
party, and neither the execution, delivery or performance of this
Agreement and the other Loan Documents nor the consummation of
the transactions herein or therein contemplated, nor compliance
with the terms and provisions hereof or thereof, will contravene
any provision of any Legal Requirement or will conflict with or
will result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or,
except as provided by the Security Documents, result in the
creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of such Person
pursuant to the terms of any indenture, mortgage, deed of trust
or Material Agreement to which such Person is a signatory or by
which such Person is bound or to which such Person may be subject
or violate any provision of the Charter Documents of such Person.
10.275 Litigation
Except as disclosed on Schedule 10.3 to this Agreement, as
of the date hereof and as of the Closing Date, there are no
actions, suits or proceedings pending or, to the knowledge of the
Borrowers, threatened, against or affecting any Borrower or any
Subsidiary before any Government Authority, which, if adversely
determined, would have a Material Adverse Effect on any Borrower
or any Subsidiary, or on the Consolidated Group.
10.276. Compliance with Law
Except for matters which could not result in a Material
Adverse Change in respect of any Borrower or any Subsidiary of
any Borrower or the Consolidated Group (a) all business and
operations of each Borrower and each Subsidiary of each Borrower
have been and are being conducted in accordance with all
applicable Legal Requirements; (b) each Borrower and each
Subsidiary of each Borrower has obtained all permits, licenses
and authorizations, or consents which are otherwise necessary,
for such Person to conduct its business as it is conducted; and
(c) neither any Borrower nor any Subsidiary of any Borrower is a
party to, has been threatened with, and there are no facts
existing as a basis for any governmental or other proceeding
which might result in a suspension, limitation or revocation of
any such permit, license or authorization.
10.277. LCC, LMSC, LTSC and Priority Trust
10.277.1 One hundred percent (100%) of the membership interest
in each of LCC, LTSC and LMSC is owned, beneficially and of
record, by LFC and such interests are not represented by one or
more certificates. One hundred percent (100%) of the beneficial
interest in the Priority Trust is owned, beneficially and of
record, by LFC and such interest is represented by a
certificate. One hundred percent (100%) of the issued and
outstanding capital stock of each LHC is owned, beneficially and
of record, by LHC. Such membership interests in LCC, LTSC and
LMSC, the beneficial interest in the Priority Trust and the
stocks of LHCs are owned by LFC free and clear of all Liens
(other than Liens in favor of the Bank).
10.277.2 Other than as disclosed in the Financial Statements
referred to in Section 10.11, no member of the Consolidated Group
has outstanding any option, warrant, bonds, debentures or other
right, put, call or commitment to issue, or any obligation or
commitment to purchase any of its authorized capital stock or
other equity interest, or any securities convertible into or
exchangeable for any of its authorized capital stock or other
equity interest.
10.277.3 None of LMSC, LTSC or LCC has any (and so long as the
membership interests in LMSC. LTSC or LCC are pledged to the Bank
as Collateral, will not have) outstanding option, warrant, bonds,
debentures or other right, put, call or commitment to issue, or
any obligation or commitment to purchase any of its membership
interests, or any securities convertible into or exchangeable for
any of its membership interests. No LHC has any (and so long as
any VFN is pledged to the Bank as Collateral, will not have)
outstanding option, warrant, bonds, debentures or other right,
put, call or commitment to issue, or any obligation or commitment
to purchase any of its capital stock, or any securities
convertible into or exchangeable for any of its capital stock.
The Priority Trust does not have any (and so long as any
beneficial interest in the Priority Trust is pledged to the Bank
as Collateral, will not have) outstanding option, warrant, bonds,
debentures or other right, put, call or commitment to issue, or
any obligation or commitment to purchase any of the beneficial
interest in the Priority Trust, or any securities convertible
into or exchangeable for any beneficial interest in the Priority
Trust.
10.278 Governmental Approvals
No order, permission, consent, approval, license,
authorization, registration or validation of, or filing with, or
exemption by, any Government Authority is required to authorize,
or is required in connection with the execution, delivery and
performance of this Agreement or the other Loan Documents by any
Borrower or any Subsidiary of any Borrower, or the taking of any
action hereby or thereby contemplated.
10.279 Federal Reserve Margin Regulations; Proceeds.
10.279.1 No member of the Consolidated Group is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulation of
the Board of Governors of the Federal Reserve System). No part
of the proceeds of any Loans will be used to purchase or carry
any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.
10.279.2 The proceeds of the Loans shall be used solely for the
Borrowers' working capital needs.
10.280. Taxes
10.280.1 All tax returns of any nature whatsoever, including but
not limited to, all US income, payroll, stock transfer, and
excise tax returns and all appropriate state and local income,
sales, excise, payroll, franchise and real and personal property
tax returns, and corresponding returns under the laws of any
jurisdiction, which are required to be filed by any Borrower or
any Subsidiary of any Borrower have been or will be filed by the
due date or extended due date of such returns.
10.280.2 Except for amounts which in the aggregate do not exceed
$100,000, all taxes due and payable with respect to each member
of the Consolidated Group have been paid, and there are no
liabilities, interest or penalties payable with respect to any
taxes which remain unpaid.
10.281 Investment Company Act
Neither any Borrower nor any Subsidiary of any Borrower
nor the entering into of the Loan Documents nor the issuance of
the Note, is subject to any of the provisions of the Investment
Company Act of 1940, as amended. Neither any Borrower nor any
Subsidiary of any Borrower is a "holding company" as defined in
the Public Utility Holding Company Act of 1935, as amended, or
subject to any other federal or state statute or regulation
limiting its ability to incur Indebtedness for Money Borrowed.
10.282. Properties of the Borrowers
10.282.1 The Borrowers and their respective Subsidiaries have
good and marketable title to, or valid leasehold interests in,
all of their material properties and assets.
10.282.2 The Borrowers have full, valid and exclusive right,
title and interest (in fee simple where applicable) to all of the
Borrowing Base Collateral. The Borrowers' ownership rights in
and to all of the foregoing are subject to no Liens, burdens or
defects.
10.282.3 The Borrowing Base Collateral Documents are in full
force and effect; there have been no amendments to, or waivers of
any provisions of, such documents other than amendments or
waivers, in the ordinary course of business, of the Required
Consumer Loan Documents which are not material to the value of
the Eligible Consumer Loans in the aggregate.
10.283. Financial Condition
10.283.1 The audited consolidated Financial Statements of the
Consolidated Group for its Fiscal Year ended December 31, 1997
and the financial statements for the nine months ended September
30, 1998 contained in LFC's quarterly report on Form 10-Q for the
quarter ended September 30, 1998 have been delivered to the Bank,
have been prepared in accordance with GAAP and fairly present the
financial condition and the results of operations of the
Consolidated Group as of the dates and for the periods covered
thereby (subject, in the case of such unaudited statements, to
normal year-end audit and adjustment). There are no contingent
obligations, material liabilities or any material unrealized or
anticipated losses from unfavorable commitments which are not
disclosed in such Financial Statements.
10.283.2 There has been no Material Adverse Change in respect of
the Consolidated Group, or any member thereof, since December 31,
1997.
10.283.3 At the time of, and after giving effect to, each Loan,
each Borrower, (i) is Solvent, and (ii) possesses, in the opinion
of the Borrowers, sufficient capital to conduct the business in
which it is engaged or presently proposes to engage.
10.284 Environmental Matters.
10.284.1 Each Borrower and each Subsidiary of any Borrower (and
any predecessor in interest of any of them) has been and
continues to be in material compliance with all applicable
Environmental Laws;
10.284.2 Each Borrower and each Subsidiary of any Borrower has
obtained all material permits and approvals required under
Environmental Laws, including all material environmental, health
and safety permits, licenses, approvals, authorization,
variances, agreements, and waivers of Government Authorities
("Environmental Permits") necessary for the conduct of its
business and the operation of its facility, and all such
Environmental Permits are in good standing and each Borrower and
each Subsidiary of any Borrower is in compliance with all
material terms and conditions of such Environmental Permits;
10.284.3 No Borrower and no Subsidiary of any Borrower nor any
of their respective Properties or operations is subject to any
outstanding written order from or agreement with any Government
Authority or other Person or is subject to any judicial or
docketed administrative proceeding respecting any (x)
Environmental Law, (y) Remedial Action or (z) Environmental Claim
or Environmental Costs;
10.284.4 To each Borrower's knowledge, there are no conditions
or circumstances now or formerly associated with any Property or
operations by any Borrower or any Subsidiary of any Borrower (or
any predecessor in interest of any of them) which may prevent or
interfere with material compliance by any Borrower or any of its
Subsidiaries with any applicable Environmental Laws or form the
basis of any material Environmental Claim or give rise to any
material Environmental Costs;
10.284.5 No Environmental Claim (including, without limitation,
in respect of any alleged violation of any Environmental Laws) is
pending or threatened against, or has been received by, any
Borrower or any Subsidiary of any Borrower;
10.284.6 No Environmental Lien and no unrecorded Environmental
Lien has attached to any Property of any Borrower or any
Subsidiary of any Borrower and to each Borrower's knowledge, no
action has been taken by any Person which could subject any such
Property to any Environmental Lien;
10.284.7 No Borrower and no Subsidiary of any Borrower (nor any
predecessor in interest of any of them) has transported or
arranged for the transportation of any Contaminant to any
location which is (i) listed on the National Priorities List
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) listed for possible
inclusion on the National Priorities List by the United States
Environmental Protection Agency, or (iii) listed on any similar
state list or (iv) to each Borrower's knowledge, the subject of
federal, state or local enforcement actions or other
investigations which may lead to Environmental Claims against any
Borrower or any Subsidiary of any Borrower or the imposition of
Environmental Costs on any Borrower or any Subsidiary of any
Borrower; and
10.284.8 Except as complies with all Environmental Laws, no
Property is located in, and no operations by any Borrower or any
Subsidiary of any Borrower (or any predecessor in interest of any
of them) affect, any Environmentally Sensitive Area.
10.285 Disclosure
Neither this Agreement or any other Loan Document nor any
statement, list, certificate or other document or information, or
any schedules to this Agreement or any other Loan Document
delivered or to be delivered to the Bank contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make statements contained
herein or therein, in light of the circumstances in which they
are made, not misleading.
10.286 Compliance with ERISA
The Borrowers and each ERISA Affiliate and each Plan and
the trusts maintained pursuant to such plans are in compliance in
all material respects with the presently applicable provisions of
Sections 401 through and including 417 of the Code, and of ERISA
and (i) no event which constitutes a Reportable Event as defined
in Section 4043 of ERISA has occurred and is continuing with
respect to any Plan which is or was covered by Title IV of ERISA,
(ii) no Plan which is subject to Part 3 of Subtitle B of Title 1
of ERISA has incurred any "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the
Code) whether or not waived, and (iii) no written notice of
liability has been received with respect to any Borrower or any
Subsidiary of any Borrower for any "prohibited transaction"
(within the meaning of Section 4975 of the Code or Section 406 of
ERISA), nor has any such prohibited transaction resulting in
liability to any Borrower or any ERISA Affiliate occurred.
Neither any Borrower nor any ERISA Affiliate (i) has
incurred any liability to the PBGC (or any successor thereto
under ERISA), or to any trustee of a trust established under
Section 4049 of ERISA, in connection with any Plan (other than
liability for premiums under Section 4007 or ERISA), (ii) has
incurred any withdrawal liability under Subtitle E of Title IV of
ERISA in connection with any Plan which is a Multiemployer Plan,
nor (iii) has contributed or has been obligated to contribute on
or after September 26, 1980, to any "multiemployer plan" (within
the meaning of Section 3(37) of ERISA) which is subject to Title
IV of ERISA.
The consummation of the transactions contemplated by
this Agreement (i) will not give rise to any liability on behalf
of any Borrower or any of its ERISA Affiliates under Title IV of
ERISA to the PBGC (other than ordinary and usual PBGC premium
liability), to the trustee of a trust established pursuant to
Section 4049 of ERISA, or to any Multiemployer Plan, and (ii)
will not constitute a "prohibited transaction" under Section 406
of ERISA or Section 4975 of the Code.
10.287. The Security Documents
(a) Each Security Document when delivered will grant a
Lien in the properties or rights intended to be covered thereby
(the "Collateral") which (i) will constitute a valid and
enforceable security interest under the Uniform Commercial Code
of the State (x) in which the Collateral is located and (y) by
which any Security Document is governed (as applicable, the
"UCC"), (ii) will be entitled to all of the rights, benefits and
priorities provided by the UCC, and (iii) when such Security
Documents or financing statements with respect thereto are filed
and recorded as required by the UCC, will be superior and prior
to the rights of all third Persons now existing or hereafter
arising whether by way of mortgage, pledge, lien, security
interest, encumbrance or otherwise, except for Permitted Liens.
All such action as is necessary in law has been taken, or prior
to the Closing Date (or, in the case of Liens to be granted
subsequent to the Closing Date, prior to the date required
therefor in accordance with the terms hereof) will have been
taken, to establish and perfect the security interest of the Bank
in the Collateral and to entitle the Bank to exercise the rights
and remedies provided in each of the Security Documents and the
UCC, and no filing, recording, registration or giving of notice
or other action is required in connection therewith except such
as has been made or given or will have been made or given prior
to such date(s). All filing and other fees and all recording or
other tax payable with respect to the recording of any of the
Security Documents and UCC financing statements have been paid or
provided for.
10.288 [Intentionally deleted.]
10.289. Long Term Debt
No principal amount of any Long Term Debt is payable on
or prior to the Revolving Credit Maturity Date other than:
10.289.1 On April 1 of each year, up to $920,000 in respect of
LFC's 10% Notes due 2004;
10.289.2 On June 1 of each year, up to $878,500 in respect of
LFC's 8 7/8% Notes due 2003;
10.289.3 On March 1 of 2001, $7,500,000 in respect of LFC's 9.3%
Notes due 2004;
10.289.4 On December 1 of each year, up to $2,587,500 in respect
of LFC's 8.45% Notes due 2002;
10.289.5 On November 1 of each year, up to $500,000 in respect
of LFC's 8.25% Notes due 2003; and
10.289.6 On December 1 of each year, up to $1,000,000 in respect
of LFC's 9.25% Notes due 2003.
