SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 12,
1997
BLC FINANCIAL SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8185
(State or Other Jurisdiction of Incorporation) (Commission File No.)
75-1430436
(IRS Employer I.D. Number)
919 Third Avenue, 17th Floor, New York, New York 10022
(Address of Principal Executive Offices) (Zip
Code)
Registrant's Telephone Number, including Area Code
(212) 751-5626
(Former Name or Former Address, If Changed Since Last
Report)
Item 5. Other Events.
On May 1, 1997, a wholly-owned subsidiary, sold
a participation in its portfolio of loans in the amount
of $2,918,947.62. The proceeds of the sale will be
utilized to partially repay Business Loan Center, Inc.'s
existing bank line and fund additional loans. Business
Loan Center, Inc.'s retained portfolio after the sale
consists of approximately $12,935,933 in loans.
As part of the sale, Business Loan Center is
entitled to receive a spread of approximately 3/4% per
annum on the loans sold, together with all servicing
income.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(c) Exhibits.
(1) Participation Agreement dated as of May 1, 1997.
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 duly
authorized.
BLC Financial Services, Inc.
(Registrant)
Dated: May 12, 1997
By: /s/ Robert F. Tannenhauser
Robert F. Tannenhauser
President
LOAN PARTICIPATION AGREEMENT
THIS LOAN PARTICIPATION AGREEMENT is made as of
this 1st day of May, 1997, by and between BUSINESS LOAN
CENTER, INC., a Delaware corporation with its principal
offices located at 919 Third Avenue, 17th Floor, New
York, New York 10022 ("Lender"), BLC FINANCIAL SERVICES,
INC., a Delaware corporation with its principal offices
located at 919 Third Avenue, 17th Floor, New York, New
York 10022 ("Parent"), and TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation with its principal
place of business located at 9399 West Higgins Road,
Suite 600, Rosemont, Illinois 60018 ("Participant"), with
reference to the following facts:
RECITALS
A. Lender has requested that Participant provide
to it a loan participation facility in the maximum
aggregate principal amount of up to $25,000,000 under
which Participant would from time to time purchase from
Lender participations in certain types of loans made by
Lender to third-party borrowers.
B. Participant is willing to extend such financial
accommodations to Lender in accordance with and on the
terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the terms
and conditions set forth herein, and of any purchase of a
participation contemplated hereby, now or hereafter made
by Participant, Lender, Parent and Participant hereby
agree as follows:
ARTICLE 1
GENERAL TERMS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings, unless
the context otherwise requires (terms defined in the
singular to have the same meaning when used in the plural
and visa versa):
"Accountant" shall have the meaning ascribed to
that term in Section 4.1(a).
"Affiliate" shall mean, with respect to any
Person, (a) each other Person that, directly or
indirectly, owns or controls, on an aggregate basis,
including all beneficial ownership and ownership or
control as a trustee, guardian or other fiduciary, at
least five percent (5%) of the outstanding capital stock
having ordinary voting power to elect a majority of the
board of directors (irrespective of whether, at the time,
stock of any other class or classes of such corporation
shall have or might have voting power by reason of the
happening of any contingency) of such Person, (b) each
Person that controls, is controlled by or is under common
control with such Person, (c) each of such Person's
officers, directors, joint venturers and partners, and
(d) in the case of Lender or Parent, the immediate family
members, spouses and lineal descendants of individuals
who are Affiliates of Lender of Parent; provided, that in
no case shall Participant be deemed to be an Affiliate of
Lender or Parent for purposes of this Agreement. For the
purpose of this definition, "control" means the
possession, directly or indirectly, of the power to
direct or to cause the direction of management and
policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall mean this Loan Participation
Agreement, including all amendments, modifications and
supplements hereto and any appendices, exhibits or
schedules to any of the foregoing, and shall refer to the
Agreement as the same may be in effect at the time such
reference becomes operative.
"Application of Payments Schedule" shall mean
an Excel spreadsheet in the format found on Exhibit C,
listing all Participating Notes Receivable and containing
a breakdown and application of all payments for
Participating Notes Receivable received by Lender since
the delivery of the immediately preceding Application of
Payments Schedule.
"Bankruptcy Code" shall mean 11 U.S.C. ' 101 et
seq. as the same may be modified, amended or supplemented
from time to time.
"Business Day" shall mean a day other than a
Saturday, Sunday or legal holiday for commercial banks
under the laws of the State of New York or the State of
Illinois.
"Change of Control" shall mean any transaction
or event as a result of which (a) Parent ceases to own
100% of the Stock of Lender, or (b) Robert F.
Tannenhauser sells or otherwise ceases to retain the
control over and beneficial interest in any of the Stock
of Parent owned or under his beneficial control as of
April 24, 1997, or (c) Robert F. Tannenhauser ceases to
be an executive officer of both Lender and Parent.
"Charges" shall mean all taxes, levies,
assessments, charges, Liens, claims or encumbrances upon
or relating to (a) the Participating Notes Receivable or
the Participations therein, (b) the Liabilities, (c) the
employees, payroll, income or gross receipts of Lender,
(d) the ownership or use of any of the assets of Lender,
or (e) and any other aspect of Lender's business.
"Closing Date" shall mean the first date on
which all conditions precedent set forth in Section 7.1
have been satisfied in a manner acceptable to Participant
or waived in writing by Participant as provided therein
and Participant makes or is prepared to purchase the
initial Participation.
"Commitment Termination Date" shall mean the
earliest of: (a) November 1, 1997; (b) the date that
Lender closes the transactions contemplated by the Loan
Agreement and repurchases all of the Participations then
held by Participant in accordance with the terms of
Section 2.5; and (c) the date Lender's right to request
that Participant purchase additional Participations is
terminated in accordance with Section 6.2.
"Compliance Certificate" shall mean the
certificate evidencing Lender's and Parent's compliance
with the terms of this Agreement, to be substantially in
the form attached as Exhibit D hereto.
"Default" shall mean any event that, with the
passage of time, the giving of notice or both, would
become an Event of Default, unless cured or waived as
specifically provided in this Agreement.
"Dollars" shall mean lawful money of the United
States of America.
"EBITDA" shall mean, with respect to any
Person, its net income plus interest, cash taxes as
measured by income, depreciation and amortization
(excluding, for each item, gains and losses resulting
from transactions occurring outside the ordinary course
of business); provided, that EBITDA shall (i) include
gross premiums received on Sold Notes Receivable, and
(ii) exclude recognition of income from valuation of
future servicing rights.
"Environmental Claim" shall mean any written
accusation, allegation, notice of violations, claim,
demand, abatement or other judicial or administrative
order or direction (conditional or otherwise) by any
governmental authority or any Person for any damage,
including personal injury (including sickness, disease or
death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential
damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the
environment, or for fines, penalties or restrictions,
resulting from or based upon (a) the existence, or the
continuation of the existence, of a Release (whether
sudden or non-sudden or accidental or non-accidental),
of, or exposure to, any Hazardous Material, in, into or
onto the environment at, in or by, from or related to any
Real Property, (b) the use, handling, transportation,
storage, treatment or disposal of Hazardous Materials in
connection with the operation of any Property, or (c) the
violation, or alleged violation, of any Environmental
Laws or Governmental Authorization relating to
environmental matters with respect to any Property.
"Environmental Laws" shall mean all statutes,
ordinances, judicial or administrative orders, rules,
regulations or decrees relating to (a) fines,
injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from
the Release or threatened Release of Hazardous Materials,
(b) the generation, use, storage, transportation or
disposal of Hazardous Materials, (c) occupational safety
and health, industrial hygiene, land use in connection
with environmental matters for the protection of health
or welfare, in any manner applicable to Lender or any of
its Subsidiaries or any of their respective properties,
including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et
seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean
Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. 2601 et seq.), the Occupational
Safety and Health Act (29 U.S.C. 651 et seq.) and the
Emergency Planning and Community Right-To-Know-Act (42
U.S.C. 11001 et seq.), each as amended or supplemented,
and any analogous future or present local, state and
Federal statutes and regulations promulgated pursuant
thereto.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as the same may be amended
from time to time.
"ERISA Affiliate" shall mean any Person that is
now or at any time in the future required to be treated
as a single employer with Lender under IRC Sections
414(b) or (c).
"Event of Default" shall mean the occurrence of
any of the events specified in Section 6.1 hereof,
provided that any requirement for notice or lapse of time
or any other condition precedent has been satisfied.
"GAAP" shall mean the generally accepted
accounting principles in the United States of America as
in effect from time to time.
"Governmental Authorization" shall mean any
permit, license, authorization, consent order or consent
decree of or from any Federal, state or local
governmental authority, agency or court.
"Governmental Requirement" shall mean, to the
extent any violation thereof or failure to comply
therewith would have a Material Adverse Effect, any law,
statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other direction or
requirement (including any of the foregoing which relate
to lender licensing, environmental standards or controls,
energy regulations and occupational, safety and health
standards or controls) of any federal, state, county,
municipal or other domestic or foreign government,
department, commission, board, court, agency or any other
instrumentality of any of them, which exercises
jurisdiction over Lender.
"Hazardous Materials" shall mean (a) any oil,
petroleum or petroleum derived substance, any drilling
fluids, produced waters and other wastes associated with
the exploration, development or production of crude oil,
any flammable substances or explosives, any radioactive
materials, any hazardous wastes or substances, any toxic
wastes or substances or any other materials or pollutants
which (i) pose a hazard to any property or to any Persons
on or about such property or (ii) cause such property to
be in violation of any Environmental Laws; (b) asbestos
in any form which is or could become friable, urea
formaldehyde foam insulation, electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per
million; (c) any chemical, material or substance
regulated or defined as or included in the definition
"hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "restricted
hazardous wastes," or "toxic substances" or any other
formulations intended to define, list or classify
substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable
Environmental Laws; and (d) any other chemical, material
or substance, exposure to which is prohibited, limited or
regulated by any governmental authority pursuant to any
Environmental Law.
"Indebtedness" shall mean all liabilities,
obligations and indebtedness of any and every kind and
nature whether heretofore, now or hereafter owing,
arising, due, or payable from Lender or Parent to any
Person and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct,
contingent, fixed, or otherwise.
"Index Rate" shall mean the higher of: (i) the
latest published prime rate which normally appear in the
"Money Rates" section of The Wall Street Journal, or (ii)
the latest published annualized rate of 90 day dealer
commercial paper which normally appears in the "Money
Rates" section of The Wall Street Journal.
"Initial Participation Amount" shall have the
meaning ascribed to such term in Section 2.1(b).
"Intangible Assets" shall mean, with respect to
any Person, collectively, organizational expenses,
financing expenses, prepaid expenses, goodwill (including
any amounts however designated, representing the excess
of the purchase price paid for assets or stock acquired
subsequent to the date hereof over the value assigned
thereto on the books of such Person), patents,
trademarks, tradenames, copyrights and other intangible
assets of such Person.
"Intermediary" shall mean Colson Service
Corporation, as fiscal and transfer agent for the SBA, or
any other Person designated by the SBA to perform the
same or similar functions.
"Lender" shall mean Business Loan Center, Inc.,
a Delaware corporation, and its successors and permitted
assigns.
"Lender's Percentage" shall mean, with respect
to each Participating Note Receivable, the percentage
equal to (a) the percentage of the Non-Guaranteed Note
Receivable portion thereof, minus (b) the Participation
Percentage therefor.
"Liabilities" shall mean all of Lender's
liabilities, obligations and indebtedness to Participant
of any and every kind and nature (including interest,
charges, expenses, attorneys' fees and other sums for
which Participant is entitled to payment from Lender),
whether arising under this Agreement or under any of the
other Participation Documents, whether heretofore, now or
hereafter owing, arising, due, or payable from Lender to
Participant and howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct,
contingent, fixed, or otherwise, including obligations of
performance.
"Lien" shall mean any interest in Property
securing an obligation owed to, or a claim by, a Person
other than the owner of the Property, whether such
interest is based on the common law, statute or contract,
and including but not limited to the lien or security
interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes.
The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property.
"Loan Guaranty Agreement" shall mean any Loan
Guaranty Agreement (Deferred Participation) (SBA Form
750) or similar agreement in force and effect between
Lender and the SBA from time to time.
"Loan Agreement" shall mean the Loan Agreement
between Lender and Participant dated as of May 1, 1997,
including all amendments, modifications and supplements
thereto and any appendices, exhibits or schedules to any
of the foregoing, and shall refer to the Loan Agreement
as the same may be in effect at the time such reference
becomes operative.
