SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended June 30, 1997 or
---------------------------------
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission file number 1-8185
BLC FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-1430406
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
c/o Jennifer M. Napier
Business Loan Center, Inc.
919 Third Avenue, 17th Floor, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 751-5626
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
At August 28, 1997, there were outstanding approximately 17,356,166
shares of the Registrant's Common Stock ("Common Stock"), $.01 par value per
share. The aggregate market value as of August 28, 1997 of the shares of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately, $5,969,351.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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Part I.
This Annual report on form 10-K contains forward-looking statements
within the meaning of that term in Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended ( the "Exchange Act"). Additional written or oral
forward-looking statements may be made by the Company from time to time, in
filings with the Securities Exchange Commission or otherwise. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions describe above. Forward-looking
statements may include, but are not limited to, projections of revenues, income
or losses, capital expenditures, plans for future operations, the elimination of
losses under certain programs, financing needs or plans. Compliance with
financial covenants in loan agreements, plans for sale of assets or businesses,
plans relating to products or services of the Company, assessments of
materiality, predictions of future events, and the effects of pending and
possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates," "estimates,"
"expects," " intends," "plans" and variations thereof and similar expressions
are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained herein. Statements in this Annual Report,
particularly in "Item 1. Business-Compliance with Environmental Laws", "Item 3.
Legal Proceedings", the Notes to Consolidated Financial Statements and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could contribute to or cause
such differences. Other factors that could contribute to or cause such
differences include, but are not limited to, increases in borrowing costs,
government regulations and other risk factors detailed in the Company's
Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unexpected events.
Item 1. BUSINESS OF THE COMPANY.
BLC Financial Services, Inc., a Delaware corporation (the
"Company"), is engaged, through its wholly owned subsidiary Business Loan
Center, Inc., a Delaware corporation ("Business Loan Center"), primarily in the
business of originating and servicing loans to small businesses under the
Guaranteed Loan Program (the "Guaranteed Loan Program" or the "SBA 7(a)
Program") sponsored by the United States Small Business Administration (the
"SBA").
The Company conducts its operations primarily through Business Loan
Center and
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the following wholly owned subsidiaries - BLC Financial Network, a Delaware
corporation ("BLC Network"); BLC Financial Network of Florida, Inc., a Delaware
corporation ("BLC Network - Florida"); and, BLC Financial Network of
Mid-America, Inc., a Kansas corporation ("BLC Network - Mid-America").
The Company was originally incorporated in Texas on October 30, 1973
under the name Crawford Energy, Inc. and was engaged, directly or through its
subsidiaries, in oil and gas exploration. The Company was reincorporated in the
state of Delaware on August 10, 1990. The Company discontinued its oil and gas
operations effective May 4, 1990.
Background
On May 4, 1990, the Company, through Business Loan Center, acquired
an 80% interest in a New York general partnership ("BLC-GP") from Business Loan
Center, Inc., a New York corporation ("BLC-New York"). BLC-GP on the same date
acquired the business and assets of BLC-New York, a Small Business Lending
Company engaged in the business of originating and servicing loans to small
businesses under the SBA 7(a) Program. BLC-New York continued to own the
remaining 20% interest in BLC-GP.
In December 1991, Business Loan Center acquired the interest of
BLC-New York in BLC-GP and simultaneously sold a portion of its interest in
BLC-GP to EBLC, Inc., an unaffiliated corporation, thereby reducing its
ownership interest to 55%. Business Loan Center increased its interest in BLC-GP
to 75% in February 1993 when the new minority partner in BLC-GP failed to obtain
certain loans for the benefit of BLC-GP and to 88.2% in January 1995 when the
minority partner failed to make capital contributions to BLC-GP. In September
1996, a wholly owned subsidiary of the Company acquired EBLC, Inc.'s remaining
interest in BLC-GP for $380,000. In February 1997, BLC-GP transferred all of its
assets to Business Loan Center, and entered into a new guaranty agreement with
the SBA in the name of Business Loan Center.
Business Loan Center, Inc.
Background. Business Loan Center, a Delaware corporation ("Business
Loan Center"), is a Small Business Lending Company (defined as "Financial
Institutions which are eligible to participate with the SBA and have executed
participation agreements"), qualified to make, sell, and service loans to small
businesses under the SBA 7(a) Guaranteed Loan Program.
Business Loan Center's principal office is located at 919 Third
Avenue, New York, New York, with branch offices in Richmond, Virginia, Panama
City Beach and Orlando, Florida, Wichita, Kansas and Burlington, Vermont.
Business Loan Center, through BLC Financial Network Inc., BLC Financial Network
of Florida, Inc., and BLC Financial Network of Mid-America, Inc. (collectively
referred to as "Loan Production Subsidiaries"), maintains non-exclusive
relationships with loan referral specialists in numerous states throughout the
United States for purposes of originating, packaging and servicing loans.
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The Guaranteed Loan Program. The SBA offers financial assistance to
eligible small businesses in the form of partial government guarantees on loans
made to such businesses by qualified participating lenders such as Business Loan
Center under the Guaranteed Loan Program.
To qualify for an SBA-guaranteed loan, a small business must meet
certain size criteria established by the SBA on an industry-by-industry basis,
which include number of employees or volume of sales, and must show that the
requested financing will be used for specific business purposes and cannot be
obtained from the resources of the business, conventional financing sources or
through the personal resources of the owners of the business. In evaluating a
loan application, the SBA attaches importance to many factors including the
character and reputation of the applicant and its principals, the experience and
depth of management, the inherent stability of the business enterprise, the past
earnings record, future prospects for the business, the long-range possibilities
of successful operations, and the soundness of the loan purpose. Applications
are rejected if there is not reasonable assurance that the loan can be repaid
from the earnings of the business (based upon demonstrated or projected cash
flows), or the applicant has sufficient equity to operate on a sound financial
basis. The loan is typically secured by real estate collateral and may also
include liens on inventory, machinery, equipment, and accounts receivable.
Generally, the owners of 20% or more of the business are required to personally
guarantee the repayment of the loan and may be required to pledge their personal
assets.
The SBA-guaranteed loans have maturities of up to 25 years depending
on the intended use of the loan proceeds. Funds to be used for working capital
purposes generally may not exceed a seven year maturity, while funds to be used
for machinery and equipment generally have maturities of ten years. Funds to be
used for leasehold improvements or the acquisition of land or building generally
have maturities ranging from 15 to 25 years. Loan principal is amortized over
the term of the loan. A participating lender is permitted to establish any legal
and reasonable rate of interest, subject to maximum interest rates published by
the SBA. Loans with maturities of seven years or more may bear a maximum
allowable interest rate not exceeding 2-3/4% over the base rate. Of those
variable rate loans, the interest rate may adjust monthly or quarterly with the
base rate established as the lowest New York prime rate in effect on the first
day of each adjustment period as published in the Wall Street Journal. In
general, the loans made by Business Loan Center are made on an adjustable rate
basis, bear the maximum allowable interest rate, and adjust on a quarterly
basis.
The SBA presently guarantees 80% of the loan amount in those cases
where the aggregate sum of all loans (including the loan under consideration)
made to a borrower and its affiliates under the Guaranteed Loan Program and
related SBA-sponsored financial assistance programs does not exceed $100,000.
The SBA's maximum guaranty percentage for loans in excess of $100,000 is 75%
with a maximum guaranty dollar amount of $750,000. With respect to those loans
submitted to the SBA for approval prior to October 12, 1995, the SBA's guaranty
for loans which did not exceed $155,000 was 90%, 75% for loans in excess of
$155,000 with maturities greater than 10 years, and 85% for loans exceeding
$155,000 with maturities equal to or less than
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10 years. In consideration for the issuance of its guarantee, the SBA charges
participating lenders a fee ranging from 3% to 3.875% of the SBA-guaranteed
portion of the loan, depending on the total loan amount. The participating
lenders may, in turn, charge this fee to the borrower upon initial disbursement
of the loan.
The SBA has established three levels of lender participation within
the Guaranteed Loan Program. Under the first level of lender participation,
commonly known as "General Participation," each loan made under the Guaranteed
Loan Program must be approved by the SBA. The second level of lender
participation, commonly known as "Certified Lender Participation," is similar to
the general participation in that the SBA must review the lender's credit
analysis and independently approve the loan. The SBA's review, however, is
expedited with completion, generally, within three business days. Lenders may
apply to be designated as "Certified Lenders" after one year of lending activity
and such status is granted at the discretion of the SBA. Business Loan Center
has been granted such Certified Lender status in the State of New York. Under
the third class of lender participation, known as "Preferred Lender
Participation," the lender is granted the authority to approve the loan and
issue a guaranty on behalf of the SBA without submitting the loan application
for SBA review and approval, thereby expediting the lending process
significantly. Business Loan Center has been granted Preferred Lender status in
Virginia, Miami and Jacksonville, Florida, Atlanta, Georgia, Chicago and
Springfield, Illinois, Denver, Colorado, St. Louis, Springfield and Kansas City,
Missouri, Wichita, Kansas, Omaha, Nebraska, Des Moines and Cedar Rapids, Iowa,
Albuquerque, New Mexico, Oklahoma City, Oklahoma, Little Rock, Arkansas and
seven districts in Texas, including Houston, Dallas and Austin.
The Lending Process. The lending process includes six stages: (i)
Business Loan Center, through the Company's loan production subsidiaries,
carefully scrutinizes and performs an in depth credit analysis for each eligible
loan application, (ii) loan applications warranting further processing must then
be approved by Business Loan Center's Loan Committee, (iii) the loan application
is then forwarded to the SBA for its approval, when applicable, (iv) the loan
then proceeds through the closing process, (v) the SBA-guaranteed portion of the
loan is sold in the secondary market by Business Loan Center while the
unguaranteed portion of the loan is retained by Business Loan Center to be
potentially sold to an investor at a later pooling date, and (vi) Business Loan
Center services the loan for its stated duration unless the loan must be
liquidated at an earlier date.
Sale in the Secondary Market. The SBA-guaranteed portions of loans
are sold by Business Loan Center, on a non-recourse basis, in the secondary
marketplace. Broker-dealer firms establish a secondary market by purchasing such
portions of the loans from Business Loan Center and other participating lenders,
either in pools or individually, and then reselling them, either in pools or
individually, to banks, pension funds, institutions, or individual investors.
The secondary market for the SBA-guaranteed portion of loans is active and
provides an immediate source of funds enabling Business Loan Center to expand
its loan portfolio. Normally, immediately prior to or upon closing a loan,
Business Loan Center solicits bids from several broker-dealers who create and
maintain the secondary market. There are numerous broker-dealers in this market
and Business
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Loan Center's ability to sell in the secondary market is not dependent on any
one or several of such broker-dealers. During the fiscal year ended June 30,
1997 ("Fiscal Year 1997"), approximately 78% of Business Loan Center's loans
were sold to one broker-dealer. The SBA facilitates the existence of this
secondary market by maintaining a Fiscal and Transfer Agent (the "FTA") which
maintains a central registration of all such loans sold in the secondary market
and issues certificates representing fractional or undivided interests in
SBA-approved pools consisting solely of SBA-guaranteed portions of loans for a
fee charged to the holders of the SBA-guaranteed portions of loans. The FTA also
acts as a central repository for funds collected on the SBA-guaranteed portion
of loans and as a disbursement agent to distribute such funds to the purchasers
in the secondary market.
Business Loan Center is generally able to sell the SBA-guaranteed
portions of its loans at a premium due to the lengthy maturity of the underlying
loan and the normally superior rate of return as compared to other investment
paper backed by the full faith and credit of the United States Government. The
amount of the premium obtained by Business Loan Center is based upon the
interest rate, the term of the loan, and the service fee to be received by
Business Loan Center from the purchaser. As a result of changes to the program
enacted by Congress in August 1993, Business Loan Center has been required to
pay to the SBA one-half of any premium in excess of 10% on the sale of the
SBA-guaranteed portion of the loans. Therefore, Business Loan Center typically
caps premiums earned on the sale of loans in the secondary market at 10%, which
results in increased servicing fees that are earned over the life of the loan.
During Fiscal Year 1997, Business Loan Center obtained an average premium of
approximately 10% on the sale of the SBA-guaranteed portion of their loans. The
premium paid on loans that default prior to the third monthly payment must be
repaid to the purchaser of the loan and cannot be recouped from the liquidation
proceeds of the defaulted loan. If the borrower has made its first three monthly
payments, subsequent default and/or liquidation of the loan would not require
Business Loan Center to return to the purchaser any premium paid. Under certain
limited circumstances, Business Loan Center may be liable, on loans that it
originated, for losses incurred by the SBA. This contingency has been accounted
for with respect to determining the adequacy of the allowance for credit losses.
Once Business Loan Center sells the SBA-guaranteed portion of the
loan in the secondary market, Business Loan Center services the loan for an
annual fee. Although the fee is subject to negotiation, the regulatory minimum
fee received by Business Loan Center for servicing these loans is equal to 1% of
the principal amount of the SBA-guaranteed portion of the loan per annum. As a
result of changes to the program enacted by Congress in October 1995,
participating Lenders such as Business Loan Center are required to pay to the
SBA a portion of the annual servicing fee it receives equal to 1/2 of 1% of the
outstanding principal amount of the SBA-guaranteed portion of loans closed
subsequent to October 12, 1995. Business Loan Center has obtained net servicing
fees ranging from 1.00% to 2.62%, with an average service fee for loans
originated during Fiscal Year 1997 of 2.01%.
In addition to guaranteed loan sales, Business Loan Center has
periodically sold participations in the unguaranteed portions of the loan
portfolio at par while retaining an interest
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spread of between .75% and 1.75%. During Fiscal Year 1997, Business Loan Center
sold participations in its unguaranteed loans approximating $5,874,000. Business
Loan Center services the loans, including the collection of payments.
Pursuant to a prior year's loan participation agreement, Business
Loan Center is required to repurchase from the purchaser of participations in
the unguaranteed portion of loans sold, any loans which are delinquent for more
than 60 days or would substitute interest in another loan of equal value. During
Fiscal Year 1997, two loans with an aggregate value of approximately $87,000
were repurchased.
Revenues. Business Loan Center derives its revenues primarily from
three sources: (1) interest earned on loans retained for its own account, (2)
gain on the sale of the SBA-guaranteed portion and unguaranteed portion of
loans, and (3) servicing fees paid and interest earned on the residual interest
of the SBA-guaranteed portion of loans sold in the secondary market and
servicing fees on the unguaranteed portion of loans sold. As a percentage of
total revenues, these three sources have contributed the following percentages
of Business Loan Center's total revenues for the fiscal years noted: 23%, 60%,
and 11% for Fiscal Year 1997; 27%, 59%, and 11% for the year ended June 30,
1996; and 30%, 51%, and 17% for the year ended June 30, 1995.
Loan Portfolio. At June 30, 1997, Business Loan Center serviced a
loan portfolio consisting of 259 loans, in the approximate aggregate principal
amount of $98,017,000. Of this amount, approximately $74,926,000 (76.4%)
consisted of the SBA-guaranteed portion of these loans, and approximately
$4,060,000(4.1%) consisted of the SBA-guaranteed portion of loans that had not
as yet been sold or were sold pending settlement on the secondary market.
Approximately $11,241,000 (11.5%) consisted of the unguaranteed portion of loans
sold, while approximately $11,850,000 (12.1%) in unguaranteed loans was retained
by Business Loan Center for its own account. The original principal amounts of
these loans range from $25,000 to $1,300,000 and the contractual maturities
range from 7 years to 25 years. At June 30, 1997, Business Loan Center's
portfolio had a weighted average maturity of approximately 18 years. The
interest rates on these loans are adjustable and substantially all are 2-3/4%
over the prime rate.
Of the 259 loans in Business Loan Center's portfolio at June 30,
1997, delinquent loans accounted for approximately $4,380,000, of which,
approximately $539,000 represented Business Loan Center's proportionate share.
Of Business Loan Center's share, delinquencies under 45 days totaled
approximately $245,000, delinquencies between 46 and 90 days totaled
approximately $142,000 and delinquencies greater than 90 days totaled
approximately $152,000.
Loans in Business Loan Center's portfolio at June 30, 1997, in
liquidation accounted for approximately $7,511,000, of which, approximately
$1,368,000 represented Business Loan Center's proportionate share. Of Business
Loan Center's share, approximately $433,000 was serviced by the SBA.
An estimation of the liquidating value of real estate collateral
securing certain loans
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in liquidation is performed regularly based on recent evaluations of collateral.
Other collateral, such as inventory, business equipment and accounts receivable,
cannot be reliably evaluated until a final liquidation of such business occurs.
The status of these loans varies on a case by case basis. All loans in
liquidation are reviewed on a weekly basis to determine changes in status. Of
the loans in liquidation, approximately 34% were in the restaurant industry, 15%
in the wholesale/distribution industry and 13% in the entertainment industry. No
other industry represented more than 10% of loans in liquidation. At June 30,
1997, Business Loan Center had allowances for credit loss and estimated future
losses on loans sold of approximately $1,000,000 on its financial statements
which incorporates management's assessment of these liquidating loans.
Due to a variety of circumstances relating to the borrower's
business or personal matters, certain loans made by Business Loan Center are
repaid, in part or in their entirety, on an accelerated basis. These prepayments
generally arise from excess cash generated by the borrower's operations, cash
from the proceeds of the sale of the borrower's business or personal real estate
or the liquidation of other business assets. During Fiscal Year 1997, Business
Loan Center collected approximately $6,117,000 of loan prepayments of which
approximately $646,000 represented Business Loan Center's proportionate share.
At June 30, 1997, 66 proposed loans in the approximate aggregate
principal amount of $50,901,000 had received both Business Loan Center and SBA
approval and were awaiting closing. In addition, 32 proposed loans in the
approximate aggregate principal amount of $18,116,000 were approved by Business
Loan Center and awaiting submission to the SBA or waiting SBA approval. Business
Loan Center's existing capital resources should enable it to fund these loans
and additional loans in process.
Service marks. The Company believes that the distinctive logo used
by Business Loan Center is an important element of continued name recognition in
the industry. The Business Loan Center logo which includes its name within a
distinctive design was registered as a service mark on the Principal Register of
the United States Patent and Trademark Office on August 10, 1993.
Government Regulations. The level of SBA funding for the Guaranteed
Loan Program is subject to the federal budgeting process for each fiscal year
ending September 30 (each a "Federal Fiscal Year"). Accordingly, the
availability of funds for SBA guarantees could increase or decrease each year.
The federal budget for Federal Fiscal Year 1997 appropriated funds to permit
approximately $10.3 billion under the Guaranteed Loan Program in which Business
Loan Center participates as compared to $7.7 billion, $7.8 billion, and $8.2
billion of actual usage of funds for the Federal Fiscal Years ended 1996, 1995,
and 1994, respectively.
The qualification of a Small Business Lending Company, such as
Business Loan Center, to participate in the Guaranteed Loan Program is subject
to termination by the SBA based on objective criteria, at its election.
Management of Business Loan Center has no reason to believe that its license to
participate in the program will be terminated.
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SBA approval of loans is dependent, in part, upon the SBA's
determination that Business Loan Center's facilities and personnel can
adequately support the servicing of the loan. Accordingly, based upon the
experience of its personnel and the present staffing of Business Loan Center in
its offices in New York, New York, Panama City Beach and Orlando, Florida,
Wichita, Kansas, Richmond, Virginia and Burlington, Vermont, Business Loan
Center reasonably believes that it satisfies this criteria in the states in
which it is currently operating.
As a Small Business Lending Company, Business Loan Center's
operations are subject to extensive local, state and federal regulations
including, but not limited to, the following federal statutes and regulations
promulgated thereunder: the Small Business Act, the Small Business Investment
Act of 1958, as amended, Title 1 of the Consumer Credit Protection Act of 1968,
as amended (including certain provisions thereof commonly known as the
"Truth-in-Lending Act"), the Equal Credit Opportunity Act of 1974, as amended,
the Fair Credit Reporting Act of 1970, as amended, Title IV of the Higher
Education Act of 1965, as amended, the Fair Debt Collection Practices Act, as
amended, and the Real Estate Settlement Procedures Act. In addition, Business
Loan Center is subject to state laws and regulations with respect to the amount
of interest and other charges which lenders can collect on loans (e.g., usury
laws). At present, Business Loan Center believes it is in material compliance
with all applicable rules and regulations.
Competition. The commercial lending business is highly competitive
and Business Loan Center competes with many banks and other non-bank commercial
lending institutions. Business Loan Center has derived its clients primarily
from referrals from its representatives, loan referral specialists and employees
and their contacts. The principal competitive factors in Business Loan Center's
business are the loan terms offered to borrowers and the quality of service
provided.
Seasonality. Business Loan Center's business is not seasonal.
Acquisition of Southeastern First Financial Network, Inc.
On February 5, 1996, the Company, through its wholly-owned
subsidiary, BLC Financial Network, Inc. ("BLC Network") acquired all of the
issued and outstanding common stock of Southeastern First Financial Network,
Inc. ("Southeastern"). Pursuant to the acquisition agreement, the Company issued
1,808,821 shares of its common stock to Robert C. McGee, Vice President and
Director of the Company.
Loan Production Subsidiaries
With Business Loan Center's representative network encompassing more
than 25 states and continuously expanding, the Company recognized the need for
an organized origination outlet to streamline loan production. Each of the
Company's three loan production subsidiaries were established to coordinate and
facilitate the loan origination activities for Business Loan Center, creating
synergy within the Company's lending process. During Fiscal Year 1997, Business
Loan
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Center generated over 80% of its loan volume directly and indirectly, through
loan referral specialists comprising the representative network. Generally, a
loan referral specialist is compensated only after the closing of the loan.
During the current fiscal year no loan specialist accounted for more than 20% of
Business Loan Center's volume.
BLC Financial Network, Inc., a Delaware corporation incorporated on
April 17, 1995 ("BLC Network"), is a wholly-owned loan production subsidiary of
BLC Financial Services, Inc. BLC Network focuses on the origination and
underwriting of commercial loans throughout the eastern portion of the United
States. BLC Network maintains operations from its corporate facilities in
Richmond, Virginia.
BLC Financial Network of Florida, Inc., a Delaware corporation
incorporated on July 10, 1996 ("BLC Network - Florida"), is a wholly-owned loan
production subsidiary of BLC Financial Network, Inc. BLC Network-Florida focuses
on origination and underwriting of commercial loans in the six state areas of
Louisiana, Mississippi, Tennessee, Alabama, Georgia and South Carolina, in
addition to the Florida market. BLC Network - Florida maintains operations from
its corporate facilities in Panama City Beach, Florida and its satellite office
in Orlando, Florida.
BLC Financial Network of Mid-America, Inc., a Kansas corporation
incorporated on October 11, 1996 ("BLC Network - Mid-America"), is a
wholly-owned loan production subsidiary of BLC Financial Network, Inc. BLC
Network-Mid-America focuses on origination and underwriting of commercial loans
in the central portion of the United States. BLC Network - Mid-America
maintains operations from its corporate facilities in Wichita, Kansas.
Non-SBA Loan Subsidiary
BLC Capital Corporation, a Delaware corporation incorporated on May
3, 1995 ("BLC Capital Corp."), was founded as a wholly-owned subsidiary of the
Company. Its function has been to provide a facility which complements the
Guaranteed Loan Program by originating, underwriting, closing, and servicing
those loans which do not meet Business Loan Center's criteria under the SBA 7(a)
Guaranteed Loan Program.
Similar to the lending processes under the Guaranteed Loan Program,
BLC Capital Corp. analyzes, underwrites, approves, closes and services loans
submitted through this lending entity. Loan proceeds for those purposes which
were not available through the Guaranteed Loan Program, such as loans which are
primarily income producing real estate loans which are otherwise ineligible
under the Guaranteed Loan Program, were accessible through BLC Capital Corp.'s
lending program.
Revenues generated by BLC Capital Corp. during Fiscal Year 1997 were
earned from retained servicing fees on two loans in its portfolio as well as
from commissions on loan referrals to outside financial institutions.
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Financing Arrangements
Current Facilities. During Fiscal Year 1997, the Company maintained
a dual purpose bank line from Sterling National Bank & Trust Company of New York
("Bank") which provided financing of both the guaranteed and unguaranteed
portion of loans made by the Company. Specifically, a $2,500,000 warehouse line
of credit was made available by the Bank to fund the guaranteed portion of each
new loan at an interest rate equal to 2.5% above the prime rate together with an
administrative fee equal to 1/4 of 1% of each advance under the guaranteed line.
In addition, the Bank line provided a financing line of $8,000,000 for funding
of the unguaranteed portion of the loans made by the Company. Approximately
$5,000,000 of this unguaranteed line bore an interest rate equal to 3% above the
prime rate, while the remaining $3,000,000 line bore an interest rate of 1%
above the prime rate. The $3,000,000 credit facility was subordinated to the
$5,000,000 facility.
In August 1997 the Company arranged for the Bank and Transamerica
Business Credit Corporation ("Transamerica") to enter into an inter-creditor
agreement pursuant to which the Bank assigned a portion of its funding
obligations to Transamerica thereby increasing the funding available to the
Company. As a result of the transaction Transamerica took over the funding of
the unguaranteed portion of the Company's loans and increased the credit line
with respect thereto to $25,000,000. The interest rate on this portion of the
facility is 2% above prime. Transamerica was paid a commitment fee of 1% in
connection with this loan. The Bank will continue to fund the guaranteed portion
of the Company's loans and has increased its credit line with respect thereto to
$8,000,000. The interest rate on this portion of the facility has been reduced
to 1 1/4% over prime together with the 1/4 of 1% facility fee on each advance.
See, "Consolidated Financial Statements Note 4."
Acquisition of BLC-GP. The Company financed the acquisition of its
interest in BLC-GP with the proceeds of a private placement (the "1990 Private
Placement") of the Company's securities (the "Units"). The Company offered a
minimum of four and a maximum of twelve Units in the 1990 Private Placement.
Each full Unit was offered at $250,000 and consisted of a 13% one-year Secured
Convertible Debenture ("13% Convertible Debenture") in the principal amount of
$250,000 and a Warrant to purchase up to 114,436 shares of the Company's common
stock at an exercise price of $.49 per share, subject to adjustment. On November
3, 1992, the Company issued a letter to its Debenture holders presenting several
options for conversion of the principal and/or interest of the 13% Convertible
Debentures at prices ranging from $.44 to $.49 per share. The holders of
$1,601,000 principal amount of the 13% Convertible Debentures elected to convert
their 13% Convertible Debentures (and interest accrued thereon) and the holders
of the remaining $80,000 principal amount of the 13% Convertible Debentures
outstanding elected to redeem their 13% Convertible Debentures (and accrued
interest thereon) with the debt to be repaid in periodic installments. The final
payment with respect to this debt was made in January 1996.