10.290. Qualification
10.290.1 Solely by reason of (and without regard to any other
activities of the Bank in any state in which Collateral is
located) the entering into, performance and enforcement of this
Agreement, the Note, the Security Documents and the other Loan
Documents by the Bank will not constitute doing business by the
Bank in Massachusetts or any such other state or result in any
liability of the Bank for taxes or other governmental charges in
any such state; and qualification by the Bank to do business in
such jurisdiction is not necessary in connection with, and the
failure to so qualify will not affect, the enforcement of, or
exercise of any rights or remedies under, any of such documents.
10.290.2 No "business activity," "doing business" or similar
report or notice is required to be filed by the Bank in any such
jurisdiction in connection with the Loans or the transactions
contemplated by this Agreement, and the failure to file any such
report or notice will not affect the enforcement of, or the
exercise of any rights or remedies under, this Agreement, the
Security Documents or any of the other Loan Documents.
10.291. Business of Consolidated Group
Schedule 10.19 hereto sets forth a complete and accurate
description of the business of the Borrowers and their respective
Subsidiaries as of the date hereof including a full description
of the types of loans made and loans and assets acquired by the
Borrowers and their respective Subsidiaries.
10.292. Dealer Recourse
Schedule 10.20 sets forth a complete and accurate
description of the Borrowers' policies for determining when
Dealer Recourse should no longer be treated as available to the
Borrowers or their respective Subsidiaries and when the amount of
Dealer Recourse which the Borrowers treat as available from a
Dealer should be reduced. The Borrowers have treated and will
treat Dealer Recourse as described in Schedule 10.20 in each
statement, report and calculation furnished and which will be
furnished to the Bank.
10.293. Identity of Spread Account: Excess Servicing Assets
The "Custody Receivables Account" specified in each
Borrowing Base Certificate is the "Spread Account" (as defined in
each of the Receivables Purchase Agreement and the Receivables
Loan Agreement). The only Person other than LMSC with any
interest in the Spread Account or the Agent's Account (as defined
in the Receivables Loan Agreement and the Receivables Purchase
Agreement, in each case as in effect on the date hereof) are
LMSC, the Agent and the Lender in their capacities as such under
the Receivables Loan Agreement, and the Agent and the Purchaser
in their capacities as such under the Receivables Purchase
Agreement. All rights of LMSC to receive remittances from the
Spread Account are set forth in Sections 2.06(b) and 2.06(c) of
(i) the Receivables Loan Agreement and (ii) the Receivables
Purchase Agreement. The rights of LMSC under Sections
2.05(c)(vii) and 2.05(c)(viii) of (i) the Receivables Loan
Agreement and (ii) the Receivables Purchase Agreement constitute
the entirety of the "Excess Servicing Asset" specified in the
most recent Borrowing Base Certificate. No Person other than
LMSC has any interest in the Excess Servicing Asset.
10.294 Borrowing Base Collateral Documents
Schedule E hereto lists all of the Borrowing Base
Collateral Documents in effect as of the date hereof. All of the
representations and warranties of the Borrowers or their
respective Subsidiaries set forth in any of the Borrowing Base
Collateral Documents are materially true and correct as of the
date hereof. No default under or material violation of the terms
of any of the Borrowing Base Collateral Documents (other than any
default under Required Consumer Loan Documents in the ordinary
course of business which is not material to the value of the
Eligible Consumer Loans in the aggregate) has occurred and is
continuing as of the date hereof.
[Intentionally deleted.]
MISCELLANEOUS
10.295. Calculations and Financial Data
Calculations hereunder (including, without limitation,
calculations used in determining, or in any certificate of the
Borrowers reflecting, compliance by the Borrowers with the
provisions of this Agreement) shall be made and financial data
required hereby shall be prepared both as to classification of
items and as to amount in accordance with GAAP consistent with
the audited Financial Statements described in Section 10.11(a);
provided that for purposes of Sections 8.18 through 8.22
(inclusive) no effect shall be given to any change in GAAP from
those in effect on December 31, 1995.
10.296 Ammendment and Waiver
Except as otherwise provided, no provision of any of the
Loan Documents may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the Bank
and the Borrowers, except that waivers of provisions relating to
the Borrowers' performance or non-performance of their
obligations hereunder or thereunder need not be signed by the
Borrowers. Any such change, waiver, discharge or termination
shall be effective only in the specific instance and for the
specific purposes for which made or given.
10.297. Expenses; Indemnification
10.297.1 Whether or not the transactions hereby contemplated shall
be consummated, the Borrowers shall pay all reasonable out-of-pocket
costs and expenses of the Bank incurred in connection with (x) the
preparation, execution, delivery, administration, filing and
recording of, and (y) the amendment (including any waiver or consent)
or modification of (including any amendment, waiver, consent or
modification at any time requested by the Borrowers, whether or not
the same is finalized or executed), and enforcement of or
preservation of any rights under, this Agreement and the other Loan
Documents, including, without limitation, (A) the reasonable fees
and expenses of Sullivan & Worcester LLP, special counsel for the
Bank and any special or local counsel retained by the Bank, (B) the
reasonable fees and expenses of any appraisers retained by the Bank
if applicable with respect to any collateral granted to the Bank
after the date hereof, and (C) travel, title insurance, mortgage
recording and filing costs.
10.297.2 The Borrowers agree to pay, and to save the Bank harmless
from (x) all present and future stamp, filing and other similar
taxes, fees or charges (including interest and penalties, if any),
which may be payable in connection with the Loan Documents or the
issuance of the Note or any modification of any of the foregoing, and
(y) all finder's and broker's fees in connection with the
transactions contemplated by this Agreement and the other Loan
Documents.
10.297.3 The Borrowers agree to indemnify, pay and hold harmless the
Bank, any Bank Assignee and each holder of a Note and their
respective present and future officers, directors, employees and
agents (collectively, the "Indemnified Parties") from and against all
liability, losses, damages and expenses (including, without
limitation, legal fees and expenses) arising out of, or in any way
connected with, or as a result of (i) the execution and delivery of
the Letter Agreement, of this Agreement and the other Loan Documents
or the documents or transactions contemplated hereby and thereby or
the performance by the parties hereto or thereto of their respective
obligations hereunder and thereunder or relating thereto; or (ii) any
claim, action, suit, investigation or proceeding (in each case,
regardless of whether or not the Indemnified Party is a party thereto
or target thereof) in any way relating to any Collateral, the
Borrowers, any Subsidiary or any Affiliate of any of the foregoing;
or (iii) any actual or alleged violation by the Borrowers, any
Affiliate or Subsidiary (or any predecessor in interest of any of
them) of any Environmental Law or any claim being made or action
being brought against any Indemnified Party under or in respect of
any Environmental Law or any alleged violation thereof by any
Indemnified Party; provided that the Borrowers shall not be liable to
any Indemnified Party for any portion of such liabilities, losses,
damages and expenses sustained or incurred as a direct result of the
gross negligence or willful misconduct of the Bank or such
Indemnified Party if such gross negligence or willful misconduct is
determined to have occurred by a final and non-appealable decision of
a court of competent jurisdiction. No Indemnified Party shall be
entitled to any indirect or consequential damages.
10.297.4 All obligations provided for in this Section 12.3 and
Sections 3.4, 3.5, 3.7, 4.1, 4.2 and 5.2 shall survive any
termination of this Agreement and the Commitment, and the payment in
full of the Loans.
10.298 Benefits of Agreement; Descriptive Headings.
10.298.1 This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and assigns, and, in particular, shall inure to
the benefit of the holders from time to time of the Note; provided,
however, that the Borrowers may not assign or transfer any of their
rights or obligations hereunder without the prior written consent of
the Bank and any such purported assignment or transfer shall be
void. In furtherance of the foregoing, the Bank shall be entitled at
any time to grant participations in or assign, sell or otherwise
transfer the whole or any part of its rights and/or obligations under
this Agreement, the Loan Documents or any Loan or the Note to any
Person. No such participation shall relieve the Bank from its
obligations hereunder and the Borrowers need deal solely with the
Bank with respect to waivers, modifications and consents to this
Agreement, the Loan Documents or the Note. Any such participant,
assignee, purchaser or transferee is referred to in this Agreement as
a "Bank Assignee". The Borrowers agree that the provisions of
Sections 3.4, 3.5, 3.6, 3.7, 5.2 and 12.3 shall run to the benefit of
each Bank Assignee and its participations or interests herein, and
the Bank may enforce such provisions on behalf of any such Bank
Assignee; provided, however, that if the Bank grants a participation
in the whole or any part of its rights and/or obligations pursuant to
this Section 12.4, then the amounts that the Borrowers are required
to pay pursuant to this Agreement (including, without limitation,
additional amounts made pursuant to Section 5.2) shall not exceed the
amounts that the Borrowers would have been required to pay to the
Bank pursuant to this Agreement had the Bank not granted such
participation. The Borrowers hereby further agree that any such Bank
Assignee may, to the fullest extent permitted by applicable law,
exercise the right of set off with respect to such participation (and
in an amount up to the amount of such participation) as fully as if
such Bank Assignee were the direct creditor of the Borrowers. Upon a
participation, assignment, sale or transfer in accordance with the
foregoing, the Borrowers shall execute such documents and do such
acts as the Bank may reasonably request to effect same. The Bank may
furnish any information concerning the Borrowers or any Subsidiary of
any Borrower in its possession from time to time to Bank Assignees
(including prospective Bank Assignees). The Bank shall notify
Borrowers of any participation, assignment, sale or transfer granted
by it pursuant to this Section 12.4 but the Borrowers' approval shall
not be required for any such participation, assignment, sale or
transfer. The Borrowers shall not be responsible for any due
diligence costs or legal expenses of such Bank Assignees in
connection with their entering into such participation, assignment,
sale or transfer.
10.298.2 The descriptive headings of the various provisions of this
Agreement and the other Loan Documents are inserted for convenience
of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
10.298.3 Notwithstanding anything to the contrary contained herein
or in any of the Loan Documents, unless the Bank or the Borrowers
otherwise request with respect to any specific exhibit, exhibits to
this Agreement shall not be required to be attached to the execution
or any other copy of this Agreement, and any references in this
Agreement or the other Loan Documents to such exhibits as "Exhibits
hereto," "Exhibits to this Agreement" or words of similar effect
shall be deemed to refer to such document as executed by the parties
thereto and delivered on the Closing Date.
10.299 Notices, Requests, Demands, etc.
Except as otherwise expressly provided herein, all notices,
requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when
delivered (if sent by Federal Express or other similar overnight
delivery service), or three Business Days after mailing (when mailed,
postage prepaid, by registered or certified mail, return receipt
requested), or (in the case of telex, telegraphic, telecopier or
cable notice) when delivered to the telex, telegraph, telecopier or
cable company, or (in the case of telex or telecopier notice sent
over a telex or telecopier owned or operated by a party hereto) when
sent; in each case addressed as follows, except that notices and
communications to the Bank pursuant to Sections 2 and 9 shall not be
effective until received by the Bank: (i) if to the Bank, at the
Closing Office, and (ii) if to the Borrowers, at LFC's address
specified with its signature below (Attention: President), or to such
other addresses as any of the parties hereto may hereafter specify to
the others in writing, provided that communications with respect to a
change of address shall be deemed to be effective when actually
received.
10.300. Governing Law
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED WHOLLY WITHIN THE STATE OF NEW YORK (REGARDLESS OF
THE PLACE WHERE THIS AGREEMENT IS EXECUTED); except (as to any other
Loan Document) to the extent specifically set forth otherwise in that
Loan Document.
10.301 Counterparts; Telecopies.
This Agreement and the other Loan Documents may be executed in
any number of counterparts by the different parties hereto and
thereto on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all the counterparts
for each such Loan Document shall together constitute one and the
same instrument. Telecopied signatures hereto and to the other Loan
Documents shall be of the same force and effect as an original of a
manually signed copy.
10.302 Waivers
No failure or delay on the part of the Bank in exercising any
right, power or privilege under this Agreement or any other Loan
Document, and no course of dealing between the Borrowers or any
Subsidiary of any Borrower and the Bank shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights
and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Bank would otherwise
have pursuant to such documents or at law or equity. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Bank to any
other or further action in any circumstances without notice or demand.
10.303 Recoveries
Any Recoveries (after deduction and payment of all expenses
and costs permitted by this Agreement, the Security Documents or
applicable law), shall be applied against the Loans.
10.304 Jurisdiction
EACH BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT, THE NOTE OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE DOCUMENTS DELIVERED IN CONNECTION
THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS
THE BANK MAY ELECT, and, by execution and delivery hereof, each
Borrower accepts and consents for itself and in respect to its
property, generally and unconditionally, the jurisdiction of the
aforesaid courts and agrees that such jurisdiction shall be
exclusive, unless waived by the Bank in writing, with respect to any
action or proceeding brought by it against the Bank and any questions
relating to usury. Each of the Bank and each Borrower agrees that
Sections 5-1401 and 5-1402 of the General Obligations Law of the
State of New York shall apply to the Loan Documents and waives any
right to stay or to dismiss any action or proceeding brought before
said courts on the basis of forum non conveniens. In furtherance of
the foregoing, each Borrower hereby irrevocably designates and
appoints Battle Fowler LLP, 75 East 55th Street, New York, New York
10022, as agent of the Borrowers to receive service of all process
brought against the Borrowers with respect to any such proceeding in
any such court in New York, such service being hereby acknowledged by
the Borrowers to be effective and binding service in every respect.