"Material Adverse Effect" shall mean any
material and adverse effect on (i) the assets,
liabilities, financial condition, business, operations,
affairs or circumstances of Lender or Parent, or (ii) the
ability of Lender or Parent to carry out its business as
at the date of this Agreement or as proposed at the date
of this Agreement to be conducted or meet its obligations
under this Agreement or the other Participation Documents
on a timely basis.
"Maximum Commitment" shall have the meaning
ascribed to such term in Section 2.1(d).
"Maximum Participation Amount" shall mean
$25,000,000.
"Net Eligible Non-Guaranteed Notes Receivable"
shall mean, at any particular time, the aggregate
principal amount then outstanding of Non-Guaranteed Notes
Receivable conforming to each of the requirements set
forth in Schedule 1.1.
"Net Worth" shall mean, with respect to any
Person, at any time for the determination thereof, the
sum of its capital stock, capital in excess of par or
stated value of shares of its capital stock, retained
earnings, loan loss reserve, and any other account which,
in accordance with GAAP, constitutes stockholder's
equity, less treasury stock.
"Non-Guaranteed Note Receivable" shall mean
that portion of any Note Receivable that is not
guaranteed by the SBA.
"Note Receivable" shall mean the obligation of
any Term Loan Debtor to pay any term loan or similar form
of financial accommodation made or extended by Lender to
such Term Loan Debtor, whether or not evidenced by a
promissory note or other instrument.
"Note Receivable Documents" shall mean, with
respect to any Note Receivable, all original documents,
instruments, and chattel paper, executed or delivered to
Lender by the applicable Term Loan Debtor and evidencing
such Note Receivable.
"Outstanding Participation Amount" shall mean,
with respect to each Participating Note Receivable, its
Initial Participation Amount as reduced from time to time
by payments received on account of principal pursuant to
Section 2.3(a).
"Parent" shall mean BLC Financial Services,
Inc., a Delaware corporation, and its successors and
assigns.
"Parent Debentures" shall mean debentures in
the original principal amount of $1,700,000 that may be
issued by Parent after the Closing Date, which shall have
a fixed interest rate of not more than ten percent (10%),
a term of not less than three (3) years with interest
only payable prior to maturity, be subordinated to
payment of the Liabilities, and otherwise be in form and
substance acceptable to Participant, and all debentures
issued or delivered by Parent in substitution or exchange
therefor and meeting the same criteria, in each case as
the same may be supplemented, modified, or amended from
time to time with the consent of Participant.
"Parent Guaranty" shall mean the Guaranty
Agreement dated as of the date hereof executed by Parent
in favor of Participant pursuant to which Parent
guarantees to Participant the payment and performance of
the Liabilities.
"Participant" shall mean Transamerica Business
Credit Corporation, a Delaware corporation, together with
its successors and permitted assigns.
"Participating Note Receivable" shall have the
meaning ascribed to such term in Section 2.1(b).
"Participations" shall have the meaning
ascribed to such term in Section 2.1(a).
"Participation Certificate" shall mean a
certificate evidencing Participant's interest in any
Participating Notes Receivable, to be substantially in
the form attached as Exhibit A hereto.
"Participation Documents" shall mean this
Agreement, the Participation Certificates, the Parent
Guaranty, and all other agreements, instruments,
documents and other written matter whether heretofore,
now, or hereafter executed by or on behalf of Lender or
Parent or delivered to Participant, with respect to this
Agreement.
"Participation Percentage" shall have the
meaning ascribed to such term in Section 2.1(b).
"Participation Request" shall mean the request
by Lender for any purchase by Participant of a
Participation under the Agreement, substantially in the
form attached as Exhibit B hereto, and setting forth,
among other things, the following information with
respect to each Note Receivable covered thereby: the name
of the Term Loan Debtor; the SBA Loan Number; the
outstanding principal balance as the proposed Purchase
Date; the percentage of the SBA Guaranteed Note
Receivable portion thereof; the percentage of the
Non-Guaranteed Note Receivable portion thereof; and
Lender's calculation of the Net Eligible Non-Guaranteed
Note Receivable portion thereof and the Initial
Participation Amount and the Participation Percentage
therefor.
"Permitted Liens" shall have the meaning
ascribed to such term in Section 3.3(a).
"Person" shall mean any individual,
corporation, partnership, joint venture, association,
joint stock company, trust, unincorporated organization,
government or any agency or political subdivision
thereof, or any other form of entity.
"Plan" shall mean, with respect to Lender or
any ERISA Affiliate, at any time, an employee benefit
plan, as defined in Section 3(3) of ERISA, which Lender
maintains, contributes to, or has an obligation to
contribute to on behalf of participants who are or were
employed by any of them.
"Property" shall mean any interest in any kind
of property or asset, whether real, personal or mixed, or
tangible or intangible.
"Purchase Date" shall mean, with respect to
each Participation, the date on which it is purchased by
Participant pursuant to this Agreement.
"Purchase Price" shall have the meaning
ascribed to such term in Section 2.1(c).
"Release" shall mean any release, spill,
emission, leaking, pumping, pouring, injection, escaping,
deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the
indoor or outdoor environment (including, the abandonment
or disposal of any barrels, containers or other closed
receptacles containing any Hazardous Materials) or into
or out of any Property, including the movement of any
Hazardous Material through the air, soil, surface water,
groundwater or property.
"SBA" shall mean the United States Small
Business Administration or any other Federal agency
administering the SBI Act.
"SBA Guaranteed Note Receivable" shall mean
that portion of any Note Receivable that is actually and
fully guaranteed by the SBA.
"SBI Act" shall mean the Small Business
Investment Act of 1958 or any similar or successor
federal statute and the rules and regulations promulgated
thereunder, as in effect from time to time.
"Schedule of Documents" shall mean the
schedule, including all appendices, exhibits or schedules
thereto, listing certain documents and information
required to be delivered in connection with this
Agreement and the other Participation Documents and the
transactions contemplated hereunder and thereunder,
substantially in the form attached hereto as Exhibit E.
"Schedule of Participating Notes Receivable"
shall have the meaning ascribed to such term in Section
4.1(c).
"Securitization Transaction" shall mean any
transaction effected in a manner acceptable to
Participant and through documentation in form and
substance acceptable to Participant, pursuant to which
Lender sells all or a specific portion of its portfolio
of Non-Guaranteed Notes Receivable by pooling and
transferred them to a trust that issues and sells
certificates representing the entire beneficial interest
in such trust.
"Solvent" shall mean, with respect to any
Person, (a) the present fair value of such Person's
assets is in excess of the total amount of such Person's
liabilities, (b) such Person is able to pay its debts as
they become due, and (c) such Person does not have
unreasonably small capital to carry on its business.
"Stated Index Rate" shall have the meaning
assigned to it in Section 2.3(b).
"Sterling" shall mean Sterling National Bank &
Trust Company of New York, a national banking
association.
"Sterling Documents" shall mean the Revolving
Credit Agreement dated as of December 19, 1994, among
Lender, Parent, and Business Loan Center, a New York
general partnership, as borrowers, and Sterling, as
lender, and all other agreements and documents executed
in connection with the financing arrangements
contemplated thereby, including all amendments,
modifications and supplements thereto and any appendices,
exhibits or schedules to any of the foregoing, and shall
refer to such agreements and documents as the same may be
in effect at the time such reference becomes operative.
"Stock" shall mean all shares, options,
warrants, interests, participation or other equivalents
(regardless of how designated) of or in a corporation or
equivalent entity, whether voting or nonvoting, including
common stock, preferred stock, convertible debentures and
all agreements, instruments and documents convertible, in
whole or in part, into any one or more or all of the
foregoing.
"Subordinated Debt" shall mean that portion of
the Indebtedness which is subordinated in a manner
satisfactory in form and substance to Participant as to
right and time of payment of principal and interest
thereon to any and all of the Liabilities, including all
intercompany accounts and borrowings.
"Subsidiary" shall mean any corporation of
which more than fifty percent (50%) of the outstanding
capital Stock having ordinary voting power to elect a
majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall have or might
have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly,
owned by Lender or one or more Subsidiaries.
"Tangible Net Worth" shall mean, with respect
to any Person, the remainder of (a) the sum of the Net
Worth of such Person plus the principal amount of
Subordinated Debt, minus (b) Intangible Assets; provided,
that for purposes of this definition only, Intangible
Assets shall not include the Loan Guaranty Agreement.
"Term Loan Debtor" shall mean any Person, other
than the SBA, who is or may become obligated to Lender
for a term loan or other financial accommodation provided
to or for the benefit of such Person.
"Termination Date" shall mean the first date on
or after the Commitment Termination Date on which
Participant no longer holds any Participations and all of
the Liabilities have been fully paid and satisfied.
"Transactions" shall mean the transactions
provided for in and contemplated by this Agreement and
the other Participation Documents.
"UCC" shall have the meaning ascribed to such
term in Section 1.3.
"Voting Stock" shall mean securities of any
class or classes of the corporation the holders of which
are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or
Persons performing similar functions).
1.2 Accounting Principles. Where the character or
amount of any asset or liability or item of income or
expense is required to be determined or other accounting
computation is required to be made for the purposes of
this Agreement, this shall be done in accordance with
GAAP, except where such principles are inconsistent with
the specific requirements of this Agreement.
1.3 Other Terms. All other terms contained in this
Agreement shall have, when the context so indicates, the
meanings provided for by the Uniform Commercial Code as
adopted and in force in the State of Illinois, as from
time to time in effect (the "UCC"); provided, that in the
event that, by reason of mandatory provisions of law, any
rights or remedies with respect to Participant's interest
in any Participating Notes Receivable is governed by the
Uniform Commercial Code as in effect in a jurisdiction
other than the State of Illinois, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions of any
Participation Document relating to such rights or
remedies and for purposes of definitions related to such
provisions.
1.4 Certain Matters of Construction. The terms
"herein", "hereof" and "hereunder" and other words of
similar import shall refer to this Agreement as a whole
and not to any particular section, paragraph or
subdivision. Any reference to a "Section", "Exhibit",
"Article" or "Schedule" shall refer to the relevant
Section or Article of or Exhibit or Schedule to this
Agreement, unless specifically indicated to the contrary.
Any pronoun used shall be deemed to cover all genders.
The term "including" shall not be limiting or exclusive,
unless specifically indicated to the contrary. All
references to statutes and related regulations shall
include any amendments of same and any successor statutes
and regulations.
ARTICLE 2
AMOUNT AND TERMS OF PARTICIPATION
2.1 The Participations and Commitment.
(a) General. Subject to the terms and
conditions set forth herein and relying on the
representations and warranties contained in this
Agreement, Participant hereby agrees that it will from
time to time prior to the Termination Date and so long as
no Default or Event of Default has occurred and is
continuing, purchase from Lender, and Lender hereby
agrees that it will sell to Participant, pursuant to
Section 2.2, participations comprising an undivided
interest in the portion of each Note Receivable that
constitutes Net Eligible Non-Guaranteed Notes Receivable
as of the Purchase Date therefor, all Note Receivable
Documents evidencing such Note Receivable, and all of
Lender's collateral and rights with respect to such Note
Receivable and Note Receivable Documents (collectively,
the "Participations").
(b) Participation Amount and Percentage. With
respect to each Note Receivable in which a Participation
is purchased under this Agreement (a "Participating Note
Receivable"), Participant shall purchase a Participation
equal to up to sixty percent (60%) of the portion of such
Participating Note Receivable that constitutes Net
Eligible Non-Guaranteed Notes Receivable as of its
Purchase Date; provided, that Lender shall at all times
retain for its own account not less than ten percent
(10%) of the total amount of such Participating Note
Receivable (the "Minimum Lender's Percentage
Requirement"); and provided further, that to the extent
that more than sixty percent (60%) of the portion of such
Participating Note Receivable that constitutes Net
Eligible Non-Guaranteed Notes Receivable as of its
Purchase Date could be purchased without violating the
Minimum Lender's Percentage Requirement, Participant
shall have the option (but not the obligation) to include
such additional amount within the Participation in such
Participating Note Receivable. Each Participation shall
be a purchase, at par, of an undivided pro rata share of
the outstanding principal amount of such Participating
Note Receivable as of its Purchase Date. With respect to
each Participating Note Receivable, (i) the amount of the
Participation therein as of its Purchase Date shall be
its "Initial Participation Amount," and (ii) the
percentage that its Initial Participation Amount is of
its total principal amount as of its Purchase Date shall
be its "Participation Percentage."