Investment By Futuronics Corporation. Pursuant to an agreement dated
November 24, 1992, between the Company and Futuronics Corporation, a New York
corporation of which a majority of stock is held by affiliates of Robert
Tannenhauser, a director and President of the
12
<PAGE>
Company, the Company sold to Futuronics Corporation 2,272,727 shares of its
Common Stock for an aggregate purchase price of $1,000,000. The Company
registered the shares sold to Futuronics Corporation under the Securities Act of
1933.
Environmental
Compliance with Federal, state and local laws and regulations
governing the discharge of materials into the environment and noise levels is
not expected to have any material adverse effect upon the Company.
Business Loan Center may in the future acquire, through foreclosure,
properties that secure defaulted loans. There is a risk that hazardous
substances or wastes, contaminants, pollutants or sources thereof could be
discovered on properties acquired by Business Loan Center. In such an event,
Business Loan Center could be required under certain environmental laws to
remove such substances and clean up the affected property at its sole cost and
expense, which could have a material adverse effect on Business Loan Center. To
date, Business Loan Center has not been named as a potentially responsible party
under any federal or state environmental laws. In most cases where commercial
properties secure loans, Business Loan Center will obtain an environmental
evaluation to ascertain the existence of toxic wastes, prior to making the loan.
Employees
The Company, through its subsidiaries, currently employ 42 full-time
and 1 part-time employees. Of these employees, 9 are employed in executive or
managerial capacities, 11 are employed in administrative or clerical capacities,
10 are employed in loan servicing capacities and 13 are employed in loan
processing and underwriting capacities. None of the Company's employees are
represented by a collective bargaining unit. The Company considers its employee
relations to be satisfactory.
Item 2. PROPERTIES.
The Company, through its subsidiaries, currently leases office space
in New York, New York, Burlington, Vermont, Richmond, Virginia, Panama City
Beach and Orlando, Florida, and Wichita, Kansas. See "Consolidated Financial
Statements - Note 8".
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
New York, Richmond, Wichita, Panama City Orlando, Burlington,
New York Virginia Kansas Beach, Florida Florida Vermont
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Approximate 3,000 (1) 3,700 3,000 2,400 300 200
Square Footage
- - -----------------------------------------------------------------------------------------
</TABLE>
(1) In January 1998, the New York office is scheduled to move to 645 Madison
Avenue, New York, New York, the new space has approximately 5,800 square
feet.
13
<PAGE>
Item 3. LEGAL PROCEEDINGS.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 30, 1997 the Company held a Special Meeting (in Lieu of
Annual Meeting) of Stockholders. Total shares voted - 12,675,009; number of
proxies received - 275. Stockholders voted on and approved: (1) an amendment to
the Certificate of Incorporation of the Company (the "Certificate of
Incorporation") to adopt a "fair price" provision ; (2) an amendment to the
Certificate of Incorporation to provide for the classification of the Board of
Directors into three classes; (3) an amendment to the Certificate of
Incorporation to require the consent of the holders of 75% of the stockholders
to take action without a meeting of stockholders; (4) an amendment to the
Certificate of Incorporation requiring the affirmative vote of the holders of
75% of the outstanding voting stock to amend, alter or repeal the By-laws and to
allow the Board of Directors to amend, alter or repeal the By-laws without the
consent of the Company's stockholders; (5) an amendment to the Certificate of
Incorporation requiring the affirmative vote of the holders of 75% of the
outstanding voting stock to amend, alter or repeal Proposals 1 through 4; (6) an
amendment to the By-laws of the Company (the "By-laws") to require that special
meetings of stockholders may be called only by the Board of Directors, the
President or the Chairman of the Board; (7) an amendment to the By-laws to
require that stockholders submit director nominations and other business to be
considered at meetings of stockholders at least 90 days in advance of such
meeting; (8) the election of seven directors; (9) alternative proposals to amend
the Certificate of Incorporation to effect a one-for-two, one-for-three or
one-for-five reverse stock split of the outstanding shares of common stock, par
value $.01 per share, of the Company; (10) the adoption of the Amended 1995
Management Incentive Plan; and (11) the appointment of Richard A. Eisner &
Company LLP as auditors of the Company for the current fiscal year ending on
June 30, 1997.
14
<PAGE>
Votes on the previous issues were cast in the following manner:
- - --------------------------------------------------------------------------------
Issue For Against Abstain Not Voted
- - --------------------------------------------------------------------------------
1 11,626,253 12,482 7,485 1,028,789
- - --------------------------------------------------------------------------------
2 11,593,707 52,196 317 1,028,789
- - --------------------------------------------------------------------------------
3 11,312,865 333,037 317 1,028,789
- - --------------------------------------------------------------------------------
4 11,269,430 301,463 75,327 1,028,789
- - --------------------------------------------------------------------------------
5 11,344,878 301,015 327 1,028,789
- - --------------------------------------------------------------------------------
6 11,342,871 303,021 328 1,028,789
- - --------------------------------------------------------------------------------
7 11,523,068 116,097 7,055 1,028,789
- - --------------------------------------------------------------------------------
8 - Election of Directors
Peter D. Blanck 12,672,733 2,276
Robert C. McGee 12,674,075 934
Kenneth S. Schwartz, M.D. 12,644,795 10,214
Robert W. Wien 12,674,525 484
Robert W. D'Loren 12,674,525 484
Irwin E. Redlener, M.D. 12,665,243 9,776
Robert F. Tannenhauser 12,669,723 5,286
- - --------------------------------------------------------------------------------
9 12,401,105 218,405 10,441 45,058
- - --------------------------------------------------------------------------------
10 11,411,513 224,263 10,444 1,028,789
- - --------------------------------------------------------------------------------
11 12,652,311 11,090 11,608 0
- - --------------------------------------------------------------------------------
15
<PAGE>
Part II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock was listed for trading in the over-the-counter
market through the OTC Electronic Bulletin Board in October 1993 and is
sporadically traded therein. The following table lists the range of high and low
bid information, as reported by the National Quotation Bureau from January 1,
1995 through June 30, 1997.
High Bid Low Bid
-------- -------
1997
Second Quarter .875 .5625
First Quarter .65625 .5
1996
Fourth Quarter .71875 .53125
Third Quarter .6875 .5
Second Quarter .75 .3125
First Quarter .3125 .28125
1995
Fourth Quarter .375 .28125
Third Quarter .375 .3125
Second Quarter .375 .28125
First Quarter .375 .28125
Quotations represent prices between dealers and do not include
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
The Company has never paid cash dividends on the Common Stock and it
is management's present intention to reinvest future earnings, if any, in the
business of the Company. The Company's ability to pay dividends in the future,
should management so determine, will be dependent upon the Company's earnings,
financial condition and other relevant factors.
As of August 28, 1997, there were approximately 914 holders of
record of the Common Stock.
16
<PAGE>
Item 6. SELECTED FINANCIAL INFORMATION.
The following selected financial information should be read in
conjunction with the financial statements included in this Report.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------
1997 1996(1) 1995(1) 1994 1993
Summary of Operations:
<S> <C> <C> <C> <C> <C>
Total revenues $7,168,000 $4,997,000 $2,536,00 $1,571,000 $1,483,000
Income before
extraordinary item 1,702,000 553,000 142,000 150,000 31,000
Extraordinary item 245,000 91,000 -- 25,000 6,000
Net Income 1,947,000 644,000 142,000 175,000 37,000
Income per share
before extraordinary item .10 .04 .01 .02 .00
Income per share
from extraordinary item .01 .01 -- -- --
Net income per
share .11 .05 .01 .02 .00
As of June 30:
Total assets $20,086,000 $10,983,000 $10,535,000 $6,691,000 $4,654,000
Total liabilities 12,896,000 5,657,000 7,274,000 4,277,000 2,926,000
Shareholders' equity 7,190,000 4,601,000 2,608,000 2,414,000 1,728,000
Shareholders' equity
per share .41 .27 .23 .21 .17
</TABLE>
(1) Restated. See footnotes to "Consolidated Financial Statements."
17
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction
with the Company's financial statements and the notes presented following the
financial statements. The discussion of results, causes and trends should not be
construed to imply any conclusion that such results or trends will necessarily
continue in the future.
Liquidity and Capital Resources
By actively engaging in commercial lending through its interest in
Business Loan Center, the Company has a constant need for debt financing. Cash
used to fund loans, repay existing debt and to fund operating expenses is
currently provided only partially through collections on loans and proceeds from
loan sales. The remainder of its cash requirements is derived from existing
capital and short and long-term borrowing.
In Fiscal Year 1997, Business Loan Center funded the unguaranteed
portion of loans it originated, as well as funded operating expenditures
incurred during the period, primarily through bank financing, premium income
received, servicing fee receipts, interest income collected, and funds received
from the private sale of participations in certain unguaranteed loans.
During Fiscal Year 1997, the Company maintained a dual purpose bank
line from Sterling National Bank & Trust Company of New York ("Bank") which
provided financing of both the guaranteed and unguaranteed portion of loans made
by the Company. Specifically, the Bank provided the Company with a $2,500,000
warehouse line of credit to fund the guaranteed portion of each new loan at an
interest rate equal to 2.5% above the prime rate together with an administrative
fee equal to 1/4 of 1% of each advance under the guaranteed line. In addition,
the Bank provided a financing line of $8,000,000 to fund the unguaranteed
portion of the loans made by the Company. Approximately $5,000,000 of this
unguaranteed line bore an interest rate equal to 3% above the prime rate, while
the remaining $3,000,000 line bore an interest rate of 1% above the prime rate.
The $3,000,000 credit facility was subordinated to the $5,000,000 facility.
In August 1997, the Company arranged for the Bank and Transamerica
Business Credit Corporation ("Transamerica") to enter into an inter-creditor
agreement pursuant to which the Bank assigned a portion of its funding
obligations to Transamerica thereby increasing the funding available to the
Company. As a result of the transaction Transamerica took over the funding of
the unguaranteed portion of the Company's loans and increased the credit line
with respect thereto to $25,000,000. The interest rate on this portion of the
facility is 2% above prime. Transamerica was paid a commitment fee of 1% in
connection with this loan. The Bank will continue to fund the guaranteed portion
of the Company's loans and has increased its credit line with respect thereto to
$8,000,000. The interest rate on this portion of the facility has been reduced
to 1-1/4% over prime together with the 1/4 of 1% facility fee on each advance.
In addition to guaranteed loan sales, Business Loan Center has
periodically sold
18
<PAGE>
participations in the unguaranteed portions of the loan portfolio at par while
retaining an interest spread of between .75% and 1.75%. During Fiscal Year 1997,
Business Loan Center sold participations in its unguaranteed loans approximating
$5,874,000.
At June 30, 1997, sales of the SBA guaranteed portions of loans in
the aggregate amount of $2,950,000 were pending settlement in the secondary
market, while $1,109,000 were construction loans pending construction and/or
renovation completions. Upon the completion of these funding projects,
participations in these loans may be sold in the secondary market, providing the
Company with an immediate source of revenues. Subsequent to June 30, 1997,
Business Loan Center received net cash proceeds of approximately $297,000 from
those loans pending settlement at June 30, 1997.
The credit facility, along with the anticipated proceeds from sales
of guaranteed loans in the secondary market, the proceeds from periodic sales of
undivided interests in the unguaranteed portion of loans, the cash generated
from the existing portfolio in the form of interest and servicing income, and
the regular principal repayments on loans receivable, enable the Company to
believe that its current capital resources and future cash flows will be
sufficient to meet its future financial obligations and projected capital
requirements. Business Loan Center expects to be able to originate and fund at
least $60,000,000 in new loans during the next fiscal year. However, there is no
assurance Business Loan Center will be able to achieve this level.
Results of Operations
General. Demand for long term commercial loans throughout the United
States has continued to remain at substantially high levels over the last
several years. The Guaranteed Loan Program has assisted participating lenders in
providing record amounts of guaranteed loans over the past three federal fiscal
years. Business Loan Center has contributed to the success of the Guaranteed
Loan Program by originating loans in the principal amount of approximately
$42,335,000 for the year ended June 30, 1997, resulting in a serviced loan
portfolio approximating $98,017,000. By establishing an effective loan
origination network along the entire length of the eastern seaboard of the
United States and mid-western United States, Business Loan Center has positioned
itself to achieve ongoing growth, both with respect to the amount of loans
originated and the geographic area in which it operates. The origination network
is currently comprised of loan referral specialists that service several broad
geographic regions and provide customers with a variety of financial products.
Management of Business Loan Center is sensitive to industry and
geographical trends, including failure rates in various industries, general
condition of local economies, and the resultant effect on businesses and real
estate values. Generally, however, Business Loan Center's current lending
pattern, both regarding industry and geographic location, has been extremely
diverse. At June 30, 1997, businesses in approximately 96 distinct industries in
approximately 26 different states received loans from Business Loan Center. The
largest industry sectors in Business Loan Center's portfolio include:
gasoline/service stations, approximating 7% of the aggregate loan
19
<PAGE>
portfolio; restaurants, approximating 17% of the aggregate loan portfolio; and,
lodging, approximating 28% of the aggregate loan portfolio. No other industry
represents more than 6% of the aggregate loan portfolio.
Year Ended June 30, 1997 vs. Year Ended June 30, 1996. The Company
recorded net income of $1,947,000 (or $.11 per share) for Fiscal Year 1997 as
compared to net income of $644,000 (or $.05 per share) for the year ended June
30, 1996 ("Fiscal Year 1996"). Net income before provision for income taxes and
extraordinary item ("Operating Income") was $1,675,000 for Fiscal Year 1997, as
compared to $620,000 for Fiscal Year 1996. Net income before extraordinary gain
was $1,702,000 (or $.10 per share) for Fiscal Year 1997, as compared to $553,000
(or $.04 per share) for Fiscal Year 1996. During Fiscal Year 1997, an
extraordinary gain of $245,000 resulted from a compromise through partial
repayment of a promissory note issued in connection with the acquisition of
Business Loan Center from its predecessor in interest, as compared to an
extraordinary gain of $91,000 during Fiscal Year 1996 that resulted from the
forgiveness of accrued interest on outstanding debentures.
Revenues for Fiscal Year 1997, which approximated $7,168,000,
increased by 43% from Fiscal Year 1996 primarily due to higher gains on loan
sales, servicing fee income, and interest income. This is directly attributable
to (i) a 46% increase in the loan portfolio, which approximated $98,017,000 at
June 30, 1997, as compared to approximately $ 67,021,000 at June 30, 1996 and
(ii) the recognition of gains on the sale of both guaranteed and unguaranteed
loans approximating $4,333,000.
Interest income increased from $1,335,000 for Fiscal Year 1996 to
$1,666,000 for Fiscal Year 1997, or by approximately 25%. This resulted from a
55.6% increase in the unguaranteed loan portfolio held by Business Loan Center,
which approximated $ 11,850,000 at June 30, 1997, as compared to $7,614,000 at
June 30, 1996. At June 30, 1997, the average interest rate on Business Loan
Center's total portfolio approximated 11%. During Fiscal Year 1997 Business Loan
Center's base lending rate, the prime rate, increased from 8.25% to 8.50%.
Service fee income, which increased by 43% from Fiscal Year 1996 ,
approximated $800,000 for Fiscal Year 1997. This increase directly resulted from
the increased guaranteed loan portfolio which yielded servicing fees of between
1.0% to 2.62% per annum, as well as, service fees ranging from .75% to 1.75% on
the sale of participations in the unguaranteed portions of the loans. With
respect to the SBA-guaranteed loans sold in the secondary market, loans
originated during Fiscal Year 1997 yielded an average service fee of 2.01%.
Operating expenses in Fiscal Year 1997 increased by approximately
11% over Fiscal Year 1996. This increase can be attributed to the increase in
salary and commission expenditures incurred in connection with the addition of
the new loan production subsidiaries, which was partially offset by a decrease
in the provision for credit loss during Fiscal Year 1997. The decrease in the
provision is primarily due to the sale of participations in the non-guaranteed
portion of loans on the secondary market without recourse, changes in the number
of loans in liquidation, and
20
<PAGE>
management's assessment of the adequacy of the allowance for credit losses.
General and administrative expenses in Fiscal Year 1997 approximated
$1,267,000, an increase of 154% from Fiscal Year 1996, as the Company incurred
greater costs in connection with the opening of new offices in Wichita, Kansas,
Panama City Beach and Orlando, Florida.
Interest expense rose approximately 10% from Fiscal Year 1996 to
$975,000 in Fiscal Year 1997. This increase was directly attributable to
Business Loan Center's increased borrowings under its bank line resulting from
the continued growth in loan production activities during the fiscal year.
Loans in the approximate aggregate principal amount of $42,335,000
were originated during Fiscal Year 1997, as compared to loans in the approximate
aggregate principal amount of $18,455,000 for Fiscal Year 1996, representing a
129% increase in origination activities during the referenced periods. The
SBA-guaranteed principal amount of the loans originated during Fiscal Year 1997
approximated $31,140,000 as compared to the aggregate SBA-guaranteed principal
of $13,848,000 for the prior fiscal year. Of those loans originated and fully
funded during Fiscal Year 1997, substantially all of the guaranteed portions
were sold in the secondary market immediately subsequent to the full funding of
each loan, at premium rates approximating 10%. Additionally, $5,874,000 in
unguaranteed loan participations were sold during Fiscal Year 1997. These
unguaranteed sales together with SBA-guaranteed sales resulted in gains on the
sale of loans of $4,333,000 for Fiscal Year 1997, as compared to gains of
$2,945,000 for the prior year's period.
The loans receivable that remain in Business Loan Center's
portfolio, as well as the guaranteed portions sold in the secondary market, are
actively serviced through the collection efforts of Business Loan Center's
staff. The number and aggregate principal amount of the loans in Business Loan
Center's portfolio at the end of Fiscal Year 1997 may be classified and compared
to the loans in its portfolio at the end of Fiscal Year 1996 as follows:
<TABLE>
<CAPTION>
YEAR ENDED 6/30/97 YEAR ENDED 6/30/96
------------------ ------------------
Total Guaranteed Ungteed. # Loans Total Guaranteed Ungteed. # Loans
Amount Amount Amount Amount Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Performing Loans 86,127,000 65,265,000 20,862,000 216 57,083,000 44,798,000 12,285,000 180
Delinquent Loans 4,379,000 3,534,000 845,000 13 1,041,000 822,000 219,000 3
Loans in Liquidation 7,511,000 6,127,000 1,384,000 30 8,897,000 7,415,000 1,482,000 40
---------- ---------- ---------- -- ---------- ---------- ----------- ---
Total Loans 98,017,000 74,926,000 23,091,000 259 67,021,000 53,035,000 13,986,000 223
========== ========== === ========== ========== ===
LESS:
Loans Sold 11,241,000 6,372,000
Allowance for Credit Losses 901,000 1,230,000
Deferred Income & Other 501,000 523,000
--------- -------
Loans Receivable Net 9,839,000 5,861,000
========== =========
</TABLE>
21
<PAGE>
Loans for which interest and principal payments are due for a period
greater than 31 days are categorized by Business Loan Center as "delinquent."
Delinquent loans generally are a result of various factors, including temporary
downturns in the borrower's business, seasonal working capital constraints,
changes in business location or products, and other factors specifically related
to each borrower. The borrowers often regain current status after a period of
time.
In certain cases, when the aforementioned factors prevent the
borrower from making any payments for a prolonged period of time, and the loan
falls beyond 90 days past due, the loan may then be categorized as in
"liquidation." After formal request is made by Business Loan Center or the FTA,
the SBA honors its guaranty by purchasing the guaranteed portion of the loan, as
well as all interest that is due for a period of up to 120 days. In general,
loans in liquidation are serviced through the efforts of Business Loan Center.
Year Ended June 30, 1996 vs. Year Ended June 30, 1995. The Company
recorded net income of $644,000 (or $.05 per share) for Fiscal Year 1996 as
compared to net income of $142,000 (or $.01 per share) for the year ended June
30, 1995 ("Fiscal Year 1995"). Operating Income was $620,000 for Fiscal Year
1996, as compared to $298,000 for Fiscal Year 1995. Net income before
extraordinary gain was approximately $553,000 (or $.04 per share) for Fiscal
Year 1996, as compared to $142,000 (or $.01 per share) for Fiscal Year 1995.
During Fiscal Year 1996, an extraordinary gain of $91,000 resulted from the
forgiveness of accrued interest on the early redemption of debentures.
Revenues for Fiscal Year 1996, which approximated $4,997,000,
increased by 97% from Fiscal Year 1995 primarily to higher gains on sales of
loans, servicing, and interest income. This is directly attributable to (i) a
20% increase in the loan portfolio, which approximated $67,021,000 at June 30,
1996, as compared to approximately $56,073,000 at June 30, 1995 and (ii) the
increased volume of SBA-guaranteed loans originated and sold in the secondary
market combined with the sale of participations in the unguaranteed loan
portfolio during this fiscal year resulting in gains of approximately
$2,945,000.
Interest income in Fiscal Year 1996, despite decreases in Business
Loan Center's base lending rate, the Prime rate, increased approximately 75%
from Fiscal Year 1995. This increase is attributed to the growth in Business
Loan Center's loan portfolio and to greater collection efforts of the Company's
servicing staff.
Service fee income increased from $432,000 for Fiscal Year 1995 to
$560,000 for Fiscal Year 1997. This 29% increase directly resulted from the
increased performing loan portfolio. Business Loan Center continues to earn
servicing fees of between 1.00% and 2.62% per annum on those loans sold in the
secondary market and through loan participations.
Operating expenses in Fiscal Year 1996 increased 76% from Fiscal
Year 1995 as a result of additional costs incurred for servicing of the
increased loan portfolio, increased salary expenditures, and an increased
provision for credit losses. The provision for credit losses was
22
<PAGE>
increased from $139,000 at June 30, 1995 to $809,000 at June 30, 1996. This
increase in the provision for credit losses is primarily due to the increase
during Fiscal Year 1996 of the aggregate of the unguaranteed loan portfolio, the
loans sold with recourse, changes in the loans in liquidation and management's
assessment of the adequacy of the allowance for credit losses.
General and administrative expenses in Fiscal Year 1996 were
approximately $498,000 as compared to $149,000 from Fiscal Year 1995, as a
result of greater accounting, administrative, and legal costs associated with
the acquisition of Southeastern First Financial Network, Inc.
Interest expense of $889,000 for Fiscal Year 1996 increased
approximately 153% from Fiscal Year 1995 due to the increased borrowing to meet
loan demand.
Loans in the approximate aggregate principal amount of $18,455,000
were originated during Fiscal Year 1996, as compared to loans in the approximate
aggregate principal amount of $20,046,000 for Fiscal Year 1995, representing
approximately an 8% decrease in origination activities during the referenced
periods. The decrease in loan originations from Fiscal Year 1995 to Fiscal Year
1996 was attributable to administrative actions taken by the SBA in the
Guaranteed Loan Program. In January 1995, the SBA temporarily limited the
maximum loan amount to $500,000 with a maximum guaranty of 75%, or $375,000, and
in May 1995 prohibited existing debt refinancing with guaranteed dollars. Both
actions remained in effect until October 1995. The SBA-guaranteed principal
amount of the loans originated during Fiscal Year, 1996 approximated
$13,848,000, as compared to the aggregate SBA-guaranteed principal of
$15,481,000 for the Fiscal Year 1995. Of those loans originated and fully funded
during Fiscal Year 1996, substantially all were sold in the secondary market
immediately subsequent to the closing of each loan, at premium rates that ranged
from 6% to 10%, resulting in gains on the sale of loans of $2,945,000 for Fiscal
Year 1996, as compared to gains of $1,292,000 for the prior year's period. A
portion of the gross gains has been deferred for both periods in accordance with
generally accepted accounting principles.
The loans receivable that remain in Business Loan Center's
portfolio, as well as the guaranteed portions sold in the secondary market, are
actively serviced through the collection efforts of Business Loan Center's
staff. The number and aggregate principal amount of the loans in Business Loan
Center's portfolio at the end of Fiscal Year 1996 may be classified and compared
to the loans in its portfolio at the end of Fiscal Year 1995 as follows:
23
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 6/30/96 YEAR ENDED 6/30/95
------------------ ------------------
Total Guaranteed Ungteed. # Loans Total Guaranteed Ungteed. # Loans
Amount Amount Amount -------- Amount Amount Amount --------
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Performing 57,083,000 44,798,000 12,285,000 180 45,521,000 36,491,000 9,030,000 159
Loans
Delinquent 1,041,000 822,000 219,000 3 524,000 445,000 79,000 2
Loans
Loans in 8,897,000 7,415,000 1,482,000 40 10,028,000 8,417,000 1,611,000 44
--------- --------- --------- -- ---------- --------- --------- --
Liquidation
Total Loans 67,021,000 53,035,000 13,986,000 223 56,073,000 45,353,000 10,720,000 205
========== ========== === ========== ========== ===
LESS:
Participations Sold 6,372,000 0
Allowance for Credit Losses 1,338,000 710,000
Deferred Income & Other 523,000 810,000
------- -------
Loans Receivable Net $5,753,000 $9,200,000
========== ==========
</TABLE>
Loans for which interest and principal payments are due for a period
greater than 31 days are categorized by Business Loan Center as "delinquent."
Delinquent loans generally result from various factors, including temporary
downturns in the borrower's business, seasonal working capital constraints,
changes in business location or products, and other factors specifically related
to each borrower. The borrowers often regain current status after a period of
time.
In certain cases, when the aforementioned factors prevent the
borrower from making any payments for a prolonged period of time, and the loan
falls beyond 90 days past due, the loan may then be categorized as in
"liquidation." After formal request is made by Business Loan Center or the FTA,
the SBA honors its guaranty by purchasing the guaranteed portion of the loan, as
well as all interest that is due for a period of up to 120 days. In general,
loans in liquidation are serviced through the efforts of Business Loan Center.