Each Borrower hereby irrevocably consents that all process served or
brought against it or its agent for service of process with respect
to any such proceeding in any such court in New York shall be
effective and binding service in every respect if sent by registered
mail, or (if permitted by law) by Federal Express or other similar
overnight delivery service, to LFC at its address set forth next to
its signature below or to such other address as the Bank is notified
of in accordance with the provisions of Section 12.5 or to its agent
as aforesaid. Nothing herein shall affect the right of the Bank to
serve process in any other manner permitted by law or shall limit the
right of the Bank to bring proceedings against the Borrowers in the
courts of any other court or tribunal otherwise having jurisdiction.
10.305 Severability.
If any provision of this Agreement shall be held or deemed to
be or shall, in fact, be illegal, inoperative or unenforceable, the
same shall not affect any other provision or provisions herein
contained or render the same invalid, inoperative or unenforceable to
any extent whatever.
10.306 Right of Set-off
In addition to any rights now or hereafter granted under
applicable law or otherwise and not by way of limitation of any such
rights, upon the occurrence of an Event of Default the Bank is hereby
authorized at any time or from time to time, without notice to the
Borrowers or to any other Person, any such notice being hereby
expressly waived, to set-off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final)
and any other indebtedness at any time held or owing by the Bank to
or for the credit or the account of any Borrower against and on
account of the obligations and liabilities of the Borrowers now or
hereafter existing under any of the Loan Documents irrespective of
whether or not any demand shall have been made thereunder and
although said obligations, liabilities or claims, or any of them,
shall be contingent or unmatured. The Bank, if it exercises any
rights granted under this Section 12.12, shall thereafter notify LFC
of such action; provided that the failure to give such notice shall
not affect the validity of such set-off and application.
10.307 No Third Party Beneficiaries.
This Agreement is solely for the benefit of the Bank, the
Borrowers and their respective successors and assigns (except as
otherwise expressly provided herein) and nothing contained herein
shall be deemed to confer upon anyone other than the Bank, the
Borrowers and their respective successors and assigns any right to
insist on or to enforce the performance or observance of any of the
obligations contained herein. All conditions to the obligations of
the Bank to effect the Loans provided for herein are imposed solely
and exclusively for the benefit of the Bank and its successors and
assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms and no
other Person shall under any circumstances be deemed to be
beneficiary of such conditions.
10.308 Effectiveness
This Agreement shall become effective when and as of the date
(the "Effective Date") that all of the parties hereto shall have
signed a copy hereof (whether the same or different counterparts) and
the Borrowers shall have delivered it to the Bank at the Closing
Office.
10.309. Survival; Integration
10.309.1 Each of the representations, warranties, terms, covenants,
agreements and conditions contained in this Agreement shall
specifically survive the execution and delivery of this Agreement and
the other Loan Documents and the making of the Loans and shall,
unless otherwise expressly provided, continue in full force and
effect until the Commitment has been terminated and the Loans
together with interest thereon, the Commitment commissions, the fees
and compensation of the Bank, and all other sums payable hereunder or
thereunder have been indefeasibly paid in full.
10.309.2 This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the
subject matter hereof and thereof and supersedes the Letter
Agreement, the Existing Agreement and all other prior agreements,
written or oral, on the subject matter hereof and thereof. In the
event of any direct conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this
Agreement shall control and govern; provided that the inclusion of
supplemental rights or remedies in favor of the Bank in any other
Loan Document shall not be deemed a conflict with this Agreement.
Each Loan Document was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor
in favor of any party, but rather in accordance with the fair meaning
thereof.
10.310 Domicile of Loans
The Bank may make, maintain or transfer any of its Loans
hereunder to, or for the account of, any branch office, subsidiary or
affiliate of the Bank.
10.311 Waiver of Jury Trial
EACH OF THE BORROWERS AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR
SUBSIDIARY OR THE BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE BANK ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.312. Joint and Several Obligations
Each and every representation, warranty, covenant and
agreement made by any of the Borrowers, hereunder and under the other
Loan Documents shall be joint and several, whether or not so
expressed, and such obligations of any of the Borrowers shall not be
subject to any counterclaim, setoff, recoupment or defense based upon
any claim any Borrower may have against any other Borrower or the
Bank, and shall remain in full force and effect without regard to,
and shall not be released, discharged or in any way affected by, any
circumstance or condition affecting any other Borrower, including
without limitation (a) any waiver, consent, extension, renewal,
indulgence or other action or inaction under or in respect of this
Agreement or any other Loan Document, or any agreement or other
document related thereto with respect to any other Borrower, or any
exercise or nonexercise of any right, remedy, power or privilege
under or in respect of any such agreement or instrument with respect
to the other Borrower, or the failure to give notice of any of the
foregoing to the other Borrower; (b) any invalidity or
unenforceability, in whole or in part, of any such agreement or
instrument with respect to any other Borrower; (c) any failure on the
part of any other Borrower for any reason to perform or comply with
any term of any such agreement ro instrument; (d) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition,
liquidation or similar proceeding with respect to any other Borrower
or its properties or creditors; or (e) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, with
respect to any other Borrower. Each Borrower hereby waives any
requirement of diligence or promptness on the part of Bank in the
enforcement of the their respective rights hereunder or under any
other Loan Document with respect to the obligations of itself or of
the other Borrowers. Without limiting the foregoing, any failure to
make any demand upon, to pursue or exhaust any rights or remedies
against a Borrower, or any delay with respect thereto, shall not
affect the obligations of the other Borrower hereunder or under any
other Loan Document.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
duly authorized officers as of the date first above written.
LITCHFIELD FINANCIAL
CORPORATION
430 Main Street
Williamstown, Massachusetts 01267
fax: 413/458-1015 By: /s/ Heather A. Sica
Title: Executive Vice
President
LFC REALTY, INC.
430 Main Street
Williamstown, Massachusetts 01267 By: /s/ Heather A. Sica
fax: 413/458-1015 Title: Executive Vice
President
BANK OF SCOTLAND
565 Fifth Avenue
New York, New York 10017
fax: 212/557-9460 By: /s/ Steve Campbell
Title: Vice President
Exhibit 10.186
AMENDMENT NO. 2 TO
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 (the "Amendment") to the Second Amended
and Restated Loan and Security Agreement dated May 28, 1997, as
amended by Amendment No. 1 to Second Amended and Restated Loan
and Security Agreement dated as of October 1, 1998 (collectively,
the "Agreement") is dated as of January ____, 1999, and is among
BANKBOSTON, N.A., a national banking association with its head
office at 100 Federal Street, Boston, Massachusetts 02110 and
with a place of business in Providence, Rhode Island as agent
(the "Agent"); various financial institutions as are or may
become parties hereto including without limitation, KEYBANK
NATIONAL ASSOCIATION ("KeyBank") (collectively, the "Lenders");
and LITCHFIELD FINANCIAL CORPORATION with its principal place of
business at 430 Main Street, Williamstown, Massachusetts (the
"Borrower").
Preliminary Statement
Pursuant to the terms of the Agreement, BankBoston, N.A. and
Fleet Bank-NH as Lenders have provided to the Borrower a
revolving credit facility in the original principal amount of up
to $50,000,000. The Borrower has requested that the definition
of the "Borrowing Base" (and certain other definitions related
thereto) be amended to increase the availability under the
facility to $60,000,000. KeyBank has agreed to become a Lender
and to advance funds, subject to the terms and conditions of the
Agreement, in an amount up to $10,000,000. This Amendment is
intended to modify and amend the Agreement in certain particulars
to accomplish the foregoing. Capitalized terms not otherwise
defined herein shall have the meaning of such terms in the
Agreement.
Agreement
It is, therefore, agreed:
The definition of "Loans" in the Preliminary Statement of
the Agreement, and Section 1.15(a) of the Agreement, are each
hereby amended by deleting "$50,000,000" and replacing the same
with "$60,000,000." A corresponding change shall be made to each
document or agreement in which the aggregate amount of the
revolving credit facilities available to the Borrower is
described including, without limitation, (i) the Second Amended
and Restated Collateral Assignment of Contracts dated May 28,
1997; (ii) the Agency Agreement; (iii) the Custodial Agreement;
and (iv) the Collateral Account Agreement, each of which being
dated May 28, 1997.
The following sections of the Agreement are hereby amended
by increasing the maximum amount which may be advanced against
various forms of Collateral in accordance with the following
table:
Section Loan Collateral Type From To
1.4 Acquisition & Development $10,000,000 $12,000,000
1.5 Construction $ 8,000,000 $ 9,600,000
1.8 Healthcare $10,000,000 $12,000,000
1.9 Home Equity $ 8,000,000 $ 9,600,000
1.11 Specialty Finance $ 5,000,000 $ 6,000,000
1.13 Tax Certificate $10,000,000 $12,000,000
New Section 1.53(a) is hereby added to the Agreement as
follows:
"1.53(a) KeyBank Note shall have the meaning provided in
Section 2.1 herein."
Section 1.55 of the Agreement is hereby amended by deleting
"$50,000,000" therefrom and replacing the same with "$60,000,000."
Section 1.81 of the Agreement is hereby modified by
replacing the term "Total Serviced Portfolio" with the term
"Total Loan Portfolio".
Section 2.1 of the Agreement is hereby deleted and replaced
with the following:
2.1 The Notes. Prior to or simultaneously with the
execution of this Agreement, (a) Borrower has executed a
Revolving Line of Credit Promissory Note payable to BankBoston in
the original principal amount of up to $30,000,000 (the
"BankBoston Note"), (b) Borrower has executed a Revolving Line of
Credit Promissory Note payable to Fleet in the original principal
amount of up to $20,000,000 (the "Fleet Note"), and (c) Borrower
is executing a Revolving Line of Credit Promissory Note payable
to KeyBank in the original principal amount of up to $10,000,000
(the "KeyBank Note" and collectively with the BankBoston Note and
the Fleet Note, the "Notes").
The introductory paragraph of Section 9.1 is hereby amended
to read as follows:
9.1 Remedies Upon Default. If an Event of Default shall occur,
Agent and Lenders shall not have any obligation to permit any
further borrowing hereunder. Upon the occurrence of an Event of
Default specified in Section 8.4 or 8.8 hereof, all the
Indebtedness, including any Notes then outstanding, shall
automatically become due and payable, together with interest
thereon, without presentment, demand, protest or notice of any
kind, all of which being hereby waived by the Borrower. Upon the
occurrence of any other Event of Default Agent and Lenders may
declare the Indebtedness, including the Notes, immediately due
and payable, without presentment, protest, demand or notice of
any kind, all of which are hereby expressly waived by Borrower.
In either such event the Agent and the Lenders shall have all
rights and remedies of a secured party under the UCC and any
other applicable law then in effect; and may pursue any and all
remedies provided for hereunder and in any one or more of the
Loan Documents or at law or in equity, including, without
limitation, the following:
Exhibit 1.16 to the Agreement is hereby replaced with
Exhibit 1.16 as annexed hereto.
From and after the date hereof, KeyBank shall be deemed to
be a "Lender" and be entitled to all of the benefits and subject
to all of the obligations of a Lender as may be set forth in the
Agreement and any documents ancillary thereto.
Except as expressly modified above, the Agreement is hereby
restated and reaffirmed by the parties in all particulars.
This Amendment No. 2 may be executed in multiple
counterparts, each being deemed an original and this being one of
the counterparts but all of which shall constitute one and the
same instrument.
Signed as a sealed instrument.
BORROWER:
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
--------------------
Name: Heather A. Sica
Title: Executive Vice President
AGENT:
BANKBOSTON, N.A.
By: /s/ Thomas J. Morris
--------------------
Name: Thomas J. Morris
Title: Director
LENDERS:
BANKBOSTON, N.A.
By: /s/ Thomas J. Morris
--------------------
Name: Thomas J. Morris
Title: Director
FLEET BANK-NH
By: /s/ David Canedy
----------------
Name: David Canedy
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ John W. Kingston
---------------------
Name: John W. Kingston
Title: Vice President
Exhibit 10.187
LITCHFIELD HYPOTHECATION CORP. 1997-B
NOTE PURCHASE AGREEMENT
March 23, 1999
LITCHFIELD HYPOTHECATION CORP.1997-B, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
("Litchfield"), hereby agree with UNION BANK OF CALIFORNIA, N.A.
(the "Purchaser"), as follows:
1. The Notes. The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of August 1,
1997, as amended (the "Indenture"), providing for the issuance
and sale by the Issuer of its Hypothecation Loan Collateralized
Notes (the "Notes"), in one or more series, secured by the Trust
Estate granted to the Trustee by the Issuer pursuant to the
Indenture, which includes, among other assets, a pool of certain
hypothecation Loans owned by the Issuer and serviced by
Litchfield Financial Corporation, a Massachusetts corporation (in
such capacity, the "Servicer"). Unless otherwise specifically
defined herein, all capitalized terms shall have the meanings
ascribed to them in the Indenture.
2. Purchase and Sale. In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, (i) the Issuer agrees
to sell to the Purchaser, and the Purchaser agrees to purchase
from the Issuer, $7,240,512.37 principal amount of Hypothecation
Loan Collateralized Notes, Series A and (ii) the Seller agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Seller, $4,134,487.63 principal amount of Hypothecation Loan
Collateralized Notes, Series C (the foregoing notes are referred
to herein collectively as the "Notes") at an aggregate price (the
"Purchase Price") equal to the aggregate outstanding principal
amount of the Notes on the Closing Date (as hereinafter
defined). The Purchase Price shall be allocated among the Seller
and the Issuer in proportion to the principal amount of Notes
sold by each. The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.