(c) Purchase Price. The price to be paid by
Participant for its purchase of any Participation (the
"Purchase Price") shall be equal to its Initial
Participation Amount. The Purchase Price shall be the
only amount payable by Participant with respect to any
Participation, and Participant shall not be responsible
for or required to pay or contribute any additional
amounts with respect to the Participation or its
Participating Note Receivable, whether for additional
funding, expenses, damages or otherwise.
(d) Maximum Commitment. Participant shall not
be required to purchase any Participation if doing so
would cause the aggregate outstanding principal amount of
the Participations purchased or held by Participant at
any one time (the "Maximum Commitment") to exceed the
lesser of:
(i) the Maximum Participation Amount; or
(ii) sixty percent (60%) of Net Eligible
Non-Guaranteed Notes Receivable.
(e) Participation Certificates. The
Participant's interest in any Participating Notes
Receivable shall be evidenced by Participation
Certificates delivered to Participant promptly upon
receipt by Lender of immediately available funds
representing the principal amount of Participant's
Participation in such Notes Receivable.
(f) Optional Participations. To the extent,
if any, that Lender is ordered and required to sell its
retained interest in any Participating Note Receivable,
Participant shall have the right (but not the
obligation), at Participant's option, to purchase
additional participating interests in such Participating
Note Receivable, subject to SBA consent, if required, and
pursuant to SBA regulations, upon the same terms and
conditions as apply to the Participations purchased
hereunder. To the extent, if any, that Lender is ordered
and required to sell its retained interest in any Note
Receivable in which a participation has previously been
sold to any Person other than Participant, Participant
shall have the right (but not the obligation), at
Participant's option, to purchase additional
participating interests in such Participating Note
Receivable, subject to SBA consent, if required, and
pursuant to SBA regulations, upon the same terms and
conditions as apply to the participating interests sold
to such other Persons.
2.2 Notice of Participations; Payment of Purchase
Price.
(a) Notice. The proposed Purchase Price and
Purchase Date of each Participation hereunder shall be
designated by Lender's execution of and delivery to
Participant of a Participation Request by no later than
12:00 noon (Central Time) on the Business Day prior to
the proposed Purchase Date (which must also be a Business
Day).
(b) Information and Documents. Each
Participation Request shall be accompanied by an executed
or conformed copy of the Note Receivable Documents for
each Note Receivable for which the purchase of a
Participation is requested thereby and, if so requested
by Participant in writing, copies of such other materials
pertaining to such Note Receivable (including financial
information required to be delivered to Lender and all
applicable SBA approvals) as Lender has in its
possession, subject only to Participant's compliance with
applicable law and any applicable confidentiality
requirements.
(c) Purchase and Payment. Upon receipt of a
Participation Request pursuant to Section 2.2(a) and all
other information required to be delivered pursuant to
Section 2.2(b), and the satisfaction of all of the other
conditions precedent set forth in Article 7, subject to
the provisions of, and satisfaction of the conditions set
forth in, Section 2.1, Participant shall, on or after the
Closing Date, purchase Participations from Lender up to a
maximum aggregate outstanding principal amount equal to
the Maximum Commitment. The Purchase Price for each
Participation shall be paid to Lender on the Purchase
Date by wire transfer to the following account:
Sterling National Bank
ABA No.: 026 007773
For credit to: Business Loan Center
Account No.: 31 50696 01
or to such other account as Lender may from time to time
designate by written notice to Participant.
2.3 Participant's Right to Payments.
(a) Principal. Participant shall be entitled
to receive, from all funds received by Lender from any
source and applied on account of a payment of principal
of a Participating Note Receivable, the Participation
Percentage for such Participating Note Receivable of such
funds. Any such payments received by Participant shall
reduce the Outstanding Participation Amount with respect
to such Participating Note Receivable.
(b) Interest. Participant shall be entitled
to receive, from all funds received by Lender from any
source and applied on account of a payment of interest on
a Participating Note Receivable, interest on the
Outstanding Participation Amount of such Participating
Note Receivable at a floating rate equal to the Index
Rate plus two percent (2%) per annum (the "Stated Index
Rate"). With respect to each Participating Note
Receivable, the Index Rate and the Stated Rate shall be
calculated and, if necessary, adjusted, on each day when
the interest rate is recalculated or adjusted under the
Note Receivable Documents for such Participating Note
Receivable. Each Schedule of Participating Notes
Receivable to be delivered to Participant by Lender
pursuant to Section 4.1(c) will indicate the dates of any
such recalculation or adjustments with respect to any
Participating Note Receivable. All computations of
interest shall be made by Participant on the basis of the
actual number of days in the year, and the actual number
of days occurring in the period, for which such interest
is payable. Each determination by Participant of an
interest rate hereunder shall be conclusive and binding
for all purposes, absent manifest error or bad faith.
(c) Late Fees. If Lender collects any late
charges, additional interest in excess of the non-default
rate of interest, waiver fees or other amounts with
respect to a default under a Participating Note
Receivable, Participant shall be entitled to receive the
Participation Percentage for such Participating Note
Receivable of such amounts.
(d) Lender's Percentage; Subordination by
Lender. With respect to each Participating Note
Receivable, Lender will at all times retain for its own
account not less than Lender's Percentage of the
outstanding principal amount thereof, except to the
extent, if any, ordered and required by SBA to sell such
interest. Lender hereby subordinates its rights to
retain for its own account any payments received by
Lender from any source and applied on account of any
payment on a Participating Note Receivable, whether as
principal, interest, or otherwise, to Participant's right
to receive all payments to which Participant would be
entitled if all payments due with respect to such
Participating Note Receivable were received by Lender as
and when due under the Note Receivable Documents
governing such Participating Note Receivable. In order
to effectuate such subordination, if Lender has not
received funds with respect to any Participating Note
Receivable sufficient to pay Participant the full amount
Participant would be entitled to receive if all payments
due with respect to such Participating Note Receivable
were received by Lender as and when due, then Lender
shall pay to Participant the amount of such shortfall out
of any funds received by Lender with respect to such
Participating Note Receivable that Lender would otherwise
be entitled to retain for Lender's own account; provided,
that Lender shall not be required to pay such funds to
Participant with respect to a shortfall in payment of
principal so long as none of such funds is applied (or
would be applied but for the application of this Section
2.3(d)) to payment of principal retained for Lender's own
account.
(e) Payments Held in Trust. All funds
received by Lender from any source with respect to any
Participating Note Receivable that Participant is
entitled to receive under this Agreement shall be
received and held by Lender in trust for and as the
separate property of Participant. Lender shall establish
a bank account acceptable to Participant into which all
payments with respect to Participating Note Receivables,
and no other payments, shall be deposited.
2.4 Collection; Payments to Participant.
Lender shall have the right to collect all
payments due on or in connection with the Participating
Notes Receivable. On each Business Day, Participant's
share of any cleared funds with respect to such payments
shall be paid to Participant by wire transfer of
immediately available funds. Wire transfers to
Participant are to be sent to the following account:
First National Bank of Chicago
ABA No.: 07100013
For credit to: Transamerica Business Credit Corporation
Account No.: 52-95726
or to such other account as Participant may from time to
time designate by written notice to Lender. On the
fifteenth day and on the last Business Day of each month,
Lender will send to Participant by facsimile transmission
and on a diskette an Application of Payments Schedule.
The Application of Payments Schedule shall list all
Participating Notes Receivable, whether or not a payment
has been received, and for any Participating Note
Receivable with respect to which Lender did not receive a
payment as and when due, the reason for non-payment and
prognosis for future payments must be indicated thereon.
If and as often as requested by Participant with respect
to any particular Participating Note Receivable for which
a payment has not been received as and when due, Lender
shall promptly provide to Participant a report indicating
the reason for non-payment and prognosis for future
payments. The Application of Payments Schedule sent on
the fifteenth day of each month shall be accompanied by a
copy of the Bank's Colson Report, Form 1502, from the
most recent month.
2.5 Lender's Repurchase of Participations.
(a) Individual Participations. Lender agrees
to repurchase the Participation in any Participating Note
Receivable, immediately upon receipt of a request
therefor from Lender, in the event of a loss with respect
to such Participating Note Receivable due to: (i) fraud
on the part of Lender, or (ii) any failure to recover
from any Term Loan Debtor, any other obligor or
collateral therefor as a result of any deficiency in
documenting or servicing such Participating Note
Receivable. Lender further agrees to repurchase the
Participation in any Participating Note Receivable if:
(x) any portion of Lender's Percentage in such
Participating Note Receivable is sold to a Person other
than Participant, or (y) Lender no longer services such
Participating Note Receivable. Lender acknowledges and
agrees that the sale of the Participations to the
Participant does not constitute the sale of a "security"
for purposes of the Securities Act of 1933 and the
Securities and Exchange Act of 1934.
(b) All Participations. Lender agrees that if
SBA consents to Borrower's entering into the Loan
Agreement and the transactions contemplated thereunder,
then Lender will, as soon as practicable, close the
transactions contemplated by the Loan Agreement,
including the repurchase by Lender of all of the
Participations then held by Participant.
(c) Repurchase Price. The repurchase price to
be paid by Lender for any Participation repurchased under
this Section 2.5 or Section 2.6 shall be the sum of (i)
its Outstanding Participation Amount, plus (ii) accrued
and unpaid interest thereon through the date of
repurchase, plus (iii) any other amounts payable under
Section 2.3 with respect thereto. The repurchase price
shall be paid to Participant by wire transfer to the
account of Participant designated pursuant to Section
2.4.
2.6 Term Loan Debtor Defaults. Lender shall notify
Participant within one (1) Business Day of Lender
becoming aware of any "Event of Default" under and as
defined in the Note Receivable Documents with respect to
any Participating Note Receivable. Participant
understands and agrees that: (a) Lender may use its
discretion with respect to exercising or refraining from
exercising any rights that it may have or taking or
refraining from taking actions it may be entitled to take
in connection with the Participating Notes Receivable,
the Note Receivable Documents with respect thereto or any
collateral therefor or any obligor thereunder; and (b) in
exercising such discretion, Lender will use the same care
to protect the interest of Participant as it does to
protect Lender's own interest. Participant further
understands and agrees that Lender may, in its sole
discretion in each instance, without prior notice to or
consent of Participant, agree to take or refrain from
taking any action with respect to any Participating Notes
Receivable, the Note Receivable Documents with respect
thereto (including any security agreement or guaranty) or
any collateral therefor or any obligor thereunder;
provided, that Lender will not, without the consent of
the Participant (which consent will not unreasonably be
withheld), agree to any amendment, modify, waive, or
release any provision or collateral of any Term Loan
Debtor with respect to any Participating Notes
Receivable, the Note Receivable Documents with respect
thereto (including any security agreement or guaranty) or
any collateral therefor or any obligor thereunder, or
make any extension of the final scheduled maturity of, or
reduction of the effective interest rate on any of the
Participating Notes Receivable, or forgiveness of any
principal of or interest on any of the Participating
Notes Receivable. Lender may, without prior consent of
Participant, take any action which SBA defines as being
within the Bank's "Unilateral Servicing Authority",
provided Lender advises Participant of this action in
writing. If Participant is unwilling to consent to any
amendment, modification, waiver, release or consent which
requires its consent, Lender shall have the right, but
not the obligation, to repurchase at such time the
Participation in the Participating Note Receivable
affected by such change, for a repurchase price
determined and payable in accordance with Section 2.5(c).
2.7 Closing Fee. Lender agrees to pay Participant
on the Closing Date, solely as consideration for
Participant agreeing to enter into this Agreement, a
fully earned and non-refundable closing fee equal to One
Hundred Twenty-Five Thousand Dollars ($125,000), which
shall be paid by Lender to Participant by either wire
transfer or cash on the Closing Date.
2.8 Refusal to Participate Above Maximum
Commitment. Participant shall have the right to refuse
to purchase additional Participations when such purchases
would cause the aggregate outstanding principal amount of
the Participations purchased or held by Participant at
any one time to exceed the Maximum Commitment.
2.9 Use of Proceeds. Lender shall use the proceeds
of the Participations purchased by Participant hereunder
solely to repay Indebtedness under the Sterling Documents
and to fund Lender's portfolio development and working
capital requirements after the Closing Date. Lender's
use of such proceeds shall be only for legal and proper
corporate purposes (duly authorized by Lender's Board of
Directors), consistent with all applicable laws, statutes
and regulations.