Item 8. Financial Statements and Supplementary Data
The financial statements located in Item 14(a)(1) and (2) are
included in this report of page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
None
24
<PAGE>
Part III
Item 10. Directors, Executive Officers and Key Employees
The directors and executive officers of the Company, their ages and
present positions held in the Company are as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
Name Age Positions Director Since Officer Since Year Term Will
Expire
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert F. 52 President & September 1986 September 1986 2000
Tannenhauser(1) Chairman of the
Board
- - ------------------------------------------------------------------------------------------------
Robert C. 61 Vice President & February 1996 February 1996 1998
McGee(1) Director
- - ------------------------------------------------------------------------------------------------
Peter D. 40 Director June 1993 N/A 2000
Blanck(1)(2)(3)
- - ------------------------------------------------------------------------------------------------
Robert W. 39 Director June 1997 N/A 1998
D'Loren(3)
- - ------------------------------------------------------------------------------------------------
Irwin E. Redlener, 53 Director June 1997 N/A 1999
M.D.(2)
- - ------------------------------------------------------------------------------------------------
Kenneth S. 52 Director June 1997 N/A 1999
Schwartz, M.D.(3)
- - ------------------------------------------------------------------------------------------------
Robert W. Wien(2) 46 Director June 1997 N/A 1998
- - ------------------------------------------------------------------------------------------------
Jennifer M. Napier 26 Treasurer N/A February 1996 N/A
- - ------------------------------------------------------------------------------------------------
David I. Redlener 29 Secretary N/A June 1997 N/A
- - ------------------------------------------------------------------------------------------------
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
- - ------------------------------------
Each director holds office, for the term limit set forth above,
until the annual meeting of the Company's shareholders and until his successor
shall have been elected and qualified. Since the Company's reorganization,
annual meetings of its shareholders were held in September 1990, June 1993 and
June 1997. Each of the executive officers serves at the pleasure of the Board of
Directors.
Robert F. Tannenhauser was of counsel to the law firm of Hall
Dickler Kent Friedman & Wood, LLP. from January 1992 until February 1995. From
March 1990 to December 1991 he was of counsel to the law firm of Graubard Mollen
Horowitz Pomeranz & Shapiro. Prior to March 1990 he was partner in the law firm
of Rosenfeld Fischbein Bernstein & Tannenhauser. Mr. Tannenhauser became full
time employee of Business Loan Center in March 1995. Additionally, Mr.
Tannenhauser serves as a Director of the Children's Health Fund, together with
Dr. Redlener.
25
<PAGE>
Robert McGee was President and owner of Southeastern First
Financial, Inc. ("Southeastern First"), an originator of commercial and SBA
loans, from 1991 to 1995. After selling Southeastern First, Mr. McGee formed
Southeastern First Financial Network, Inc., also an originator of commercial and
SBA loans, which was subsequently acquired by the Company. See "Business of the
Company - Acquisition of Southeastern First Financial Network, Inc."
Peter Blanck has been as a Professor of Law since May 1993, and as
an Associate Professor of Law from July 1991 to April 1993, with the University
of Iowa College of Law. Since February 1992, Mr. Blanck has been a director and
the President of Futuronics Corporation. Mr. Blanck is the brother-in-law of
Robert F. Tannenhauser.
Robert W. D'Loren has been self-employed for the last 11 years and
currently conducts business in a company known as D'Loren, Levien & Company,
LLC. This company provides investment banking services to the mortgage and
asset-backed industry. Prior to forming his own company in 1986, Mr. D'Loren
served as manager in the accounting firm of Deloitte Touche.
Irwin Redlener is currently Director of the Division of Community
Pediatrics and Associate Professor of Pediatrics at the Albert Einstein College
of Medicine, Montefiore Medical Center. Dr. Redlener has served as Associate
Attending Pediatrician at Montefiore Medical Center in New York since 1990. Dr.
Redlener is President and Director of The Children's Health Fund, a
not-for-profit foundation developed to support health care for homeless and
medically under served children.
Kenneth S. Schwartz is currently Vice President of Complete
Management, Inc. in Jefferson Valley, New York. From 1996 to present, Dr.
Schwartz served as Chief Executive Officer of Advanced Alliance Management
Corporation and Director of Radiology at St. Francis Hospital in New York. Since
1995, Dr. Schwartz has been Systems Director of Radiology and Imaging
Associates, P.C. From 1981 to 1995, Dr. Schwartz served as a Director of
Radiology at Hudson Valley Hospital, a Director of Northern Metropolitan
Radiology Associates, and a Medical Director at Putnam Hospital Center in
Carmel, New York.
Robert W. Wien has served as Managing Director and Director of
Mergers and Acquisitions at Josephthal, Lyon & Ross, Incorporated since May
1996. From July 1994 to May 1996, Mr. Wien held the position of Director of
Corporate Finance and Real Estate Advisory Services at Coopers & Lybrand, LLP.
Additionally, Mr. Wien served as Senior Vice President of Investment Banking at
Dean Witter Reynolds, Inc. from April 1987 to June 1994.
Jennifer Napier served as Assistant Secretary of the Company from
February 1996 to June 1997 and was subsequently elected Treasurer in June 1997.
From June 1994 until the present, Ms. Napier has been employed by Business Loan
Center. Ms. Napier graduated with a degree in Accounting from San Diego State
University and is currently pursuing a Masters degree in Finance.
26
<PAGE>
David Redlener was elected Secretary of the Company in June 1997.
From September 1994 until December 1996 Mr. Redlener was employed as an
Assistant District Attorney in the County of the Bronx, New York. Currently, Mr.
Redlener is employed as Counsel to the Business Loan Center. Mr. Redlener
graduated with a degree in Economics from Hunter College and earned his law
degree from Saint Louis University School of Law in May 1994. Mr. Redlener is
the son of Dr. Irwin Redlener, Director of the Company.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Jennifer M. Napier, Treasurer of the Company made a late filing on
August 7, 1997 on a report required by Section 16(a) of the Exchange Act of
1934, covering the transaction or event in the Company's common stock.
Item 11. Executive Compensation.
Board of Directors Report on Executive Compensation
The Board of Directors of the Company traditionally performs the
functions of a compensation committee, including the review and approval of
compensation and terms of employment for all officers and those employees of the
Company and its subsidiaries. The members of the Board of Directors at June 30,
1997 were Robert F. Tannenhauser, Robert C. McGee, Peter D. Blanck, Robert W.
D'Loren, Irwin E. Redlener, M.D., Kenneth S. Schwartz, M.D. and Robert W. Wien.
Peter Blanck, Robert D'Loren and Kenneth Schwartz were appointed to the
Compensation Committee of the Board of Directors of the Company.
The Company's executive compensation is intended to reward, retain
and motivate management. The primary component of compensation has been base
salary. However, for certain of the most senior executives, compensation
packages now include stock-based long-term incentive rewards (the "Awards"). The
grant of these Awards is intended to align the interests of the Company's most
senior executives to improve the Company's long-term business position and
performance. No awards were made to the Chief Executive Officer and the other
executive officers of the Company in 1997. The Board of Directors believes that
the Company's executive compensation arrangements are reasonable in light of the
needs of the Company, competitive compensation levels and the goals of retention
and motivation of management.
In determining salary levels for the executive officers, primary
consideration is given to each executive's level of responsibility and
individual performance.
Compensation Committee Interlocks and Insider Participation
27
<PAGE>
The Board of Directors of the Company traditionally performs the
functions of a compensation committee, including the review and approval of
compensation and terms of employment for all officers and those employees of the
Company and its subsidiaries.
Certain members of the Company's Board of Directors also served as
officers of the Company in 1997. Specifically, Robert F. Tannenhauser served as
President and Robert C. McGee served as Vice President.
Performance Graph
The following is a tabular version of a Plot Point Graph to be included in the
Annual Report.
Plot Points 6/30/94 6/30/95 6/30/96 6/30/97
- - ----------- ------- ------- ------- -------
BLC Financial Services, Inc. ........... $100.0 $70.5 $117.6 $164.72
Peer Group Index ....................... 100.0 122.4 178.3 241.32
Russell 2000 Index ..................... 100.0 120.0 148.9 173.21
The following table sets forth all plan and non-plan compensation
paid to the named individual for services rendered in all capacities to the
Company and its subsidiaries during the three fiscal years ended June 30, 1997.
The following salaries and/or benefits are presently payable pursuant to
employment agreements. See "Certain Relationships and Related Transactions".
SUMMARY COMPENSATION TABLE
--------------------------
- - --------------------------------------------------------------------------------
Name and Principal Position Year Annual Compensation Options
- - --------------------------------------------------------------------------------
Salary Bonus Other
------ ----- -----
Robert F. Tannenhauser 1997 $207,411(1) 0 0 0
President and Director 1996 $150,997(1) 0 0 0
1995 $37,198(1) 0 0 450,000
- - --------------------------------------------------------------------------------
Robert C. McGee 1997 $200,000 0 0 0
Vice President and Director 1996 $209,022 0 0 187,475
1995 N/A N/A
- - --------------------------------------------------------------------------------
1 Includes premiums for excess health insurance.
There were no options granted to executive officers within the
fiscal year ending June
28
<PAGE>
30, 1997.
Non-Qualified Stock Option Agreements were authorized on June 30,
1997 whereby certain Directors are to receive 20,000 options to purchase Common
Stock at an exercise price of $.90, all of which are exercisable immediately or
at any time prior to June 30, 2002 as well as $1,000 per meeting of the Board of
Directors. The Directors covered under the above referenced compensation package
include: Robert W. D'Loren, Irwin E. Redlener, M.D., Kenneth S. Schwartz, M.D.
and Robert W. Wien.
The Company entered into employment agreements with Robert F.
Tannenhauser and Robert C. McGee on February 5, 1996.
Robert F. Tannenhauser. Robert F. Tannenhauser's employment
agreement provides that he shall be employed as President and Chairman of the
Board of the Company and as Chief Executive Officer of Business Loan Center
through January 15, 2001 at an annual gross salary of $200,000. Mr. Tannenhauser
is also entitled to participate in all benefit plans established from time to
time by the Company and Business Loan Center on the same basis as all other
executive employees.
The agreement shall automatically renew for successive one-year
periods until the Company registers the shares of Common Stock held by Mr.
Tannenhauser under the Securities Act and lists the Common Stock for trading on
Nasdaq, The American Stock Exchange ("AMEX") or another recognized securities
exchange. Thereafter, the agreement shall automatically renew for additional
successive one-year periods unless notice to the contrary is given by any party
not less than 90 days prior to the expiration of the then current term.
The agreement obliges the Company to pay to Mr. Tannenhauser the
greater of $200,000 or his annual gross salary if (i) Mr. Tannenhauser's
employment is terminated for any reason other than his death or disability, (ii)
the agreement is not renewed by Business Loan Center or (iii) Mr. Tannenhauser
terminates the agreement due to a reduction in Mr. Tannenhauser's salary or
benefits or the diminution of his responsibility, authority or status as chief
executive.
Robert C. McGee. Robert C. McGee's employment agreement provides
that he shall be employed as Vice President of the Company, a Managing Partner
of Business Loan Center and President and Chief Executive Officer of BLC Network
through January 15, 2001 at an annual gross salary of $200,000.
Mr. McGee was also issued warrants to purchase 187,475 shares of
Common Stock at an exercise price of $.60, all of which are exercisable
immediately or at any time prior to November 5, 2000. Mr. McGee is also entitled
to participate in all benefit plans established from time to time by the Company
and Business Loan Center on the same basis as all other executive employees.
29
<PAGE>
The agreement shall automatically renew for successive one-year
periods until the Company registers the shares of Common Stock held by Mr. McGee
under the Securities Act and lists the Common Stock for trading on Nasdaq, AMEX
or other recognized securities exchange. Thereafter, the agreement shall
automatically renew for additional successive one-year periods unless notice to
the contrary is given by any party not less than 90 days prior to the expiration
of the then current term.
The agreement obliges the Company to pay to Mr. McGee the greater of
$200,000 or his annual gross salary if (i) Mr. McGee's employment is terminated
for any reason other than his death or disability, (ii) the Agreement is not
renewed by Business Loan Center or (iii) Mr. McGee terminates the agreement due
to a reduction in Mr. McGee's salary or benefits or the diminution of his
responsibility, authority or status as Chief Executive Officer of BLC Network.
The following table sets forth information concerning each exercise
of stock options during the fiscal year ended June 30, 1997 by the named
individual, along with the year-end value of unexercised options:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Name Shares Acquired on Value Realized Number of Value of Unexercised In-
Exercise Unexercised The-Money Options at
Options at 6/30/97(1)
6/30/97(1)
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert F. Tannenhauser 140,000 $59,500 481,857 $204,789(2)
- - ------------------------------------------------------------------------------------------------------
Robert C. McGee 0 0 187,475 $51,556(2)
- - ------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options are exercisable; there were no unexcercisable options at June
30, 1997
(2) The value realized equals the market value of the common stock at June 30,
1997 (Closing Bid) of $0.875 minus the exercise price.
- - --------------------
Reference is made to the section of this Report entitled "Certain
Relationships and Related Transactions" for a description of options granted to
certain executive officers, fees paid to entities that are affiliated with
certain executive officers, and a description of the employment agreements with
certain executive officers.
Indemnification of Directors and Officers
Section 102(b)(7) of the General Corporation Law of the State of
Delaware grants corporations the right to limit or eliminate the personal
liability of their directors in certain circumstances and in accordance with the
provisions therein set forth. Article 7 of the Company's Amended and Restated
Certificate of Incorporation provides for the elimination of personal liability
of a Director to the Corporation or its stockholders for monetary damages for
the breach of the Director's fiduciary duty to the full extent allowable under
Section 102 (b) (7).
30
<PAGE>
Section 145 of the General Corporation Law of the State of Delaware
grants corporations the right to indemnify their directors, officers, employees
and agents in accordance with the provisions therein set forth. Article 8 of the
Company's Certificate of Incorporation provides for indemnification of such
persons to the full extent allowable under applicable law.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of August 28,
1997 with respect to (i) those persons or groups known to the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each director
of the Company, (iii) each named executive officer and (iv) all directors and
officers of the Company as a group. The information is determined in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 ("Rule
13d-3") based upon information furnished by the persons listed or known to the
Company. Except as indicated below, the shareholders listed possess sole voting
and investment power with respect to their shares.
Name and Address of Amount and Nature Percent of
Beneficial Owner of Beneficial Class
Ownership
- - --------------------------------------------------------------------------------
Futronics Corporation 3,109,964(1) 17.4%
3652 Forest Gate Drive, N.E
Iowa City, Iowa 52240
- - --------------------------------------------------------------------------------
Peter D. Blanck 3,576,132(2)(3) 20.0%
University of Iowa, College of Law
Iowa City, Iowa 52241
- - --------------------------------------------------------------------------------
Richard Blanck 3,501,130(3)(4) 19.6%
9 Hickory Road
Manhasset Hills, New York 11040
- - --------------------------------------------------------------------------------
Robert W. D'Loren -0- *
72 Woodland Drive
Oyster Bay Cove, NY 11771
- - --------------------------------------------------------------------------------
Robert C. McGee 1,996,296(5) 11.4%
204 Oxford Circle East
Richmond, Virginia 23221
- - --------------------------------------------------------------------------------
Jennifer M. Napier 75,000 *
50 West 72nd Street
New York, New York 10023
- - --------------------------------------------------------------------------------
David I. Redlener 15,000 *
50 West 72nd Street
New York, New York 10023
- - --------------------------------------------------------------------------------
Irwin E. Redlener -0- *
11 Alfred Lane
New Rochelle, New York 10804
- - --------------------------------------------------------------------------------
Diane Rosenfeld 1,130,597(6) 6.4%
RR #1 Box 427 D
County Road #86
Amenia, New York 12501
- - --------------------------------------------------------------------------------
31
<PAGE>
- - --------------------------------------------------------------------------------
Kenneth S. Schwartz 6,525 *
284 Guard Hill Road
Bedford, New York 10506
- - --------------------------------------------------------------------------------
Carol Tannenhauser 5,597,861(3)(7) 30.5%
210 East 68th Street
New York, New York 10021
- - --------------------------------------------------------------------------------
Robert F. Tannenhauser 5,597,861(7) 30.5%
210 East 68th Street
New York, New York 10021
- - --------------------------------------------------------------------------------
Robert W. Wien 20,000 *
24 James Road
Mount Kisco, New York 10549
- - --------------------------------------------------------------------------------
All Directors and officers 11,286,814 (8) 47.1%
as a group (nine persons)
- - --------------------------------------------------------------------------------
* Owns less than 1% of the outstanding shares of Common Stock
(1) Includes (a) 2,609,964 shares owned directly by Futuronics Corporation and
(b) 500,000 shares that may be acquired upon the exercise of Warrants by
Futuronics Corporation. Carol Tannenhauser, Richard Blanck, and Peter D.
Blanck are officers and directors of Futuronics Corporation.
(2) Carol Tannenhauser, Richard Blanck, and Peter D. Blanck are siblings. Each
disclaims beneficial ownership of the shares owned by the others.
(3) Includes (a) 85,737 shares owned directly by Peter D. Blanck, (b) 128,601
shares deemed owned by Peter D. Blanck as custodian for his three
children, (c) 75,000 shares underlying options owned by Peter D. Blanck,
(d) 176,830 shares owned by Trust created under the Will of Albert Blanck
under which Peter D. Blanck is a Trustee and Beneficiary, (e) 2,609,964
shares owned by Futuronics Corporation of which Peter D. Blanck is an
officer and director, and (f) 500,000 shares that may be acquired upon the
exercise of Warrants by Futuronics Corporation of which Peter D. Blanck is
an officer and director.
(4) Includes (a) 107,168 shares owned directly by Richard Blanck, (b) 107,168
shares deemed owned by Richard Blanck as custodian for his two children,
(c) 176,830 shares owned by Trust created under the Will of Albert Blanck
under which Richard Blanck is a Trustee and Beneficiary, (d) 2,609,964
shares owned by Futuronics Corporation of which Richard Blanck is an
officer and director, and (e) 500,000 shares that may be acquired upon the
exercise of Warrants by Futuronics Corporation of which Richard Blanck is
an officer and director.
(5) Includes (a) 1,808,821 shares owned directly by Robert C. McGee and (b)
187,475 shares that may be acquired upon the exercise of certain warrants
owned by Robert C. McGee.
(6) Includes (a) 690,710 shares directly owned by Diane Rosenfeld, (b) 4,013
shares directly owned by Eric Rosenfeld, the spouse of Ms. Rosenfeld, (c)
342,500 shares underlying options owned by Diane Rosenfeld, and (d) 93,374
shares that may be acquired upon the exercise of Warrants owned by Diane
Rosenfeld.
(7) Includes (a) 171,468 shares owned directly by Robert F. Tannenhauser, (b)
1,325,408 shares directly owned by Carol Tannenhauser, the spouse of
Robert F. Tannenhauser, (c) 107,168 shares deemed owned by the spouse of
Robert F. Tannenhauser as custodian for their two children, (d) 2,609,964
owned by Futuronics Corporation of which the spouse of Robert F.
Tannenhauser is an officer and director, (e) 176,830 shares owned by Trust
created under the Will of Albert Blanck under which the spouse of Robert
F. Tannenhauser is Trustee and Beneficiary, (f) 481,857 shares underlying
options owned by Carol Tannenhauser, (g) 500,000 shares that may be
acquired upon the exercise of Warrants by Futuronics Corporation of which
the spouse of Robert F. Tannenhauser is an officer and director,
(h)112,583 shares owned by David Tannenhauser, the son of Robert F.
Tannenhauser and (i) 112,583 shares held in a custodial account for the
benefit of Emily Tannenhauser, the daughter of Robert F. Tannenhauser and
of which Robert F. Tannenhauser is custodian. Each of Carol Tannenhauser
and Robert F. Tannenhauser share voting and dispositive power of such
shares.
(8) Represents shares beneficially owned pursuant to Rule 13d-3 by Mr.
Tannenhauser, a Director and President of the Company, Mr. McGee, a
Director and Vice President of the Company, Ms. Napier, Treasurer of the
Company, Mr. Redlener Secretary of the Company, Messrs. D'Loren, Blanck
and Wien and Drs. Redlener and Schwartz, directors of the Company. The
shares deemed beneficially owned by Robert F. Tannenhauser and Peter D.
Blanck through Futuronics Corporation and Trust created under the Will of
Albert Blanck have been added only once to the total shares owned by
officers and directors as a group.
32
<PAGE>
Item 13. Certain Relationships and Related Transactions.
Since June 30, 1992, various members of the immediate family and
affiliates of Robert F. Tannenhauser have made available funds to Business Loan
Center for the purpose of originating loans. In exchange for extending such
loans, Business Loan Center paid interest to the person or entities funding such
loans during Fiscal Years 1995, 1996 and 1997. For those periods, Business Loan
Center incurred interest expense relating to such individuals in the aggregate
amounts of $157,000, $130,000, and $24,000, respectively. The maximum amounts
outstanding for these loans during the periods in question were $2,594,000,
$2,108,000, and $1,800,000, respectively.
The Company has negotiated a line of credit and entered into a loan
participation agreement and a securitization arrangement with a certain
financial institution introduced to the Company by Robert W. D'Loren, a Director
of the Company. In connection with such arrangements, D'Loren, Levin & Company,
LLC, a limited liability company of which Mr. D'Loren is a member, received an
initial fee of $50,000 and in August 1997, received an additional fee of $75,000
upon the closing of such line of credit and securitization arrangements.
On April 1, 1997, the Company entered into an employment agreement
with R. Matthew McGee whereby Mr. McGee shall be employed as a consultant for
BLC Capital Corp. through March 31, 2002 at an annual gross salary of $136,000.
Mr. McGee is entitled to participate in all plans established from time-to-time
on the same basis as all other employees.
During Fiscal Year 1996 the Company entered into employment
agreements with two executive officers. See "Item 11-Executive Compensation".
33
<PAGE>
Part IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedules, And
Reports on Form 8-K.
(a)(1) and (2) Financial Statements and Financial Statement
Schedules
REGISTRANT:
The following consolidated financial statements and schedules of BLC Financial
Services, Inc. and subsidiaries, the notes thereto and the related report
thereon of the independent auditors are filed under Item 8 of this Report:
Reports of Independent Auditors................................. F-2
Consolidated Balance Sheets at June 30,
1997 and 1996................................................. F-3
Consolidated Statements of Income --
Years ended June 30, 1997, 1996 and
1995.......................................................... F-4
Consolidated Statements of Changes in
Shareholders' Equity -- Years ended
June 30, 1996, 1995 and 1994.................................. F-5
Consolidated Statements of Cash Flows --
Years ended June 30, 1997, 1996 and
1995 ........................................................ F-6
Notes to Consolidated Financial Statements...................... F-7
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the instructions to Item 8 or are inapplicable, and therefore, have been
omitted.
(a)(3) Exhibits Filed
See Exhibit Index beginning on page __ of this Report.
(b) Reports on Form 8-K
The Company filed one Report on Form 8-K during the fiscal year
ending on June 30, 1997. On May 12, 1997, Business Loan Center, a
wholly-owned subsidiary of the Company, sold a participation in its
loan portfolio to a private financial investor.
(c) Exhibits
See Item 14(a)(3) above.
(d) Financial Statement Schedules
34
<PAGE>
The financial statement schedules required to be filed pursuant to
this Item 14(d) are listed above under Items 14(a)(1) and (2).
35
<PAGE>
BLC FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 and 1996
<PAGE>
BLC FINANCIAL SERVICES, INC.
Contents
Page
Independent Auditors' Report F-2
Consolidated Financial Statements
Balance sheets F-3
Statements of income F-4
Statements of changes in shareholders' equity F-5
Statements of cash flows F-6
Notes to financial statements F-7
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
BLC Financial Services, Inc.
We have audited the accompanying consolidated balance sheets of BLC Financial
Services, Inc. and subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three year period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BLC Financial
Services, Inc. and subsidiaries as of June 30, 1997 and 1996 and the
consolidated results of their operations and their consolidated cash flows for
each of the years in the three year period ended June 30, 1997, in conformity
with generally accepted accounting principles.
As described in Note 5, the financial statements for 1996 and 1995 have been
restated to reflect a correction in accounting for certain income tax benefits.
/s/ Richard A. Eisner & Company, LLP
September 12, 1997
Florham Park, New Jersey
<PAGE>
BLC FINANCIAL SERVICES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
1997 1996
============================================================================================================
<S> <C> <C>
ASSETS
Loans receivable - net $ 9,839,000 $ 5,861,000
Loans held for sale 1,109,000 2,324,000
Cash 803,000 493,000
Accounts receivable - loans sold 3,247,000
Accounts and other receivables 282,000 259,000
Prepaid expenses 218,000
Furniture and equipment, net of accumulated depreciation of $211,000 in
1997; $142,000 in 1996 344,000 159,000
Servicing assets 1,972,000 1,479,000
Residual interests 952,000
Deferred income taxes 1,037,000 340,000
Security deposits 3,000 22,000
Deferred financing costs, net of accumulated amortization of $47,000 in
1997; $31,000 in 1996 280,000 46,000
- - ------------------------------------------------------------------------------------------------------------
$20,086,000 $10,983,000
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 8,770,000 $ 3,704,000
Accrued expenses 422,000 361,000
Due to participants 524,000
Allowance for estimated future losses on loans sold 99,000 108,000
Due to affiliates 2,594,000 628,000
Debt 156,000 590,000
Customer deposits 331,000 266,000
- - ------------------------------------------------------------------------------------------------------------
Total liabilities 12,896,000 5,657,000
- - ------------------------------------------------------------------------------------------------------------
Minority interest - 725,000
- - ------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.10 par value:
Authorized - 2,000,000 shares, issued and outstanding - none
Common stock, $.01 par value:
Authorized - 35,000,000 shares, issued and outstanding 17,341,243
in 1997 and 16,882,052 in 1996 173,000 169,000
Additional paid-in capital 7,391,000 6,843,000
Accumulated deficit (464,000) (2,411,000)
Unrealized gain on residual interests (net of income taxes of $10,000) 90,000
- - ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 7,190,000 4,601,000
- - ------------------------------------------------------------------------------------------------------------
$20,086,000 $10,983,000
============================================================================================================
</TABLE>
See notes to financial statements F-3
<PAGE>
BLC FINANCIAL SERVICES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996 1995
==========================================================================================================
<S> <C> <C> <C>
Revenues:
Interest income $ 1,666,000 $1,335,000 $ 762,000
Gain on sale of loans 4,333,000 2,945,000 1,292,000
Service fee income 800,000 560,000 432,000
Miscellaneous 369,000 157,000 350,000
- - ----------------------------------------------------------------------------------------------------------
7,168,000 4,997,000 2,536,000
- - ----------------------------------------------------------------------------------------------------------
Expenses:
Operating costs 3,249,000 2,918,000 1,662,000
General and administrative 1,267,000 498,000 149,000
Interest 975,000 889,000 352,000
- - ----------------------------------------------------------------------------------------------------------
5,491,000 4,305,000 2,163,000
- - ----------------------------------------------------------------------------------------------------------
Equity of minority interest in income of subsidiary 2,000 72,000 75,000
- - ----------------------------------------------------------------------------------------------------------
Income before provision (benefit) for income taxes
and extraordinary item 1,675,000 620,000 298,000
Provision (benefit) for income taxes (27,000) 67,000 156,000
- - ----------------------------------------------------------------------------------------------------------
Income before extraordinary item 1,702,000 553,000 142,000
Extraordinary gain - forgiveness of debt
(net of income taxes of $27,000 in 1997 and
$14,000 in 1996) 245,000 91,000
- - ----------------------------------------------------------------------------------------------------------
Net income $1,947,000 $ 644,000 $ 142,000
==========================================================================================================
Earnings per share:
Income before extraordinary item $.10 $.04 $.01
Extraordinary item $.01 $.01
- - ----------------------------------------------------------------------------------------------------------
Net income $.11 $.05 $.01
==========================================================================================================
Weighted average number of common shares
outstanding and common stock equivalents 18,232,857 14,361,462 11,747,194
==========================================================================================================
</TABLE>
See notes to financial statements F-4
<PAGE>
BLC FINANCIAL SERVICES, INC.