3. The Closing; Delivery of the Notes. The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 23, 1999 (the "Closing
Date"). The Closing shall take place by mail or at such place as
the parties hereto shall designate. At the Closing, the Issuer
and the Seller, respectively, will deliver to the Purchaser,
against payment of the Purchase Price therefor, one Series A Note
in the denomination of $ 7,240,512.37 and one Series C Note in
the denomination of $4,134,487.63 registered in the Purchaser's
name, or in the name of its nominee; provided however, that if
the Purchaser requests the Issuer or the Seller in writing not
less than one Business Day prior to the Closing Date to deliver
to the Purchaser Notes in other denominations (authorized
pursuant to the Indenture) that equal in the aggregate the
denominations specified above, the Seller and the Issuer shall
comply with such request.
4. Conditions of the Purchaser's Obligation. The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:
(a) Each of this Purchase Agreement, the Notes, the
Indenture, the Servicing Agreement, and the Purchase and
Sale Agreement (collectively, the "Agreements") shall have
been duly authorized, executed and delivered by each of the
parties thereto and be in full force and effect; and
(b) The Purchaser shall have received copies of all
documents and other information as it may reasonably
request, in form and substance reasonably satisfactory to
it, with respect to such transactions and the taking of all
proceedings in connection therewith.
5. Representations and Warranties. (a) The Issuer
represents and warrants to the Purchaser as of the date hereof as
follows:
(i) Each of the Agreements to which the Issuer is a
party has been duly authorized, executed and delivered by
the Issuer and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and
binding agreement of the Issuer enforceable against the
Issuer in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
The Notes have been validly issued and are entitled to the
benefits of the Indenture and constitute valid instruments
enforceable in accordance with their terms subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law).
(ii) Neither the issuance or sale of the Notes, nor
the consummation of any other of the transactions
contemplated in any of the Agreements to which the Issuer is
a party, nor the execution, delivery or performance of the
terms of any of the Agreements to which the Issuer is a
party, has or will result in the breach of any term or
provision of the certificate of incorporation or by-laws of
the Issuer, or conflict with, result in a breach or
violation on the part of the Issuer of or the acceleration
of indebtedness under or constitute a default under, the
terms of any indenture or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any
statute or regulation applicable to the Issuer or any order
applicable to the Issuer of any court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Issuer.
(iii) No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Issuer for the execution and delivery or by the
Issuer with any of the Agreements to which the Issuer is a
party or the Notes, or the issuance of the Notes, or the
consummation by the Issuer of any transaction contemplated
under any of the Agreements to which the Issuer is a party,
or such consent, approval or authorization has been obtained
or such registration, filing or notice has been made (or,
with respect to assignments of mortgages and financing
statements, will be made by the Issuer as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against,
or investigation of, the Issuer pending or, to the best of
its knowledge, threatened, before any court, administrative
agency or other tribunal which, either individually or in
the aggregate, (A) may result in any material adverse change
in the financial condition, properties, or assets of the
Issuer or in any material and adverse impairment of the
right or ability of the Issuer to perform its obligations
under the Agreements, or (B) asserts the invalidity of any
of the Agreements to which either the Issuer is a party or
the Notes or (C) seeks to prevent the consummation of any of
the transactions contemplated by any of the Agreements to
which the Issuer is a party.
(v) Based in part on the representations and
warranties contained in Section 6 hereof, the Issuer is not,
and the sale of the Notes in the manner contemplated by this
Purchase Agreement will not cause the Issuer to be, subject
to registration or regulation as an investment company or
affiliate of any investment company under the Investment
Company Act of 1940, as amended.
(vi) Each Loan included in the Trust Estate securing
the Notes has been delivered to the Trustee or its
collateral agent, together with an assignment thereof by the
Issuer, which immediately prior to such assignment will own
full legal and equitable title to each Loan, free and clear
of any lien, charge, encumbrance or participation or
ownership interest in favor of any other Person. Upon
endorsement and delivery to the Trustee or its collateral
agent of the executed original promissory notes and
execution and delivery of the Indenture, all of the Issuer's
right, title and interest in and to the Loans will be
validly and effectively transferred to the Indenture Trustee
as collateral security for the benefit of the Holders of the
Notes.
(vii) On the Closing Date after giving effect to the
sale of the Notes to the Purchaser hereunder, the aggregate
principal amount of all Hypothecation Loan Collateralized
Notes outstanding shall be $38,929,826.47, of which
$7,240,512.37 aggregate principal amount shall be Series A
Notes owned of record by the Purchaser, $12,205,028.91
aggregate principal amount shall be Series A Notes owned by
Green Tree Financial Servicing Corporation ("Green Tree"),
$219,914.52 aggregate principal amount shall be Series B
Variable Funding Notes owned of record by the Seller,
$4,134,487.63 aggregate principal amount shall be Series C
Notes owned of record by the Purchaser, $10,542,751.91
aggregate principal amount shall be Series C Notes owned of
record by Green Tree and $4,587,131.13 aggregate principal
amount shall be Series C Notes owned of record by Berkshire
Bank. Such outstanding amounts are fully authorized (and do
not exceed any limitations under the Indenture).
(b) The Seller represents and warrants to the Purchaser as of
the date hereof as follows:
(i) Each of the Agreements to which the Seller is a
party has been duly authorized, executed and delivered by
the Seller and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and
binding agreement of the Seller enforceable against the
Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(ii) Neither the sale of the Notes, nor the
consummation of any other of the transactions contemplated
in any of the Agreements to which the Seller is a party, nor
the execution, delivery or performance of the terms of any
of the Agreements to which the Seller is a party, has or
will result in the breach of any term or provision of the
certificate of incorporation or by-laws of the Seller, or
conflict with, result in a breach or violation on the part
of the Seller of or the acceleration of indebtedness under
or constitute a default under, the terms of any indenture or
other agreement or instrument to which the Seller is a party
or by which it is bound, or any statute or regulation
applicable to the Seller or any order applicable to the
Seller of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Seller.
(iii)No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Seller for the execution and delivery or by the
Seller with any of the Agreements to which the Seller is a
party, or the sale of the Notes, or the consummation by the
Seller of any transaction contemplated under any of the
Agreements to which the Seller is a party, or such consent,
approval or authorization has been obtained or such
registration, filing or notice has been made (or, with
respect to assignments of mortgages and financing
statements, will be made by the Seller as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against, or
investigation of, the Seller pending or, to the best of its
knowledge, threatened, before any court, administrative
agency or other tribunal which, either individually or in
the aggregate, (A) may result in any material adverse change
in the financial condition, properties, or assets of the
Seller or in any material and adverse impairment of the
right or ability of the Seller to perform its obligations
under the Agreements, or (B) asserts the invalidity of any
of the Agreements to which either the Seller is a party or
the Notes or (C) seeks to prevent the consummation of any of
the transactions contemplated by any of the Agreements to
which either the Seller is a party.
(v) Neither the Seller nor any Affiliate of the Seller
nor any Person authorized or employed by the Seller will,
directly or indirectly, offer or sell any Note or similar
security in a manner which would render the sale of the
Notes pursuant to this Purchase Agreement a violation of
Section 5 of the 1933 Act, or require registration pursuant
thereto. Based in part on the representations and
warranties contained in Section 6 hereof, the offering and
sale of the Notes by the Seller to Purchaser at closing are
exempt from the registration requirements of the 1933 Act
and the Indenture is not required to be qualified under the
Trust Indenture Act of 1939, as amended.
The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.
6. The Purchaser's Representations. The Purchaser
represents to the Issuer as follows:
(a) The Purchaser is acquiring the Notes for its own
account. The Purchaser understands that the Notes are not
being registered under the Securities Act of 1933, as
amended (the "1933 Act"), or any State securities or "Blue
Sky" law and are being sold to the Purchaser in reliance
upon the Purchaser's representations contained herein in a
transaction that is exempt from the registration
requirements of the 1933 Act and any applicable State law.
The Purchaser agrees that the Notes may not be Transferred
unless subsequently registered under the 1933 Act
and any applicable State securities or "Blue Sky" law or
unless exemptions from the registration requirements of the
1933 Act and applicable State laws are available. Subject to
the express provisions of this Purchase Agreement and the
Indenture, the disposition of the Notes shall at all times
be within the control of the owner thereof. Notwithstanding
anything to the contrary, express or implied, in this
Agreement, the Indenture or otherwise, the Purchaser
understands that none of the Trust, the Note Registrar or
the Indenture Trustee is obligated to register the Notes
under the 1933 Act or any other securities law and that any
Transfer in violation of the provisions of the Indenture
shall be void ab initio. The foregoing shall in no way limit
the ability or the right of the Purchaser to sell
participation interests in any Notes owned by the Purchaser.
(b) The Purchaser is either (i) an "accredited
investor" as defined in rule 501(a) under the 1933 Act or
(ii) a Qualified Institutional Buyer as defined in Rule 144A
under the 1933 Act.
(c) The Purchaser is authorized to enter into this
Purchase Agreement and to purchase the Notes. This Purchase
Agreement has been duly authorized executed and delivered by
the Purchaser and constitutes the Purchaser's legal, valid
and binding agreement enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy,
insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(d) The Purchaser has sufficient knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment
in the Notes and the Purchaser is able to bear the economic
risk of investment in the Notes. The Purchaser acknowledges
that in connection with the making of its investment
decision, the Purchaser has been afforded the opportunity to
ask questions of, and receive answers regarding, and to
conduct its investigation of, the Issuer, the Loans and the
Loan Collateral, the Trust Estate, the Notes and the
Servicer as is sufficient and necessary for the Purchaser to
make an informed investment decision with respect to the
Notes.
(e) No placement agent, broker, finder or investment
banker has been employed by or has acted for the Seller or
the Purchaser in connection with the transactions with the
Purchaser contemplated in this Purchase Agreement or
otherwise in connection with the Notes; and the Purchaser is
solely responsible for, and the Purchaser shall indemnify
the Seller for the fees, expenses or commissions of any
placement agent, broker, finder or investment banker and any
other person or entity claiming to have acted in such
capacity for or under the authority of the Purchaser.
(f) The Purchaser agrees to treat, and to take no
action inconsistent with the treatment of, the Notes as debt
of the Issuer for tax purposes.
7. Notices. All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, Union Bank
of California, N.A., 445 South Figueroa Street, 15th Floor, Los
Angeles, California 90071, Attention: Stephen R. Sweeney, and (b)
if to the Issuer or Litchfield, c/o Litchfield Financial
Corporation, 430 Main Street, Williamstown, Massachusetts 01267,
Attention: Executive Vice President, or to such other address as
the Issuer or Litchfield shall have furnished to the Purchaser in
writing. Any notice so given by registered or certified mail
shall be deemed to have been given five days after being
deposited in a depository of the United States mails. Any notice
given by means of a nationally recognized overnight delivery
service shall be deemed to have been given upon receipt thereof.
8. Miscellaneous. (a) This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.
(b) Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, Litchfield and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.
Each of the Issuer, Litchfield and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in the Supreme
Court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
(d) The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.
(e) This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof. This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.
(f) This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.
(g) This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.
9. No Recourse. It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by Litchfield but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
Litchfield to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall Litchfield be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of Litchfield under the Guarantee or the Purchase and
Sale Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.
LITCHFIELD HYPOTHECATION CORP. 1997-B
By: /s/ Heather A. Sica
--------------------
Title: Executive Vice President
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
--------------------
Title: Executive Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Stephen R. Sweeney
--------------------------
Title: Vice President
Exhibit 10.188
LIMITED GUARANTEE
LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of UNION BANK OF CALIFORNIA, N.A., a
California banking corporation with an address at 445 South
Figueroa Street, 15th Floor, Los Angeles, California 90071("Union
Bank"), as a Noteholder under the Indenture hereinafter referred
to.
WHEREAS, Litchfield Hypothecation Corp.1997-B, a Delaware
corporation (the "Issuer") and a wholly-owned subsidiary of
the Guarantor, and The Chase Manhattan Bank, as trustee
(the "Trustee") are parties to an Indenture of Trust (the
"Indenture") (capitalized terms used but not defined herein
shall have the meanings attributed thereto in the Indenture
or in Appendix A thereto), dated as of August 1, 1997
providing for the issuance by the Issuer from time to time
of its Hypothecation Loan Collateralized Notes
(collectively, the "Notes");
WHEREAS, the Issuer and the Trustee have executed and
delivered Amendment No. 1 to the Indenture, dated as of March 1,
1999 ("Amendment No. 1 to the Indenture") providing for the
issuance by the Issuer of Series A Notes in an initial aggregate
principal amount of $7,240,512.37(the "Additional Series A
Notes") and to authorize the Trustee to authenticate and deliver
the Additional Series A Notes to Union Bank; and
WHEREAS, pursuant to the Indenture, the Issuer has
issued the Additional Series A Notes which Additional Series A
Notes the Issuer has sold to Union Bank pursuant to a Note
Purchase Agreement dated as of March 23, 1999 (the "Note Purchase
Agreement"); and
WHEREAS, pursuant to the Indenture, the Issuer has
issued and the Guarantor has purchased certain Series C Notes in
the original principal amount of $4,134,487.63(the "Series C
Notes") which Series C Notes the Guarantor has sold to Union Bank
pursuant to the Note Purchase Agreement; and
WHEREAS, it is a condition to the purchase by Union
Bank of the Additional Series A Notes and the Series C Notes
(collectively, the "Guaranteed Notes) that the Guarantor issue a
guarantee in the form hereof of certain of the obligations of the
Issuer under the Guaranteed Notes.
NOW, THEREFORE, in consideration of the premises and in
order to induce Union Bank to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:
Section 1. Guarantee. The Guarantor hereby
irrevocably and unconditionally guarantees the punctual payment
when due, whether at stated maturity, after maturity, by
acceleration or otherwise, of principal of and interest on the
Guaranteed Notes (the "Guaranteed Obligations") in an aggregate
amount not to exceed $568,750(the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a
Guaranteed Obligation upon receipt of written demand therefor
from Union Bank (a "Demand Notice") which Demand Notice shall
specify that an Event of Default has occurred and is continuing
under either or both of Sections 7.1(a) and 7.1(b) of the
Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to Union Bank
under the Guaranteed Notes and the Indenture. The obligation of
the Guarantor hereunder shall in no event exceed the Guaranteed
Amount. The Guaranteed Amount shall be reduced by (i) the amount
of any payments made by Guarantor hereunder or (ii) the portion
allocable to the Guaranteed Notes of any unreimbursed Servicer
Advances pursuant to the Indenture.
Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO UNION BANK UNDER THIS GUARANTEE AND UNION BANK'S
CONSENT TO SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF UNION
BANK'S RIGHTS HEREUNDER.
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that Union Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by Union Bank to collect the
Guaranteed Obligations or any portion thereof or to enforce the
obligations of the Guarantor under this Guarantee, and (iv) any
other action, event or precondition to the enforcement of this
Guarantee or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Union Bank with respect
thereto.
(b) No invalidity, irregularity, voidability, voidness
or unenforceability of the Indenture or the Guaranteed Notes or
of all or any part of the Guaranteed Obligations or of any
security therefor, shall affect, impair or be a defense to this
Guarantee.
(c) The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or performance,
and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Guaranteed
Obligation, any security therefor, or any liability incurred
directly or indirectly in respect thereof, or any other
amendment or waiver of or any consent to departure from the
Indenture or the Guaranteed Notes , including any increase
in the Guaranteed Obligations resulting from the extension
of additional credit to the Issuer;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, all or any of the Guaranteed
Obligations, and/or any offset thereagainst, or failure to
perfect, or continue the perfection of, any lien in any such
property, or delay in the perfection of any such lien, or
any amendment or waiver of or consent to departure from any
other guarantee for all or any of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the Issuer
or others (including the Guarantor);
(iv) any settlement or compromise of any Guaranteed Obligation, any
security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect
thereof or hereof, and any subordination of the payment of
all or any part thereof to the payment of any Guaranteed
Obligations (whether due or not) of the Issuer to creditors
of the Issuer other than the Guarantor;
(v) any manner of application of any collateral, or proceeds thereof,
to all or any of the Guaranteed Obligations, or any manner
of sale or other disposition of any collateral for all or
any of the Guaranteed Obligations or any other assets of the
Issuer or any of its subsidiaries; or
(vi) any change, restructuring or termination of the existence of the
Issuer.
(d) Union Bank may at any time and from time to time
(whether or not after revocation or termination of this
Guarantee) without the consent of, or notice (except as shall be
required by applicable statute and cannot be waived) to, the
Guarantor, and without incurring responsibility to the Guarantor
or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever
realized to any Guaranteed Obligation regardless of what
Guaranteed Obligations remain unpaid.
(e) This Guarantee shall continue to be effective or
be reinstated, as the case may be, if claim is ever made upon
Union Bank for repayment or recovery of any amount or amounts
received by Union Bank in payment or on account of any of the
Guaranteed Obligations and Union Bank repays all or part of said
amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Union Bank, or any
settlement or compromise of any such claim effected by Union Bank
with any such claimant (including the Issuer), then and in such
event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
Union Bank hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received
by Union Bank.
Section 4. Continuing Guarantee. This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, Union Bank and its successors, transferees and
assigns. All obligations to which this Guarantee applies or may
apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with Union Bank that:
(a) The Guarantor has the corporate power to execute
and deliver this Guarantee and to incur and perform its
obligations hereunder;
(b) The Guarantor has duly taken all necessary
corporate action to authorize the execution, delivery and
performance of this Guarantee and to incur and perform its
obligations hereunder;
(c) No consent, approval, authorization or other
action by, and no notice to or of, or declaration or filing
with, any governmental or other public body, or any other
person, is required for the due authorization, execution,
delivery and performance by the Guarantor of this Guarantee
or the consummation of the transactions contemplated hereby;
and
(d) The Guarantor shall provide to Union Bank (i)
within 60 days of the end of each fiscal quarter, the report on
form 10-Q of the Guarantor and (ii) within 135 days of the end of
each fiscal year of the Guarantor, the report on form 10-K of the
Guarantor.
Section 6. Terms. (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".
(b) All references herein to Sections and subsections
shall be deemed to be references to Sections and subsections of
this Guarantee unless the context shall otherwise require.
Section 7. Amendments and Modification. No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.
Section 8. Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with Union
Bank in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature. Guarantor will not claim
any set-off or counterclaim against Issuer in respect of any
liability of Guarantor to Issuer. Guarantor waives any benefit
of and any right to participate in any collateral which may be
held by Union Bank.
Section 9. Statute of Limitations. Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against Union Bank shall have commenced to run, toll the running
of such statute of limitations and, if the period of such statute
of limitations shall have expired, prevent the operation of such
statute of limitations.
Section 10. Rights and Remedies Not Waived. No act,
omission or delay by Union Bank shall constitute a waiver of its
rights and remedies hereunder or otherwise. No single or partial
waiver by Union Bank of any default hereunder or right or remedy
which it may have shall operate as a waiver of any other default,
right or remedy or of the same default, right or remedy on a
future occasion.
Section 11. Admissibility of Guarantee. The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to Union Bank shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.
Section 12. Notices. All notices, requests and
demands to or upon Union Bank or the Guarantor under this
Agreement shall be in writing and given as provided in the
Indenture (with respect to the Guarantor, to the address of the
Issuer as set forth in the Indenture and with respect to Union
Bank, at its address set forth above).
Section 13. Counterparts. This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
Section 14. CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, THE
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).
GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH UNION BANK MAY DESIRE TO USE.
(b) The Guarantor irrevocably consents to the service
of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the Guarantor at its address determined
pursuant to Section 12 hereof.
(c) Nothing herein shall affect the right of Union
Bank to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice of
dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).
Section 15. GOVERNING LAW. THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
Section 16. Captions; Separability. (a) The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.
(b) If any term of this Guarantee shall be held to be
invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.
Section 17. Acknowledgment of Receipt. The Guarantor
acknowledges receipt of a copy of this Guarantee.
Section 18. This Guarantee shall inure to the benefit
of and be enforceable by Union Bank, its successors, transferees
and assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.
IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed in the State of New
York as of the date first above set forth.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
--------------------
Title: Executive Vice President
Exhibit 10.189
LITCHFIELD HYPOTHECATION CORP. 1998-A
NOTE PURCHASE AGREEMENT
March 23, 1999
LITCHFIELD HYPOTHECATION CORP. 1998-A, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Seller"), hereby agree with BSB BANK & TRUST (the
"Purchaser"), as follows:
1. The Notes. The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of June 1,
1998, as amended by Amendment No 1. thereto dated as of September
1, 1998, Amendment No. 2 thereto dated as of November 1, 1998 and
Amendment No. 3 thereto dated as of March 1, 1999 (collectively,
the "Indenture"), providing for the issuance and sale by the
Issuer of its Hypothecation Loan Collateralized Notes, in one or
more series, secured by the Trust Estate granted to the Trustee
by the Issuer pursuant to the Indenture, which includes, among
other assets, a pool of certain hypothecation Loans owned by the
Issuer and serviced by Litchfield Financial Corporation, a
Massachusetts corporation (in such capacity, the "Servicer").
Unless otherwise specifically defined herein, all capitalized
terms shall have the meanings ascribed to them in the
Indenture.
2. Purchase and Sale. In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, the Issuer agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Issuer, $5,000,000 principal amount of Hypothecation Loan
Collateralized Notes, Series A (the "Notes") at an aggregate
price (the "Purchase Price") equal to the aggregate outstanding
principal amount of the Notes on the Closing Date (as hereinafter
defined). The Purchase Price shall be allocated among the Seller
and the Issuer in proportion to the principal amount of Notes
sold by each. The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.
3. The Closing; Delivery of the Notes. The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 3, 1999 (the "Closing
Date"). The Closing shall take place by mail or at such place as
the parties hereto shall designate. At the Closing, the Issuer
and the Seller, respectively, will deliver to the Purchaser,
against payment of the Purchase Price therefor, one Series A Note
in the denomination of $5,000,000 registered in the Purchaser's
name, or in the name of its nominee; provided however, that if
the Purchaser requests the Issuer or the Seller in writing not
less than one Business Day prior to the Closing Date to deliver
to the Purchaser Notes in other denominations (authorized
pursuant to the Indenture) that equal in the aggregate the
denominations specified above, the Seller and the Issuer shall
comply with such request.
4. Conditions of the Purchaser's Obligation. The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:
(a) Each of this Purchase Agreement, the Notes, the
Indenture, the Servicing Agreement, and the Purchase and
Sale Agreement (collectively, the "Agreements") shall have
been duly authorized, executed and delivered by each of the
parties thereto and be in full force and effect; and
(b) The Purchaser shall have received copies of all
documents and other information as it may reasonably
request, in form and substance reasonably satisfactory to
it, with respect to such transactions and the taking of all
proceedings in connection therewith.
5. Representations and Warranties. (a) The Issuer
represents and warrants to the Purchaser as of the date hereof as
follows:
(i) Each of the Agreements to which the Issuer is a
party has been duly authorized, executed and delivered by
the Issuer and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and
binding agreement of the Issuer enforceable against the
Issuer in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
The Notes have been validly issued and are entitled to the
benefits of the Indenture and constitute valid instruments
enforceable in accordance with their terms subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law).
(ii) Neither the issuance or sale of the Notes, nor
the consummation of any other of the transactions
contemplated in any of the Agreements to which the Issuer is
a party, nor the execution, delivery or performance of the
terms of any of the Agreements to which the Issuer is a
party, has or will result in the breach of any term or
provision of the certificate of incorporation or by-laws of
the Issuer, or conflict with, result in a breach or
violation on the part of the Issuer of or the acceleration
of indebtedness under or constitute a default under, the
terms of any indenture or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any
statute or regulation applicable to the Issuer or any order
applicable to the Issuer of any court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Issuer.
(iii) No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Issuer for the execution and delivery or by the
Issuer with any of the Agreements to which the Issuer is a
party or the Notes, or the issuance of the Notes, or the
consummation by the Issuer of any transaction contemplated
under any of the Agreements to which the Issuer is a party,
or such consent, approval or authorization has been obtained
or such registration, filing or notice has been made (or,
with respect to assignments of mortgages and financing
statements, will be made by the Issuer as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against,
or investigation of, the Issuer pending or, to the
best of its knowledge, threatened, before any
court, administrative agency or other tribunal
which, either individually or in the aggregate,
(A) may result in any material adverse change in
the financial condition, properties, or assets of
the Issuer or in any material and adverse
impairment of the right or ability of the Issuer
to perform its obligations under the Agreements,
or (B) asserts the invalidity of any of the
Agreements to which either the Issuer is a party
or the Notes or (C) seeks to prevent the
consummation of any of the transactions
contemplated by any of the Agreements to which the
Issuer is a party.
(v) (v) Based in part on the representations and
warranties contained in Section 6 hereof, the
Issuer is not, and the sale of the Notes in the
manner contemplated by this Purchase Agreement
will not cause the Issuer to be, subject to
registration or regulation as an investment
company or affiliate of any investment company
under the Investment Company Act of 1940, as
amended.
(vi) Each Loan included in the Trust Estate securing
the Notes has been delivered to the Trustee or its
collateral agent, together with an assignment thereof by the
Issuer, which immediately prior to such assignment will own
full legal and equitable title to each Loan, free and clear
of any lien, charge, encumbrance or participation or
ownership interest in favor of any other Person. Upon
endorsement and delivery to the Trustee or its collateral
agent of the executed original promissory notes and
execution and delivery of the Indenture, all of the Issuer's
right, title and interest in and to the Loans will be
validly and effectively transferred to the Indenture Trustee
as collateral security for the benefit of the Holders of the
Notes.
(vii) On the Closing Date after giving effect to the
sale of the Notes to the Purchaser hereunder, the aggregate
principal amount of all Hypothecation Loan Collateralized Notes
outstanding shall be $29,181,670.90, of which $5,000,000
aggregate principal amount shall be Series A Notes owned of
record by the Purchaser, $10,782,573.07 aggregate principal
amount shall be Series A Notes owned of record by BankBoston,
N.A., $1,962,801.70 aggregate principal amount shall be Series A
Notes owned of record by MetroWest Bank, $941,548.14 aggregate
principal amount shall be Series A Notes owned of record by the
Seller, $6,067,004.76 aggregate principal amount shall be Series
B Variable Funding Notes owned of record by the Seller,
$2,385,954.55 aggregate principal amount shall be Series C Notes
owned of record by BankBoston, N.A., and $2,041,788.68 aggregate
principal amount shall be Series C Notes owned of record by
MetroWest Bank.
(b) The Seller represents and warrants to the Purchaser as of the
date hereof as follows:
(i) Each of the Agreements to which the Seller is a
party has been duly authorized, executed and delivered by
the Seller and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and
binding agreement of the Seller enforceable against the
Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(ii) Neither the sale of the Notes, nor the
consummation of any other of the transactions contemplated
in any of the Agreements to which the Seller is a party, nor
the execution, delivery or performance of the terms of any
of the Agreements to which the Seller is a party, has or
will result in the breach of any term or provision of the
certificate of incorporation or by-laws of the Seller, or
conflict with, result in a breach or violation on the part
of the Seller of or the acceleration of indebtedness under
or constitute a default under, the terms of any indenture or
other agreement or instrument to which the Seller is a party
or by which it is bound, or any statute or regulation
applicable to the Seller or any order applicable to the
Seller of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Seller.