2.10 Term of Agreement. Subject to Participant's
right to cease purchasing Participations from Lender on
the Commitment Termination Date, the provisions of this
Agreement shall be in effect until the Termination Date.
2.11 Business Days. If any payment on the
Participations or any other payment due hereunder becomes
due and payable on a day other than a Business Day, then
for all purposes of the Participation Documents, the
maturity of such payment shall be extended to the next
succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then
applicable rate during such extension.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce Participant to provide the
financial accommodations to Lender provided for herein
and in the other Participation Documents, Lender and
Parent make the following warranties and representations
to Participant, each of which will be correct and true as
of the Closing Date and on the date that each
Participation is requested by Lender:
3.1 Corporate Existence. Each of Lender and Parent
(i) is a corporation duly organized, legally existing and
in good standing under the laws of the State of Delaware;
(ii) is duly qualified or licensed to do business in all
other jurisdictions wherein the business transacted by it
makes such qualification necessary, except where the
failure to so qualify would not have a Material Adverse
Effect; (iii) has the requisite corporate power and
authority and the legal right to conduct its business as
now, heretofore and proposed to be conducted; and (iv) is
in compliance with its Certificate of Incorporation and
By-Laws.
3.2 Corporate Power and Authorization. Each of
Lender and Parent is duly authorized and empowered to
execute, deliver and perform the Participation Documents,
including this Agreement, to which it is a party; and all
corporate action on Lender's or Parent's part requisite
for the due execution, delivery and performance of the
Participation Documents, including this Agreement, to
which it is a party has been duly and effectively taken.
3.3 Ownership of Property; Permitted Liens.
(a) Except for the permitted Liens, if any,
set forth on Schedule 3.3(b) (the "Permitted Liens"), no
Property of Lender is subject to any Lien.
(b) Each Participation hereunder creates a
valid and enforceable interest in favor of Participant to
the extent of Participant's Participation in the
Participating Notes Receivable purported to be covered
thereby, and no further action is required to establish
or perfect such ownership interest.
3.4 Capital Structure. The number and nature of
all outstanding securities of each of Lender and Parent,
and the holder of all outstanding securities of Lender,
each as of the date hereof, and the holder of all
outstanding securities of Parent as of April 24, 1997,
are set forth on Schedule 3.4. All such shares have been
duly issued and are fully paid and non-assessable. There
are not outstanding any options to purchase, or any
rights or warrants to subscribe for, or any commitments
or agreements to issue or sell, or any securities or
obligations convertible into, or any powers of attorney
relating to, shares of the capital Stock of Lender,
except as set forth on Schedule 3.4. Except as set forth
on Schedule 3.4, there are no outstanding agreements or
instruments binding upon any of Lender's shareholders
relating to the ownership of its shares of capital Stock.
3.5 Binding Obligations. This Agreement does, and
the other Participation Documents to which Lender or
Parent is a party upon their creation, issuance,
execution and delivery will, constitute valid and binding
obligations of such Person, enforceable in accordance
with their terms except to the extent that such
enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors'
rights generally or by principles of equity pertaining to
the availability of equitable remedies.
3.6 No Legal Bar; No Lien. Each of the
Participation Documents, including this Agreement, to
which Lender or Parent is a party do not and will not
violate any provisions of its articles or certificate of
incorporation, bylaws, or any contract, agreement,
instrument or Governmental Requirement to which Lender or
Parent is subject; and (b) neither the execution,
delivery, or performance of the Participation Documents,
including this Agreement, shall create, or constitute
cause for the creation of, any Lien on any asset of
Lender or Parent.
3.7 No Consent. Lender's and Parent's execution,
delivery and performance of the each of the Participation
Documents, including this Agreement, to which it is a
party do not require the consent or approval of any other
Person which has not been obtained, including any
regulatory authority or governmental body of the United
States of America or any state thereof or any political
subdivision of the United States of America or any state
thereof.
3.8 Liabilities; Litigation. Neither Lender nor
Parent has, as of the Closing Date, any material
(individually or in the aggregate) liabilities, direct or
contingent, except as disclosed in Schedule 3.8. Except
as disclosed in Schedule 3.8, as of the Closing Date,
there is no litigation, legal, administrative or arbitral
proceeding, investigation or other action of any nature
pending or, to the knowledge of Lender or Parent,
threatened against or affecting Lender or Parent that
would have a Material Adverse Effect on Lender or Parent
or challenge any Transaction contemplated hereunder.
3.9 Taxes; Governmental Charges. As of the Closing
Date or the date each advance is requested by Lender, as
applicable, each of Lender and Parent has filed all tax
returns and reports required to be filed prior to such
date and has paid all taxes, assessments, fees and other
governmental charges levied upon it or its income which
are due and payable, including interest and penalties, or
has provided adequate reserves for the payment thereof.
3.10 Defaults. Neither Lender nor Parent is in
default nor has any event or circumstance occurred which,
but for the passage of time or the giving of notice, or
both, would constitute a default under any loan or credit
agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument evidencing or
pertaining to any debt of Lender or Parent, or under any
material agreement or instrument to which Lender or
Parent is a party or by which it is bound or which would
have a Material Adverse Effect on Lender or Parent or its
business. No Default or Event of Default hereunder has
occurred and is continuing.
3.11 Use of Proceeds; Margin Stock. The proceeds of
Participations will be used by Lender to fund Lender's
commercial lending activities and for other purposes
permitted by Section 2.9. None of such proceeds will be
used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part
221), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or
carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Lender is not engaged in
the business of extending credit for the purpose of
purchasing or carrying margin stocks. Neither Lender,
Parent nor any Person acting on behalf of Lender or
Parent has taken or will take any action which might
cause any of the Participation Documents, including this
Agreement, to violate Regulation U or any other
regulation of the Board of Governors of the Federal
Reserve System or to violate Section 7 of the Securities
Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same
may hereinafter be in effect.
3.12 Compliance with the Law. Neither Lender nor
Parent:
(a) is in violation of any Governmental
Requirement;
(b) has failed to obtain any license, permit,
franchise or other governmental authorization necessary
to the conduct of its business, which violation or
failure would have (in the event such violation or
failure were asserted by any Person through appropriate
action) a Material Adverse Effect. Without limiting the
generality of the foregoing, Lender has obtained the Loan
Guaranty Agreement and has complied and will continue to
comply with all statutory, and other regulatory
requirements necessary to obtain and maintain the Loan
Guaranty Agreement.
3.13 ERISA. Each of Lender and Parent is in
compliance in all material respects with the applicable
provisions of ERISA, and no "reportable event," as such
term is defined in Section 4043 of ERISA, has occurred
with respect to any Plan of Lender of Parent.
3.14 No Material Misstatements. No information,
exhibit or report furnished to Participant by Lender or
Parent in connection with the negotiation or execution of
this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not
misleading.
3.15 Investment Company Act. Neither Lender nor
Parent is an "investment company" or a company
"controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as
amended.
3.16 No Financing of Corporate Takeovers. No
proceeds of any Participations hereunder will be used to
acquire any security in any transaction which is subject
to Sections 13 or 14 of the Securities Exchange Act of
1934, including, Sections 13(d) and 14(d) thereof.
3.17 Location of Lender. Lender's and Parent's
principal place of business and chief executive offices
are located at the address stated in the preamble of this
Agreement; provided, that after the Closing Date such
principal place of business and chief executive offices
may be relocated if Lender and Parent comply with the
requirements of Section 5.4.
3.18 Use of Proceeds. Lender's use of the proceeds
of any Participations purchased by Participant pursuant
to this Agreement are, and will continue to be, legal and
proper corporate uses duly authorized by its Board of
Directors and such uses are consistent with all
applicable laws and statutes, as in effect as of the date
hereof.
3.19 Hazardous Materials.
(a) the operations of Lender and Parent
comply in all material respects with all Environmental
Laws;
(b) each of Lender and Parent has obtained
all material Governmental Authorizations under
Environmental Laws necessary to its operations, and all
such Governmental Authorizations are in good standing in
all material respects, and each of Lender and Parent is
in compliance with all material terms and conditions of
such Governmental Authorizations;
(c) (i) Neither Lender nor Parent has
received (A) any notice or claim to the effect that it is
or could reasonably be expected to be subject to a
material liability to any Person as a result of the
Release or threatened Release of any Hazardous Materials
or (B) any letter or request for information under
Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. 9604 et seq.)
or comparable state laws, and (ii) to Lender's and
Parent's knowledge, none of its operations is the subject
of any Federal or state investigation evaluating whether
any remedial action is needed to respond to a Release or
threatened Release of any Hazardous Material at any
Property;
(d) none of the operations of Lender or
Parent is the subject of any pending judicial or
administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely
determined could reasonably be expected to have a
Material Adverse Effect;
(e) Neither Lender nor Parent is subject to
any outstanding written order or agreement with any
governmental authority or private party (other than lease
agreements entered into in the ordinary course of
business containing standard provisions relating to
environmental matters) respecting (i) any liabilities
which have arisen or may arise under any Environmental
Laws or (ii) any Environmental Claims;
(f) Neither Lender or Parent, nor, to the
knowledge of Lender or Parent, any predecessor of Lender
or Parent has filed any notice under any Environmental
Law indicating past or present treatment, storage, or
disposal of Hazardous Materials at any Property, and none
of the operations of Lender or Parent involves the
generation, transportation, treatment or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state equivalent (other than hazardous materials
used in the ordinary course of business, the use of which
is not reasonably likely to materially adversely affect
any Property), and neither Lender or Parent, nor, to the
knowledge of Lender or Parent, any predecessor in title
to Lender or Parent or any third party at any time
occupying any Property has at any time used, generated,
disposed of, stored, transported to or from, released or
threatened the release of any Hazardous Materials, in any
form, quantity or concentration on, from, under or
affecting such Property in a manner that could reasonably
be expected to result in material liability of or
material claim against Lender or Parent;
(g) Neither Lender nor Parent has filed any
notice or report of a Release of any Hazardous Materials
that could reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect and,
to the knowledge of Lender or Parent, no Hazardous
Materials exist on, under or about any Property in a
manner that could reasonably be expected to give rise to
an Environmental Claim having a Material Adverse Effect;
(h) neither Lender or Parent, nor, to the
knowledge of Lender or Parent, any of its predecessors,
has disposed of any Hazardous Materials in a manner that
could reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(i) to the knowledge of Lender or Parent, no
underground storage tanks or surface impoundments are on
or at any Property owned or used by Lender or Parent,
which could reasonably be expected to give rise to any
Environmental Claim materially adversely effecting such
Property; and
(j) no Lien in favor of any governmental
authority for (i) any liability under Environmental Laws,
or (ii) damages arising from or costs incurred by such
governmental authority in response to a Release has been
filed or attached to any Property owned or used by Lender
or Parent.
3.20 Insurance Policies. Schedule 3.20 lists all
insurance of any nature maintained for current
occurrences by Lender or Parent, as well as a summary of
the terms of such insurance. All of such policies are in
full force and effect and provide coverage of such risks
and for such amounts as is customarily maintained for
businesses of the scope and size of Lender and Parent.
3.21 Schedule of Deposit Accounts. Schedule 3.21
lists all banks and other financial institutions at which
Lender maintains or will maintain deposit and/or other
accounts, and such exhibit correctly identifies the name
and address of each depository, the name in which the
account is held, the purpose of the account, and the
complete account number.
3.22 Labor Matters. There are no labor disputes
against Lender or Parent pending or, to Lender's or
Parent's knowledge, overtly threatened, that would have a
Material Adverse Effect. Hours worked by and payment
made to the employees of Lender have not been in
violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters, which violation
would have a Material Adverse Effect. All payments due
from Lender or Parent on account of employee health and
welfare insurance which would have a Material Adverse
Effect if not paid will be paid or, if not due, will be
accrued as a liability on the books of Lender or Parent.
3.23 Employment and Labor Agreements. Except as
listed in Schedule 3.23, there are no employment
agreements and no agreements for the payment of deferred
compensation, severance, or change in control pay
covering the officers and managers of Lender or Parent,
and there are no collective bargaining agreements or
other labor agreements covering any employees of Lender
or Parent. A true and complete copy of each such
agreement has been furnished to Participant.