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Gain on
Number Paid-in Accumulated Residual
of Shares Amount Capital Deficit Interests Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 11,369,527 $114,000 $5,498,000 $(3,197,000) $2,415,000
Costs in connection with registration statements (51,000) (51,000)
Common stock issued in the pooling of interests 1,808,821 18,000 (18,000)
Pre-confirmation net operating loss utilization 102,000 102,000
Net income 142,000 142,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 13,178,348 132,000 5,531,000 (3,055,000) 2,608,000
Issuance of common stock 3,703,704 37,000 963,000 1,000,000
Pre-confirmation net operating loss utilization 349,000 349,000
Net income 644,000 644,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 16,882,052 169,000 6,843,000 (2,411,000) 4,601,000
Exercise of warrants 459,191 4,000 174,000 178,000
Net income 1,947,000 1,947,000
Pre-confirmation net operating loss utilization 374,000 374,000
Change in unrealized gain on residual interests,
net of income tax effect $90,000 90,000
====================================================================================================================================
Balance, June 30, 1997 17,341,243 $173,000 $7,391,000 $ (464,000) $90,000 $7,190,000
====================================================================================================================================
</TABLE>
See notes to financial statements F-5
<PAGE>
BLC FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996 1995
=============================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary item $ 1,702,000 $ 553,000 $ 142,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 69,000 39,000 32,000
Minority interest in income of subsidiary 2,000 72,000 75,000
Amortization 217,000 14,000 14,000
Provision for credit losses 74,000 917,000 139,000
Deferred income tax expense (benefit) (333,000) 9,000 102,000
Write-off of estimated liability (28,000)
Transfer of deferred income to the allowance for credit losses 36,000
Changes in:
Loans held for sale 1,215,000 (1,806,000) (518,000)
Accounts receivable - loans sold (3,247,000) 309,000 760,000
Accounts and other receivables (23,000) (102,000) (74,000)
Prepaid expenses (218,000)
Deferred financing costs (250,000) 13,000 (46,000)
Accrued expenses 34,000 (55,000) 59,000
Due to participants 524,000
Security deposits 19,000 (3,000)
Customer deposits 65,000 165,000 29,000
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (150,000) 125,000 722,000
- - -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Loans originated (10,996,000) (4,433,000) (4,462,000)
Principal collections and sales of loans receivable 5,037,000 5,484,000 390,000
Principal payments on residual interests 15,000
Acquisition of equipment (254,000) (137,000) (17,000)
Purchase of minority interest in subsidiary (380,000)
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (6,578,000) 914,000 (4,089,000)
- - -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under line of credit 5,066,000 (260,000) 3,114,000
Proceeds from bank loans 6,103,000
Principal payments on notes payable - bank (7,077,000)
Proceeds from exercise of warrants and options 178,000
Proceeds from issuance of common stock 1,000,000
Principal payments on debentures (1,006,000) (12,000)
Securities registration costs (51,000)
Due to affiliates 1,966,000 (492,000) 587,000
Principal payments on notes payable (172,000) (13,000)
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 7,038,000 (758,000) 3,451,000
- - -------------------------------------------------------------------------------------------------------------
Net increase in cash 310,000 281,000 84,000
Cash at beginning of period 493,000 212,000 128,000
- - -------------------------------------------------------------------------------------------------------------
Cash at end of period $ 803,000 $ 493,000 $ 212,000
=============================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 961,000 $ 899,000 $ 277,000
- - -------------------------------------------------------------------------------------------------------------
Income taxes $ 438,000 $ 30,000 $ 21,000
=============================================================================================================
</TABLE>
See notes to financial statements F-6
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 1. Summary of Significant Accounting Policies
Principles of consolidation and preparation:
The accompanying consolidated financial statements include the accounts of BLC
Financial Services, Inc. (the "Company") its corporate subsidiaries and, its
general partnership (the "Partnership") after elimination of all significant
intercompany accounts and transactions. On September 16, 1996, a wholly-owned
subsidiary of the Company purchased the minority interest of the Partnership for
$380,000. Prior to September 16, 1996, The Company owned 88% of the Partnership.
In February 1997, the assets and liabilities of the Partnership were transferred
into a wholly-owned subsidiary of the Company.
On February 5, 1996, the Company acquired Southeastern 1st Financial Network,
Inc. ("Network") in a business combination accounted for as a pooling of
interests by exchanging 1,808,821 shares of its common stock for all of
Network's outstanding common stock. Network (formed during the year ended June
30, 1995) is a commercial loan originator, primarily originating SBA loans. The
accompanying financial statements are based on the assumption that the companies
were combined as of the date of Network's formation.
The prior period financial statements have been reclassified to conform to this
year's presentation and have also been restated to reflect a correction in
accounting for certain income tax benefits (see Note 5.)
Business operations:
The Company is primarily engaged in the business of originating, selling and
servicing loans to small businesses under the Section 7(a) Guaranteed Loan
Program sponsored by the United States Small Business Administration ("SBA").
The Company sells the SBA guaranteed portion of the loan in the secondary
market, without recourse, at a premium. During the years ended June 30, 1997,
1996 and 1995, two loan production companies accounted for 29%, one loan
production company accounted for 43%, and two loan production companies
accounted for 32% of the Company's loan originations, respectively. During the
years ended June 30, 1997, 1996 and 1995, 78% of the guaranteed loans were sold
to one securities dealer, 90% were sold to four securities dealers and 88% were
sold to one securities dealer, respectively. Additionally, for the year ended
June 30, 1997, the Company sold without recourse, portions of the unguaranteed
loans receivable to two finance companies and during the year ended June 30,
1996, sold with recourse, portions of the unguaranteed loans receivable to one
finance company.
Accounting for loans and revenue recognition:
The Company's policy is to sell the SBA guaranteed portion of all loans that it
originates, at a premium, in the secondary market on a nonrecourse basis. The
guaranteed portion of the loans receivable that have been originated, but not
yet sold, are carried at the lower of aggregate cost or market value. Market
value is determined by outside commitments from investors or current yield on
similar loans. Loans receivable held for investment are stated at the principal
amount outstanding less deferred income.
Effective January 1, 1997, as required by Statement of Financial Accounting
Standards No. 125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabiities ("FAS 125"), upon the sale of loans, the
Company allocates the cost, based upon the relative fair values, to the
guaranteed portion of the loan, the unguaranteed portion of the loan, the
servicing asset and residual interest, if any. The impact of the adoption of FAS
125 on net income in 1997 was immaterial.
Gain on sales of loans receivable principally represents the present value of
the differential between the interest rates charged by the Company and the
interest rates passed on to the purchaser of the receivables, after considering
the effects of estimated prepayments, repurchases and normal servicing fees.
Gains on the sale of loan receivables are recorded on the trade date using the
specific identification method.
F-7
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 1. Summary of Significant Accounting Policies (continued)
Accounting for loans and revenue recognition: (continued)
The Company generally ceases to accrue interest income on loan receivables which
become 90 days delinquent, categorizes these loans as being in liquidation, and
takes apropriate steps to attempt to collect the loan in full. Interest received
on nonaccrual loans is either applied against principal or reported as interest
income, according to management's judgement as the the collectibility of
principal.
Effective July 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("FAS") No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures", and continues its existing income
recognition policies with respect to nonaccrual loans. The impact of the
adoption of FAS 118 and FAS 114 (discussed below under credit losses) on net
income in 1996 was immaterial.
Credit losses:
The adequacy of the allowance for credit losses is determined through a
quarterly review of outstanding loans and commitments to extend credit. The
impact of economic conditions on the creditworthiness of the borrowers is given
consideration, as well as credit loss experience, changes in the composition and
volume of the loan portfolio, and management's assessment of the risk inherent
in the loan portfolio. These and other factors are used in assessing the overall
adequacy of the allowance for credit losses and the resulting provision for
credit losses.
Provisions for credit losses are charged to income in amounts sufficient to
maintain the allowance for credit losses at a level considered adequate to cover
the losses of principal in the existing portfolio. The Company's charge-off
policy is based on an account-by-account review for all loans receivable.
On July 1, 1995, the Company adopted prospectively FAS No. 114, "Accounting by
Creditors for Impairment of a Loan". This Statement defines an impaired loan as
a loan for which it is probable, based on current information, that the lender
will not collect all amounts due under the contractual terms of the loan
agreement. The Company has defined the population of impaired loans to be all
loans in liquidation. The impaired loan portfolio is primarily collateral
dependent, as defined by FAS 114. Impaired loans are individually assessed to
determine that each loan's carrying value is not in excess of the fair value of
the related collateral or the present value of the expected future cash flows.
The provision for credit losses for the loans sold with recourse is measured
based on the present value of expected future losses discounted at a riskless
interest rate.
Under certain limited circumstances, the Company may be liable, on loans that it
originated, for losses incurred by the SBA. Management considers this
contingency in determining the adequacy of the allowance for credit losses.
Residual interests:
In accordance with FAS 125, effective January 1, 1997, the Company, upon sale of
loans recognizes a residual interest. The residual interest represents the
estimated discounted cash flow of the differential of the total interest to be
earned on the loans sold and the sum of the interest to be paid to the
participants and the contractual servicing fee.
The residual interests are accounted for as available-for-sale securities and
are stated at estimated fair value. Unrealized gains and losses, net of the
income tax effect, are included in shareholders' equity.
F-8
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 1. Summary of Significant Accounting Policies (continued)
Servicing assets:
Servicing assets arise from the sale of fractional interests of loans. Servicing
assets represent the estimated present value of the differential between the
interest paid by the borrower and the sum of the contractual servicing fee and
the Company's normal servicing cost. These capitalized amounts are amortized
over the estimated average life of the loans in each pool sold. The Company
reviews the carrying amount of each pool for possible impairment. If the
estimated present value of the future servicing income is less than the carrying
amount, the Company recognizes an impairment loss and reduces future
amortization accordingly. Each pool consists of SBA loans which, in management
opinion, have similar risk characteristics.
Furniture and equipment:
Furniture and equipment are recorded at cost. Depreciation is computed using the
straight-line method over five to seven years, which approximates the estimated
useful lives of the assets.
Per share information:
Earnings per common share are calculated by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding during
the year. Fully diluted earnings are not presented as the effect would be
immaterial or antidilutive.
Income taxes:
The Company and its corporate subsidiaries file consolidated Federal income tax
returns. Deferred income taxes relate to temporary differences and the net
operating loss carryforwards.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Stock-based compensation:
Statement of Financial Accounting Services No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123") allows companies to either expense the estimated
fair value of stock options or to continue to follow the intrinsic value method
set forth in APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB
25") but disclose the pro forma effects on net income had the fair value of the
options been expensed. The Company has elected to continue to apply APB 25 in
accounting for its stock option incentive plans.
Recently issued accounting standards:
In February 1997, the Financial Standards Accounting Board issued Statement of
Financial Accounting Standards No, 128, "Earnings per Share" ("FAS 128") which
is effective for periods ending after December 15, 1997. Management believes
that "basic earnings per share" as defined, for each of the periods included in
these financial statements would be substantially the same as the earnings per
share amounts included on the statements of income.
F-9
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 2. Loans Receivable and Allowance for Credit Losses
The loans receivable are principally long-term business loans, with initial
terms ranging from 7 to 25 years, made to qualifying small businesses. The loans
have variable interest rates which adjust based upon the prime rate.
As of June 30, 1997 and 1996, loans receivable - net consisted of:
1997 1996
===========================================================================
Loans receivable $11,560,000 $ 7,462,000
Less:
Deferred income (820,000) (371,000)
Allowance for credit losses (901,000) (1,230,000)
- - ---------------------------------------------------------------------------
Net loans receivable $ 9,839,000 $5,861,000
===========================================================================
As of June 30, 1997, contractual maturities of loans receivable for each of the
next five years were as follows:
Year Ending
June 30,
===========================================================================
1998 $237,000
1999 265,000
2000 296,000
2001 331,000
2002 370,000
===========================================================================
As of June 30, 1997 and 1996, the impaired loan portfolio totaled $1,368,000 and
$1,481,000, respectively, for which specific allocations to the allowance for
credit losses aggregated $509,000 and $653,000 respectively. The average balance
of the impaired loan portfolio for the year ended June 30, 1997 and 1996
approximated $1,425,000 and $1,280,000, respectively. The Company did not
recognize any interest income on its impaired loan portfolio during the years
ended June 30, 1997 and 1996.
Changes in the allowance for credit losses for the three years ended June 30,
1997 were as follows:
===========================================================================
Balance as of June 30, 1994 $ 567,000
Provision for credit losses 139,000
Transfer of deferred income on loans in liquidation 36,000
Loans charged off (39,000)
Recoveries 7,000
- - ---------------------------------------------------------------------------
Balance as of June 30, 1995 710,000
Provision for credit losses 809,000
Loans charged off (289,000)
- - ---------------------------------------------------------------------------
Balance as of June 30, 1996 1,230,000
Provision for credit losses 83,000
Loans charged off (412,000)
- - ---------------------------------------------------------------------------
Balance as of June 30, 1997 $ 901,000
===========================================================================
F-10
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 3. Servicing Assets and Residual Interests
Changes in servicing assets and residual interests for the two years ended June
30, 1997 are as follows::
Servicing Residual
Assets Interests
================================================================================
Balance, July 1, 1995
Assets originating from loan sales $1,479,000
- - -------------------------------------------------------------------------------
Balance, June 30, 1996 1,479,000
Assets originating from loan sales 684,000 $867,000
- - -------------------------------------------------------------------------------
Amortization (191,000)
Principal payments (15,000)
Change in market value 100,000
- - -------------------------------------------------------------------------------
Balance, June 30, 1997 $1,972,000 $952,000
================================================================================
As of June 30, 1997, the gross unrealized gains were $100,000.
Note 4. Financing
Notes payable as of June 30, 1997 and 1996 consist of the following:
1997 1996
================================================================================
Advances collateralized by loans receivable $4,513,000 $2,999,000
Subordinated advances collateralized by
loans receivable 4,257,000 705,000
- - --------------------------------------------------------------------------------
$8,770,000 $3,704,000
================================================================================
In August 1997, the Company refinanced its $10,500,000 revolving credit facility
with two revolving credit facilities, a $25,000,000 facility and an $8,000,000
facility. The $25,000,000 facility is collateralized by SBA loans and bears
interest at the index rate plus 2%. The $8,000,000 faciity is collateralized by
the guaranteed portion of SBA loans and bears interest at the prime rate plus
1-1/4%. Both facilities expire in August 1999 and include covenants requiring
the Company to, among other matters, maintain minimum tangible net worth.
Amounts due to affiliates are collateralized by the unguaranteed loans and are
subordinated to the revolving credit facilities. In connection with the
refinancing, all amounts due to affiliates were repaid.
Debt as of June 30, 1997 and 1996 consists of the following:
1997 1996
================================================================================
Noninterest bearing note with interest imputed at 8% $590,000
Note payable in monthly payments of $9,000 including
interest at 7% per annum, due January 1999 $156,000
- - --------------------------------------------------------------------------------
$156,000 $590,000
================================================================================
F-11
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 4. Financing (continued)
As of June 30, 1997, principal payments of $103,000 and $53,000 are due during
the year ended June 30, 1998 and 1999, respectively.
During the year ended June 30, 1996, debenture holders agreed to forgive accrued
interest aggregating $105,000 in exchange for the Company to prepay its
obligation. Accordingly, the Company recognized an extraordinary gain.
During the year ended June 30, 1997, the Company settled the noninterest bearing
note for $50,000 in cash and a $205,000 note. Additionally, the Company incurred
$73,000 in legal fees. Accordingly, the Company recognized an extraordinary gain
of $272,000.
Note 5. Income Taxes
The significant components of the Company's deferred income tax assets and
liabilities as of June 30, 1997 and 1996 are as follows:
1997 1996
================================================================================
Net operating losses $ 3,859,000 $ 4,233,000
Allowance for credit losses 440,000 409,000
Deferred income 230,000 152,000
Alternative minimum tax credit carryforward 33,000 17,000
Other 4,000
- - --------------------------------------------------------------------------------
4,566,000 4,811,000
Valuation allowance (3,529,000) (4,471,000)
- - --------------------------------------------------------------------------------
Net deferred tax asset $ 1,037,000 $ 340,000
================================================================================
The valuation allowance as of June 30, 1997 relates primarily to pre
confirmation net operating loss carryforwards. Upon realization of such
carryforwards, the valuation allowance will be credited to additional paid-in
capital.
In 1986, the Company was reorganized under Chapter 11 of the Bankruptcy Code.
The prior years' financial statements have been restated to reflect the
Company's utilization of pre-confirmation net operating loss carryforwards as an
increase to additional paid-in capital instead of as an income tax benefit as
originally reported. The effect of this was to decrease income before
extraordinary items and net income as originally reported by $349,000 ($0.02 per
share) in 1996 and $102,000 ($0.01 per share) in 1995. The impact on additional
paid-in capital and accumulated deficit as of July 1, 1994 is not material.
F-12
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 5. Income Taxes (continued)
The significant components of the provision (benefit) for income taxes for the
years ended June 30, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
===========================================================================================
<S> <C> <C> <C>
Current:
Federal $ 20,000 $ 10,000 $ 5,000
State 286,000 48,000 49,000
- - -------------------------------------------------------------------------------------------
Total current taxes 306,000 58,000 54,000
- - -------------------------------------------------------------------------------------------
Deferred:
Pre-confirmation net operating loss carryforward 374,000 349,000 102,000
Other net operating loss carryforwards 94,000
Allowance for credit losses (31,000) (148,000) (59,000)
Deferred income (78,000) 101,000 (40,000)
Partnership income (109,000) 23,000
Alternative minimum tax carryforward (16,000) (17,000)
Other (14,000)
Change in valuation allowance (568,000) (167,000) (18,000)
- - -------------------------------------------------------------------------------------------
Total deferred taxes (333,000) 9,000 102,000
- - -------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $ (27,000) $ 67,000 $156,000
===========================================================================================
</TABLE>
The difference between the statutory federal income tax rate on the Company's
income before extraordinary items and the Company's effective income tax rate
for the years ended June 1997, 1996 and 1995 is summarized as follows:
1997 1996 1995
================================================================================
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income tax, net of federal benefit 5.2 5.1 10.8
Reduction in valuation allowance (33.9) (26.9) (6.0)
Utilization of net operating loss carryforwards (24.5)
Miscellaneous (6.9) (1.4) 3.8
- - --------------------------------------------------------------------------------
Effective income tax rate (1.6)% (10.8)% 18.1%
================================================================================
As of June 30, 1997, the Company has net operating loss carryforwards for income
tax purposes expiring as follows:
Year Ending
June 30,
================================================================================
1998 $ 5,208,000
1999 3,819,000
2000 225,000
2001 1,127,000
2002 124,000
2003 124,000
2004 546,000
2005 125,000
2007 52,000
- - --------------------------------------------------------------------------------
$11,350,000
================================================================================
F-13
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 6. Stock Options and Warrants
The Company has stock option plans (the "Plans") for directors, officers and
employees which provide for the grant of nonqualified and incentive stock
options. The Board of Directors determines the option price (not to be less than
fair market value for incentive options) at the date of grant. The options have
a maximum term of 10 years and outstanding options expire from August 1997
through June 2005. Options on 1,547,475 shares are exercisable from the dates of
grant until expiration dates. Options on 350,000 shares vest 25% per year and
25,000 shares vest in one year from the grant date.
The Company applies APB 25 in accounting for its stock option incentive plan
and, accordingly, recognizes compensation expense for the difference between the
fair value of the underlying common stock and the grant price of the option at
the date of grant. Had compensation cost for the Company's stock option plans
been determined based upon the fair value at the grant date for awards under the
plans consistent with the methodology prescribed under FAS No. 123, the effect
on net income in 1997 and 1996 would not have been material.
The following table summarizes stock option transactions under the Plans:
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996 1995
---------------------- ------------------------ -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at the
beginning of year 1,947,475 $0.56 1,785,000 $0.55 1,500,000 $0.56
Options granted 150,000 0.62 874,432 0.56 285,000 0.50
Options exercised (140,000) 0.50
Options expired or
canceled (35,000) 0.50 (711,957) 0.55
- - -----------------------------------------------------------------------------------------------------------
Outstanding options at the
end of year 1,922,475 $0.57 1,947,475 0.56 1,785,000 $0.55
</TABLE>
The following table summarizes information about the Plans' outstanding options
as of June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life (in Years) Price Exercisable Price
===============================================================================================
<S> <C> <C> <C> <C> <C>
$0.50-$0.75 1,922,475 2.8 $0.57 1,659,975 $0.57
</TABLE>
As of June 30, 1997, the Company had outstanding warrants to purchase 2,313,320
shares of common stock at prices ranging from $.40 to $.65. These warrants
expire between December 1997 and March 1999.
During the year ended June 30, 1995, the Company registered 2,950,000 shares of
common stock representing 1,600,000 shares to be distributed upon conversion of
$800,000 of convertible debentures, (the debentures were repaid in 1996 and none
were converted into common stock) 800,000 shares to be distributed upon the
exercising of warrants and 550,000 shares to be distributed upon exercise of
stock options. Costs of $51,000 have been charged to additional paid-in capital.
F-14
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 6. Stock Options and Warrants (continued)
As of June 30, 1997 4,860,795 shares have been reserved for the exercise of
warrants and stock options, including 625,000 shares available for future grant.
Note 7. Gain on Sale of Loans
During 1997, the Company sold, without recourse, fractional interests in the
unguaranteed portion of certain loans receivable with a par value of
approximately $5,900,000. During 1996, the Company sold, with recourse,
fractional interests in the unguaranteed portion of certain loans receivable
with a par value of approximately $6,400,000.
Since the Company did not retain the future economic benefits embodied in the
loans and can reasonably estimate its obligation under the recourse provision,
the transactions have been accounted for as sales. Accordingly, the Company
recognized gains of approximately $1,500,000 and $1,800,000 for the years ended
June 30, 1997 and 1996, respectively.
Note 8. Commitments and Contingencies
Lease commitments:
The Company has entered into operating leases for office space expiring through
May 2008. Minimum future rental payments under these leases are as follows:
Year Ending
June 30,
=======================================================
1998 $ 275,000
1999 266,000
2000 224,000
2001 213,000
2002 213,000
Thereafter 1,325,000
- - -------------------------------------------------------
$2,516,000
=======================================================
Rent expense for the years ended June 30, 1997, 1996 and 1995 aggregated
$109,000, $104,000 and $89,000, respectively.
Litigation:
During 1997, the litigation by a former minority partner of the Partnership was
settled.
F-15
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 9. Financial Instruments, Credit Risk Concentration and Other Matters:
Fair value of financial instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Values of Financial Instruments" ("FAS 107") requires disclosure of fair value
information about financial instruments, whether or not recognized on the
balance sheet, for which it is practicable to estimate that value. Because no
market exists for certain of the Company's assets and liabilities, fair value
estimates are based upon judgments regarding credit risk, investor expectation
of economic conditions, normal cost of administration and other risk
characteristics, including interest rate and prepayment risk. These estimates
are subjective in nature and involve uncertainties and matters of judgment which
significantly affect the estimates.
Fair value estimates are based on existing on balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabiities that are not considered
financial instruments. The tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on the fair value
estimates and have not been considered in the estimates.
The following summarizes the information about the fair value of the financial
instruments recorded on the Company's financial statements in accordance with
FAS 107:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
==================================================================================================
Carrying Value Fair Value Carrying Value Fair Value
==================================================================================================
<S> <C> <C> <C> <C>
Cash $ 803,000 $ 803,000 $ 493,000 $ 493,000
Loans held for sale 1,109,000 1,220,000 2,324,000 2,556,000
Servicing assets and residual 2,924,000 3,364,000 1,479,000 1,693,000
Loans receivable 9,724,000 10,544,000 5,861,000 6,232,000
Accounts receivable 3,247,000 3,247,000 259,000 259,000
Debt, notes payable or due to
affiliates 11,520,000 11,520,000 590,000 328,000
==================================================================================================
</TABLE>
The methodology and assumptions utilized to estimate the fair value of the
Company's financial instruments, are as follows:
Cash:
The carrying amount of cash approximates fair value.
Loans held for sale:
The Company has estimated the fair values reported based on recent sales.
Loans receivable, servicing assets and residual interests:
The Company has estimated the fair value reported based on the present value of
expected future cash flows.
Accounts receivable:
The carrying amount of accounts receivable approximates fair value.
F-16
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 9. Financial Instruments, Credit Risk Concentration and Other Matters
(continued)
Debt, notes payable and due to affiliates:
Since these are primarily variable rate and short-term, the carrying amounts
approximate fair value except, as of June 30, 1996, debt has been valued at its
settlement amount.