(iii)No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Seller for the execution and delivery or by the
Seller with any of the Agreements to which the Seller is a
party, or the sale of the Notes, or the consummation by the
Seller of any transaction contemplated under any of the
Agreements to which the Seller is a party, or such consent,
approval or authorization has been obtained or such
registration, filing or notice has been made (or, with
respect to assignments of mortgages and financing
statements, will be made by the Seller as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against,
or investigation of, the Seller pending or, to the
best of its knowledge, threatened, before any
court, administrative agency or other tribunal
which, either individually or in the aggregate,
(A) may result in any material adverse change in
the financial condition, properties, or assets of
the Seller or in any material and adverse
impairment of the right or ability of the Seller
to perform its obligations under the Agreements,
or (B) asserts the invalidity of any of the
Agreements to which either the Seller is a party
or the Notes or (C) seeks to prevent the
consummation of any of the transactions
contemplated by any of the Agreements to which
either the Seller is a party.
(v) (v) Neither the Seller nor any Affiliate of the
Seller nor any Person authorized or employed by
the Seller will, directly or indirectly, offer or
sell any Note or similar security in a manner
which would render the sale of the Notes pursuant
to this Purchase Agreement a violation of Section
5 of the 1933 Act, or require registration
pursuant thereto. Based in part on the
representations and warranties contained in
Section 6 hereof, the offering and sale of the
Notes by the Seller to Purchaser at closing are
exempt from the registration requirements of the
1933 Act and the Indenture is not required to be
qualified under the Trust Indenture Act of 1939,
as amended.
The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.
6. The Purchaser's Representations. The Purchaser
represents to the Issuer as follows:
(a) The Purchaser is acquiring the Notes for its own
account. The Purchaser understands that the Notes are not being
registered under the Securities Act of 1933, as amended (the
"1933 Act"), or any State securities or "Blue Sky" law and are
being sold to the Purchaser in reliance upon the Purchaser's
representations contained herein in a transaction that is exempt
from the registration requirements of the 1933 Act and any
applicable State law. The Purchaser agrees that the Notes may
not be Transferred unless subsequently registered under the 1933
Act and any applicable State securities or "Blue Sky" law or
unless exemptions from the registration requirements of the 1933
Act and applicable State laws are available. Subject to the
express provisions of this Purchase Agreement and the Indenture,
the disposition of the Notes shall at all times be within the
control of the owner thereof. Notwithstanding anything to the
contrary, express or implied, in this Agreement, the Indenture or
otherwise, the Purchaser understands that none of the Trust, the
Note Registrar or the Indenture Trustee is obligated to register
the Notes under the 1933 Act or any other securities law and that
any Transfer in violation of the provisions of the Indenture
shall be void ab initio. The foregoing shall in no way limit the
ability or the right of the Purchaser to sell participation
interests in any Notes owned by the Purchaser.
(b) The Purchaser is either (i) an "accredited
investor" as defined in rule 501(a) under the 1933 Act or
(ii) a Qualified Institutional Buyer as defined in Rule 144A
under the 1933 Act.
(c) The Purchaser is authorized to enter into this
Purchase Agreement and to purchase the Notes. This Purchase
Agreement has been duly authorized executed and delivered by
the Purchaser and constitutes the Purchaser's legal, valid
and binding agreement enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy,
insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(d) The Purchaser has sufficient knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment
in the Notes and the Purchaser is able to bear the economic
risk of investment in the Notes. The Purchaser acknowledges
that in connection with the making of its investment
decision, the Purchaser has been afforded the opportunity to
ask questions of, and receive answers regarding, and to
conduct its investigation of, the Issuer, the Loans and the
Loan Collateral, the Trust Estate, the Notes and the
Servicer as is sufficient and necessary for the Purchaser to
make an informed investment decision with respect to the
Notes.
(e) No placement agent, broker, finder or investment
banker has been employed by or has acted for the Seller or
the Purchaser in connection with the transactions with the
Purchaser contemplated in this Purchase Agreement or
otherwise in connection with the Notes; and the Purchaser is
solely responsible for, and the Purchaser shall indemnify
the Seller for the fees, expenses or commissions of any
placement agent, broker, finder or investment banker and any
other person or entity claiming to have acted in such
capacity for or under the authority of the Purchaser.
(f) The Purchaser agrees to treat, and to take no
action inconsistent with the treatment of, the Notes as debt
of the Issuer for tax purposes.
7. Notices. All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, BSB Bank &
Trust, 58-68 Exchange Street, Binghamton, New York 13902-1056,
Attention: Glenn R. Small, and (b) if to the Issuer or the
Seller, c/o Litchfield Financial Corporation, 430 Main Street,
Williamstown, Massachusetts 01267, Attention: Executive Vice
President, or to such other address as the Issuer or the Seller
shall have furnished to the Purchaser in writing. Any notice so
given by registered or certified mail shall be deemed to have
been given five days after being deposited in a depository of the
United States mails. Any notice given by means of a nationally
recognized overnight delivery service shall be deemed to have
been given upon receipt thereof.
8. Miscellaneous. (a) This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.
(b) Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, the Seller and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.
Each of the Issuer, the Seller and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in any state
court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
(d) The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.
(e) This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof. This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.
(f) This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.
(g) This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.
9. No Recourse. It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by the Seller but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
the Seller to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall the Seller be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of the Seller under the Guarantee or the Purchase and
Sale Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.
LITCHFIELD HYPOTHECATION CORP. 1998-A
By: /s/ Heather A. Sica
-------------------
Name: Heather A. Sica
Title: Executive Vice President
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
-------------------
Name: Heather A. Sica
Title: Executive Vice President
BSB BANK & TRUST
By: /s/ Glenn R. Small
------------------
Name: Glenn R. Small
Title: Executive Vice President
Exhibit 10.190
LIMITED GUARANTEE
LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of BSB Bank & Trust, a New York
banking corporation with an address at 58-68 Exchange Street,
Binghamton, New York ("BSB"), as a Noteholder under the Indenture
hereinafter referred to.
WHEREAS, Litchfield Hypothecation Corp. 1998-A, a
Delaware corporation (the "Issuer") and a wholly-owned subsidiary
of the Guarantor, is a party to an Indenture of Trust dated as of
June 1, 1998, as amended by Amendment No. 1 thereto dated as of
September 1, 1998, Amendment No. 2 thereto dated as of November
1, 1998 and Amendment No. 3 thereto dated as of March 1, 1999
(the "Indenture") (capitalized terms used but not defined herein
shall have the meanings attributed thereto in the Indenture or in
Appendix A thereto) with The Chase Manhattan Bank (the "Trustee")
pursuant to which on the date hereof the Issuer has issued that
certain Series A Note in the original principal amount of
$5,000,000 (the "Guaranteed Notes"); and
WHEREAS, the Issuer, the Guarantor and BSB are
parties to a Note Purchase Agreement, dated the date hereof,
pursuant to which and subject to the terms and conditions
contained therein, BSB shall purchase the Guaranteed Notes from
the Issuer; and
WHEREAS, it is a condition to the purchase by BSB of
the Guaranteed Notes that the Guarantor issue a guarantee in the
form hereof of certain of the obligations of the Issuer under the
Guaranteed Notes.
NOW, THEREFORE, in consideration of the premises and in
order to induce BSB to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:
Section 1. Guarantee. The Guarantor hereby irrevocably
and unconditionally guarantees the punctual payment when due,
whether at stated maturity, after maturity, by acceleration or
otherwise, of principal of and interest on the Guaranteed Notes
(the "Guaranteed Obligations") in an aggregate amount not to
exceed $250,000 (the "Guaranteed Amount"). The Guarantor hereby
agrees that it shall make the payment of a Guaranteed Obligation
upon receipt of written demand therefor from BSB (a "Demand
Notice") which Demand Notice shall specify that an Event of
Default has occurred and is continuing under either or both of
Sections 7.1(a) and 7.1(b) of the Indenture due to the failure of
the Issuer to make the applicable payment of principal and/or
interest due and owing to BSB under the Guaranteed Notes and the
Indenture. The obligation of the Guarantor hereunder shall in no
event exceed the Guaranteed Amount. The Guaranteed Amount shall
be reduced by (i) the amount of any payments made by Guarantor
hereunder or (ii) the amount of any unreimbursed Servicer
Advances pursuant to the Indenture.
Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO BSB UNDER THIS GUARANTEE AND BSB'S CONSENT TO SUCH
REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF BSB'S RIGHTS
HEREUNDER.
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that BSB protect, secure, perfect or insure any
security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by BSB to collect the Guaranteed
Obligations or any portion thereof or to enforce the obligations
of the Guarantor under this Guarantee, and (iv) any other action,
event or precondition to the enforcement of this Guarantee or the
performance by the Guarantor of the obligations hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of BSB with respect thereto.
(b) No invalidity, irregularity, voidability,
voidness or unenforceability of the Indenture or the Guaranteed
Notes or of all or any part of the Guaranteed Obligations or of
any security therefor, shall affect, impair or be a defense to
this Guarantee.
(c) The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or performance,
and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Guaranteed
Obligation, any security therefor, or any liability incurred
directly or indirectly in respect thereof, or any other
amendment or waiver of or any consent to departure from the
Indenture or the Guaranteed Notes, including any increase in
the Guaranteed Obligations resulting from the extension of
additional credit to the Issuer;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, all or any of the Guaranteed
Obligations, and/or any offset thereagainst, or failure to
perfect, or continue the perfection of, any lien in any such
property, or delay in the perfection of any such lien, or
any amendment or waiver of or consent to departure from any
other guarantee for all or any of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights
against the Issuer or others (including the Guarantor);
(iv) any settlement or compromise of any Guaranteed Obligation, any
security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect
thereof or hereof, and any subordination of the payment of
all or any part thereof to the payment of any Guaranteed
Obligations (whether due or not) of the Issuer to creditors
of the Issuer other than the Guarantor;
(v) any manner of application of any collateral,
or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Guaranteed Obligations
or any other assets of the Issuer or any of its
subsidiaries; or
(vi) any change, restructuring or termination of the existence of
the Issuer.
(d) BSB may at any time and from time to time
(whether or not after revocation or termination of this Guarantee)
without the consent of, or notice (except as shall be required by
applicable statute and cannot be waived) to, the Guarantor, and
without incurring responsibility to the Guarantor or impairing or
releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed
Obligation regardless of what Guaranteed Obligations remain
unpaid.
(e) This Guarantee shall continue to be effective
or be reinstated, as the case may be, if claim is ever made upon
BSB for repayment or recovery of any amount or amounts received
by BSB in payment or on account of any of the Guaranteed
Obligations and BSB repays all or part of said amount by reason
of any judgment, decree or order of any court or administrative
body having jurisdiction over BSB, or any settlement or
compromise of any such claim effected by BSB with any such
claimant (including the Issuer), then and in such event the
Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
BSB hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by
BSB.
Section 4. Continuing Guarantee. This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable
by, BSB and its successors, transferees and assigns. All
obligations to which this Guarantee applies or may apply under
the terms hereof shall be conclusively presumed to have been
created in reliance hereon.
Section 5. Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with BSB that:
(a) The Guarantor has the corporate power to execute
and deliver this Guarantee and to incur
and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary
corporate action to authorize the execution,
delivery and performance of this Guarantee and to incur and
perform its obligations hereunder;
(c) No consent, approval, authorization or other
action by, and no notice to or of, or declaration
or filing with, any governmental or other public body, or any
other person, is required for the due authorization, execution,
delivery and performance by the Guarantor of this Guarantee or
the consummation of the transactions contemplated hereby; and
(d) The Guarantor shall provide to BSB (i) within
60 days of the end of each fiscal quarter, the report on
form 10-Q of the Guarantor and (ii) within 135 days of the end of
each fiscal year of the Guarantor, the report on form 10-K of the
Guarantor.
Section 6. Terms. (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".
(b) All references herein to Sections and
subsections shall be deemed to be references to Sections and
subsections of this Guarantee unless the context shall otherwise
require.
Section 7. Amendments and Modification. No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.
Section 8. Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with BSB
in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature. Guarantor will not claim any set-off
or counterclaim against Issuer in respect of any liability of
Guarantor to Issuer. Guarantor waives any benefit of and any
right to participate in any collateral which may be held by BSB .
Section 9. Statute of Limitations. Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against BSB shall have commenced to run, toll the running of such
statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such
statute of limitations.
Section 10. Rights and Remedies Not Waived. No act,
omission or delay by BSB shall constitute a waiver of its rights
and remedies hereunder or otherwise. No single or partial waiver
by BSB of any default hereunder or right or remedy which it may
have shall operate as a waiver of any other default, right or
remedy or of the same default, right or remedy on a future
occasion.
Section 11. Admissibility of Guarantee. The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to BSB shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.
Section 12. Notices. All notices, requests and
demands to or upon BSB or the Guarantor under this Agreement
shall be in writing and given as provided in the Indenture (with
respect to the Guarantor, to the address of the Issuer as set
forth in the Indenture and with respect to BSB, at its address
set forth above).
Section 13. Counterparts. This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
Section 14. CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTEE, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).
GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS
GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
BSB MAY DESIRE TO USE.
(b) The Guarantor irrevocably consents to the
service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to the Guarantor at its address
determined pursuant to Section 12 hereof.
(c) Nothing herein shall affect the right of BSB
to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice
of dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).
Section 15. GOVERNING LAW. THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
Section 16. Captions; Separability. (a) The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.
(b) If any term of this Guarantee shall be held to
be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.
Section 17. Acknowledgment of Receipt. The Guarantor
acknowledges receipt of a copy of this Guarantee.
Section 18. This Guarantee shall inure to the benefit
of and be enforceable by BSB , its successors, transferees and
assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.
IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed as of the date first
above set forth.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
-------------------
Name: Heather A. Sica
Title: Executive Vice President
Exhibit 10.191
LITCHFIELD HYPOTHECATION CORP. 1998-B
NOTE PURCHASE AGREEMENT
March 23, 1999
LITCHFIELD HYPOTHECATION CORP.1998-B, a Delaware
corporation, and its successors and assigns (the "Issuer"), and
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
("Litchfield" or the "Seller"), hereby agree with UNION BANK OF
CALIFORNIA, N.A. (the "Purchaser"), as follows:
1. The Notes. The Issuer has authorized the
execution and delivery to The Chase Manhattan Bank, as trustee
(the "Trustee"), of an Indenture of Trust, dated as of June 1,
1998 (the "Indenture"), providing for the issuance and sale by
the Issuer of its Hypothecation Loan Collateralized Notes (the
"Notes"), in one or more series, secured by the Trust Estate
granted to the Trustee by the Issuer pursuant to the Indenture,
which includes, among other assets, a pool of certain
hypothecation Loans owned by the Issuer and serviced by
Litchfield Financial Corporation, a Massachusetts corporation (in
such capacity, the "Servicer"). Unless otherwise specifically
defined herein, all capitalized terms shall have the meanings
ascribed to them in the Indenture.
2. Purchase and Sale. In reliance upon the
representations and warranties contained herein and subject to
the terms and conditions set forth herein, the Seller agrees to
sell to the Purchaser, and the Purchaser agrees to purchase from
the Seller, $3,725,000 principal amount of Hypothecation Loan
Collateralized Notes, Series C (the foregoing notes are referred
to herein collectively as the "Notes") at an aggregate price (the
"Purchase Price") equal to the aggregate outstanding principal
amount of the Notes on the Closing Date (as hereinafter
defined). The Purchase Price shall be payable to or upon the
instructions of the Issuer and the Seller on the Closing Date by
wire transfer in immediately available Federal funds.
3. The Closing; Delivery of the Notes. The
closing of the purchase and sale of the Notes pursuant hereto
(the "Closing") shall be held on March 23, 1999 (the "Closing
Date"). The Closing shall take place by mail or at such place as
the parties hereto shall designate. At the Closing, the Seller
will deliver to the Purchaser, against payment of the Purchase
Price therefor, one Series C Note in the denomination of
$3,725,000 registered in the Purchaser's name, or in the name of
its nominee; provided however, that if the Purchaser requests the
Seller in writing not less than one Business Day prior to the
Closing Date to deliver to the Purchaser Notes in other
denominations (authorized pursuant to the Indenture) that equal
in the aggregate the denominations specified above, the Seller
shall comply with such request.
4. Conditions of the Purchaser's Obligation. The
obligation of the Purchaser set forth in Section 2 to purchase
the Notes on the Closing Date shall be subject to the accuracy as
of the date hereof and as of the Closing Date of (i) the
representations and warranties of the Issuer set forth in Section
5 hereof, (ii) the representations and warranties of the Seller
in the Purchase and Sale Agreement and in Section 5 hereof, and
(iii) the representations and warranties of the Servicer in the
Servicing Agreement, and shall also be subject to the following
additional conditions:
(a) Each of this Purchase Agreement, the Notes, the
Indenture, the Servicing Agreement, and the Purchase and
Sale Agreement (collectively, the "Agreements") shall have
been duly authorized, executed and delivered by each of the
parties thereto and be in full force and effect; and
(b) The Purchaser shall have received copies of all
documents and other information as it may
reasonably request, in form and substance
reasonably satisfactory to it, with respect to
such transactions and the taking of all
proceedings in connection therewith.
5. Representations and Warranties. (a) The Issuer
represents and warrants to the Purchaser as of the date
hereof as follows:
(i) Each of the Agreements to which the Issuer is a
party has been duly authorized, executed and delivered by the
Issuer and, assuming due execution and delivery by the other
parties thereto, constitutes a legal, valid and binding agreement
of the Issuer enforceable against the Issuer in accordance with
its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject,
as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at
law). The Notes have been validly issued and are entitled to the
benefits of the Indenture and constitute valid instruments
enforceable in accordance with their terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
(ii) Neither the issuance or sale of the Notes, nor
the consummation of any other of the transactions
contemplated in any of the Agreements to which the Issuer is
a party, nor the execution, delivery or performance of the
terms of any of the Agreements to which the Issuer is a
party, has or will result in the breach of any term or
provision of the certificate of incorporation or by-laws of
the Issuer, or conflict with, result in a breach or
violation on the part of the Issuer of or the acceleration
of indebtedness under or constitute a default under, the
terms of any indenture or other agreement or instrument to
which the Issuer is a party or by which it is bound, or any
statute or regulation applicable to the Issuer or any order
applicable to the Issuer of any court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Issuer.
(iii) No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Issuer for the execution and delivery or by the
Issuer with any of the Agreements to which the Issuer is a
party or the Notes, or the issuance of the Notes, or the
consummation by the Issuer of any transaction contemplated
under any of the Agreements to which the Issuer is a party,
or such consent, approval or authorization has been obtained
or such registration, filing or notice has been made (or,
with respect to assignments of mortgages and financing
statements, will be made by the Issuer as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against,
or investigation of, the Issuer pending or, to the
best of its knowledge, threatened, before any
court, administrative agency or other tribunal
which, either individually or in the aggregate,
(A) may result in any material adverse change in
the financial condition, properties, or assets of
the Issuer or in any material and adverse
impairment of the right or ability of the Issuer
to perform its obligations under the Agreements,
or (B) asserts the invalidity of any of the
Agreements to which either the Issuer is a party
or the Notes or (C) seeks to prevent the
consummation of any of the transactions
contemplated by any of the Agreements to which the
Issuer is a party.
(v) (v) Based in part on the representations and
warranties contained in Section 6 hereof, the
Issuer is not, and the sale of the Notes in the
manner contemplated by this Purchase Agreement
will not cause the Issuer to be, subject to
registration or regulation as an investment
company or affiliate of any investment company
under the Investment Company Act of 1940, as
amended.
(vi) Each Loan included in the Trust Estate securing
the Notes has been delivered to the Trustee or its
collateral agent, together with an assignment thereof by the
Issuer, which immediately prior to such assignment will own
full legal and equitable title to each Loan, free and clear
of any lien, charge, encumbrance or participation or
ownership interest in favor of any other Person. Upon
endorsement and delivery to the Trustee or its collateral
agent of the executed original promissory notes and
execution and delivery of the Indenture, all of the Issuer's
right, title and interest in and to the Loans will be
validly and effectively transferred to the Indenture Trustee
as collateral security for the benefit of the Holders of the
Notes.
(vii) On the Closing Date after giving effect to the sale of
the Notes to the Purchaser hereunder, the aggregate principal
amount of all Hypothecation Loan Collateralized Notes outstanding
shall be $12,274,249.86, of which $8,549,249.86 aggregate
principal amount shall be Series A Notes owned of record by
BankAtlantic and $3,725,000 aggregate principal amount shall be
Series C Notes owned by the Purchaser. Such outstanding amounts
are fully authorized (and do not exceed any limitations under the
Indenture).
(b) The Seller represents and warrants to the Purchaser as of the
date hereof as follows:
(i) Each of the Agreements to which the Seller is a
party has been duly authorized, executed and delivered by
the Seller and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and
binding agreement of the Seller enforceable against the
Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(ii) Neither the sale of the Notes, nor the
consummation of any other of the transactions contemplated
in any of the Agreements to which the Seller is a party, nor
the execution, delivery or performance of the terms of any
of the Agreements to which the Seller is a party, has or
will result in the breach of any term or provision of the
certificate of incorporation or by-laws of the Seller, or
conflict with, result in a breach or violation on the part
of the Seller of or the acceleration of indebtedness under
or constitute a default under, the terms of any indenture or
other agreement or instrument to which the Seller is a party
or by which it is bound, or any statute or regulation
applicable to the Seller or any order applicable to the
Seller of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Seller.
(iii)No consent, approval, authorization of,
registration or filing with, or notice to, any governmental
or regulatory authority, agency, department, commission,
board, bureau, body or instrumentality is required on the
part of the Seller for the execution and delivery or by the
Seller with any of the Agreements to which the Seller is a
party, or the sale of the Notes, or the consummation by the
Seller of any transaction contemplated under any of the
Agreements to which the Seller is a party, or such consent,
approval or authorization has been obtained or such
registration, filing or notice has been made (or, with
respect to assignments of mortgages and financing
statements, will be made by the Seller as contemplated by
the Indenture).
(iv) There is no action, suit or proceeding against,
or investigation of, the Seller pending or, to the
best of its knowledge, threatened, before any
court, administrative agency or other tribunal
which, either individually or in the aggregate,
(A) may result in any material adverse change in
the financial condition, properties, or assets of
the Seller or in any material and adverse
impairment of the right or ability of the Seller
to perform its obligations under the Agreements,
or (B) asserts the invalidity of any of the
Agreements to which either the Seller is a party
or the Notes or (C) seeks to prevent the
consummation of any of the transactions
contemplated by any of the Agreements to which
either the Seller is a party.
(v) (v) Neither the Seller nor any Affiliate of the
Seller nor any Person authorized or employed by
the Seller will, directly or indirectly, offer or
sell any Note or similar security in a manner
which would render the sale of the Notes pursuant
to this Purchase Agreement a violation of Section
5 of the 1933 Act, or require registration
pursuant thereto. Based in part on the
representations and warranties contained in
Section 6 hereof, the offering and sale of the
Notes by the Seller to Purchaser at closing are
exempt from the registration requirements of the
1933 Act and the Indenture is not required to be
qualified under the Trust Indenture Act of 1939,
as amended.
The Issuer and the Seller agree that the representations and
warranties set forth in this Section 5 shall be fully assignable
to the initial party to whom the Purchaser may sell the Notes.
6. The Purchaser's Representations. The Purchaser
represents to the Issuer as follows:
(a) The Purchaser is acquiring the Notes for its own
account. The Purchaser understands that the Notes are not
being registered under the Securities Act of 1933, as
amended (the "1933 Act"), or any State securities or "Blue
Sky" law and are being sold to the Purchaser in reliance
upon the Purchaser's representations contained herein in a
transaction that is exempt from the registration
requirements of the 1933 Act and any applicable State law.
The Purchaser agrees that the Notes may not be Transferred
unless subsequently registered under the 1933 Act and any
applicable State securities or "Blue Sky" law or unless
exemptions from the registration requirements of the 1933
Act and applicable State laws are available. Subject to the
express provisions of this Purchase Agreement and the
Indenture, the disposition of the Notes shall at all times
be within the control of the owner thereof. Notwithstanding
anything to the contrary, express or implied, in this
Agreement, the Indenture or otherwise, the Purchaser
understands that none of the Trust, the Note Registrar or
the Indenture Trustee is obligated to register the Notes
under the 1933 Act or any other securities law and that any
Transfer in violation of the provisions of the Indenture
shall be void ab initio. The foregoing shall in no way limit
the ability or the right of the Purchaser to sell
participation interests in any Notes owned by the Purchaser.
(b) The Purchaser is either (i) an "accredited
investor" as defined in rule 501(a) under the 1933 Act or
(ii) a Qualified Institutional Buyer as defined in Rule 144A
under the 1933 Act.
(c) The Purchaser is authorized to enter into this
Purchase Agreement and to purchase the Notes. This Purchase
Agreement has been duly authorized executed and delivered by
the Purchaser and constitutes the Purchaser's legal, valid
and binding agreement enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy,
insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(d) The Purchaser has sufficient knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment
in the Notes and the Purchaser is able to bear the economic
risk of investment in the Notes. The Purchaser acknowledges
that in connection with the making of its investment
decision, the Purchaser has been afforded the opportunity to
ask questions of, and receive answers regarding, and to
conduct its investigation of, the Issuer, the Loans and the
Loan Collateral, the Trust Estate, the Notes and the
Servicer as is sufficient and necessary for the Purchaser to
make an informed investment decision with respect to the
Notes.
(e) No placement agent, broker, finder or investment
banker has been employed by or has acted for the Seller or
the Purchaser in connection with the transactions with the
Purchaser contemplated in this Purchase Agreement or
otherwise in connection with the Notes; and the Purchaser is
solely responsible for, and the Purchaser shall indemnify
the Seller for the fees, expenses or commissions of any
placement agent, broker, finder or investment banker and any
other person or entity claiming to have acted in such
capacity for or under the authority of the Purchaser.
(f) The Purchaser agrees to treat, and to take no
action inconsistent with the treatment of, the Notes as debt
of the Issuer for tax purposes.
7. Notices. All notices and other communications
hereunder shall be in writing and shall be sent by first class
registered or certified mail, return receipt requested, or by
facsimile transmission, provided such transmission is confirmed
by overnight mail delivered by a nationally recognized overnight
delivery service, addressed (a) if to the Purchaser, Union Bank
of California, N.A., 445 South Figueroa Street, 15th Floor, Los
Angeles, California 90071, Attention: Stephen R. Sweeney, and (b)
if to the Issuer or Litchfield, c/o Litchfield Financial
Corporation, 430 Main Street, Williamstown, Massachusetts 01267,
Attention: Executive Vice President, or to such other address as
the Issuer or Litchfield shall have furnished to the Purchaser in
writing. Any notice so given by registered or certified mail
shall be deemed to have been given five days after being
deposited in a depository of the United States mails. Any notice
given by means of a nationally recognized overnight delivery
service shall be deemed to have been given upon receipt thereof.
8. Miscellaneous. (a) This Purchase Agreement shall
be construed and enforced in accordance with and governed by the
law of the State of New York.
(b) Any action or proceeding relating in any way to
this Purchase Agreement may be brought and enforced in the courts
of the State of New York or of the United States for the Southern
District of New York and each of the Issuer, Litchfield and the
Purchaser irrevocably submits to the jurisdiction of each such
court (and any appellate court from any thereof) in respect of
any such action or proceeding.
Each of the Issuer, Litchfield and the Purchaser
irrevocably waives, to the fullest extent permitted by applicable
law, any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in the Supreme
Court of the State of New York or the United States District
Court for the Southern District of New York, and any claim that
any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
(d) The headings in this Purchase Agreement are for
the purposes of reference only and shall not limit or define the
meaning hereof.