3.24 Solvent Financial Condition. Each of Lender
and Parent is now and, after giving effect to the
advances to be made hereunder, at all times will be,
Solvent.
3.25 Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees in
connection with the transactions contemplated by this
Agreement, except for the fee payable solely by Parent
and Lender to D'Loren, Levin & Company in the amount of
$50,000, which will be paid by Borrower on the Closing
Date.
3.26 True Sales of Participations. Lender now
intends and at all times will intend that its transfers
of the Participations in Participating Notes Receivable
to Participant constitute true sales and not financing
devices.
3.27 No Material Intellectual Property. Neither
Lender nor Parent holds or owns, or employs in its
business operations, any material rights in, to, or under
copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, or tradenames
(collectively, "Intellectual Property"), except as set
forth on Schedule 3.27. Neither Lender nor Parent is a
party to or the subject of any agreement or dispute
respecting Intellectual Property which, if resolved
unfavorably to Lender or Parent, would have a Material
Adverse Effect.
3.28 Automatic Warranty and Reaffirmation of
Warranties and Representations; Survival of Warranties
and Representations. Each request by Lender for a
Participation pursuant to this Agreement or the other
Participation Documents shall constitute (a) a warranty
and representation by Lender and Parent to Participant
that there does not then exist a Default or an Event of
Default, except as otherwise disclosed in writing by
Lender to Participant, and (b) a reaffirmation as of the
date of said request of the representations and
warranties of Lender and Parent contained in Sections 3.1
through and including 3.27. All representations and
warranties of Lender and Parent contained in this
Agreement and the other Participation Documents shall
survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions
described therein or related thereto. Upon the Closing
Date, and at such other times as Participant in its sole
discretion may request, Lender shall deliver to
Participant Certificates of Validity of Participating
Notes Receivable in the form of Exhibit F, executed by
Lender's President and Chief Financial Officer,
respectively, or such other officers of Lender as
Participant may require.
ARTICLE 4
AFFIRMATIVE COVENANTS
Lender and Parent will at all times comply with the
covenants contained in this Article 4, from the date
hereof and for so long as any part of the Participations
are held by Participant or any Liabilities are
outstanding.
4.1 Financial Statements and Reports and Other
Data. Lender and Parent will promptly furnish to
Participant from time to time upon request such
information regarding the business affairs and financial
condition of Lender or Parent as Participant may
reasonably request, which information shall be certified
by the President and Chief Financial Officer of Lender or
Parent to be true and correct as of the date provided.
The information that may be requested by Participant
includes the following reports:
(a) Annual Reports
(i) Promptly after becoming available and
in any event within ninety (90) days after the close of
each fiscal year of Parent, Parent and Lender shall
provide to Participant audited fiscal year end financial
statements of Parent, Lender, and Parent's other
consolidated Subsidiaries, prepared on a consolidated and
consolidating basis by Richard A. Eisner & Company, LLP,
or other independent public accountants selected by
Parent and Lender and acceptable to Participant (the
"Accountant"), showing the balance sheet as at the end of
such year, the income statement for such year, and the
statement of cash flows for such year, setting forth in
each case in comparative form (for periods for which
available) the corresponding figures for the preceding
fiscal year, accompanied by the related report of the
Accountant, which report shall be to the effect that such
statements have been prepared in accordance with GAAP
consistently followed throughout the period indicated
except for such changes in such principles with which the
Accountant shall have concurred along with a certificate
certifying to Participant that, based upon Accountant's
examination of the affairs of Parent, Lender, and
Parent's other consolidated Subsidiaries performed in
connection with the preparation of said statements,
Accountant is not aware of the existence of any condition
or event which constitutes or would, upon notice or lapse
of time or both, constitute an Event of Default under
Section 6.1(b) or, if it is aware of such condition or
event, the nature thereof; and
(ii) As soon as available, but not later
than thirty (30) days prior to the close of each fiscal
year, Parent and Lender's annual business and financial
plans in form and substance satisfactory to Participant,
as approved by Parent's and Lender's Board of Directors,
which plans shall include the budget and cash flow
projections for Parent and Lender for the following
fiscal year;
(b) Monthly Reports
(i) Promptly after becoming available
and in any event within twenty (20) days after the end of
each month in each fiscal year of Parent, unaudited
internally prepared interim financial statements of
Parent, Lender, and Parent's other consolidated
Subsidiaries, prepared on a consolidated and
consolidating basis, that are satisfactory to Participant
in scope and detail and which include, but are not
limited to, the balance sheets as at the end of such
period, and the income statements and the statements of
cash flows for such month and for the period from the
beginning of the fiscal year to the close of such month,
setting forth in each case in comparative form the
corresponding figures for the corresponding period of the
preceding fiscal year, certified by the principal
financial officers of Parent and Lender to have been
prepared in accordance with GAAP consistently followed
throughout the period indicated except to the extent
stated therein, subject to normal changes resulting from
quarterly or year-end adjustments;
(ii) At the time of each delivery of the
monthly financial statements referred to in Section
4.1(b)(i), a Compliance Certificate duly and properly
executed and completed by either the President or the
Chief Financial Officer of Lender and either the
President or the Chief Financial Officer of Parent;
(iii) Promptly after becoming available
and in any event within twenty (20) days after the end of
each month in each fiscal year of Lender, such other
information as Participant shall reasonably request with
respect to the Participating Notes Receivable; and
(iv) Promptly after becoming available and
in any event within twenty (20) days after the end of
each month in each fiscal year of Lender, all audit
reports prepared by Lender with respect to any Term Loan
Debtor.
(c) Daily Reports. Accompanying each request
for a Participation hereunder, and in any event no less
frequently than each Business Day, Lender shall provide
Participant with a report listing, by name of obligor and
other identifying information ordinarily employed by
Lender, each of the Participating Notes Receivable, along
with the outstanding principal amount, payment schedule,
and collection and delinquency history thereof, and such
other collateral information as reasonably requested by
Participant (each a "Schedule of Participating Notes
Receivable").
(d) Other Reports.
(i) Audit Reports. Promptly upon
receipt thereof, one copy of each management letter or
other report submitted to Lender or Parent by its
accountants in connection with any annual, interim or
special audit made by them of the books of Lender or
Parent.
(ii) SEC Filings. Promptly after the
filing by Parent or Lender with the SEC of any report on
Form 10Q or 10K, or any other material disclosure, Lender
shall deliver a copy of such filing to Participant.
(iii) Collateral Appraisals on Defaulted
Loans. Promptly after a request by Participant with
respect to any Participating Note Receivable that is no
longer a Net Eligible Non-Guaranteed Note Receivable,
subject to SBA concurrence, Lender shall obtain and
deliver to Participant a copy of a current appraisal,
prepared by an appraiser acceptable to Participant, of
the underlying collateral for such Participating Note
Receivable.
(iv) Other Data. Promptly upon receipt
thereof, copies of such other financial or other data as
Participant may, in its sole discretion, reasonably
request.
4.2 Taxes and Other Liens. Each of Lender and
Parent will pay and discharge promptly when due all
taxes, assessments and governmental charges or levies
imposed upon it or upon its income as well as all claims
of any kind (including claims for labor, materials,
supplies and rent) which, if unpaid, might become a Lien
upon any or all of its Property; provided, that neither
Lender nor Parent shall be required to pay any such tax,
assessment, charge, levy or claim to the extent that the
amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of Lender or Parent.
4.3 Maintenance.
(a) Each of Lender and Parent shall (i)
maintain its corporate existence, rights and franchises;
and (ii) observe and comply with all Governmental
Requirements.
(b) Each of Lender and Parent shall maintain
in full force and good standing all licenses, permits,
franchises or other governmental authorizations necessary
to the conduct of its business, the failure to maintain
which could reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the
foregoing, Lender and Parent shall continue to comply
with all statutory and other regulatory requirements
necessary to maintain in full force and good standing the
Loan Guaranty Agreement, to the extent such requirements
have not been waived or become inapplicable pursuant to
the terms of the Multi-Party Agreement.
4.4 Further Assurances. Each of Lender and Parent
will promptly cure any defects in the execution and
delivery of the Participation Documents, including this
Agreement. Provided that such action would not violate
applicable SBA rules or regulations, each of Lender and
Parent at its expense will promptly execute and deliver
to Participant upon request all such other and further
documents, agreements and instruments as shall reasonably
be necessary in compliance with or accomplishment of the
covenants and agreements of Lender in the Participation
Documents, including this Agreement, or to further
evidence and more fully describe the Participations
hereunder, or to correct any omissions in the
Participation Documents, or more fully to state the
obligations set out herein or in any of the Participation
Documents, or to make any recordings, to file any
notices, or obtain any consents, all as may be deemed
necessary or appropriate in connection therewith by
Participant in its sole and absolute discretion.
4.5 Performance of Obligations. To the fullest
extent permitted by applicable law, each of Lender and
Parent will do and perform every act and discharge all of
the obligations provided to be performed and discharged
by it under the Participation Documents, including this
Agreement, at the time or times and in the manner
specified.
4.6 Accounts and Records. Each of Lender and
Parent will keep 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
activities, in accordance with GAAP, consistently applied
except only for changes in accounting principles or
practices with which Lender's and Parent's Accountant
concurs.
4.7 Right of Inspection. Each of Lender and Parent
will permit any officer, employee or agent of Participant
to examine Lender's and Parent's books of record and
accounts, take copies and extracts therefrom, and discuss
the affairs, finances and accounts of Lender and Parent
with Lender's and Parent's officers, accountants and
auditors, all at such reasonable times and as often as
Participant may desire. Lender and Parent acknowledges
that Participant presently anticipates performing a
minimum of four (4) audits in each fiscal year of Lender
and Parent.
4.8 Notice of Certain Events. Each of Lender and
Parent shall promptly notify Participant if it learns of
the occurrence of: (i) any event which constitutes a
Default or an Event of Default, together with a detailed
statement by a responsible officer of Lender or Parent of
the steps being taken to cure the effect of such Default
or Event of Default; or (ii) the receipt of any notice
from, or the taking of any other action by, the holder of
any promissory note, debenture or other evidence of
Indebtedness of Lender or Parent or of any security (as
defined in the Securities Act of 1933, as amended) of
Lender or Parent with respect to a claimed default,
together with a detailed statement by a responsible
officer of Lender or Parent specifying the notice given
or other action taken by such holder and the nature of
the claimed default and what action Lender or Parent is
taking or proposes to take with respect thereto; or (iii)
any legal, judicial or regulatory proceedings affecting
Lender or Parent or any of the Participating Notes
Receivable or Participations in which the amount involved
is material and is not covered by insurance or which, if
adversely determined, would have a Material Adverse
Effect; or (iv) any dispute between Lender or Parent and
any governmental or regulatory body, any Term Loan
Debtor, or any other Person which, if adversely
determined, could reasonably be expected to have a
Material Adverse Effect; or (v) any event or condition,
including any event or condition affecting the credit of
a Term Loan Debtor, that could reasonably be expected to
have a Material Adverse Effect.
4.9 Financial Covenants. From and after the
Closing Date and until the Liabilities are fully
satisfied, Lender and Parent shall:
(a) Tangible Net Worth. Maintain, on a
consolidated basis, Tangible Net Worth of not less than
$3,000,000 as of the end of their fiscal quarter ending
September 30, 1997, and $3,500,000 as of the end of each
of their subsequent fiscal quarters.
(b) EBITDA Ratio. Unless otherwise agreed in
writing by Lender, achieve, on a consolidated basis, as
measured as of the end of their fiscal quarters indicated
below, a minimum ratio of EBITDA for the twelve-month
period ending on the date of measurement to total,
actual, interest expense for such twelve-month period, of
not less than the ratio set forth below for such
measurement date:
Measurement Date EBITDA Ratio
Fiscal Quarter Ending June 30, 1997 1.1 to 1.0
Fiscal Quarter Ending September 30, 1997 1.1 to 1.0
Fiscal Quarter Ending December 31, 1997 1.1 to 1.0
Fiscal Quarter Ending March 31, 1998 1.1 to 1.0
Fiscal Quarter Ending June 30, 1998 1.1 to 1.0
Fiscal Quarter Ending September 30, 1998 1.2 to 1.0
Fiscal Quarter Ending December 31, 1998 1.2 to 1.0
Fiscal Quarter Ending March 31, 1999 1.2 to 1.0
Fiscal Quarter Ending June 30, 1999 1.2 to 1.0
(c) Default Percentage. As measured on the
last day of each month, not cause or allow those
Participating Note Receivables with respect to which
either a payment of interest, principal or other amount
due thereunder is more than 120 past due, or which SBA
has designated as "liquidation accounts," to be more than
ten percent (10%) of all of Borrower's Participating Note
Receivables (measured by the respective aggregate
outstanding principal amounts).