Financial instruments with off-balance sheet or concentrations of credit risk:
In the normal course of business, there are various financial instruments which
are properly not recorded in the financial statements. The Company's risk of
accounting loss due to the credit risks and market risks associated with these
off-balance sheet instruments varies with the type of financial instrument and
principal amounts and are not necessarily indicative of the degree of exposure
involved. Credit risk represents the possibility of a loss occurring from the
failure of another party to perform in accordance with the terms of a contract.
Market risk represents the possibility that future changes in market prices may
make a financial instrument less valuable or more onerous.
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash and loans receivable. The Company maintains its
cash in highly rated financial institutions. As of June 30, 1997, the Company
had bank deposits exceeding Federally insured limits by approximately $921,000.
The Company originates loans to a large number of customers in diverse
commercial entities and states.
In the normal course of business, the Company enters into commitments to extend
credit. The Company uses the same credit policies in making commitments as it
does for loans receivable reflected on the balance sheet. As of June 30, 1997,
the Company's commitments to extend credit aggregated $71,823,000. However,
$52,519,000 of the commitments are SBA guaranteed loans which the Company
intends to sell in the secondary market.
As of June 30, 1997, loans sold with recourse aggregated $5,376,000.
Additionally, during the year ended June 30, 1997, the Company repurchased,
under the recourse provision, nonperforming loans aggregating $87,000.
The Company lends to diverse industries primarily in the eastern United States.
As of June 30, 1997, the lodging and restaurant industries represented
approximately 28% and 17% of the Company's loan portfolio, respectively.
Note 10. Related Parties Transactions
In 1995, the Company wrote off an estimated obligation of $28,000 payable to two
of its officers and directors, pursuant to an oil field equipment leasing
agreement.
Certain officers and directors were members of law firms which provided
professional services to the Company. During 1996, the Company wrote off
approximately $48,000 of legal fees which were incurred in prior years from such
firms.
During the year ended June 30, 1996, Network paid an affiliated company
management fees aggregating $285,000.
During the years ended June 30, 1997, 1996 and 1995, the maximum amount of
short-term loans outstanding from family members of an officer aggregated
$2,594,000, $2,108,000 and $1,800,000, respectively. Interest expense
aggregating $157,000, $130,000 and $24,000 on such loans was paid in 1997, 1996
and 1995, respectively.
F-17
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1997 and 1996
Note 11. Employee Benefit Plan
The Company maintains a contributory employee savings plan, in accordance with
the provisions of Section 401(k) of the Internal Revenue Code. Pursuant to the
terms of the plan, participants can defer a portion of their income through
contributions to the plan.
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 9, 1997 BLC FINANCIAL SERVICES, INC.
(Registrant)
By: /s/ Robert F. Tannenhauser
Robert F. Tannenhauser,
President (principal
accounting and
financial officer)
By: /s/ Jennifer M. Napier
Jennifer M. Napier
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
- - ---------- ----- ----
/s/ Robert F. Tannenhauser Director October 9, 1997
Robert F. Tannenhauser
/s/ Peter D. Blanck Director October 9, 1997
Peter D. Blanck
/s/ Robert W. D'Loren Director October 9, 1997
Robert W. D'Loren
/s/ Robert C. McGee Director October 9, 1997
Robert C. McGee
/s/ Irwin E. Redlener Director October 9, 1997
Irwin E. Redlener
/s/ Kenneth S. Schwartz Director October 9, 1997
Kenneth S. Schwartz
/s/ Robert W. Wien Director October 9, 1997
Robert W. Wien
36
<PAGE>
EXHIBIT INDEX
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
Exhibit 1.1[6] 1.1 Articles of Incorporation of Registrant
Exhibit 1.2[6] 1.2 By-Laws of Registrant
* 1.3 Amended and Restated Certificate of
Incorporation of Registrant
* 1.4 Amended and Restated By-Laws of Registrant
Exhibit 2.1[6] 2.1 Form of Common Stock Certificate of Registrant
Exhibit 2.2[1] 2.2 Form of 13% One-Year Convertible Debenture
issued by Registrant
Exhibit 2.3[1] 2.3 Form of Warrant Agreement issued by Registrant
Exhibit 2.4[6] 2.4 Form of Letter to Unit Holders regarding
Conversion of Debentures
Exhibit 2.5[6] 2.5 Form of Stock Option Agreement issued to
certain directors in August 1992
Exhibit 2.6[8] 2.6 Form of 7% Three-Year Unsecured Convertible
Debenture issued by Registrant in connection
with its 1994 Debenture-Unit Private Placement
Exhibit 2.7[8] 2.7 Form of Class A Warrant issued by Registrant
in connection with its 1994 Debenture-Unit
Private Placement
Exhibit 2.8[8] 2.8 Form of Class B Warrant issue by Registrant in
connection with its 1994 Debenture-Unit
Private Placement
Exhibit 2.9[8] 2.9 Form of Warrant issued by Registrant to
Financial Advisor
Exhibit 2.10[8] 2.10 Form of Warrant issued by Registrant in
connection with its 1994 Common Stock-Unit
Private Placement
37
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
* 2.11 Form of Stock Option Agreement issued to
certain directors in June 1997
Exhibit 3.1[4] 3.1 Investment Agreement dated February 9, 1990
among Business Loan Center, Inc., a New York
corporation ("BLC-New York"), Business Loan
Center, a New York general partnership
("Business Loan Center"), Mark Scharfman and
Registrant
Exhibit 3.2[4] 3.2 Modification Agreement dated May 4, 1990
among BLC-New York, Business Loan Center, Mark
Scharfman, Business Loan Center, Inc., a
Delaware corporation and wholly-owned
subsidiary of Registrant ("BLC-Delaware"), and
Registrant
Exhibit 3.3[3] 3.3 Assignment and Assumption Agreement dated May
4, 1990 between BLC-New York and Business Loan
Center
Exhibit 3.4[3] 3.4 Note and Security Agreement between
BLC-Delaware, as Maker, and BLC-New York, as
Payee
Exhibit 3.5[3] 3.5 Note and Security Agreement between
BLC-Delaware, as Maker, and Business Loan
Center, as Payee
Exhibit 3.6[4] 3.6 Partnership Agreement of Business Loan Center
dated May 4, 1990 between BLC-New York and
BLC-Delaware
Exhibit 3.8[3] 3.8 Agreement dated June 18, 1990 between BLC-New
York and BLC-Delaware
Exhibit 3.9[3] 3.9 Employment Agreement dated May 4, 1990 between
Business Loan Center and Mark Scharfman
Exhibit 3.10[6] 3.10 Agreement dated December 19, 1991 among
BLC-Delaware, BLC-New York, Business Loan
Center and Mark Scharfman
38
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
* 4.1 Small Business Administration Loan Guaranty
Agreement (Deferred Participation) dated March
27, 1997 between BLC-New York and the United
States Small Business Administration (SBA Form
750)
Exhibit 5.1[3] 5.1 Lease Agreement dated July 28, 1983 between
Costal Realty Associates, Ltd. and Tidewater
Dominion Small Business Lending Company
Exhibit 5.2[3] 5.2 Equipment Lease dated May 8, 1985 between Oil
Field Services Leasing Company and
Hardeman-Williston Basin Drilling Fund, and
Assignment from Hardeman-Williston Basin
Drilling Fund to Registrant
Exhibit 6.1[3] 6.1 Agreement dated May 4, 1990 between Lewis Alan
Management Corp. and Business Loan Center
Exhibit 6.2[3] 6.2 Agreement dated May 4, 1990 between Chardan
Advertising Agencies, Inc. and Business Loan
Center
Exhibit 7.1[3] 7.1 Modification and Consent Agreement dated May,
1990 among BLC-New York, Mark Scharfman,
Business Loan Center, BLC-Delaware and Apple
Bank for Savings
Exhibit 7.2[1] 7.2 Investment Agreement dated as of December 9,
1991 by and among BLC-Delaware, EBLC, Inc., a
New York corporation ("EBLC") and Business
Loan Center
Exhibit 7.3[1] 7.3 Restated and Amended Partnership Agreement
dated as of December 20, 1991 by and between
BLC-Delaware and EBLC
Exhibit 8.1[6] 8.1 Lease Agreement dated November 30, 1992 by and
between Wm. A. White/Grubb & Ellis Inc., as
landlord, and BLC-Delaware, as tenant.
39
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
* 8.1.b Lease Agreement dated July 31, 1997 by and
between The Equitable-Nissei Madison Co., as
landlord, and Business Loan Center, Inc., as
tenant.
Exhibit 8.2[6] 8.2 Sublease Agreement dated December 1, 1992 by
and between BLC-Delaware, as overtenant, and
Business Loan Center, a New York general
partnership, as undertenant.
Exhibit 9.1[7] 9.1 Financing Agreement dated as of December 15,
1993 by and between Business Loan Center and
New York Federal Savings Bank
Exhibit 9.2[8] 9.2 Amended and Restated Financing Agreement dated
as of April 12, 1994 by and between Business
Loan Center and New York Federal Savings Bank
Exhibit 9.3[7] 9.3 Pledge and Security Agreement dated as of
December 15, 1993 by and between Business Loan
Center and New York Federal Savings Bank
Exhibit 9.4[8] 9.4 Amended and Restated Pledge Agreement dated as
of April 12, 1994 by and between Business
Loan Center and New York Federal Savings Bank
Exhibit 9.5[7] 9.5 Tri-Party Agreement dated as of December 15,
1993 by and among Business Loan Center, New
York Federal Savings Bank and the United
States Small Business Administration
Exhibit 9.6[8] 9.6 Amended and Restated Tri-Party Agreement dated
as of April 12, 1994 by and among Business
Loan Center, New York Federal Savings Bank,
Herrick, Feinstein and the United States Small
Business Administration
Exhibit 9.7[8] 9.7 Guaranty dated May 1994 to New York Federal
Savings Bank by Registrant
Exhibit 10.1[9] 10.1 Revolving Credit Agreement dated as of 1994
between BLC-Delaware, Registrant, Business
Loan Center and Sterling National Bank & Trust
Company of New York
40
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
Exhibit 10.2[9] 10.2 Revolving Credit Note dated May 22, 1995
Between BLC-Delaware, BLC Financial Services,
Inc., Business Loan Center and Sterling
National Bank & Trust Company of New York
* 10.3 Amended and Restated Revolving Credit
Agreement dated August 27, 1997 between BLC
Financial Services, Inc., Business Loan
Center, Inc. and Sterling National Bank
(f/k/a/ Sterling National Bank & Trust Company
of New York)
* 10.4 Revolving Credit Agreement dated August 27,
1997 between BLC Financial Services, Inc. and
Sterling National Bank (f/k/a/ Sterling
National Bank & Trust Company of New York)
* 10.5 Confirmation Agreement by and among Robert F.
Tannenhauser in favor of Sterling National
Bank dated August 27, 1997
* 10.6 Partial Assignment Agreement between Sterling
National Bank and Transamerica Business Credit
Corporation dated August 27, 1997
Exhibit 11.1[9] 11.1 Security Agreement dated as of December 1994
between BLC-Delaware, Registrant, Business
Loan Center and Sterling National Bank & Trust
Company of New York
* 11.2 Amendment No.1 to Security Agreement between
BLC-Delaware, Registrant, Business Loan Center
and Sterling National Bank (f/k/a Sterling
National Bank & Trust Company of New York)
dated August 27, 1997.
* 11.3 Release among Sydney Yoskowitz and Sterling
National Bank dated August 27, 1997
Exhibit 12.1[9] 12.1 Multi-Party Agreement dated as of December
1994 (relating to SBA Loan Documentation and
Administration)
41
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
Exhibit 13.1[10] 13.1 Exchange Agreement between BLC Financial
Network, Inc., BLC Financial Services, Inc.,
and Southeastern 1st Financial Network, Inc.
Exhibit 14.1[10] 14.1 Employment Agreement between BLC Financial
Network, Inc., BLC Financial Services, Inc.,
and Robert C. McGee
Exhibit 14.2[10] 14.2 Employment Agreement between BLC Financial
Network, Inc., BLC Financial Services, Inc.,
and R. Matthew McGee
* 14.3 Employment Agreement between BLC Financial
Network, Inc., BLC Financial Services, Inc.,
and R. Matthew McGee dated April 1, 1997
Exhibit 14.4[10] 14.4 Employment Agreement between BLC Financial
Network, Inc., BLC Financial Services, Inc.,
and Mary D. McGee
Exhibit 14.5[10] 14.5 Employment Agreement between BLC Financial
Services, Inc., Business Loan Center, and
Robert F. Tannenhauser
Exhibit 14.6[10] 14.6 Employment Agreement between BLC Financial
Network, Inc., Business Loan Center, and Eric
D. Rosenfeld
Exhibit 15.1[10] 15.1 Warrant Certificate for Purchase of Common
Stock
Exhibit 15.2[10] 15.2 Class A Warrant to Purchase Shares of Common
Stock
Exhibit 15.3[10] 15.3 Class B Warrant to Purchase Shares of Common
Stock
Exhibit 16.1[10] 16.1 Stock Purchase Agreement between BLC Financial
Services, Inc. and Robert C. McGee
Exhibit 16.2[10] 16.2 Stock Purchase Agreement between R. Matthew
McGee for 306,818 shares of Common Stock
Exhibit 16.3[10] 16.3 Stock Purchase Agreement between R. Matthew
McGee for 380,139 shares of Common Stock
42
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
Exhibit 17.1[10] 17.1 Participation Agreement between Business Loan
Center and GE Capital Small Business Finance
Corporation
* 17.2 Participation Agreement between Business Loan
Center and GE Capital Small Business Finance
Corporation - March 20, 1997
* 18.1 Agreement between BLC Management Consulting
Services, Inc., Business Loan Center, Inc.,
and Business Loan Center dated February 3,
1997 (relating to the cessation of Business
Loan Center, a New York general partnership as
a small business lending company)
* 18.2 Assignment and Assumption Agreement between
Business Loan Center, Inc. and Business Loan
Center, a New York general partnership.
* 18.3 Schedule of Assets and Liabilities (relating
to Assignment and Assumption Agreement between
Business Loan Center, Inc. and Business Loan
Center, a New York general partnership.
* 18.4 Agreement between BLC Management Consulting
Services, Inc., Eastland National Corp., EBLC,
Inc. and Salim El Hage (relating to
acquisition of EBLC, Inc.'s interest in
Business Loan Center, a New York general
partnership)
Exhibit 19.1[14] 19.1 Notice of Special Meeting (In Lieu of Annual
Meeting) of Stockholders - to be held on June
30, 1997
Exhibit 20.1[13] 20.1 Participation Agreement between Business Loan
Center, Inc., BLC Financial Services, Inc. and
Transamerica Business Credit Corporation dated
May 1, 1997.
* 20.2 Security Agreement between Business Loan
Center, Inc. and Transamerica Business Credit
Corporation dated August 27, 1997
43
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- - ------------ ------ ----------------------------
* 20.3 Guaranty Agreement between Business Loan
Center, Inc. and Transamerica Business Credit
Corporation dated August 27, 1997
* 20.4 Restated and Amended Loan Agreement between
Business Loan Center, Inc., BLC Financial
Services, Inc. andTransamerica Business Credit
Corporation dated August 27, 1997
* 20.5 Trademark Security Agreement between between
Business Loan Center, Inc. and Transamerica
Business Credit Corporation dated August 27,
1997
* 20.6 Revolving Credit Note between between
Business Loan Center, Inc. and Transamerica
Business Credit Corporation dated August 27,
1997
* 20.7 Intercreditor Agreement between Transamerica
Business Credit Corporation and Sterling
National Bank dated August 27, 1997
* 21 Amended List of Subsidiaries
* 27 EDGAR filing: Article 5 Financial Data Schedule
Exhibit 23.1[6] 23.1 Service Mark Registration for "BUSINESS LOAN
CENTER"
- - ----------------------------------
* Filed Herewith
Previous SEC Filings:
[1] Registrant's Annual Report on Form 10-K for the year ended June 30,
1993.
[2] Registrant's Annual Report on Form 8-K dated August 8, 1986.
[3] Registrant's Annual Report on Form 10-K for the year ended June 30,
1990.
[4] Registrant's Annual Report on Form 8-K dated May 4, 1990.
[5] Registrant's Annual Report on Form 10-K for the year ended June 30,
1991.
[6] Registrant's Registration Statement on Form S-1 filed with the
Securities & Exchange Commission on September 27, 1993.
[7] Pre-effective Amendment No. 2 to Registrant's Registration
Statement on Form S-1
44
<PAGE>
filed with the Securities and Exchange Commission on December 30, 1993.
[8] Pre-effective Amendment No. 5 to Registrant's Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission on August 4, 1994.
[9] Registrant's Annual Report on Form 10-K for the year ended June 30,
1996.
[10] Registrant's Current Report on Form 8-K dated February 5, 1996
[11] Registrant's Current Report on Form 8-K dated June 4, 1996.
[12] Registrant's Current Report on Form 8-K dated September 17, 1996
[13] Registrant's Current Report on Form 8-K dated May 12, 1997
[14] Registrant's Notice of Special Meeting (in Lieu of Annual Meeting) of
Stockholders dated June 6, 1997
45
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLC FINANCIAL SERVICES, INC.
The Undersigned, being the President and Chief Executive Officer
certifies as follows:
FIRST: The name of the corporation is BLC Financial Services, Inc.
(hereinafter called the "Corporation")
SECOND: The date it filed its Certificate of Incorporation with the
Secretary of State is August 10, 1990.
The name under which BLC Financial Services, Inc. was originally
incorporated is Crawford Energy, Inc.
THIRD: The text of the Certificate of Incorporation, as amended
heretofore, is hereby restated as further amended to read herein set forth in
full:
ARTICLE I
The name of the corporation is BLC Financial Services, Inc.
(hereinafter called the "Corporation").
ARTICLE II
The registered office of the Corporation is to be located in the
County of Kent at 15 East North Street, Dover, Delaware 19901. The name of its
registered agent at that address isUnited Corporate Services, Inc.
<PAGE>
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
(a) The total number of shares of stock which the Corporation shall
have authority to issue is 37,000,000 shares consisting of one class of
35,000,000 shares of Common Stock having a par value of $.01 per share (the
"Common Stock") and one class of 2,000,000 shares of Preferred Stock having a
par value of $.01 per share (the "Preferred Stock").
(b) The Preferred Stock is to be issued in one or more series, with
each series to have such designations, preferences, and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of each series adopted by the Board of
Directors of the Corporation, subject to the limitations prescribed by law and
in accordance with the provisions hereof, the Board of Directors being hereby
expressly vested with authority to adopt any such resolution or resolutions.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, the determination or fixing of the
following:
(i) The number of shares to constitute the series and the
distinctive designation thereof;
(ii) The amount or rate of dividend on the shares of the
series, whether dividends shall be cumulative, the times at and the terms
and conditions upon which dividends shall be paid and any relative rights
of priority of payment of dividends to the shares of the series in
relation to dividends payable to any other class or series of stock of the
Corporation;
(iii) Whether the shares of the series shall be redeemable
and, if redeemable, the terms and conditions upon which the shares of the
series may be
2
<PAGE>
redeemed, including the price at and the date or dates after which the
shares may be redeemed and the relative rights of priority of redemption
of the shares of the series in relation to the redemption of any other
class or series of stock of the Corporation;
(iv) Whether the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase or
redemption of the shares for retirement and, if such retirement or sinking
fund is established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(v) Whether the share of the series shall be convertible into
shares of any class or classes or of any other series of the same class
and, if convertible, the terms and conditions upon which the shares may be
converted, including the conversion price or prices or the rate at which
the conversion may be made and the method, if any, of adjusting the same;
(vi) The rights of the shares of the series in the event of
the voluntary or involuntary liquidation, dissolution, or winding up of
the Corporation, including the amount payable upon the shares in such
event, the terms and conditions of such payment and the relative rights of
priority of payment of such shares in relation to the payment of any other
class or series of stock of the Corporation;
(vii) The restrictions, if any, on the payment of dividends
upon, and the making of distributions to, any class of stock ranking
junior to the shares of the series, and the restrictions, if any, on the
purchase or redemption of the shares of any such junior class;
(viii) Whether the shares of the series shall have voting
rights in addition to the voting rights provided by law, and, if so, the
terms of such voting rights, including the number of votes per share, the
matters on which the shares can vote and the contingency, if any, which
makes the voting rights effective; and
(ix) Any other relative rights, preferences, and limitations
of that series.
(c) All shares of Common Stock shall have identical rights and
privileges in every respect. Except as shall be stated and expressed in the
resolution or resolutions providing for the issue of each series of Preferred
Stock adopted by the Board of Directors of the Corporation or by law, all shares
of Preferred Stock shall have identical relative rights, preferences and
limitations.
3
<PAGE>
(d) Except as otherwise required by law and except to the extent the
holders of shares of a series of Preferred Stock may be granted voting rights by
the Board of Directors of the Corporation in the resolution or resolutions
providing for the issue of such series, all voting rights of shareholders in the
Corporation shall be vested exclusively in the holders of the Common Stock, who
shall be entitled to one vote for each share of Common Stock.
(e) The amount of the authorized stock of any class may be increased
or decreased by the affirmative vote of the holders of a majority of the total
number of outstanding shares of any series of Preferred Stock entitled to vote,
and of Common Stock, voting as a single class.
ARTICLE V
The name and address of the sole incorporator are as follows:
Name Address
---- -------
Peter M. Ziemba c/o Graubard Mollen Horowitz
Pomeranz & Shapiro
600 Third Avenue
New York, New York 10016
ARTICLE VI
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) Election of directors need not be by ballot unless the by-laws
of the Corporation so provide.
(b) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation; subject, nevertheless, to the provision of the statutes
of the State of Delaware, of this Certificate of Incorporation, and to any
by-laws from time to time made by the stockholders; provided, however, that no
by-law so made shall invalidate any prior act of the directors which would have
been valid if such by-law had not been made.
4
<PAGE>
ARTICLE VII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omission not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. Neither the amendment nor repeal of this Article
7, nor the adoption of any provision of this Certificate of Incorporation
inconsistent with this Article 7, shall eliminate or reduce the effect this
Article 7 in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Article 7, would accrue or arise prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
The Corporation, to the full extent permitted by Section 145 of the
Delaware General Corporation Law, as amended from time to time, shall indemnify
all persons who it may indemnify pursuant thereto.
ARTICLE IX
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
5
<PAGE>
the stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
ARTICLE X
For the management of the business and for the conduct of the
affairs of the Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and its directors and stockholders:
(a) Except as otherwise fixed by or pursuant to provisions hereof
relating to the rights of the holders of any class or series of stock having a
preference over common stock as to dividends or upon liquidation to elect
additional Directors under specified circumstances, the number of Directors of
the Corporation shall be between six (6) and twelve (12) directors, the exact
number fixed from time to time by affirmative vote of a majority of the
Directors then in office. The Directors, other than those who may be elected by
the holders of any classes or series of stock having a preference over the
common stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, as shall be provided in the manner specified
in the By-Laws of the Corporation, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1998, another class
to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1999, and another class to be originally elected for
a term expiring at the annual meeting of stockholders to be held in 2000, with
each class to hold office until its successor is elected and qualified. At each
annual meeting of the stockholders of the Corporation after fiscal year 1997,
the successors of the class of Directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
(b) Except as otherwise fixed by or pursuant to provisions hereof
relating to the rights of the holders of any class or series of stock having a
preference over common stock as to dividends or upon liquidation to elect
additional Directors under specified circumstances, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of the Board
of Directors. Any Director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of Directors
in which the new directorship was created or the vacancy occurred and until such
Director's successor shall have been elected
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and qualified. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent director.
ARTICLE XI
(a) (i) In addition to any affirmative vote required by law, by this
Certificate of Incorporation or by any Preferred Stock Designation (as
hereinafter defined), and except as otherwise expressly provided in Section (b)
of this Article 11:
(A) any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with or into (x) any Interested Stockholder (as
hereinafter defined) or (y) any other corporation (whether or not
itself an Interested Stockholder), which is, or after such merger or
consolidation would be, an Affiliate or Associate (as such terms are
hereinafter defined) of as Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value (as hereinafter
defined) of $1 million or more; or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder in exchange
for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $1 million or more; or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise
involving any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
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shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is "beneficially owned" (as
hereinafter defined) by any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder;
shall require the affirmative vote of not less than seventy-five
percent (75%) of the voting power of all outstanding Voting Shares
that are not beneficially owned by the Interested Stockholder
referred to in clauses (A) through (E) above or the Affiliates or
Associates of such Interested Stockholder voting together as a
single class. Such affirmative vote shall be required
notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law or of any agreement with any
national securities exchange or otherwise which might otherwise
permit a lesser vote or no vote.
(ii) The term "Business Combination" as used in this Article
11 shall mean any transaction which is referred to in any one or more of
clauses (A) through (E) of paragraph (i) of this Section 11(a).
Notwithstanding any of the foregoing, the term Business Combination shall
not include any transaction between the Corporation or any Subsidiary and
another corporation fifty percent (50%) or more of the voting stock of
which is owned by the Corporation or any Subsidiary and none of which is
owned by an Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder if each holder of common stock of the Corporation
or any Subsidiary receives the same type of consideration in proportion to
his holdings.
(b) The provisions of Section (a) of this Article 11 shall not be
applicable to any particular Business Combination in which a particular
Interested Stockholder or any Affiliate or Associate of such Interested
Stockholder has an interest of the type contemplated by Section (a)(i) of this
Article 11, and such Business Combination shall require only such affirmative
vote as is required by law, any other provision of this Certificate of
Incorporation and any Preferred Stock Designation, if, in the case of a Business
Combination that does not involve any cash or other consideration being received
by the stockholders of the Corporation, solely in their respective capacities as
stockholders of the Corporation, the condition specified in the following
paragraph (i) is met, or, in the case of any other Business Combination, the
conditions specified in either of the following paragraph (i) or paragraph (ii)
are met:
(i) The Business Combination shall have been approved by a
majority of the Continuing Directors (as hereinafter defined); provided
however, that
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this condition shall not be capable of satisfaction unless there are at
least three Continuing Directors.