(e) This Purchase Agreement shall be binding upon the
respective successors and assigns of the parties hereto and shall
inure to the benefit of and be enforceable by any registered
owner or owners at the time of each Note then issued, or any part
thereof. This Purchase Agreement may be assigned by the
Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the
Indenture.
(f) This Purchase Agreement may be amended, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such amendment, waiver,
discharge or termination is sought.
(g) This Purchase Agreement may be executed
simultaneously in several counterparts, or by different parties
in separate counterparts, each of which counterparts shall be an
original, but all of which shall constitute one instrument.
9. No Recourse. It is expressly understood and
agreed by the parties hereto that (a) the representations,
undertakings and agreements herein made on the part of the Issuer
are made and intended not as personal representations,
undertakings and agreements by Litchfield but are made and
intended for the purpose of binding only the Issuer, (b) nothing
herein contained shall be construed as creating any liability on
Litchfield to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly
waived by the parties hereto, and (c) under no circumstances
shall Litchfield be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement;
it being understood that the foregoing shall in no way limit the
obligations of Litchfield under the Guarantee or the Purchase and
Sale Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be duly executed on the date first written
above.
LITCHFIELD HYPOTHECATION CORP. 1998-B
By: /s/ Heather A. Sica
--------------------
Name: Heather A. Sica
Title: Executive Vice President
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
-------------------
Name: Heather A. Sica
Title: Executive Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Stephen R. Sweeney
----------------------
Name: Stephen R. Sweeney
Title: Vice President
Exhibit 10.192
LIMITED GUARANTEE
LIMITED GUARANTEE dated as of March 1, 1999 by
LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
(the "Guarantor"), in favor of UNION BANK OF CALIFORNIA, N.A., a
California banking corporation with an address at 445 South
Figueroa Street, 15th Floor, Los Angeles, California 90071("Union
Bank"), as a Noteholder under the Indenture hereinafter referred
to.
WHEREAS, Litchfield Hypothecation Corp.1998-B, a Delaware
corporation (the "Issuer") and a wholly-owned subsidiary of
the Guarantor, and The Chase Manhattan Bank, as trustee
(the "Trustee")are parties to an Indenture of Trust (the
"Indenture") (capitalized terms used but not defined herein
shall have the meanings attributed thereto in the Indenture
or in Appendix A thereto), dated as of June 1, 1998
providing for the issuance by the Issuer from time to time
of its Hypothecation Loan Collateralized Notes
(collectively, the "Notes");
WHEREAS, pursuant to the Indenture, the Issuer has
issued and the Guarantor has purchased certain Series C Notes in
the original principal amount of $3,725,000.00(the "Guaranteed
Notes")which Series C Notes the Guarantor has sold to Union Bank
pursuant to a Note Purchase Agreement, dated as of March 23, 1999
by and among the Issuer, the Guarantor and Union Bank; and
WHEREAS, it is a condition to the purchase by Union
Bank of the Guaranteed Notes that the Guarantor issue a guarantee
in the form hereof of certain of the obligations of the Issuer
under the Guaranteed Notes.
NOW, THEREFORE, in consideration of the premises and in
order to induce Union Bank to purchase the Guaranteed Notes, the
Guarantor hereby agrees as follows:
Section 1. Guarantee. The Guarantor hereby
irrevocably and unconditionally guarantees the punctual payment
when due, whether at stated maturity, after maturity, by
acceleration or otherwise, of principal of and interest on the
Guaranteed Notes (the "Guaranteed Obligations") in an aggregate
amount not to exceed $186,250(the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a
Guaranteed Obligation upon receipt of written demand therefor
from Union Bank (a "Demand Notice") which Demand Notice shall
specify that an Event of Default has occurred and is continuing
under either or both of Sections 7.1(a) and 7.1(b) of the
Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to Union Bank
under the Guaranteed Notes and the Indenture. The obligation of
the Guarantor hereunder shall in no event exceed the Guaranteed
Amount. The Guaranteed Amount shall be reduced by (i) the amount
of any payments made by Guarantor hereunder or (ii) the portion
allocable to the Guaranteed Notes of any unreimbursed Servicer
Advances pursuant to the Indenture.
Notwithstanding the limitation contained in the
preceding sentence, the Guarantor shall also pay all costs and
expenses, including attorneys' fees, costs relating to all costs
and expenses arising out of or with respect to the validity,
enforceability, collection, defense, administration or
preservation of this Guarantee.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE
OF THE HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS
OF THE INDENTURE OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH
SUCH OPTION OR OBLIGATION OR THE PAYMENT OR PERFORMANCE BY
GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER UNDER THE INDENTURE
OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS OF
GUARANTOR TO UNION BANK UNDER THIS GUARANTEE AND UNION BANK'S
CONSENT TO SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF UNION
BANK'S RIGHTS HEREUNDER.
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent
permitted by law, (i) promptness, diligence, notice of acceptance
and any other notice with respect to this Guarantee,(ii) any
requirement that Union Bank protect, secure, perfect or insure
any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Issuer or any
other person or any collateral, (iii) any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature
whatsoever with respect to this Guarantee, the obligations of the
Guarantor hereunder or the obligations of any other person or
party (including, without limitation, the Issuer) relating to
this Guarantee or the obligations of the Guarantor hereunder or
otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by Union Bank to collect the
Guaranteed Obligations or any portion thereof or to enforce the
obligations of the Guarantor under this Guarantee, and (iv) any
other action, event or precondition to the enforcement of this
Guarantee or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor
guarantees that, to the fullest extent permitted by law, the
Guaranteed Obligations will be paid or performed strictly in
accordance with their terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of Union Bank with respect
thereto.
(b) No invalidity, irregularity, voidability, voidness
or unenforceability of the Indenture or the Guaranteed Notes or
of all or any part of the Guaranteed Obligations or of any
security therefor, shall affect, impair or be a defense to this
Guarantee.
(c) The liability of the Guarantor under this
Guarantee shall be absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or performance,
and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Guaranteed
Obligation, any security therefor, or any liability incurred
directly or indirectly in respect thereof, or any other
amendment or waiver of or any consent to departure from the
Indenture or the Guaranteed Notes , including any increase
in the Guaranteed Obligations resulting from the extension
of additional credit to the Issuer;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, all or any of the Guaranteed
Obligations, and/or any offset thereagainst, or failure to
perfect, or continue the perfection of, any lien in any such
property, or delay in the perfection of any such lien, or
any amendment or waiver of or consent to departure from any
other guarantee for all or any of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the Issuer
or others (including the Guarantor);
(iv) any settlement or compromise of any Guaranteed Obligation, any
security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect
thereof or hereof, and any subordination of the payment of
all or any part thereof to the payment of any Guaranteed
Obligations (whether due or not) of the Issuer to creditors
of the Issuer other than the Guarantor;
(v) any manner of application of any collateral, or proceeds thereof,
to all or any of the Guaranteed Obligations, or any manner
of sale or other disposition of any collateral for all or
any of the Guaranteed Obligations or any other assets of the
Issuer or any of its subsidiaries; or
(vi) any change, restructuring or termination of the existence of the
Issuer.
(d) Union Bank may at any time and from time to time
(whether or not after revocation or termination of this
Guarantee) without the consent of, or notice (except as shall be
required by applicable statute and cannot be waived) to, the
Guarantor, and without incurring responsibility to the Guarantor
or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever
realized to any Guaranteed Obligation regardless of what
Guaranteed Obligations remain unpaid.
(e) This Guarantee shall continue to be effective or
be reinstated, as the case may be, if claim is ever made upon
Union Bank for repayment or recovery of any amount or amounts
received by Union Bank in payment or on account of any of the
Guaranteed Obligations and Union Bank repays all or part of said
amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Union Bank, or any
settlement or compromise of any such claim effected by Union Bank
with any such claimant (including the Issuer), then and in such
event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
notwithstanding any revocation hereof or the cancellation of the
Guaranteed Notes, and the Guarantor shall be and remain liable to
Union Bank hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received
by Union Bank.
Section 4. Continuing Guarantee. This Guarantee is a
continuing one and shall (i) remain in full force and effect
until the indefeasible payment and satisfaction in full of the
Guaranteed Obligations, (ii) be binding upon the Guarantor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, Union Bank and its successors, transferees and
assigns. All obligations to which this Guarantee applies or may
apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants.
The Guarantor hereby represents, warrants and covenants to and
with Union Bank that:
(a) The Guarantor has the corporate power to execute
and deliver this Guarantee and to incur and perform its
obligations hereunder;
(b) The Guarantor has duly taken all necessary
corporate action to authorize the execution, delivery and
performance of this Guarantee and to incur and perform its
obligations hereunder;
(c) No consent, approval, authorization or other
action by, and no notice to or of, or declaration or filing
with, any governmental or other public body, or any other
person, is required for the due authorization, execution,
delivery and performance by the Guarantor of this Guarantee
or the consummation of the transactions contemplated hereby;
and
(d) The Guarantor shall provide to Union Bank (i)
within 60 days of the end of each fiscal quarter, the report
on form 10-Q of the Guarantor and (ii) within 135 days of
the end of each fiscal year of the Guarantor, the report on
form 10-K of the Guarantor.
Section 6. Terms. (a) The words "include," "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation".
(b) All references herein to Sections and subsections
shall be deemed to be references to Sections and subsections of
this Guarantee unless the context shall otherwise require.
Section 7. Amendments and Modification. No provision
hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guarantee and to such
provision, and executed by the party to be charged.
Section 8. Waiver of Subrogation Rights. Guarantor
hereby waives until the Guaranteed Obligations are paid in full
any right of indemnity, reimbursement, contribution, or
subrogation arising as a result of payment by Guarantor
hereunder, and will not prove any claim in competition with Union
Bank in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature. Guarantor will not claim
any set-off or counterclaim against Issuer in respect of any
liability of Guarantor to Issuer. Guarantor waives any benefit
of and any right to participate in any collateral which may be
held by Union Bank.
Section 9. Statute of Limitations. Any acknowledgment
or new promise, whether by payment of principal or interest or
otherwise and whether by the Issuer or others (including the
Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor
against Union Bank shall have commenced to run, toll the running
of such statute of limitations and, if the period of such statute
of limitations shall have expired, prevent the operation of such
statute of limitations.
Section 10. Rights and Remedies Not Waived. No act,
omission or delay by Union Bank shall constitute a waiver of its
rights and remedies hereunder or otherwise. No single or partial
waiver by Union Bank of any default hereunder or right or remedy
which it may have shall operate as a waiver of any other default,
right or remedy or of the same default, right or remedy on a
future occasion.
Section 11. Admissibility of Guarantee. The Guarantor
agrees that any copy of this Guarantee signed by the Guarantor
and transmitted by telecopier for delivery to Union Bank shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.
Section 12. Notices. All notices, requests and
demands to or upon Union Bank or the Guarantor under this
Agreement shall be in writing and given as provided in the
Indenture (with respect to the Guarantor, to the address of the
Issuer as set forth in the Indenture and with respect to Union
Bank, at its address set forth above).
Section 13. Counterparts. This Guarantee may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
Section 14. CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL; ETC. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTEE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, THE
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (iii) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY
OTHER ACTION).
GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY
VOLUNTARILY WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER
ANY APPLICABLE STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH UNION BANK MAY DESIRE TO USE.
(b) The Guarantor irrevocably consents to the service
of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the Guarantor at its address determined
pursuant to Section 12 hereof.
(c) Nothing herein shall affect the right of Union
Bank to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the
Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice of
dishonor and protests of all instruments included in or
evidencing any of the Guaranteed Obligations, and any and all
other notices and demands whatsoever (except as expressly
provided herein).
Section 15. GOVERNING LAW. THIS GUARANTEE AND THE
GUARANTEED OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
Section 16. Captions; Separability. (a) The captions
of the Sections and subsections of this Guarantee have been
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guarantee.
(b) If any term of this Guarantee shall be held to be
invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby.
Section 17. Acknowledgment of Receipt. The Guarantor
acknowledges receipt of a copy of this Guarantee.
Section 18. This Guarantee shall inure to the benefit
of and be enforceable by Union Bank, its successors, transferees
and assigns, and it shall be binding upon Guarantor and the
successors and assigns of Guarantor.
IN WITNESS WHEREOF, the Guarantor has duly executed or
caused this Guarantee to be duly executed in the State of New
York as of the date first above set forth.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
-------------------
Name: Heather A. Sica
Title: Executive Vice President
Exhibit 11.1
Litchfield Financial Corporation
Computation of Earnings Per Share
Three Months Ended
March 31,
1999 1998
---- ----
Basic:
Weighted average number of
common shares outstanding....... 6,886,559 5,659,756
========== ==========
Net income......................... $2,278,000 $1,550,000
========== ==========
Net income per common share. $ .33 $ .27
========== ==========
Diluted:
Weighted average number of
common shares outstanding....... 6,886,559 5,659,756
Weighted average number of
common stock equivalents
outstanding:
Stock options................... 305,819 360,402
---------- -----------
Weighted average common and
common equivalent shares
outstanding..................... 7,192,378 6,020,158
========== ==========
Net income......................... $2,278,000 $1,550,000
========== ==========
Net income per common share........ $ .32 $ .26
========== ==========
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3 MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,358
<SECURITIES> 28,118
<RECEIVABLES> 225,456
<ALLOWANCES> 7,133
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 313,355
<CURRENT-LIABILITIES> 0
<BONDS> 134,588
<COMMON> 69
0
0
<OTHER-SE> 86,005
<TOTAL-LIABILITY-AND-EQUITY> 313,355
<SALES> 0
<TOTAL-REVENUES> 11,075
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 4,628
<INCOME-PRETAX> 3,703
<INCOME-TAX> 1,425
<INCOME-CONTINUING> 2,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,278
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