4.10 Bad Debt Reserve. Lender shall maintain on its
books, at all times, a bad debt reserve equal to at least
two and one-half percent (2.5%) of the aggregate
outstanding principal amount of all Non-Guaranteed Notes
Receivable.
4.11 Charges; Liens.
(a) Lender shall pay, and cause its Affiliates
and Subsidiaries to pay, promptly when due, all of the
Charges, and promptly discharge any Liens, encumbrances
or other claims against the Participating Notes
Receivable. Except for Liens in favor of Participant and
any other Permitted Liens, if Lender, at any time or
times hereafter, shall fail to pay any Charges when due
or promptly obtain the discharge of such Charges or of
any Lien, claim or encumbrance asserted against the
Participating Notes Receivable, subject to the provisions
of Section 4.11(b) below, Participant may, without
waiving or releasing any obligation or liability of
Lender hereunder or any Event of Default, in its sole
discretion, at any time or times thereafter, make such
payment, or any part thereof, or obtain such discharge
and take any other action with respect thereto which
Participant deems advisable. All sums so paid by
Participant and any expenses, including attorneys' fees,
court costs, expenses and other reasonable charges
relating thereto, shall be payable, upon demand, by
Lender to Participant.
(b) Lender may in good faith contest, by
proper legal actions or proceedings, the validity or
amount of any Charges or claims, and provided that Lender
gives Participant advance notice of its intention to
contest the validity or amount of any such Charge or
claim, Participant will forebear from making any payment
or otherwise obtaining the discharge of such Charge or
claim if at the time of the commencement of any such
action or proceeding, and during the pendency thereof (i)
no Event of Default shall have occurred and be
continuing, (ii) reserves with respect thereto are
maintained on the books of Lender in an amount reasonably
acceptable to Participant, (iii) such contest operates to
suspend collection of the contested Charges or claims and
is maintained and prosecuted continuously with diligence,
(iv) none of the Participating Notes Receivable will be
subject to forfeiture or loss of by reason of the
institution or prosecution of such contest, (v) no Lien
that shall exist for such Charges or claims during such
action or proceeding, (vi) Lender shall promptly pay or
discharge such contested Charges and all additional
charges, interests, penalties and expenses, if any, and
shall deliver to Participant evidence reasonably
acceptable to Participant of such compliance, payment or
discharge, if such contest is terminated or discontinued
adversely to Lender, and (vii) Participant has not
advised Lender in writing that Participant reasonably
believes that non-payment or non-discharge thereof would
have a Material Adverse Effect.
4.12 Communication With Accountants. Each of Lender
and Parent shall cooperate with Participant to permit
reasonable access to Accountant and authorizes Accountant
to disclose to Participant any and all financial
statements and other supporting financial data, including
matters relating to the conduct of the annual audit and
copies of any management letter with respect to Lender's
or Parent's business, pending litigation, financial
condition and other affairs. On or before the Closing
Date, Parent and Lender shall deliver to Participant a
letter addressed to such accountants in the form of
Exhibit G.
4.13 Loan Guaranty Agreement. Lender shall at all
times comply with the terms and conditions of the Loan
Guaranty Agreement.
4.14 Right of First Refusal for Securitization
Transaction Subordinated Certificates. Parent and Lender
shall cause Participant to be given a right of first
refusal to purchase any subordinated certificates issued
in connection with a Securitization Transaction.
ARTICLE 5
NEGATIVE COVENANTS
Without Participant's prior written consent, which
Participant may or may not in its sole discretion give,
each of Lender and Parent covenants that it shall not:
5.1 Liens. Except as otherwise expressly permitted
herein or in the other Participation Documents, encumber,
pledge, mortgage, or grant a security interest in (except
for Permitted Liens), or assign, sell (except for the
sale of SBA Guaranteed Notes Receivable to the extent
permitted by Section 5.5, the sale of the Participations
under this Agreement and the sale of other property in
the ordinary course of business), lease or otherwise
dispose of or transfer, whether by sale, merger,
consolidation, liquidation, dissolution, or otherwise,
any of Lender's or Parent's assets.
5.2 Capital Structure. Make any material change in
Lender's or Parent's capital structure or in any of its
business objectives, purposes and operations which might
in any way adversely affect the repayment of the
Liabilities.
5.3 Change of Business. Enter into any new
business or make any material change in any of Lender's
or Parent's business objectives, purposes or operations.
5.4 Location of Books and Records. Remove its
books and records or the Participating Notes Receivable
from the location listed in the preamble to this
Agreement, or keep any of such books and records and/or
the Participating Notes Receivable at any other office(s)
or location(s) unless (i) Lender gives Participant
written notice thereof and of the new location of said
books and records at least thirty (30) days prior thereto
and (ii) the other office or location is within the
continental United States of America.
5.5 Sale or Discount of Receivables. Discount or
sell any portion of its Notes Receivable; provided, that
so long as no Event of Default shall have occurred and be
continuing, Lender may sell Notes Receivable to the
extent that such sales are made (a) at par or at a
premium, (b) on ordinary business terms, (c) by or
through the Intermediary, and (d) in full conformity with
all applicable provisions of the SBI Act and other
governing law.
5.6 Consulting and Brokerage Services. Provide, or
enter into any contract or agreement to provide, or allow
any Affiliate or Subsidiary of Lender or Parent to
provide, or enter into any contract or agreement to
provide, to any Term Note Debtor or purchaser of Notes
Receivable, any advisory, consulting, brokerage, or
similar services, other than (a) the advisory or
consulting services, if any, Lender or Parent provides in
the ordinary course of business to prospective and actual
Term Note Debtors or purchasers of SBA Guaranteed Notes
Receivable in connection with (i) the marketing,
structuring, documentation, and closing of Note
Receivable transactions and (ii) the servicing of any
Notes Receivable, and (b) consulting services provided to
Term Loan Debtors or prospective borrowers in the
ordinary course of business that result in (i) a referral
by Lender or Parent to another funding source that is not
an Affiliate or Subsidiary of Lender or Parent, and (ii)
the receipt by Lender or Parent of a reasonable referral
fee in an arm's-length relationship with such other
funding source.
5.7 Survival of Obligations Upon Termination of
Agreement. Except as otherwise expressly provided for in
this Agreement and in the other Participation Documents,
no termination or cancellation (regardless of cause or
procedure) of this Agreement or the other Participation
Documents shall in any way affect or impair the powers,
obligations, duties, rights, and Liabilities of Lender,
Parent or Participant relating to (a) any transaction or
event occurring prior to such termination or
cancellation, (b) the Participations, or (c) any of the
undertakings, agreements, covenants, warranties and
representations of Lender, Parent or Participant
contained in this Agreement or the other Participation
Documents. All such undertakings, agreements, covenants,
warranties and representations shall survive such
termination or cancellation and be effective until the
Termination Date; provided, that all indemnity claims of
Participant under the Participation Documents shall
survive such full and final payment.
ARTICLE 6
EVENTS OF DEFAULT
6.1 Events. Any of the following events shall be
considered an "Event of Default" as that term is used
herein:
(a) Payments. Default is made in the payment
or prepayment when due of any installment of principal or
interest due to Participant under this Agreement; or
(b) Financial Covenants. Lender or Parent
fails to satisfy any financial covenant set forth in
Section 4.9 hereof; or
(c) Representations and Warranties. Lender or
Parent fails to perform, keep or observe any material
representation or warranty made by it herein or in any
other Participation Document or in any certificate,
request or other document furnished pursuant to or under
this Agreement or any other Participation Document, or
any such representation or warranty proves to have been
incorrect in any material respect as of the date when
made or deemed made; or
(d) Covenants. Lender or Parent fails to
perform, keep or observe any of the covenants or
agreements contained in Article 4 and Article 5 (other
than any failure to make any payment when due, or any
failure to perform any of the covenants in Section 4.9),
or in any other Loan Document, and such default continues
unremedied for a period of five (5) Business Days after
the earlier of (i) written notice thereof being given by
Participant to Lender, or (ii) such default otherwise
becoming known to Lender; or
(e) Other Obligations. A default shall occur
under any agreement, document or instrument, other than
this Agreement or the other Participation Documents, to
which Lender or Parent is a party, the consequences of
which could have a Material Adverse Effect, and which
default is not cured within ten (10) Business Days after
Lender becomes aware of such default; or
(f) Breach of Agreement with SBA. Lender
shall breach in any material respect its servicing or any
other obligations under any Loan Guaranty Agreement; or
(g) Default Under Sterling Documents. Any
event of default shall occur under the Sterling
Documents; or
(h) Default Under Parent Debentures. Any
event of default shall occur under the Parent Debentures
or any of the documents evidencing such Indebtedness; or
(i) Default Under Parent Guaranty. Any event
of default shall occur under the Parent Guaranty; or
(j) Misrepresentations. Any statement,
report, financial statement or certificate made or
delivered by Lender or Parent, or any of its officers,
employees or agents, to Participant is untrue, incomplete
or incorrect in any material respect at the time when
made and the same shall remain untrue for five (5)
Business Days after Lender shall receive written notice
of such fact from Participant or five (5) Business Days
after Lender becomes aware of such default; or
(k) Involuntary Bankruptcy or Other
Proceedings. The filing of a petition with a court having
jurisdiction over Lender or Parent to commence an
involuntary case for Lender or Parent under the
Bankruptcy Code, as now constituted or hereafter amended,
or any other applicable Federal or state bankruptcy,
insolvency or similar law; or the appointment of a
receiver, liquidator, assignee, custodian, trustee,
agent, sequestrator or other similar official for
Lender's or Parent's affairs; and the failure to obtain
the dismissal of such petition or appointment within, or
the continuance of such decree or order unstayed and in
effect for, a period of thirty (30) days from the date of
such filing or appointment or the entry of such order or
decree; or
(l) Voluntary Petitions, etc. The
commencement by Lender or Parent of a voluntary case
under the Bankruptcy Code, as now constituted or
hereafter amended, or any other applicable Federal or
state bankruptcy, insolvency or similar law; the consent
by Lender or Parent to the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator,
agent or other similar official for Lender or Parent or
for any material part of Lender's or Parent's property;
the making by Lender or Parent of an assignment for the
benefit of creditors; any case of proceeding is commenced
by Lender or Parent for Lender's or Parent's dissolution,
liquidation or termination; or the taking of any action
by or on behalf of Lender or Parent in furtherance of any
of the foregoing; or
(m) Discontinuance of Business. Lender or
Parent ceases to conduct its business as now conducted or
is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its
business affairs; or
(n) ERISA Notices. Lender or Parent fails to
(i) furnish Participant, within fifteen (15) days
thereafter, with written notice upon the occurrence of
any of the following events: (A) the happening of a
Reportable Event with respect to any pension plan of
Lender or Parent governed by ERISA, as to which the
requirement of notice has not been waived by PBGC, (B)
the termination of any such plan, (C) the appointment of
a trustee by an appropriate United States District Court
to administer any such plan, or (D) the institution of
any proceedings by the Pension Benefit Guaranty
Corporation to terminate any such plan or to appoint a
trustee to administer any such plan; or (ii) notify
Participant promptly upon receipt by Lender or Parent of
any notice of the institution of any proceeding or other
action which may result in the termination of such plan;
or
(o) Participation Documents. The
Participation Documents, after delivery thereof, shall
for any reason, except to the extent permitted by the
terms thereof, cease to be in full force and effect and
valid, binding and enforceable in accordance with their
terms, or cease to create a valid and enforceable
ownership interest to the extent of Participant's
Participation in the Participating Notes Receivable
purported to be covered thereby, or Lender or Parent (or
any other Person who may have granted or purported to
grant such Lien) shall so state in writing; or
(p) Material Adverse Event. A Default or any
other event shall have occurred which would have a
Material Adverse Effect, which event continues for five
(5) days after written notice to Lender; or
(q) Change of Control. A Change of Control
shall have occurred; or
(r) Merger. Lender or Parent shall merge or
consolidate with or acquire the Stock or assets of any
Person; or
(s) Solvency. Lender or Parent is no longer
Solvent.