(ii) All of the following conditions shall have been met:
(A) The aggregate amount of (x) cash and (y) Fair Market Value as of the
date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least equal to
the highest amount determined under subparagraphs i), ii), iii) and
iv) below:
i) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder or any of its
Affiliates or Associates for any share of Common Stock
acquired by it or them;
ii) the higher of: (x) the highest Fair Market Value per
share of Common Stock during the three-month period
ending on the day after the date of the first public
announcement of the proposal of the Business Combination
(the "Announcement Date") or (y) (if applicable) the
Fair Market Value per share of Common Stock on the date
on which the Interested Stockholder became an Interested
Stockholder (such latter date is referred to in this
Article 11 as the "Determination Date"), provided that
the Determination Date is not more than two years prior
to the Announcement Date;
iii) (if applicable) the price per share equal to the Fair
Market Value per share of Common Stock determined
pursuant to subparagraph (b)(ii)(A)(ii)(x) above,
multiplied by the ratio of (x) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the
Interested Stockholder or any of its Affiliates or
Associates for any shares of Common Stock acquired by it
or them within the two-year period immediately prior to
the Announcement Date to (y) the Fair Market Value per
share of Common Stock on the first day in such two-year
period on which the Interested Stockholder or any of its
Affiliates or Associates acquired any shares of Common
Stock; and
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iv) the earnings per share of Common Stock for the four full
consecutive fiscal quarters immediately preceding the
record date for determining the holders of record of
Common Stock entitled to vote on the Business
Combination (or if no such record date is set, then the
Announcement Date), multiplied by the then
price/earnings multiple (if any) of such Interested
Stockholder as customarily computed and reported in the
financial community; provided, however that if the
common stock of the Interested Person is not at such
time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of
the Securities Exchange Act of 1934, as amended (or any
comparable provision of any superseding statute), and
such Interested Stockholder is a direct or indirect
subsidiary of another person the common stock of which
is and has been so registered, the price/earnings
multiple shall be that of such other person.
(B) The aggregate amount of (x) cash and (y) Fair Market Value as of the
date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any class of outstanding Preferred Stock shall be at least
equal to the highest amount determined under subparagraphs i), ii),
iii) and iv) below.
i) the highest per share price (including any brokerage
commission, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder or any of its
Affiliates or Associates for any shares of such class of
Preferred Stock acquired by it or them;
ii) the highest preferential amount per share to which the
holders of shares of such class of Preferred Stock would
be entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of
the Corporation, regardless of whether the Business
Combination to be consummated constitutes such an event;
iii) the higher of: (x) the highest Fair Market Value per
share of Preferred Stock during the three-month period
ending on the day after the Announcement Date, or (y)
(if applicable) the Fair Market Value per share of such
class of Preferred Stock on the Determination Date,
provided the Determination Date is not more than two
years prior to the Announcement Date; and
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iv) (if applicable) the price per share equal to the Fair
Market Value per share of such Class of Preferred Stock
determined pursuant to subparagraph (b)(ii)(B)iii)(x)
above, multiplied by the ratio of (x) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder or any of its Affiliates or
Associates for any shares of such class of Preferred
Stock acquired by it or them within the two-year period
immediately prior to the Announcement Date to (y) the
Fair Market Value per share of such class of Preferred
Stock on the first day in such two-year period upon
which the Interested Stockholder or any of its
Affiliates or Associates acquired any shares of such
class of Preferred Stock.
The provisions of this subparagraph (b)(ii)(B) shall be required to
be met with respect to every class of outstanding Preferred Stock,
whether or not the Interested Stockholder has previously acquired
any shares of a particular class of Preferred Stock.
(C) If the Interested Stockholder or any of its Affiliates or Associates
have paid for shares of any class or series of Capital Stock with
varying forms of consideration, the form of consideration to be
received per share by holders of shares of that class or series of
Capital Stock shall be either cash or the form used to acquire the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder or any of its
Affiliates or Associates. The price determined in accordance with
subparagraphs (b)(ii)(A) and (B) of this Article 11 shall be subject
to appropriate adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
(D) After becoming an Interested Stockholder and prior to the
consummation of such Business Combination (a) such Interested
Stockholder or any of its Affiliates or Associates shall not have
acquired any newly issued shares of Capital Stock, directly or
indirectly, from the Corporation or any Subsidiary (except upon
conversion of convertible securities acquired by it prior to
becoming an Interested Stockholder or upon compliance with the
provisions of this Article 11 or as a result of a pro rata stock
dividend or stock split); (b) except as approved by a majority of
the Continuing Directors, there shall have been (x) no failure to
declare and pay at the regular date thereof any full quarterly or
semi-annual dividends (whether or not cumulative) on the
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outstanding Preferred Stock, (y) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), and (z) an increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
Common Stock; and (c) such Interested Stockholder or any of its
Affiliates or Associates shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of
any loans, advances, guarantees, pledges or other financial
assistance or tax credits or other tax advantages provided by the
Corporation or any Subsidiary, or made any major changes in the
Corporation's or any Subsidiary's business or equity capital
structure; and
(E) A proxy statement describing the proposed Business Combination and
complying with the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations),
whether or not the Corporation is then subject to such requirements,
shall be mailed to the stockholders of the Corporation at least
thirty (30) days prior to the consummation of such Business
Combination for the purpose of soliciting stockholder approval of
such Business Combination. The proxy statement shall contain on the
first page there, in a prominent place, any recommendation as to the
advisability (or inadvisability) of the Business Combination that
the Continuing Directors, or any of them, may choose to state and,
if deemed advisable by a majority of the Continuing Directors, the
opinion of an investment banking firm selected by a majority of the
Continuing Directors, as to the fairness (or not) of the terms of
the Business Combination, from a financial point of view to the
holders of the outstanding shares of capital stock of the
Corporation other than the Interested Stockholder and its Affiliates
or Associates (such investment banking firm to be paid a reasonable
fee for its services by the Corporation).
(c) For the purposes of this Article 11:
(i) A "person" means any individual, limited partnership,
limited liability partnership, general partnership, corporation, limited
liability company, business trust or other firm or entity.
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(ii) "Interested Stockholder" means any person (other than the
Corporation or any Subsidiary), who or which together with their
Affiliates or Associates:
(A) is the beneficial owner, directly or indirectly, of fifteen percent
(15%) or more of the voting power of the outstanding Capital Stock
with respect to the election of directors of the Corporation; or
(B) is an Affiliate or an Associate of the Corporation or any Subsidiary
and at any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or indirectly,
of fifteen percent (15%) or more of the voting power of the then
outstanding Capital Stock with respect to the election of directors
of the Corporation; or
(C) is an assignee of or has otherwise succeeded to any shares of
Capital Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933, as amended.
(iii) A person shall be a "beneficial owner" of, or shall
"beneficially own", any Capital Stock:
(A) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as in effect on
June 30, 1997; or
(B) which such person or any of its Affiliates or Associates has (a) the
right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding (but neither such person nor any such Affiliate or
Associate shall be deemed to be the beneficial owner of any shares
of Capital Stock solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to which
shares neither such person nor any such Affiliate or Associate is
otherwise deemed to beneficially own); or
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(C) which are beneficially owned, directly or indirectly, within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
in effect on June 30, 1997 by any other person with which such
person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting (other than solely by reason of a revocable proxy as
described in subparagraph (iii)(B) or disposing of any shares of
Capital Stock;
provided, however, that in the case of any employee stock ownership
or similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of
Capital Stock held by such plan, no such plan nor any trustee with
respect thereto (nor any Affiliate or Associate of such trustee),
solely by reason of such capacity of such trustee, shall be deemed
for any purposes hereof, to beneficially own any shares of Capital
Stock held under any such plan.
(iv) For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph (ii) of this Section (c), the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed owned through application of paragraph (iii) of this Section
(c) but shall not include any other unissued shares of Capital Stock which
may be issuable pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or options, or otherwise.
(v) "Affiliate" or "Associate" shall have the respective
meaning ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
June 30, 1997.
(vi) "Subsidiary" means a corporation of which a majority of
any class of equity securities is owned directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (ii) of this Section (c),
the term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned directly or indirectly by the
Corporation.
(vii) "Continuing Director" means (x) any member of the Board
of Directors of the Corporation who is unaffiliated with the Interested
Stockholder and was either a member of the Board of Directors on the
effective date of this Article 11 or a member of the Board of Directors
prior to the time that the Interested
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Stockholder in question became an Interested Stockholder and (y) any
director who is thereafter chosen to fill any vacancy on the Board of
Directors or who is elected and who, in either event, is unaffiliated with
the Interested Stockholder and in connection with his or her initial
assumption of office is recommended for appointment or election by a
majority of Continuing Directors.
(viii) "Fair Market Value" means (x) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for
New York Stock Exchange-Listed Stock, or if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended,
on which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation during the 30-day period
immediately preceding the date in question in the over-the-counter market,
as reported by the NASDAQ National Market or such other system then in
use, or, if no such quotations are available, the fair market value on the
date in question as determined in good faith by a majority of the
Continuing Directors and (y) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
(ix) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in subparagraphs (b)(ii)(A) and (b)(ii)(B) of this
Article 11 shall include the shares of Common Stock and/or the shares of
any other class (or series) of outstanding capital stock retained by the
holders of such shares.
(x) "Whole Board" means the total number of directors which
this Corporation would have if there were no vacancies.
(xi) "Voting Shares" shall mean (x) the Common Stock of the
Corporation and (y) any shares of Preferred Stock of the Corporation that
(a) by the terms of this Certificate of Incorporation or any Preferred
Stock Designation are entitled to vote on matters presented to a vote of
stockholders under this Article 11 (or, if applicable, Article 13), and
(b) were issued by the Corporation prior to the date any Person who is at
the time of the vote an Interested Stockholder became an Interested
Stockholder or, if issued thereafter, the issuance thereof was approved by
a majority of the Continuing Directors; provided, however, that this
condition shall not be capable of satisfaction unless there are at least
three Continuing Directors.
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(xii) "Preferred Stock Designation" shall mean a certificate
filed with the Secretary of State of the State of Delaware to evidence the
designation of any series of the Preferred Stock of the Corporation
established by resolution of the Board of Directors pursuant to authority
granted in this Certificate of Incorporation.
(d) A majority of the Whole Board, but only if a majority of the
Whole Board shall then consist of Continuing Directors or, if a majority of the
Whole Board shall not then consist of Continuing Directors, a majority of the
then Continuing Directors, shall have the power and duty to determine, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Article 11, including, without limitation, (1)
whether a person is an Interested Stockholder, (2) the number of shares of
Capital Stock beneficially owned by any person, and whether any shares are
"Voting Shares" under paragraph (11) of Section C of this Article 11, (3)
whether a person is an Affiliate or Associate of another, (4) whether the
applicable conditions set forth in paragraph (2) of Section B have been met with
respect to any Business Combination, (5) the Fair Market Value of stock or other
property in accordance with paragraph (viii) of Section (c) of this Article 11
and (6) whether the assets which are the subject of any Business Combination
referred to in paragraph (i)(B) of Section (a) have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination referred to in paragraph (i)(c) or
Section (a) has, an aggregate Fair Market Value of $1 million or more. A
majority of the Whole Board, but only if a majority of the Whole Board shall
then consist of Continuing Directors, or, if a majority of the Whole Board shall
not then consist of Continuing Directors, a majority of the then Continuing
Directors shall have the further power to interpret all of the terms and
provisions of this Article 11.
(e) A majority of the Whole Board shall have the right to demand,
but only if a majority of the Whole Board shall then consist of Continuing
Directors, or, if a majority of the Whole Board shall not then consist of
Continuing Directors, a majority of the then Continuing Directors shall have the
right to demand that any person who it is reasonably believed is an Interested
Stockholder or Affiliate or Associate thereof (or holds of record shares of
Capital Stock Beneficially Owned by any Interested Stockholder or Affiliate or
Associate thereof) supply the Corporation with complete information as to (1)
the record owner(s) of all shares Beneficially Owned by such person who it is
reasonably believed is an Interested Stockholder or Affiliate or Associate
thereof, (2) the number of, the class or series of, shares Beneficially Owned by
such person who it is reasonably believed is an Interested Stockholder or
Affiliate or Associate thereof and held of record by each such record owner and
the number(s) of the stock certificate(s) evidencing such shares and (3) any
other factual matter relating to the applicability or effect of this Article 11,
as may be reasonably
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requested of such person, and such person shall furnish such information within
10 days after receipt of such demand.
(f) Nothing contained in this Article 11 shall be construed to
relieve any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder from any fiduciary obligation imposed by law.
ARTICLE XII
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected (i) at a duly called annual or special meeting
of such holders or (ii) by a consent in writing only by the consent of the
holders of seventy-five percent (75%) of the outstanding shares of voting stock
of the Corporation. At any annual meeting or special meeting of stockholders of
the Corporation, only such business shall be conducted as shall have been
brought before such meeting in the manner provided by the By-laws of the
Corporation.
ARTICLE XIII
The Board of Directors may adopt, repeal, alter or amend the By-laws
of the Corporation by the vote of a majority of the Whole Board (as defined in
subparagraph (c)(x) of Article 11). Notwithstanding any other provisions of this
Certificate of Incorporation or any Preferred Stock Designation or any provision
of law, which might otherwise permit a lesser vote or no vote, but in addition
to any requirements of law and any other provisions of this Certificate of
Incorporation or any Preferred Stock Designation (as defined in subparagraph
(c)(xii) of Article 11, the stockholders may not adopt, amend, alter or repeal
any provision of the By-laws of the Corporation, except by the affirmative vote
of (i) the holders of at least seventy-five percent (75%) of the then
outstanding Voting Shares (as defined in subparagraph (c)(xi) of Article 11)
voting together as a single class, and (ii) if such amendment has been proposed,
directly or indirectly, by or on behalf of any Interested Stockholder (as
defined in subparagraph (c)(ii) of Article 11), it must also be approved by the
affirmative vote of not less than seventy-five percent (75%) of all outstanding
Voting Shares that are not beneficially owned by such Interested Stockholder or
the Affiliates or Associates (as defined in subparagraph (c)(v) of Article 11)
of such Interested Stockholder, voting together as a single class.
ARTICLE XIV
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Notwithstanding any other provisions of this Certificate of
Incorporation, any Preferred Stock Designation (as defined in subparagraph
(c)(xii) of Article 11), or any provision of law, which might otherwise permit a
lesser vote or no vote, but in addition to any requirements of law, any other
provisions of this Certificate of Incorporation or any Preferred Stock
Designation, the affirmative vote of not less than seventy-five percent (75%) of
all outstanding Voting Shares (as defined in subparagraph (c)(xi) of Article 11)
voting together as a single class, shall be required to alter, amend or repeal
Article 10, Article 11, Article 12, Article 13 or this Article 14; provided,
however, that if such action has been proposed, directly or indirectly, by or on
behalf of any Interested Stockholder (as defined in subparagraph (c)(ii) of
Article 11), it must also be approved by the affirmative vote of not less than
seventy-five percent (75%) of all outstanding Voting Shares (as defined in
subparagraph (c)(xi) of Article 11) that are not beneficially owned by such
Interested Stockholder or the Affiliates or Associates (as defined in
subparagraph (c)(v) of Article 11) of such Interested Stockholder, voting
together as a single class.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation which restates, integrates and amends the provisions of the
certificate of incorporation of the Corporation, and which has been duly adopted
by the stockholders of the Corporation in accordance with the provisions of
Sections 242 and 245 of the Delaware General Corporation Law has been executed
by Robert F. Tannenhauser, its President and Chief Executive Officer on
September 18, 1997.
BLC FINANCIAL SERVICES, INC.
/s/ Robert F. Tannenhauser
-----------------------------
Robert F. Tannenhauser
President and Chief Executive
Officer
18
AMENDED AND RESTATED
BY LAWS
OF
BLC FINANCIAL SERVICES, INC.
(Dated June 30, 1997)
ARTICLE I - OFFICES
The principal office of the corporation shall be located in the
City, County and State so provided in the Certificate of Incorporation. The
Corporation may also maintain offices at such other places within or without the
State of Delaware as the board of Directors may, from time to time, determine
and the business may require.
ARTICLE II - STOCKHOLDER
1. Place of Meetings.
Meeting of stockholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of Delaware as
the Board shall authorize.
2. Annual Meetings.
The annual meeting of the stockholders of the Corporation shall be
held at 2:00PM on the last Tuesday of the third month in each year after the
close of the fiscal year of the Corporation, if such date is not a legal holiday
and if a legal holiday, then on the next business day following at the same
hour, at which time the stockholders shall elect a Board of Directors, and
transact such other business as may properly come before the meeting.
3. Special Meetings.
Special meetings of the stockholders may be called at any time by
the Board or by the President or by the Chairman of the Board or as otherwise
required by law.
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4. Notice of Meetings.
Written notice of each meeting of stockholders, whether annual or
special, stating the time when and place where it is to be held, shall be served
wither personally or by mail. Such notice shall be served not less than ten (10)
nor more than sixty (60) days before the meeting, upon each stockholder of
record entitled to vote at such meeting, and to any other stockholder to whom
the giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by the person calling the meeting. If at any
meeting, action is proposed to be taken that would, if taken, entitle
stockholders to receive payment for their shares, the notice of such meeting
shall include a statement of that purpose and to that effect. If mailed, such
notice shall be directed to each such stockholder at his address, as it appears
on the records of the stockholders of the Corporation, unless he shall have
previously filed with the Secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in which event, it
shall be mailed to the address designated in such request.
5. Waiver.
Notice of any meeting need not be given to any stockholder who
submits a signed waiver of a notice either before or after a meeting. The
attendance of any stockholder at a meeting, in person or by proxy, shall
constitute a waiver of notice by such stockholder.
6. Fixing Record Date.
For the purpose of determining the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining stockholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other action, the
Board shall fix, in advance, a date as the record date for any such
determination of stockholders. Such date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. If no record date is fixed, it shall be
determined in accordance with the provisions of law.
7. Quorum.
(a) Except as otherwise provided by the Certificate of
Incorporation, at all meetings of stockholders of the Corporation, the presence
at the commencement of such
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meeting, in person or by proxy, of stockholders holding a majority of the total
number of shares of the Corporation then issued and outstanding on the records
of the Corporation and entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. If a specified item of
business is required to be voted on by a class or classes, the holder of a
majority of the shares of such class or classes shall constitute a quorum for
the transaction of such specified item of business. The withdrawal of any
stockholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or
special meeting of stockholders, the stockholders, by a majority of the votes
cast by the holders of shares entitled to vote thereon, may adjourn the meeting.
8. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board and
the proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders (A) pursuant to the Corporation's
notice of meeting, (B) by or at the direction of the Board or (C) by any
stockholder of the Corporation who was a stockholder of record at the time
of giving of notice provided for in this By-law, who is entitled to vote
at the meeting and who complies with the notice procedures set forth in
this By-law.
(ii) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (C)
of paragraph (a)(i) of this By-law, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for stockholder action.
To be timely, a stockholder's notice shall be delivered to the Secretary
at the principal executive offices of the Corporation not later than the
close of business on the 60th day nor earlier than the close of business
on the 90th day prior to the first anniversary of the preceding year's
annual meeting, provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to
such annual meeting and not later than the close of business on the later
of (a) the 60th day prior to such annual meeting, or (b) the 10th day
following the day on which public announcement of the date of such meeting
is first made by the
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Corporation. In no event shall the public announcement of an adjournment
of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall
set forth (A) as to each person whom the stockholder proposes to nominate
for election or re-election as a director all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (B) as to
any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as
to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (1) the name and address
of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (2) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
paragraph (a)(ii) of the By-law to the contrary, in the event that the
number of directors to be elected to the Board of the Corporation is
increased and there is no public announcement by the Corporation naming
all of the nominees for director or specifying the size of the increased
Board at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-law
shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (i) by or at the direction of the Board or (ii) provided that
the Board has determined that directors shall be elected at such meeting, by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of
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notice provided for in this By-law, who shall be entitled to vote at the meeting
and who complies with the notice procedures set forth in this By-law. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board, any such stockholder may nominate a
person or persons (as the case may be), for election to such position(s) as
specified in the Corporation's notice of meeting, if the stockholder's notice
required by paragraph (a)(ii) of the By-law shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the close
of business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(c) General.
(i) Only such persons who are nominated in accordance with
the procedures set forth in this By-law shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this By-law. Except as otherwise provided
by law, the Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be, in accordance
with the procedures set forth in this By-law and, if any proposed
nomination or business is not in compliance with this By-law, to declare
that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this By-law, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news-service or in a
document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(iii) Notwithstanding the foregoing provisions of this
By-law, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this By-law. Nothing in this By-law shall be
deemed to affect any rights (A) of stockholders to request inclusion of
proposals in the Corporation's proxy statement
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pursuant to Rule 14a-8 under the Exchange Act or (B) of the holders of any
series of Preferred Stock to elect directors under specified
circumstances.
ARTICLE III - BOARD OF DIRECTORS
1. Duties and Powers.
The Board shall be responsible for the control and management of the
affairs, property and interests of the Corporation, and may exercise all powers
of the Corporation, except those powers expressly conferred upon or reserved to
the stockholders.
2. Annual Meetings.
Regular annual meetings of the Board shall be held immediately
following the annual meeting of stockholders.
3. Regular Meetings and Notice.
The Board may provide by resolution for the holding of regular
meetings of the Board of Directors, and may fix the time and place thereof.
Notice of regular meetings shall not be required to be given and, if
given, need not specify the purpose of the meeting; provided, however, that in
case the Board shall fix or change the time or place of any regular meeting,
notice of such action be given to each director who shall not have been present
at the meeting at which such action was taken within the time limited, and in
the manner set forth at Section 7 of this Article III, unless such notice shall
be waived.
4. Special Meetings and Notice.
(a) Special meetings of the Board shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each
director, addressed to him at the address designated by him for such purpose at
his usual place of business, at least two (2) business days before the day on
which the meeting is to be held, or
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delivered to him personally or given to him orally, not later than the business
day before the day on which the meeting is to be held.
(c) Notice of a special meeting shall not be required to be given to
any director who shall attend such meeting, or who submits a signed waiver of
notice.
5. Chairman.
At all meetings of the Board, the Chairman, if present, shall
preside. If there shall be no Chairman, or he shall be absent, then the
President shall preside. In his absence, the Chairman shall be chosen by the
Directors present.
6. Quorum and Adjournments.
(a) At all meetings of the Board, the presence of a majority of the
entire board shall be necessary to constitute a quorum for the transaction of
business, except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-laws. Participation of any one or more members of
the board by means of a conference telephone or similar communications
equipment, allowing all persons participating in the meeting to hear each other
at the same time, shall constitute presence in person at any such meeting.
(b) A majority of the directors present at any regular or special
meeting, although less than a quorum, may adjourn the same from time to time
without notice, until a quorum shall be present.
7. Manner of Acting.
(a) At all meeting of the Board, each director present shall have
one vote.
(b) Except as otherwise provided by law, by the Certificate of
Incorporation, or these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board. Any action authorized, in writing, by all of the directors entitled to
vote thereon and filed with the minutes of the Corporation shall be the act of
the Board with the same force and effect as if the same had been passed by
unanimous vote at a duly called meeting of the board.
8. Vacancies.
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Any vacancies in the Board of Directors resulting from an increase
in the number of directors, or the death, resignation, disqualification, removal
or inability to act of any director, shall be filled for the unexpired portion
of the term by a majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the Board called for that
purpose.
9. Resignation.
Any director may resign at any time by giving written notice to the
board, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board or such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
10. Removal.
Any director may be removed, with or without cause, at any time by
the holders of a majority of the shares then entitled to vote at an election of
directors, at a special meeting of the stockholders called for that purpose, and
may be removed for cause by action of the Board.
11. Compensation.
No compensation shall be paid to directors as such, for their
services, but by resolution of the BOARD, a fixed sum and expenses for actual
attendance may be authorized for attendance at each regular or special meeting
of the Board. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
12. Contracts.
(a) No contract or other transaction between this Corporation and
any other business shall be affected or invalidated, nor shall any director be
liable in any way by reason of the fact that a director of this Corporation is
interested in, or is financially interested in such other business, provided
such fact is disclosed to the Board.
(b) Any director may be a party to or may be interested in any
contract or transaction of this Corporation individually, and no director shall
be liable in any way by reason of such interest, provided that the fact of such
participation or interest be disclosed to the Board and provided that the Board
shall authorize or ratify such contract or transaction
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by the vote (not counting the vote of any such director) of a majority of a
quorum, notwithstanding the presence of any such director at the meeting at
which such action is taken. Such director may be counted in determining the
presence of a quorum at such meeting. This Section shall not be construed to
invalidate or in any way affect any contract or other transaction which would
otherwise be valid under the law applicable thereto.
13. Committees.
The Board, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, which such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall remain in existence at the pleasure of the
Board. Participation of any one or more members of a committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time, shall
constitute a director's presence in person at any such meeting. Any action
authorized in writing by all of the members of a committee and filed with the
minutes of the committee shall be the act of the committee with the same force
and effect as if the same had been passed by unanimous vote at a duly called
meeting of the committee.
ARTICLE IV - OFFICERS
1. Number and Qualifications.
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, a Treasurer, and such other officers,
including a Chairman of the Board, as the Board of Directors may from time to
time deem advisable. Any officer other than the Chairman of the Board may be,
but is not required to be, a director of the Corporation. Any two or more
offices may be held by a director of the Corporation. Any two or more offices
may be held by the same person, except the offices of President and Secretary.
2. Election.
The officers of the Corporation shall be elected by the Board of the
regular annual meeting of the Board following the annual meeting of
stockholders.
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3. Term of Office.
Each Officer shall hold office until the annual meeting of the Board
next succeeding his election, and until his successor shall have been elected
and qualified, or until his death, resignation or removal.
4. Resignation.
Any officer may resign at any time by giving written notice thereof
to the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect upon receipt thereof by the Board or by such
officer, unless otherwise specified in such written notice. The acceptance of
such resignation shall not be necessary to make it effective.
5. Removal.
Any officer, whether elected or appointed by the Board, may be
removed by the Board, with or without cause, and a successor elected by the
Board at any time.
6. Vacancies.
A vacancy in any office by reason of death, resignation, inability
to act, disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board.
7. Duties.
Unless otherwise provided by the Board, officers of the Corporation
each shall have powers and duties as generally pertain to their respective
offices, such powers and duties as may be set forth in these by-laws, and such
powers and duties as may be specifically provided for by the Board. The
president shall be the chief executive officer of the Corporation.
8. Sureties and Bonds.
At the request of the Board, any officer, employee or agent of the
Corporation shall execute for the Corporation a bond in such sum, and with such
surety as the board may direct, conditioned upon the faithful performance of his
duties to the Corporation, including
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responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
9. Shares of Other Corporations.
Whenever the Corporation is the holder of shares of any other
corporation, any right or power of the Corporation as such stockholder shall be
exercised on behalf of the Corporation in such manner as the Board may
authorize.
ARTICLE V - SHARES OF STOCK
1. Certificate.
(a) The certificates representing shares in the Corporation shall be
in such form as shall be approved by the Board and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares and shall be signed by (i) the Chairman of the Board or the Vice
Chairman of the Board or the President or a Vice President, and (ii) the
Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and
shall bear the corporate seal.
(b) Certificate representing shares shall not be issued until they
are fully paid for.
(c) The Board may authorize the issuance of certificates for
fractions of a share which shall entitle the holder to exercise voting rights,
receive dividends and participate in liquidating distributions, in proportion to
the fractional holdings.
2. Lost or Destroyed Certificates.
Upon notification by the holder of any certificate representing
shares of the Corporation or the loss of destruction of one or more certificates
representing the same, the Corporation may issue new certificates in place of
any certificates previously issued by it, and alleged to have been lost or
destroyed. Upon production of evidence of loss or destruction, in such form as
the Board in its sole discretion may require, the Board may require the owner of
the lost or destroyed certificates to provide the Corporation with a bond in
such sum as the board may direct, and with such surety as may be satisfactory to
the Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificates. A new
certificate may be issued
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without requiring any such evidence or bond when, in the judgment of the Board,
it is proper to do so.
3. Transfers of Shares.
(a) Transfers of shares of the Corporation may be made on the share
records of the Corporation solely by the holder of such records, in person or by
a duly authorized attorney, upon surrender for cancellation of the certificates
representing such shares, with an assignment or power of transfer endorsed
thereon or delivered therewith, duly executed and with such proof of the
authenticity of the signature, and the authority to transfer and the payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record
of any shares as the absolute owner thereof for all purposes and shall not be
bound to recognize any legal, equitable or other claim to, or interest in, such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by law.
(c) The Corporation shall be entitled to impose such restrictions on
the transfer of shares as may be necessary for the purpose of electing or
maintaining Subchapter S status under the Internal Revenue Code or for the
purpose of securing or maintaining any other tax advantage to the Corporation.
4. Record Date.
In lieu of closing the share records of the Corporation, the Board
may fix, in advance, a date not less than ten (10) days nor more than sixty (60)
days, as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, any meeting of stockholders, or to consent to
any proposal without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividends, or allotment of any rights, or for
the purpose of determining stockholders entitled to receive payment of any
dividends, or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day immediately preceding the day on which
notice is given, or, if the notice is waived, at the close of business on the
day immediately preceding the day on which the meeting is held; the record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the resolution of the directors relating thereto is
adopted. The record date for determining stockholders entitled to express
consent to corporate action in writing without
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a meeting, when no prior action by the Board is necessary, shall be the day on
which the first written consent is expressed. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided for herein, such determination shall
apply to any adjournment thereof, unless the directors fix a new record date for
the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to this Certificate of Incorporation and to applicable law,
dividends may be declared and paid out of any funds available therefor, as
often, in such amount, and at such time or times as the Board may determine.
Before payment of any dividends, there may be set aside out of the net proceeds
of the Corporation available for dividends, such sum or sums as the Board, form
time to time, in its sole discretion, deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board shall think
conductive to the interests of the Corporation, and the Board may modify or
abolish any such reserve.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be
approved from time to time by the Board.
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INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 30th day of June
1997 by and between BLC FINANCIAL SERVICES, INC., a Delaware corporation with
offices at 919 Third Avenue, New York, New York 10022 (hereinafter called the
"Company") and FIELD(1) with offices at FIELD(2) (hereinafter called the
"Director").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has determined that
the interests of the Company will be advanced by encouraging and enabling
certain independent directors of the Company to acquire proprietary shares in
the Company, thus providing them with a more direct concern for the Company's
welfare and assuring a closer identification of their interests with those of
the Company; and
WHEREAS, the Board of Directors of the Company has resolved to
facilitate the acquisition by such directors of such proprietary shares in the
Company through the medium of the Company's Stock Option Plan (the "Plan"), the
provisions of which are incorporated in this Agreement as if fully set forth
herein; and
WHEREAS, the Board of Directors of the Company has determined that
the director is one of those individuals, referred to above, to whom an option
should be granted under the Plan; and
WHEREAS, the Plan and the grant of these options will be presented
to stockholders for approval, and is subject to such approval.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable considerations, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Subject to shareholder approval, the Company hereby grants to
the Director, as a matter of separate inducement and agreement in connection
with his position as an independent director of the Company, and not in lieu of
any salary or other compensation for his services, the right and option (the
"Option") to purchase, on the terms and conditions hereinafter set forth, all or
any part of an aggregate of 20,000 shares of the presently-authorized Common
Stock of the Company of the par value of one cent ($.01) per share (the
"Shares") , at the purchase price of $.90 per share.
2. The term of the Option shall commence on the date of its grant
(which is the date of this Agreement) and shall terminate 5 years from such
date, unless it is sooner terminated as provided in this Agreement.
3. The Director may exercise the Option, from time to time in his
discretion, to purchase all or any part of the maximum number of Shares which
may then be purchased by him in accordance with the provisions of this
Agreement. In no case may the Director exercise the Option to purchase a
fraction of a Share.
4. The Director shall exercise the Option by giving written notice
thereof to the Company. Such notice shall specify the number of Shares to be
purchased by such exercise, and shall be accompanied by the Director's payment
of the full purchase price for the Shares to be so purchased. The purchase price
shall be payable in cash; provided, however, that the purchase price may be paid
in whole or in part by the exchange of Common Stock of the Company.
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5. The Option may not be transferred, assigned, pledged,
hypothecated or otherwise disposed of (whether by operation of law or otherwise)
except pursuant to a Qualified Domestic Relations Order, as defined in Internal
Revenue Code Section 414(p) ("QDRO"), or by will or the laws of descent and
distribution. The Option shall be exercised during the lifetime of the Director
only by him.
6. The Option shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of the Option (except pursuant to a QDRO), or upon a levy or
any attachment or similar process with respect to the Option, the term of the
Option shall terminate and the Option shall immediately become null and void.
7. (a) The Option may be exercised within 12 months after the date
of the Director's termination of employment on account of his death or his
disability (within the meaning of Internal Revenue Code Section 22(e)(3)), but
only to the extent it was otherwise exercisable at the date of his termination
of employment.
(b) The Option may be exercised within three (3) months after
the date of the Director's termination of employment for any reason other than
on account of his death or disability, but only to the extent it was otherwise
exercisable at the date of his termination of employment.
(c) The provisions of this Section shall in no event operate
to extend the term of the Option beyond the time limit provided for in Section
2.
8. Notwithstanding any other provision of this Agreement, if
(a) the Director is convicted of a felony in a court of law,
or
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(b) the Director commits any act of dishonesty or moral
turpitude which adversely affects the business of the
Company, or
(c) the Director discloses to any person any confidential
information or trade secrets of the Company,
the Board of Directors of the Company or any Committee appointed by it to
administer the Plan (collectively, the "Committee") may, in its sole discretion,
terminate the term of the Option and the Option shall thereupon become null and
void.
(a) The Option shall be exercisable only if, at the date of
exercise, the Shares are included in a current registration statement effective
under the Securities Act of 1933 (the "Act") or, in the opinion of counsel to
the Company, its exercise would not violate, or cause the Company to be in
violation of, the Act.
(b) The Company will use its best efforts, throughout the term
of the Option, to maintain a current registration statement effective under the
Act covering the Shares if, in the opinion of counsel to the Company, such
registration statement is required. Notwithstanding the foregoing, it is
specifically understood and agreed that neither the Company nor any of its
officers, directors or Directors shall have any liability, hereunder or
otherwise, in the event the Option shall not be exercisable or its exercise is
delayed on account of the Company's failure to maintain such a registration
statement as aforesaid.
(c) The Director agrees for himself, his heirs and legal
representatives that no Shares shall be sold, transferred, pledged or otherwise
disposed of unless, in the opinion of counsel for the Company, such sale,
transfer, pledge or other disposition is made in compliance with the provisions
of the Act. The Committee may direct that certificates representing the Shares
be inscribed with a legend setting forth the terms of this paragraph.
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10. In the event that, prior to the delivery by the Company of all
the Shares, there shall be any change in the outstanding Common Stock of the
Company by reason of any share dividend, recapitalization, merger,
consolidation, split-up, combination or exchange of shares, or the like, without
the payment of any consideration for such change, either in money, services or
property, the number of Shares deliverable upon the exercise of the Option, and
the option price, shall be proportionately adjusted (but without regard for
fractional shares) by the Committee. The determination of the Committee in each
such case shall be conclusive and binding on the Company and the Director and
his legal representatives.
11. Neither the Director nor his legal representatives shall have
any of the rights or privileges of a stockholder of the Company with respect to
any of the Shares unless and until certificates representing such Shares shall
have been delivered pursuant to the terms of this Agreement.
12. The Committee shall have the authority to make reasonable
constructions of the Option, and to correct any defect or supply any omission or
reconcile any inconsistency in the Option, and to prescribe reasonable rules and
regulations relating to the administration of the Option and other options
granted under the Plan.
13. Any notice to be given under this Agreement shall be deemed to
have been given when received by the party for whom such notice is intended at
his or its address set forth above, or at such other address as such party shall
have specified by notice similarly given.
14. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
15. This Agreement shall be interpreted in accordance with the laws
of the State
5
<PAGE>
of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day, month and year first above written.
BLC FINANCIAL SERVICES, INC.
By: __________________________
Attest:
__________________________________
_______________________________
FIELD(1), Director
6
U.S. SMALL BUSINESS ADMINISTRATION
LOAN GUARANTY AGREEMENT (DEFERRED PARTICIPATION)
AGREEMENT, made the 27th day of March, 1997, by and between Business Loan
Center, Inc., 919 Third Avenue, New York, NY 10022 and Small Business
Administration (SBA), an agency of the United States Government.
WHEREAS, the parties intend for Lender to make and SBA to guarantee loans
to small business concerns pursuant to the Small Business Act, as amended, and
Title V of the Small Business Investment Act, as amended:
NOW, THEREFORE, the parties agree as follows:
1. Application for Guaranty. This agreement shall cover only loans duly
approved hereafter for guaranty by Lender and SBA subject to SBA's Rules and
Regulations as promulgated from time to time. Any loan approved by Lender
contingent upon SBA's guaranty under this agreement shall be referred to SBA for
authorization upon the separate application* of Lender and the loan applicant.
2. Approval of Guaranty. SBA shall either approve in a formal loan
authorization or decline the guaranty by written notice to the Lender. Prior to
full disbursement of the loan, any change the terms or conditions stated in the
loan authorization shall be subject to prior written agreement between SBA and
Lender.
3. Closing and Disbursement of Loans. Lender shall close and disburse each
loan in accordance with the terms and conditions of the approved loan
authorization. Lender shall cause to be executed a note* and all additional
instruments and take such other actions which shall, consistent with prudent
closing practices, be required to order fully to protect or preserve the
interests of Lender and SBA in the loan. Immediately after the first
disbursement of each loan, Lender shall furnish SBA with a copy of the executed
note, settlement sheet* and the compensation agreement* and guarantee fee
mentioned in paragraph 5 hereof. Immediately following any subsequent
disbursements, Lender shall furnish SBA with an executed settlement sheet*. SBA
shall be entitled at any time, after written notice to examine and obtain copies
of all notes, security agreements, instruments of hypothecation, all other
agreements and documents (herein collectively called "Loan Instruments"), and
the loan repayment records held by Lender which relate to loans made pursuant to
this agreement.
4. Report of Status. Lender shall complete and forward to SBA a written,
quarterly status report.* This report shall be due within 20 days after the end
of the reporting period specified in the report. SBA shall not be obligated to
purchase the guaranteed percentage of the outstanding balance of the loan if SBA
determines that Lender's failure to provide timely and accurate status
information caused any substantial harm to the Government. this information
collection requirement has been approved under OMB Number 3245-0095.
<PAGE>
5. Guaranty Fee. Lender shall pay SBA a one-time guaranty fee amounting to
one percent of the total amount guaranteed by SBA. The guaranty fee shall be
paid within 90 days of the date of the loan approval stated int eh loan
authorization. If this fee is not paid within this time period, SBA will send
the Lender a written notice which will state that the guaranty on this loan will
be terminated if SBA does not receive the fee within the time specified in the
written notice. The guaranty on this loan may be reinstated by SBA at its sole
discretion pursuant to notice published by SBA in the Federal Register. There
will be no rebate of the guaranty fee at any time unless the Lender has not made
any disbursement of the guaranteed loan and requests a return of the fee
together with cancellation of the loan authorization. Acceptance of the guaranty
fee by SBA shall not constitute any waiver by SBA of any negligence or other
misfeasance on the part of the Lender.
6. Administration of Loans. Lender shall hold the Loan Instruments and
shall receive all payments of principal and interest until transfer of the note
to SBA. Holder of the note (Lender or SBA) shall not, without prior written
consent of the other: (a) make or consent to any substantial alteration in the
terms of any Loan Instrument ("Substantial" includes but is not limited to,
increases in principal amount or interest rate or any action that benefits or
confers a preference on the holder); (b) make or consent to releases of
collateral having a cumulative value, as reasonably determined by the holder of
the note, which is more than 20 percent of the original loan amount; (c)
accelerate the maturity of any note; (d) sue upon any Loan Instrument; or (e)
waive any claim against any borrower, guarantor, obligor or standby creditor
arising out of any Loan Instrument. All servicing actions shall be the
responsibility of the holder who shall follow accepted standards of loan
servicing employed by prudent lenders generally, except that borrowers
compliance with SBA's non-discrimination regulations (13 C.F.R., Part 113) shall
be subject to action solely by SBA.
7. Purchase by SBA. Lender may demand in writing that SBA purchase the
guaranteed percentage of the outstanding balance of the loan if default by a
borrower continues uncured for more than 60 days (or less, if SBA agrees) in
making payment, when due, of any installment of principal or interest on any
note. By making written demand that SBA purchase the guaranteed portion of a
loan, Lender shall be deemed thereby to certify that the loan has been disbursed
and serviced in compliance with this agreement and that this agreement remains
in full force and effect with respect to the loan. Within 30 days after receipt
of Lender's demand, together with a certified transcript of the loan account,
and the assignment of the Loan Instruments, without recourse, SBA will pay to
Lender the guaranteed percentage of the balance of the loan plus accrued
interest. SBA will pay to Lender the guaranteed percentage of the balance of the
loan plus accrued interest at the note rate, after adjustment for other charges,
as appropriate: SBA will issue to Lender a certificate of interest* evidencing
the percentage of loan retained by the Lender. If SBA consents that Lender may
continue administration of the loan after SBA purchases the guaranteed
percentage, Lender shall deliver to SBA at the time of purchase conformed copies
of any of the Loan Instruments not previously furnished SBA and issue to SBA a
certificate of interest* evidencing SBA's percentage of the loan. Purchase by
SBA shall not waive any right of SBA arising from Lender's negligence,
misconduct, or violation of any provision of this agreement.
<PAGE>
8. Fees or Commissions. Lender shall not require certificates or deposit
or compensation balances and shall not directly or indirectly charge or receive
any bonus, fee, commission or other payment or benefit in connection with making
or servicing any loan, except reimbursement for charges or expenses incurred or
compensation for actual services rendered.
9. Sharing of Repayment Proceeds and Collateral. Lender shall not acquire
any preferential security, surety or insurance to protect its unguaranteed
interest in a loan. All repayments, security or guaranty of any nature,
including without limitation rights of set off and counterclaim, which Lender or
SBA jointly or severally may at any time recover from any source whatsoever or
have the right to recover on any guaranteed loan, shall repay and secure the
interest of Lender and SBA in the same proportion as such interest bears
respectively to the unpaid balance of the loan. Lender shall notify SBA of any
loan or advance by Lender to a borrower subsequent to a guaranteed loan, and if,
in SBA's option, circumstances require, and any borrower's consent required is
first obtained, enter into a written agreement with SBA providing for the
application of collateral for proceeds realized therefrom to the respective
loans in a manner satisfactory to the parties hereto.
10. Payment of Expenses. All ordinary expense of making, servicing, and
liquidating a guaranteed loan shall be paid by, or be recoverable from the
borrower. All reasonable expenses incurred by Lender or SBA which are not
recoverable from the borrower shall be shared ratably by Lender and SBA in
accordance with their respective interests in any such loan.
11. SBA Purchase Privilege. Notwithstanding any provision of any agreement
between SBA and Lender, SBA has the absolute right at any time to purchase its
guaranteed percentage of any loan in the interest of the Government or the
borrower. Within 15 days of the Lender's receipt of SBA's written demand to
purchase the guaranteed percentage, Lender shall deliver to SBA a certified
transcript of the loan account showing date and amount of each advance or
disbursement and repayment and shall assign and deliver to SBA the Loan
Instruments pursuant to paragraph 7 above. Upon receipt of these documents, SBA
shall pay Lender the guaranteed portion of the amount then owing on the loan
pursuant to paragraph 7 above.
12. Assignment of Interest in Loan. A. Either party may assign, in whole
or part, its rights or obligations under this agreement on any guaranteed loan
with the prior written consent of the other party including transfers pursuant
to Secondary Participation Agreements (13 C.F.R. Part 12 Section 120.5(a)(3)).
B. Nothing in this agreement prohibits, upon written notice to SBA, assignment
by the Lender (or holder of the Note) to other banking institutions provided (1)
the Lender retains an unguaranteed interest of not less an 10 percent of the
outstanding principal amount of the loan, (2) SBA may continue to deal solely
with the Lender as to the entire loan and (3) assignee shall have no greater
rights than assignor, C. Nothing in this agreement prohibits Lender, without
notice to SBA from using any guaranteed loan as security for (1) Treasury Tax
and Loan Accounts (Treasury Department Circular 92), (2) the deposit of public
funds, (3) uninvested trust funds, or (4) discount borrowings at the Federal
Reserve Bank, provided (a) Lender has not sold or otherwise assigned any part of
the guaranteed loan, and (b) Lender retains full authority to perform its
responsibilities under this agreement.
<PAGE>
13. Termination.
a. Either party may terminate this agreement upon not less than 10
days written notice by certified mail to the other party. Termination shall not
affect the guaranty of any loan previously authorized by SBA. This subparagraph
is not applicable where this agreement applies only to one designated borrower.
b. Lender may terminate the guaranty as to any unassigned loan
guaranteed hereunder at any time prior to purchase by SBA upon notice to SBA.
The guaranty of any loan shall be terminated if demand for SBA to purchase or a
request to extend the maturity is not received by SBA within one year after the
maturity of the note.
This agreement shall inure to the benefit of, and be binding upon the
parties, their successor and assigns.
IN WITNESS WHEREOF, Lender and SBA have caused this agreement to be duly
executed the date first above written.
(SEAL)
Business Loan Center, Inc.
NAME OF LENDER
ATTEST:
/s/ Gina Chilewitz By: /s/ Robert F. Tannenhauser
TITLE
Robert F. Tannenhauser, President
SMALL BUSINESS ADMINISTRATION
By: /s/ Jane Palsgrove Butler
TITLE
Jane Palsgrove Butler, Acting
Associate Administrator for
Financial Assistance
(Lender shall execute and submit two copies to SBA field office.)
- - -------------------
*Form to be furnished by SBA.
SBA 750(10-83)
================================================================================
AGREEMENT OF LEASE
between
THE EQUITABLE-NISSEI MADISON CO.
Landlord
and
BUSINESS LOAN CENTER, INC.
Tenant
645 Madison Avenue
New York, New York 10022
<PAGE>
TABLE OF CONTENTS
DEFINITIONS .................................................................1
ARTICLE 1 DEMISE, PREMISES, TERM, RENT.....................................9
ARTICLE 2 USE AND OCCUPANCY...............................................10
ARTICLE 3 ALTERATIONS.....................................................10
ARTICLE 4 REPAIRS-FLOOR LOAD..............................................16
ARTICLE 5 WINDOW CLEANING.................................................18
ARTICLE 6 REQUIREMENTS OF LAW.............................................18
ARTICLE 7 SUBORDINATION...................................................19
ARTICLE 8 RULES AND REGULATIONS...........................................22
ARTICLE 9 INSURANCE, PROPERTY LOSS OR DAMAGE;
REIMBURSEMENT...................................................22
ARTICLE 10 DESTRUCTION-FIRE OR OTHER CAUSE.................................24
ARTICLE 11 EMINENT DOMAIN..................................................28
ARTICLE 12 ASSIGNMENT, SUBLETTING, MORTGAGE, ETC...........................30
ARTICLE 13 ELECTRICITY.....................................................38
ARTICLE 14 ACCESS TO PREMISES..............................................42
ARTICLE 15 CERTIFICATE OF OCCUPANCY........................................45
ARTICLE 16 DEFAULT.........................................................45
ARTICLE 17 REMEDIES AND DAMAGES............................................48
ARTICLE 18 LANDLORD FEES AND EXPENSES......................................50
ARTICLE 19 NO REPRESENTATIONS BY LANDLORD..................................51
ARTICLE 20 END OF TERM.....................................................51
ARTICLE 21 QUIET ENJOYMENT.................................................52
ARTICLE 22 FAILURE TO GIVE POSSESSION......................................52
ARTICLE 23 NO WAIVER.......................................................53
ARTICLE 24 WAIVER OF TRIAL BY JURY.........................................54
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<PAGE>
ARTICLE 25 INABILITY TO PERFORM............................................54
ARTICLE 26 BILLS AND NOTICES...............................................55
ARTICLE 27 ESCALATION......................................................56
ARTICLE 28 SERVICES........................................................63
ARTICLE 29 PARTNERSHIP TENANT..............................................66
ARTICLE 30 VAULT SPACE.....................................................67
ARTICLE 31 SECURITY DEPOSIT................................................67
ARTICLE 32 CAPTIONS........................................................69
ARTICLE 33 PARTIES BOUND...................................................69
ARTICLE 34 BROKER..........................................................70
ARTICLE 35 INDEMNITY.......................................................70
ARTICLE 36 ADJACENT EXCAVATION-SHORING.....................................71
ARTICLE 37 MISCELLANEOUS...................................................71
ARTICLE 38 RENT CONTROL....................................................75
ARTICLE 39 EXPANSION OPTION................................................75
ARTICLE 40 EXTENSION OF TERM...............................................77
SCHEDULE A RULES AND REGULATION..............................................
SCHEDULE B CLEANING SPECIFICATIONS...........................................
EXHIBIT A FLOOR PLAN........................................................
EXHIBIT B LETTER OF CREDIT..................................................
ii
<PAGE>
AGREEMENT OF LEASE, made as of the 31st day of July, 1997, between
Landlord and Tenant.
W I T N E S S E T H :
The parties hereto, for themselves, their legal representatives,
successors and assigns, hereby covenant as follows.
DEFINITIONS
"Affiliate" shall mean a Person which shall (1) Control, (2) be
under the Control of, or (3) be under common Control with the Person in
question.
"Alteration Fee" shall have the meaning set forth in Section 3.2
hereof.
"Alteration(s)" shall mean alterations, installations, improvements,
additions or other physical changes in or about the Premises, including the
Initial Alterations (as hereinafter defined), exclusive of Tenant's Property not
affixed to the demised premises.
"Applicable Rate" shall mean the lesser of (x) two (2) percentage
points above the then current Base Rate, and (y) the maximum rate permitted by
applicable law.
"Assignment Proceeds" shall have the meaning set forth in Section
12.10C. hereof.
"Bank" shall have the meaning set forth in Section 31.2 hereof.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., or any
statute of similar nature and purpose.
"Base Operating Expenses" shall have the meaning set forth in
Section 27.1 hereof.
"Base Operating Year" shall have the meaning set forth in Section
27.1 hereof.
"Base Rate" shall mean the rate of interest publicly announced from
time to time by Chase Manhattan Bank, or its successor, as its "prime lending
rate" (or such other term as
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<PAGE>
may be used by Chase, from time to time, for the rate presently referred to as
its "prime lending rate").
"Base Taxes" shall have the meaning set forth in Section 27.1
hereof.
"Broker" shall have the meaning set forth in Article 34 hereof.
"Building" shall mean all the buildings, equipment and other
improvements and appurtenances of every kind and description now located or
hereafter erected, constructed or placed upon the land and any and all
alterations, and replacements thereof, additions thereto and substitutions
therefor, known by the address of 645 Madison Avenue, New York, New York.
"Building System" shall mean any of the Building Systems.
"Building Systems" shall mean the mechanical, gas, electrical,
sanitary, heating, air conditioning, ventilating, elevator, plumbing, fire
control and suppression, sprinkler, life-safety and other service systems of the
Building.
"Business Days" shall mean all days, excluding Saturdays, Sundays
and all Holidays.
"Business Hours" shall mean the hours of 8:00 A.M. to 6:00 P.M. on
Business Days.
"Commencement Date" shall have the meaning set forth in Section 1.1
hereof.
"Control" or "control" shall mean ownership of fifty percent (50%)
or more of the outstanding voting stock of a corporation or other majority
equity and control interest if not a corporation and the possession of power to
direct or cause the direction of the management and policy of such corporation
or other entity, whether through the ownership of voting securities, by statute
or according to the provisions of a contract.
"Consumer Price Index" shall mean the Consumer Price Index for all
Urban Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, New York, N.Y. Northeastern N.J. Area, All Items (1982-84 =
100), or any successor index thereto, approximately adjusted. In the event that
the Consumer Price Index is converted to a different standard reference base or
otherwise revised, the determination of adjustments provided for herein shall be
made with the use of such conversion factor, formula or table for converting the
Consumer Price Index as may be published by the Bureau of Labor Statistics or,
if said Bureau shall not publish the same, then with the use of such conversion
factor, formula
2
<PAGE>
of table as may be published by Prentice Hall, Inc., or any other nationally
recognized publisher of similar statistical information. If the Consumer Price
Index ceases to be published, and there is no successor thereto, such other
index as Landlord and Tenant shall agree upon in writing shall be substituted
for the Consumer Price Index. If Landlord and Tenant are unable to agree as to
such substituted index, such matter shall be submitted to the American
Arbitration Association or any successor organization for determination in
accordance with the regulations and procedures thereof then obtaining for
commercial arbitration.