6.2 Termination of Agreement and Acceleration of
the Liabilities. During any period of grace afforded
Lender or Parent under this Article 6 after which an act
or omission of Lender or Parent will become an Event of
Default, Participant shall have no obligation to purchase
any Participations hereunder. Upon the occurrence and
continuation of an Event of Default, all of the
Liabilities may, at the option of Participant and without
demand, notice, or legal process of any kind, be
declared, and immediately shall become, due and payable,
and Participant, at its option, may terminate its
obligation to purchase any additional Participations
under this Agreement; provided, that all of the
Liabilities shall immediately become due and payable, and
Participant's obligation to purchase any additional
Participations under this Agreement shall be terminated
upon the occurrence and continuation of an Event of
Default set forth in Section 6.1(k) or Section 6.1(l);
and further provided, that Participant's rights and
remedies under this Agreement shall survive any such
termination.
6.3 Remedies. Upon the occurrence and at any time
during the continuance of any Event of Default specified
in Section 6.1, Participant shall have all of the rights
and remedies contained in this Agreement and in all of
the other Participation Documents, and all of the rights
and remedies under applicable law, all of which rights
and remedies shall be cumulative and non-exclusive, to
the extent permitted by law.
6.4 Marshalling; Payments Set Aside. Participant
shall be under no obligation to marshall any assets in
favor of Lender or any other party or against or in
payment of any or all of the Liabilities. To the extent
that Lender makes a payment or payments to Participant or
Participant exercises its rights of set-off, and such
payment or payments or the proceeds of such set-off or
any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set-aside and/or
required to be repaid to a trustee, receiver or any other
party under the Bankruptcy Code, or any State or Federal
law, common law or equitable cause, then to the extent of
such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been
made or such set-off had not occurred.
ARTICLE 7
CONDITIONS OF PARTICIPATIONS
The obligations of Participant to purchase
Participations pursuant to this Agreement are subject to
the conditions precedent stated in this Article 7.
7.1 Initial Participation. The obligation of
Participant to purchase the initial Participation under
this Agreement is, in addition to the conditions
precedent specified in Section 7.2 hereof, subject to the
following conditions precedent wherein each document to
be delivered to Participant shall be in form and
substance satisfactory to Participant:
(a) Closing. Lender and Parent shall have
executed and delivered to Participant this Agreement.
Participant shall have received such documents,
instruments and agreements as Participant shall request
in connection with the Transactions contemplated by this
Agreement, including all documents, instruments,
agreements and schedules listed in the Schedule of
Documents, each in form and substance satisfactory to
Participant.
(b) Initial Participation Certificate. Lender
shall have duly and validly issued, executed and
delivered to Participant the Participation Certificates
for the Participations to be purchased as of the Closing
Date.
(c) Opinion of Lender's and Parent's Counsel.
Participant shall have received from counsel for Lender
and Parent a written opinion in form and substance
acceptable to Participant as to such matters as
Participant may require, including opinions regarding (i)
Lender's and Parent's corporate authorization to enter
into the Transactions contemplated by this Agreement,
(ii) Lender's and Parent's compliance with all Federal,
state and local laws, (iii) the existence of litigation
against Lender or Parent that may result in a Material
Adverse Effect, and (iv) as to such other matters which
may materially impact the legal and credit risks
associated with the Transactions.
(d) No Material Adverse Change. Since
December 31, 1996 and through the Closing Date, there
shall have been (a) no material adverse change in the
business, financial or other conditions of Lender or
Parent, or any Affiliate or Subsidiary of Lender or
Parent, or in the Participating Notes Receivable, or in
the prospects or projections of Lender, Parent or their
Affiliates and Subsidiaries, (b) no material increase in
the liabilities (absolute or contingent) of Lender,
Parent or their Affiliates and Subsidiaries, whether or
not disclosed or required to be reserved against on any
pro forma balance sheet, other than (i) liabilities
incurred by Lender or Parent in the ordinary course of
its business in connection with the execution, delivery,
and performance of loan documents by Lender, as lender to
its customers, and (ii) the Parent Debentures, (c) no
material decrease in the assets of Lender, Parent or
their Affiliates and Subsidiaries, and (d) no
distribution by Lender or Parent of capital Stock either
by dividends or otherwise.
(e) Fees. Participant shall have received the
fees described in Section 2.7 hereof.
(f) Certificate of Validity of Notes
Receivable. Participant shall have received a
"Certificate of Validity of Participating Notes
Receivable" executed by the President and Chief Financial
Officer of Lender in substantially the form attached as
Exhibit F hereto.
(g) Schedule of Documents. Participant shall
have received all other documents, agreements and items
set forth on the Schedule of Documents.
(h) Lender's Guidelines and Operations Manual.
Lender shall have delivered to Participant Lender's
written operating guidelines and written operations
manuals, detailing Lender's business development and
underwriting processes, credit granting procedures, loan
documentation, and procedures for packaging and SBA
approval, loan closing and servicing, collections,
account/portfolio administration, and liquidation, and
such materials shall be in a form satisfactory to
Participant.
(i) Lender's Credit Request and Field
Examination Forms. Lender shall have delivered to
Participant Lender's credit request, loan report and
analysis, and field examination/site visit forms, and
such materials shall be in a form satisfactory to
Participant.
(j) Lender's Form Participation Documents.
Lender shall have submitted to Participant the standard
form loan agreement, security agreement, note, deed of
trust, guaranty, subordination agreement, and other form
loan documents employed by Lender (including, where
applicable, standard forms prescribed or supplied by the
SBA), and all such loan documents shall be satisfactory
to Participant and its counsel.
(k) Chief Financial Officer. Robert F.
Tannenhauser shall be serving as the Chief Financial
Officer of Parent and Jennifer Napier shall be serving as
the Chief Financial Officer of Lender, or replacements
acceptable to Participant shall be serving in such
positions.
(l) Loan Guaranty Agreement. Lender shall
have provided Participant with evidence satisfactory to
Participant that the SBA shall have entered into the Loan
Guaranty Agreement with Lender.
(m) Consent by Sterling and Release of Lien on
Participating Notes Receivable. Lender shall have
provided Participant with evidence satisfactory to
Participant that Sterling has (i) given its written
consent to the execution of this Agreement and Lender's
sale to Participant of any Participations made hereunder,
and (ii) released any Lien that Sterling might have on
any Participating Notes Receivable and any payments or
proceeds thereof.
(n) Other. Participant shall have received
such other documents as it may reasonably have requested
at any time at or prior to the Closing Date.
7.2 All Participations. The obligation of
Participant to purchase Participations under this
Agreement is subject to the following further conditions
precedent:
(a) Participation Requests and Schedules.
Before each purchase of a participation, Participant
shall have received a Participation Request, and a
Schedule of Participating Notes Receivable, each of which
shall be true and correct and shall be duly and properly
executed and completed by either the President or the
Chief Financial Officer of Lender.
(b) No Default. No Default or Event of
Default shall have occurred and be continuing or would
result from purchase of such Participation.
(c) Representations and Warranties. All of
the representations and warranties of Lender or Parent
contained herein shall be correct in all material
respects as of the date of each such advance as though
made on and as of such date, except (i) to the extent
that any such representation or warranty expressly
relates to an earlier date, and (ii) for changes therein
permitted or contemplated by this Agreement. All of the
representations and warranties of Lender or Parent
contained in any of the other Participation Documents
shall be correct in all material respects as of the date
delivered, except to the extent that any such
representation or warranty expressly relates to an
earlier date.
(d) No Material Adverse Change. There shall
have occurred no change in the condition, financial or
otherwise, of Lender which Participant reasonably deems
to be a Material Adverse Effect.
(e) Key Officers. Each of Lender and Parent
shall continue to employ as its President and its Chief
Financial Officer the Persons holding such positions as
of the Closing Date, or shall have hired replacements for
such officers acceptable to Participant.
The acceptance by Lender of the proceeds of any
Participation hereunder shall be deemed to constitute, as
of the date of such acceptance, (i) a representation and
warranty by Lender that the conditions in this Section
7.2 have been satisfied, and (ii) a confirmation by
Lender of the granting and continuance of Participant's
Lien pursuant hereto.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. Except as otherwise provided herein,
whenever this Agreement provides that any notice, demand,
request, consent, approval, declaration or other
communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties
desires to give or serve upon another any communication
with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other
communication shall be in writing and shall be delivered
(i) in person with receipt acknowledged, or (ii) by
facsimile with receipt confirmed, or (iii) by registered
or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to Participant at:
Transamerica Business Credit
Corporation
8750 W. Bryn Mawr Avenue, Suite 720
Chicago Illinois 60631
Attention: Account Executive - BLC
Facsimile: (773) 380-6169
and
Transamerica Business Credit
Corporation
9399 West Higgins Road, Suite 600
Rosemont, Illinois 60018
Attention: Mary F. Krakowski, Esq.
Facsimile: (847) 685-1142
With copies to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Hill Blackett, III, Esq.
Facsimile: (415) 421-7879
(b) If to Lender or Parent, at:
Business Loan Center, Inc.
919 Third Avenue, 17th Floor
New York, New York 10022
Attention: Mr. Robert Tannenhauser
President
Facsimile: (212) 751-9345
With copies to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attention: Simeon Gold, Esq.
Facsimile: (212) 310-8007
or at such other address as may be substituted by notice
given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party
entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly
given or served on the date on which personally delivered
or sent by facsimile, with receipt acknowledged or
confirmed, or three (3) Business Days after the same
shall have been deposited in the United States mail.
Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other
communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval,
declaration or other communication.
8.2 Modification of Agreement; Sale of Interest.
This Agreement and the other Participation Documents may
not be modified, altered or amended, except by an
agreement in writing signed by Lender and Participant.
Lender may not sell, assign or transfer this Agreement,
or the other Participation Documents or any portion
thereof, including Lender's rights, title, interests,
remedies, powers, or duties hereunder or thereunder.
Each of Lender and Parent hereby consents to
Participant's participation, sale, assignment, transfer
or other disposition, at any time or times after the
Commitment Termination Date, of this Agreement, or the
other Participation Documents, or of any portion hereof
or thereof, including Participant's rights, title,
interests, remedies, powers, or duties hereunder or
thereunder. Participant agrees that prior to any such
disposition it will make a good faith effort to provide
Lender with notice of such disposition; provided, that
the failure of Participant to provide such notice shall
not prevent Participant from making such disposition.
8.3 Fees and Expenses. Lender shall reimburse
Participant for all reasonable out-of-pocket expenses of
Participant in connection with the negotiation,
preparation, execution, interpretation and administration
of this Agreement and the other Participation Documents
(including the reasonable fees and expenses of all of
Participant's counsel retained in connection with the
Transactions contemplated hereby). If, at any time or
times, regardless of the existence of an Event of
Default, Participant shall employ counsel or other
professional advisors, including management consultants,
for advice or other representation or shall incur
reasonable legal, appraisal, accounting, consulting or
other costs and expenses in connection with:
(a) any interpretation, amendment,
modification or waiver of, or consent with respect to,
this Agreement or the other Participation Documents;
(b) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Participant,
Lender, Parent or any other Person) in any way relating
to the Participating Notes Receivable, this Agreement or
the other Participation Documents, including any
litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection
with a case commenced by or against Lender, Parent or any
other Person that may be obligated to Participant by
virtue of this Agreement or the other Participation
Documents, under the Bankruptcy Code, or any other
applicable Federal, state, or foreign bankruptcy or other
similar law;
(c) any attempt to enforce any rights of
Participant against Lender, Parent or any other Person
that may be obligated to Participant by virtue of this
Agreement or the other Participation Documents; or
(d) any attempt to appraise, inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of
the Participating Notes Receivable
then, and in any such event, a $500 per day per auditor
charge in connection with any audit of the Participating
Notes Receivable by Participant and the reasonable fees
of such attorneys and other professional advisors and
consultants arising from such services, including those
of any appellate proceedings, and all reasonable
expenses, costs, charges and other fees incurred by such
auditors, counsel or other professionals in any way or
respect arising in connection with or relating to any of
the events or actions described in this Section 8.3, and
shall be payable, on demand, by Lender to Participant.
Without limiting the generality of the foregoing, such
reasonable expenses, costs, charges and fees may include:
paralegal fees, costs and expenses; accountants' fees,
costs and expenses; appraisers' fees, costs and expenses;
management and other consultants' fees, costs and
expenses; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges;
and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal
or other professional services.
8.4 Severability. In the event that any one or
more of the provisions contained in this Agreement or in
any other Participation Documents shall, for any reason,
be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not
affect any other provision of the this Agreement or any
other Participation Document.
8.5 Waiver by Participant. Participant's failure,
at any time or times hereafter, to require strict
performance by Lender or Parent of any provision of this
Agreement shall not waive, affect or diminish any right
of Participant thereafter to demand strict compliance and
performance. Any suspension or waiver by Participant of
an Event of Default by Lender or Parent under this
Agreement or the other Participation Documents shall not
suspend, waive or affect any other Event of Default by
Lender or Parent under this Agreement or the other
Participation Documents, whether the same is prior or
subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements,
warranties, covenants and representations of Lender or
Parent contained in this Agreement or the other
Participation Documents and no Event of Default by Lender
or Parent under this Agreement or the other Participation
Documents shall be deemed to have been suspended or
waived by Participant, unless such suspension or waiver
is by an instrument in writing signed by an officer of
Participant and directed to Lender or Parent specifying
such suspension or waiver.
8.6 Successors and Assigns. All covenants and
agreements by or on behalf of Lender or Parent contained
in this Agreement and any other Participation Documents
shall bind its successors and assigns and shall inure to
the benefit of Participant. Neither Lender nor Parent
shall, however, have the right to assign its rights under
this Agreement or any interest herein, without the prior
written consent of Participant.
8.7 Conflict of Terms. The other Participation
Documents and all Schedules and Exhibits hereto are
incorporated in this Agreement by this reference thereto.
Except as otherwise provided in this Agreement and except
as otherwise provided in the other Participation
Documents by specific reference to the applicable
provision of this Agreement, if any provision contained
in this Agreement is in conflict with, or inconsistent
with, any provision in the other Participation Documents,
the provision contained in this Agreement shall govern
and control.
8.8 Waivers by Lender and Parent. Except as
otherwise provided herein, each of Lender and Parent
waives: (a) presentment, demand and protest and notice
of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at
any time held by Participant on which Lender or Parent
may in any way be liable and hereby ratifies and confirms
whatever Participant may do in this regard; (b) all
rights to notice of a hearing prior to Participant's
taking possession or control of, or to Participant's
replevy, attachment or levy upon, the Participating Notes
Receivable or any bond or security which might be
required by any court prior to allowing Participant to
exercise any of Participant's remedies; and (c) the
benefit of all valuation, appraisement and exemption
laws. Each of Lender and Parent acknowledges that it has
been advised by counsel with respect to this Agreement
and the transactions evidenced by this Agreement.
8.9 Cumulative Rights. The rights and remedies of
Participant under this Agreement and each other Loan
Document shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.
8.10 GOVERNING LAW. THIS AGREEMENT AND THE OTHER
PARTICIPATION DOCUMENTS ARE CONTRACTS MADE UNDER AND
SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY, AND PERFORMANCE, AND ALL CLAIMS
AND CAUSES OF ACTION RELATED HERETO AND THERETO, WHETHER
SOUNDING IN CONTRACT OR IN TORT, BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED
STATES OF AMERICA AND THE STATE OF ILLINOIS, AS SUCH LAWS
ARE NOW IN EFFECT (WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICTS OF LAWS) AND, WITH RESPECT TO
USURY LAWS, IF ANY, APPLICABLE TO PARTICIPANT AND TO THE
EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE IN
EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST
RATE THAN SUCH LAWS NOW ALLOW. IT IS THE INTENT OF ALL
OF THE PARTIES HERETO THAT THE LAWS OF THE STATE OF
ILLINOIS SHALL GOVERN THIS AGREEMENT AND THE OTHER
PARTICIPATION DOCUMENTS, AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.
8.11 Taxes, etc. Any taxes (excluding income taxes)
payable or ruled payable by federal or state authority in
respect of the this Agreement or the other Participation
Documents shall be paid by Lender, together with interest
and penalties, if any.
8.12 Governmental Regulation. Anything contained in
this Agreement to the contrary notwithstanding,
Participant shall not be obligated to extend credit to
Lender in an amount in violation of any limitation or
prohibition provided by any applicable statute or
regulation.
8.13 Titles of Articles and Sections. All titles or
headings to articles and sections or other divisions of
this Agreement or the exhibits hereto are only for the
convenience of the parties and shall not be construed to
have any effect or meaning with respect to the other
content of such articles, sections or other divisions,
such other content being controlling as to the agreement
between the parties hereto.
8.14 Authorized Signatures. Until Participant is
notified by Lender to the contrary in writing as provided
by Section 8.1, the signature upon this Agreement or any
of the other Participation Documents of an individual
designated in Lender's incumbency resolutions of even
date herewith shall bind Lender and be deemed to be the
act of Lender affixed pursuant to and in accordance with
resolutions duly adopted by Lender's Board of Directors.
8.15 Publicity. Each of Lender and Parent hereby
agrees that, except as required by law, (a) this
Agreement and its contents and (b) the Transactions
contemplated by this Agreement, will not be disclosed
publicly without the prior written consent of
Participant; provided, that so long as Lender or Parent
does not (i) employ or cause to be employed the name or
logo of Participant or its affiliates, or (ii) purport to
represent Participant or its affiliates in any capacity,
Lender or Parent may disclose (x) any matters of public
record relating to the Transactions contemplated by this
Agreement in the ordinary course of business to
prospective and actual employees, Term Note Debtors, and
purchasers of SBA Guaranteed Notes Receivable in
connection with the employment relationship or the
marketing, structuring, documentation, closing, and
servicing of Note Receivable transactions, as applicable,
and (y) other matters relating to the Transactions
contemplated by this Agreement in oral communications
with select potential investors in Lender or Parent.
Each of Lender and Parent hereby consents to Participant
issuing a press release or publishing a tombstone or
similar advertising material relating to the financing
transactions contemplated by this Agreement.
8.16 Counterparts. This Agreement may be executed
in counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an
original, but all of such counterparts together shall
constitute one and the same instrument.
8.17 Entire Agreement. This Agreement and the other
Participation Documents represent the final agreement
between the parties with respect to the subject matter
hereof and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between
the parties.
8.18 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE
MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED
AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE
AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
LENDER, PARENT AND PARTICIPANT HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
ANY OF THE OTHER PARTICIPATION DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
PARTICIPANT, LENDER AND PARENT EACH ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER
IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. PARTICIPANT, LENDER AND PARENT FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS
AGREEMENT, THE PARTICIPATION DOCUMENTS, OR ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE LIABILITIES. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have
caused this instrument to be duly executed as of the date
first above written.
LENDER:
BUSINESS LOAN CENTER, INC.,
a Delaware corporation
By: /s/ Robert F.
Tannenhauser
Name: Robert F.
Tannenhauser
Title: President
PARENT:
BUSINESS FINANCIAL
SERVICES, INC.,
a Delaware corporation
By: /s/ Jennifer Napier
Name: Jennifer Napier
Title: Chief Financial
Officer
PARTICIPANT:
TRANSAMERICA BUSINESS
CREDIT CORPORATION, a Delaware corporation
By:
Name:
Title
ACKNOWLEDGMENT OF INSTRUMENTS
STATE OF )
) SS.
COUNTY OF )
On before me, the undersigned notary public in and
for said state, personally appeared, personally known to
me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their
signature(s) on the instrument, the person(s), or the
entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS my hand and official seal.
Signature (Seal)
ACKNOWLEDGMENT OF INSTRUMENTS
STATE OF )
) SS.
COUNTY OF )
On before me, the undersigned notary
public in and for said state, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument, the
person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
Schedule 1.1
Net Eligible Non-Guaranteed Notes Receivable
Upon delivery to Participant of a Participation
Request, Participant shall determine, in its sole
discretion, which Non-Guaranteed Notes Receivable, if
any, shall be deemed to be "Net Eligible Non-Guaranteed
Notes Receivable" for purposes of determining the
Participations to be purchased pursuant to Section 2.1.
In making this determination, Participant shall be
generally guided by the following requirements with
respect to each Non-Guaranteed Note Receivable and its
underlying Note Receivable (collectively, in each
instance, a "Loan"):
.A. All conditions precedent to the effectiveness
of the SBA guaranty with respect to the Loan have been
met, and either (i) the Loan has been fully disbursed by
Lender to or for the account of the Term Loan Debtor, or
(ii) in the event the Loan has been made with respect to
any Loan that has not been fully or partially funded,
only that portion of such Loan that has actually been
funded and disbursed by Lender to or for the account of
the Term Loan Debtor shall be eligible under this
paragraph A; provided, that at the discretion of
Participant, the disbursement requirements of this
paragraph A may be deemed satisfied on the condition
subsequent that the subject disbursements are actually
made to the Term Loan Debtor on the same Business Day as
the date of the advance made by Participant;
.B. Lender has perfected its security interests and
liens in all underlying collateral for the Loan required
to be obtained as a condition of obtaining the SBA
guaranty with respect thereto;
.C. No event or condition subsequent that would
release the SBA from its obligations to Lender with
respect to the Loan or any recovery with respect thereto
has occurred, and the SBA has not rejected the Loan or
the Note Receivable Documents in any respect;
.D. The Loan conforms to Lender's written credit
and underwriting guidelines, copies of which have been
previously delivered to Participant; provided, that to
the extent the original principal amount of any
Non-Guaranteed Note Receivable exceeds $750,000, such
excess shall not constitute any part of the Net Eligible
Non-Guaranteed Notes Receivable;
.E. The Loan does not exceed fifteen percent (15%)
of the aggregate amount of Non-Guaranteed Notes
Receivable; provided, that such Loan will be ineligible
only to the extent of such excess;
.F. The Loan does not exceed thirty percent (30%)
of the aggregate amount of Non-Guaranteed Notes
Receivable owed by Term Loan Debtors whose business
activities fall within a single industry, as defined by
the Standard Industrial Classification then in effect;
provided, that such Loan will be ineligible only to the
extent of such excess;
.G. The Term Loan Debtor is neither the United
States of America nor any subdivision, department, or
agency thereof, except to the extent that Lender has
delivered to Participant all documents necessary to
comply with the Federal Assignment of Claims Act of 1940,
as amended from time to time;
.H. The Term Loan Debtor is not a state or
subdivision, department, or agency thereof, unless Lender
gives prompt notice to Participant of any Notes
Receivable with respect to these entities;
.I. The Term Loan Debtor is not insolvent or the
subject of an insolvency proceeding or a case commenced
under the Bankruptcy Code;
.J. No payment of interest and principal, or other
amount due under the Loan is more than sixty (60) days
past due;
.K. The Loan is a valid, legally enforceable
obligation of the Term Loan Debtor and is not subject to
any offset or other defense on the part of such Term Loan
Debtor or to any claim on the part of the Term Loan
Debtor denying liability;
.L. The subject Note Receivable is subject to no
lien or security interest;
.M. Other than the sale of the SBA Guaranteed Note
Receivable portion thereof, Lender has not previously
sold any interest in the subject Note Receivable to any
Person other than Participant.
.N. The Loan is evidenced by legal documentation in
form and substance satisfactory to Participant; provided,
that (i) legal documentation that conforms in all
material respects to forms provided by the SBA shall be
presumed to be satisfactory to Participant, and (ii) any
Loan evidenced by legal documentation that does not
satisfy clause (i) above must have been reviewed by
Lender's legal counsel for legal sufficiency and the
perfection of Lender's liens in any collateral
thereunder, with the written results of such review being
satisfactory to Participant;
.O. The Loan does not arise out of transactions
with an employee, officer, agent, director, stockholder,
or Affiliate of Lender or any Affiliate of any thereof;
.P. With respect to the Non-Guaranteed Note
Receivable, Lender has made or reaffirmed the warranties
and representations set forth in the Loan Participation
Agreement, at the time the most recent Schedule of
Participating Notes Receivable was provided to
Participant;
.Q. The Loan has not been turned over to the SBA or
any other Person for servicing or collection; and
.R. The Loan is determined by Participant, in its
business judgment, to constitute adequate collateral to
support the Participation requested by Lender.
Notwithstanding any other provision of this
Schedule or the Loan Participation Agreement, Participant
shall retain the right, in its sole discretion, to revise
or further restrict the criteria for Participations, if
any, to be purchased in Net Eligible Non-Guaranteed Note
Receivables and, in the event such criteria are further
restricted for any reason, the restriction shall become
effective immediately for purposes of calculating new
advances.