"Current Year" shall have the meaning set forth in Section 27.4
hereof.
"Default" shall mean that an Event of Default has occurred and is
continuing.
"Deficiency" shall have the meaning set forth in Section 17.2
hereof.
"Escalation Rent" shall mean, individually or collectively, the Tax
Payment and the Operating Payment.
"Event of Default" shall have the meaning set forth in Section 16.1
hereof.
"Expiration Date" shall mean the Fixed Expiration Date or such
earlier date on which the Term shall sooner end pursuant to any of the terms,
conditions or covenants of this Lease or pursuant to law.
"Fiscal Quarter" shall mean a three (3) month period commencing on
the first day of each Fiscal Year, and on the first day of the fourth, seventh
and tenth month of each Fiscal Year.
"Fiscal Year" shall mean the twelve (12) month period used by Tenant
from time to time as its fiscal year for accounting purposes.
"Fixed Expiration Date" shall have the meaning set forth in Section
1.1 hereof.
"Fixed Rent" shall have the meaning set forth in Section 1.1 hereof.
"Force Majeure" shall have the meaning set forth in Article 25
hereof.
"Governmental Authority (Authorities)" shall mean the United States
of America, the State of New York, The City of New York, any political
subdivision thereof and any agency, department, commission, board, bureau,
official or instrumentality of any of the foregoing, or any Quasi-governmental
authority, now existing or hereafter created, having jurisdiction over the Real
Property or any portion thereof.
3
<PAGE>
"Hazardous Materials" shall have the meaning set forth in Section
37.13 hereof.
"Holidays" shall mean any day observed by any labor union serving
the Building as a holiday and/or any federal, state and local holiday.
"Indemnitees" shall mean Landlord, Lessors and Mortgagees and its
and their partners, shareholders, officers, directors, employees, agents and
contractors.
"Initial Alterations" shall have the meaning set forth in Section
3.4B.
"Landlord", on the date as of which this Lease is made, shall mean
The Equitable-Nissei Madison Co., a New York partnership, having an office c/o
Equitable Real Estate at 787 Seventh Avenue, New York, New York 10019, but
thereafter, "Landlord" shall mean only the fee owner of the Real Property or, if
there shall exist a Superior Lease, the tenant thereunder.
"Leaseback Notice" shall have the meaning set forth in Section 12.6
hereof.
"Leaseback Space" shall have the meaning set forth in Section 12.6
hereof.
"Lessor(s)" shall mean a lessor under a Superior Lease.
"Long Lead Work" shall mean any item which is not a stock item and
must be specially manufactured, fabricated or installed or is of such an
unusual, delicate or fragile nature that there is a substantial risk that,
(i) there will be a delay in its manufacture, fabrication, delivery
or installation, or
(ii) after delivery, such item will need to be reshipped or
redelivered or repaired,
so that the item in question would delay the completion of the standard items
even though the items of Long Lead Work in question are (1) ordered together
with the other items required, and (2) installed or performed (after the
manufacture or fabrication thereof) in the order and sequence that such Long
Lead Work and other items are normally installed or performed in accordance with
good construction practice.
"Mortgage(s)" shall mean any trust indenture or mortgage which
may now or hereafter affect the Real Property, the Building or any Superior
Lease and the leasehold interest created thereby, and all renewals, extensions,
supplements, amendments, modifications,
4
<PAGE>
consolidations and replacements thereof or thereto, substitution therefor, and
advances made thereunder.
"Mortgagee(s)" shall mean any trustee, mortgagee or holder of a
Mortgage.
"Operating Expenses" shall have the meaning set forth in Section
27.1 hereof.
"Operating Payment" shall have the meaning set forth in Section 27.4
hereof.
"Operating Statement" shall have the meaning set forth in Section
27.1 hereof.
"Operating Year" shall have the meaning set forth in Section 27.1
hereof.
"Operation of the Property" shall mean the maintenance, security,
repair and management of the Real Property and the curbs, sidewalks and areas
adjacent thereto.
"Overtime Periods" shall have the meaning set forth in Section 28.1
hereof.
"Overtime Rate" shall have the meaning set forth in Section 28.1
hereof.
"Parties" shall have the meaning set forth in Section 37.2 hereof.
"Partner" or "partner" shall mean any partner of Tenant, any
employee of a professional corporation which is a partner of Tenant, and any
shareholder of Tenant if Tenant shall become a professional corporation.
"Partnership Tenant" shall have the meaning set forth in Article 29
hereof.
"Person(s)" or "person(s)" shall mean any natural person or persons,
a partnership, a corporation and any other form of business or legal association
or entity.
"Premises" shall mean, subject to the provisions of Section 14.4
hereof, the entire rentable portion of the 18th floor in the Building, as more
particularly described on the floor plan attached hereto and made a part hereof
as Exhibit "A".
"Real Property" shall mean the Building, together with the plot of
land upon which it stands.
"Rental" shall mean and be deemed to include Fixed Rent, Escalation
Rent, all additional rent and any other sums payable by Tenant to Landlord
hereunder.
5
<PAGE>
"Rent Commencement Date" shall mean the 180th day immediately
following the Commencement Date.
"Requirements" shall mean all present and future laws, rules,
orders, ordinances, regulations, statutes, requirements, decisions, codes and
executive orders, extraordinary as well as ordinary, of all Governmental
Authorities now existing or hereafter created, and of any and all of their
departments and bureaus, and of any applicable fire rating bureau, or other body
exercising similar functions, affecting the Real Property, or any street, avenue
or sidewalk comprising a part of or in front thereof or any vault in or under
the same, or affecting the maintenance, use or occupation of the Real Property.
Without limiting the generality of the foregoing, Requirements shall include
Local Laws 5/1973, 16/1984, 16/1987, 58/1987 and 76/1985 of the City of New
York, and the Americans With Disabilities Act of 1990, as such laws and acts
have been and may hereafter be amended.
"Rules and Regulations" shall mean the rules and regulations annexed
hereto and made a part hereof as Schedule A, and such other and further rules
and regulations as Landlord or Landlord's agents may from time to time adopt on
such notice to be given as Landlord may elect.
"Space Factor" shall mean 5,875, as the same may be increased or
decreased pursuant to the terms hereof.
"Specialty Alterations" shall mean Alterations consisting of
kitchens, executive bathrooms, raised computer floors, computer installations,
communications installations, security systems, fire detection and suppression
systems, vaults, internal staircases, dumbwaiters, pneumatic tubes, vertical and
horizontal transportation systems, and other Alterations of a similar character
or nature, exclusive of Tenant's Property not affixed to the demised premises.
"Sublease Expenses" shall have the meaning set forth in Section
12.10 hereof.
"Sublease Profit" shall have the meaning set forth in Section 12.10
hereof.
"Sublease Rent" shall have the meaning set forth in Section 12.10
hereof.
"Sublease Rent Per Square Foot" shall have the meaning set forth in
Section 12.10 hereof.
"Successor Landlord" shall have the meaning set forth in Section 7.2
hereof.
6
<PAGE>
"Superior Lease(s)" shall mean all ground or underlying leases of
the Real Property or the Building heretofore or hereafter made by Landlord and
all renewals, extensions, supplements, amendments and modifications thereof.
"Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Tax Payment" shall have the meaning set forth in Section 27.2
hereof.
"Tax Statement" shall have the meaning set forth in Section 27.1
hereof.
"Tax Year" shall have the meaning set forth in Section 27.1 hereof.
"Tenant", on the date as of which this Lease is made, shall mean
Business Loan Center Inc., a Delaware corporation, having an office at 919 Third
Avenue, New York, New York, but thereafter, "Tenant" shall mean only the tenant
under this Lease at the time in question; provided, however, that the originally
named tenant and any assignee of this Lease shall not be released from liability
hereunder in the event of any assignment of this Lease.
"Tenant's Designated Representative" shall mean the agent, employee,
officer or director of Tenant who is authorized from time to time to make
decisions, give notices and receive notices contemplated hereunder, and whose
name Tenant has given Landlord prior written notice thereof.
"Tenant's Floor Share" shall mean with respect to any portion of the
Premises which comprises less than an entire floor, the quotient obtained by
dividing the rentable square footage leased by Tenant on the floor in question
by the rentable square footage on the entire floor.
"Tenant's Share" with respect to (i) Operating Expenses shall mean
5.52%, and (ii) Taxes shall mean 4.22%; as such percentages may be increased or
decreased pursuant to the terms hereof.
"Tenant's Property" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings, decorations
and other items of personal property, including, without limitation, computer
and related equipment, copy machines, telefax machines, scanners and file
cabinets.
"Tentative Monthly Escalation Charge" shall have the meaning set
forth in Section 27.4 hereof.
"Term" shall mean a term which shall commence on the Commencement
Date and shall expire on the Expiration Date.
7
<PAGE>
"Unavoidable Delays" shall have the meaning set forth in Article 25
hereof.
8
<PAGE>
ARTICLE 1
DEMISE, PREMISES, TERM, RENT
Section 1.1 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord, the Premises for the Term to commence on the date Landlord delivers
possession of the Premises to Tenant broom clean and with the existing tenant
installations therein demolished in a Building standard manner (the
"Commencement Date") and to end on the last day of the calendar month in which
occurs the ten (10) year six (6) month anniversary of the Commencement Date
(subject to Section 39.4 below) (the "Fixed Expiration Date"), at an annual rent
(the "Fixed Rent") of: (i) $212,968.75 per annum ($17,747.40 per month) for the
period commencing on the Rent Commencement Date to and including the last day
(the "First Date") of the calendar month immediately preceding the month in
which the fifth anniversary of the Commencement Date occurs, and (ii)
$224,718.75 per annum ($18,726.56 per month) for the period commencing on the
day immediately following the First Date to and including the Fixed Expiration
Date;
which Fixed Rent Tenant agrees to pay in lawful money of the United States which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment, in equal monthly installments in advance, on the first
(1st) day of each calendar month during the Term, from the Rent Commencement
Date, at the office of Landlord or such other place as Landlord may designate,
without any set-off, offset, abatement or deduction whatsoever, except that
Tenant shall pay the first full monthly installment of Fixed Rent ($17,747.40)
on the execution hereof.
Section 1.2 Should the obligation to pay Fixed Rent commence on a day
other than on the first day of a month (or should this Lease expire or terminate
on any day other than the last day of a month), then the Fixed Rent for such
month shall be prorated on a per diem basis.
Section 1.3 Notwithstanding anything to the contrary contained herein,
provided Tenant is not then in default under this Lease after notice and the
expiration of applicable cure periods, if any, Tenant shall not be required to
pay the sum of $16,401.04 from each of the monthly installments of Fixed Rent
payable under this Lease for the following months: thirty-second, thirty-third,
thirty-fourth, thirty-fifth and forty-second months immediately following the
Commencement Date.
Section 1.4 Upon the occurrence of Commencement Date, Landlord may send a
notice to Tenant confirming same. In such event Tenant shall confirm such date
with reasonable promptness. The failure of Tenant to so confirm the Commencement
Date shall not affect the validity thereof, as determined by Landlord, or any of
the other provisions of this Lease. Landlord shall use reasonable efforts to
provide Tenant with at least five (5) days advance notice of the Commencement
Date.
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ARTICLE 2
USE AND OCCUPANCY
Section 2.1 Tenant shall use and occupy the Premises as general and
executive offices and for no other purpose.
Section 2.2 A. Tenant shall not use the Premises or any part thereof, or
permit the Premises or any part thereof to be used, (1) for the business of
photographic, multilith or multigraph reproductions or offset printing, or a
manufacturing business of any kind (2) for a retail banking, trust company,
depository, guarantee or safe deposit business, targeting off-the-street
customers, nothing in this Section 2.2 shall prohibit tenant from using premises
as a loan company for small business, commercial and other loans which do not
primarily target off-the-street customers* (3) as a retail savings bank, savings
and loan association, or loan company, targeting off-the-street customers, (4)
for the sale of travelers checks, money orders, drafts, foreign exchange or
letters of credit or for the receipt of money for transmission, to
off-the-street customers (5) as a stockbroker's or dealer's office or for the
underwriting or sale of securities, (6) by the United States government, the
City or the State of New York, any foreign government, the United Nations or any
agency or department of any of the foregoing or any other Person having
sovereign or diplomatic immunity, (7) as a restaurant or bar or for the sale of
confectionery, soda or other beverages, sandwiches, ice cream or baked goods or
for the preparation, dispensing or consumption of food or beverages in any
manner whatsoever, (8) for the rendition of medical, dental or other therapeutic
or diagnostic services, (9) for the conduct of a public auction, (10) for the
sale at retail of any products, (11) as an employment agency, executive search
firm or similar enterprise, labor union, school, or vocational training center,
or (12) as a barber shop or beauty salon.
B. In connection with, and incidental to, Tenant's use of the Premises for
general and executive offices as provided in this Article 2, Tenant, at its sole
cost and expense and upon compliance with all applicable Requirements, may
install a (i) "dwyer", microwave or similar unit in the Premises for the purpose
of warming food for the employees and business guests of Tenant (but not for use
as a public restaurant), (ii) typical household dishwasher, the location and
manner of installation of which shall be approved by Landlord, and (iii) small
refrigerator, with a waterproof pan attached thereto, to prevent water seepage
into the floor; provided that Tenant shall obtain all permits required by any
Governmental Authorities for the operation thereof and such installation shall
comply with the provisions of this Lease, including, without limitation, Article
3 hereof.
ARTICLE 3
ALTERATIONS
Section 3.1 A. Tenant shall not make any Alterations without Landlord's
prior consent and the prior consent of any Lessor or Mortgagee if such party's
consent is required pursuant to the terms of any Superior Lease or Mortgage.
Landlord shall not unreasonably
* Nothing in this Section 2.2 shall prohibit tenant from using premises as a
loan company for small business, commercial and other loans which do not
primarily target off-the-street customers.
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withhold or delay its consent to any proposed nonstructural Alterations,
provided that such Alterations (i) are not visible from the outside of the
Building, (ii) do not affect the use of or require access to any part of the
Building other than the Premises, (iii) do not adversely affect any service
required to be furnished by Landlord to Tenant or to any other tenant or
occupant of the Building, (iv) do not affect the engineering and/or proper
functioning of any Building System, (v) do not reduce the value or utility of
the Building, or (vi) do not affect the certificate of occupancy for the
Building or the Premises. Landlord shall respond to requests for consent to
proposed alterations with reasonable diligence after receipt of all required
documents in connection therewith.
B. (1) Prior to making any Alterations, including, without
limitation, the Initial Alterations, Tenant shall (i) submit to Landlord
detailed construction plans and specifications (including layout, architectural,
mechanical, electrical, plumbing, sprinkler, engineering and structural
drawings) for each proposed Alteration and shall not commence any such
Alteration without first obtaining Landlord's approval of such plans and
specifications, which approval, in the case of nonstructural Alterations
described in Section 3.1A, shall not be unreasonably withheld or delayed, (ii)
at Tenant's expense, obtain all permits, approvals, inspections (to be performed
by Tenant's approved engineer or general contractor), sign-offs and certificates
required by any Governmental Authorities, it being agreed that all filings with
Governmental Authorities to obtain such permits, approvals, inspections,
sign-offs and certificates shall be made, at Tenant's expense, by a Person
designated by Landlord (except as otherwise provided above for inspections),
provided the fees charged by such Person are competitive, otherwise by a Person
approved by Landlord (which approval shall not be unreasonably withheld or
delayed), and (iii) furnish to Landlord duplicate original policies or
certificates thereof of worker's compensation (covering all persons to be
employed by Tenant, and Tenant's contractors and subcontractors in connection
with such Alteration) and comprehensive public liability (including property
damage coverage) insurance in such form, with such companies, for such periods
and in such amounts as Landlord may reasonably approve, naming Landlord and its
agents, and any Lessor and any Mortgagee, as additional insureds, provided that,
with respect to any agent, Lessor and Mortgagee, Tenant has received notice
thereof. Upon completion of such Alteration, Tenant, at Tenant's expense, shall
obtain certificates of final approval of such Alteration required by any
Governmental Authority and shall furnish Landlord with copies thereof, together
with the "as-built" plans and specifications (reproducible mylars and microfiche
index cards) for such Alterations, air and water balancing reports and
certificates that indicate compliance with flame and smoke spread criteria, it
being agreed that all filings with Governmental Authorities to obtain such
reports, permits, approvals and certificates shall be made, at Tenant's expense,
by a Person designated by Landlord. All Alterations shall be made and performed
in accordance with the plans and specifications therefor as approved by
Landlord, all then current Requirements (including, without limitation, ADA (as
hereinafter defined)), the Rules and Regulations, and all rules and regulations
relating to Alterations promulgated by Landlord in its reasonable judgment. Upon
approval by Landlord of Tenant's plans depicting the Initial Alterations,
Landlord shall assist Tenant in
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obtaining an ACP-5 certificate to the extent required by the New York City
Buildings Department in order to obtain a building permit. Landlord represents
that the Premises are in a sufficient condition for the receipt of an ACP-5
certificate. All materials and equipment to be incorporated in the Premises as a
result of any Alterations or a part thereof shall be first quality and no such
materials or equipment or Alterations (other than Tenant's Property) shall be
subject to any lien, encumbrance, chattel mortgage or title retention or
security agreement. In addition, no Alteration at a cost for labor and materials
(as reasonably estimated by Landlord's architect, engineer or contractor) in
excess of Fifty Thousand Dollars ($50,000) (which amount shall be increased on
the third (3rd) anniversary of the Commencement Date and annually thereafter by
the annual percentage increase, if any, in the Consumer Price Index from that in
effect on the Commencement Date), either individually or in the aggregate with
any other Alteration constructed in any twelve (12) month period, shall be
undertaken prior to Tenant's delivering to Landlord either (i) a performance
bond and labor and materials payment bond (issued by a surety company and in
form both reasonably satisfactory to Landlord), each in an amount equal to 120%
of such estimated cost, or (ii) such other security as shall be reasonably
satisfactory to Landlord or required by any Mortgagee or Lessor. All Alterations
requiring the consent of Landlord shall be performed only under the supervision
of an independent licensed architect experienced with similar commercial
build-outs retained and paid for by Tenant and approved by Landlord, which
approval shall not be unreasonably withheld.
(2) Landlord reserves the right to disapprove any plans
and specifications in part, to reserve approval of items shown thereon pending
its review and approval of other plans and specifications, and to condition its
approval upon Tenant making revisions to the plans and specifications or
supplying additional information. Landlord shall specify with reasonable
particularity the reasons for any such disapproval. Any review or approval by
Landlord of any plans and/or specifications with respect to any Alteration is
solely for Landlord's benefit, and without any representation or warranty
whatsoever to Tenant or any other Person with respect to the adequacy,
correctness, compliance with Requirements or efficiency thereof or otherwise.
C. Tenant shall be permitted to perform Alterations during the
hours of 8:00 A.M. to 6:00 P.M. on Business Days, provided that such work shall
not interfere with, interrupt or disturb the operation and maintenance of the
Building or unreasonably interfere with, interrupt or disturb the use and
occupancy of the Building by other tenants in the Building. Supplementing the
preceding sentence, but not in limitation thereof, in no event shall any
Alterations interfere with, interrupt or disturb the premises (including,
without limitation, the ceiling or flooring therein) of any other tenant or
occupant of the Building. Otherwise, Alterations shall be performed at such
times and in such manner as Landlord may from time to time reasonably designate.
The foregoing shall not be deemed to prevent Tenant from performing Alterations
between the hours of 6:00 P.M. and 8:00 A.M. on Business Days and during any
hours on non-Business Days, provided same are performed in such manner as
Landlord may from time to time reasonably designate. All Tenant's Property
installed by
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Tenant and all Alterations in and to the Premises which may be made by Tenant at
its own cost and expense prior to and during the Term, shall with respect to
Tenant's Property, remain the property of Tenant, and with respect to said
Alterations, become the property of Landlord upon the expiration or sooner
termination of this Lease. Upon the Expiration Date, Tenant shall remove
Tenant's Property from the Premises and, if Landlord consents, Tenant may
remove, at Tenant's cost and expense, all Alterations made by Tenant to the
Premises, provided, however, in any case, that Tenant shall repair and restore
in a good and workerlike manner to good condition any damage to the Premises or
the Building caused by such removal. Notwithstanding the foregoing, however,
Landlord, upon notice given at least one hundred twenty (120) days prior to the
Fixed Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any Specialty Alterations, and to repair and restore in a good and
workerlike manner to good condition any damage to the Premises or the Building
caused by such removal.
D. (1) All Alterations shall be performed, at Tenant's sole
cost and expense, by Landlord's contractor(s) or by contractors, subcontractors
or mechanics approved by Landlord, which approval shall not be unreasonably
withheld or delayed, except with respect to contractors or subcontractors
performing structural work, or work affecting any of the Building Systems. Prior
to making an Alteration, at Tenant's request, Landlord shall furnish Tenant with
a list of contractors who may perform Alterations to the Premises on behalf of
Tenant. If Tenant engages any contractor set forth on the list, Tenant shall not
be required to obtain Landlord's consent for such contractor unless, prior to
the earlier of (a) entering into a contract with such contractor, and (b) the
commencement of work by such contractor, Landlord shall notify Tenant that such
contractor has been removed from the list.
(2) Notwithstanding the foregoing, with respect to any
Alteration affecting any Building System (i) Tenant shall select a contractor
from a list of approved contractors furnished by Landlord to Tenant (containing
when reasonably practical at least three (3) contractors), and (ii) the
Alteration shall, at Tenant's cost and expense, be designed by Landlord's
engineer for the relevant Building System provided the fees charged by such
engineer are competitive, otherwise Tenant shall select an engineer, subject to
Landlord's approval, which shall not be unreasonably withheld or delayed. If any
such Alteration affecting any Building System has been designed by Landlord's
engineer, such Alteration shall, subject to the limitations set forth in Section
3.1A. above, be deemed approved by Landlord.
E. Any mechanic's lien filed against the Premises or the Real
Property for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant shall be discharged by Tenant within twenty (20) days
after Tenant shall have received notice thereof (or such shorter period if
required by the terms of any Superior Lease or Mortgage), at Tenant's expense,
by payment or filing the bond required by law. Tenant shall not, at any time
prior to or during the Term, directly or indirectly employ, or permit the
employment of, any contractor, mechanic or laborer in the Premises, whether in
connection
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with any Alteration or otherwise, if such employment would interfere or cause
any conflict with other contractors, mechanics or laborers engaged in the
construction, maintenance or operation of the Building by Landlord, Tenant or
others, or of any adjacent property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Building immediately.
Section 3.2 A. Tenant shall pay to Landlord on demand and as additional
rent in connection with any Alteration (including, without limitation, the
Initial Alterations (as hereinafter defined)), except Landlord's Work, (i) a fee
(the "Alteration Fee") equal to the reasonable or customary out-of-pocket costs
(including, without limitation, reasonable fees and disbursements of attorneys,
consultants, engineers and other professionals) incurred by Landlord in
connection with such Alteration, including, without limitation, the cost
incurred by Landlord to have such plans and specifications reviewed by outside
architects, engineers or consultants, as applicable.
Section 3.3. Upon the request of Tenant, Landlord, at Tenant's cost and
expense, shall join in any applications for any permits, approvals or
certificates required to be obtained by Tenant in connection with any permitted
Alteration (provided that the provisions of the applicable Requirement shall
require that Landlord join in such application) and shall otherwise cooperate
with Tenant in connection therewith, provided that Landlord shall not be
obligated to incur any cost or expense, including, without limitation,
attorneys' fees and disbursements, or suffer any liability in connection
therewith.
Section 3.4 (A) Subject to the provisions of this Section 3.4, Landlord
shall contribute an amount not to exceed Two Hundred Thirty-Five Thousand
Dollars ($235,000.00) (the "Tenant Fund") toward (x) the cost of the performance
of the Initial Alterations including, without limitation, installation of
lighting (except lamps and bulbs), and computer and telecommunication wiring in
the premises (other than Soft Costs), and (y) the fees of architects and
engineers, and filing fees incurred in connection with the performance of the
Initial Alterations (the costs described in this clause (y) being collectively
referred to herein as "Soft Costs"). Notwithstanding the foregoing, Landlord
shall not be required to contribute toward Soft Costs an amount in excess of
fifteen percent (15%) of the Tenant Fund.
(B) Landlord shall disburse a portion of the Tenant Fund to
Tenant from time to time, within thirty (30) days after receipt of the items set
forth in Section 3.4(C) hereof, provided that on the date of a request and on
the date of disbursement from the Tenant Fund, no Event of Default shall have
occurred and be continuing. Disbursements from the Tenant Fund shall not be made
more frequently than monthly, and any such disbursement when added to all other
amounts previously disbursed shall not exceed 90% of the Tenant Fund and such
request by Tenant shall not have been the subject of a previous
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disbursement as certified by the chief financial officer of Tenant or Tenant's
independent licensed architect. Landlord has the right to retain 10% from each
requested disbursement from Tenant until the Initial Alterations are completed.
(C) Landlord's obligation to make disbursements from the
Tenant Fund shall be subject to receipt of: (a) a request for such disbursement
from Tenant signed by the chief financial officer of Tenant, together with the
certification required by Section 3.4(B) hereof, (b) copies of all receipts,
invoices and bills for the work completed and materials furnished in connection
with the Initial Alterations and incorporated in the Premises, for which Tenant
is seeking reimbursement, (c) with respect to disbursements of the Tenant Fund
to cover costs other than Soft Costs, a certificate of Tenant's independent
licensed architect stating that the portion of the Initial Alterations
theretofore completed and for which the disbursement is requested was performed
in a good and workerlike manner substantially in accordance with the final
detailed plans and specifications for such Initial Alterations, as approved by
Landlord, and (d) partial lien waivers, to the extent permitted by law, from
each contractor, subcontractor and materialman who performed work in connection
with the Initial Alterations, to the extent of the amount theretofore paid to
such contractor, subcontractor or materialman.
(D) In no event shall the aggregate amount paid by Landlord to
Tenant under this Section 3.4 exceed the amount of the Tenant Fund. Upon the
completion of the Initial Alterations (which shall include completion of all
"punch list" items and payment of Soft Costs, and satisfaction of the conditions
set forth in Section 3.4(E) hereof), any retainage held by Landlord pursuant to
Section 3.4(B) above shall be paid to Tenant and any other amount of the Tenant
Fund which has not been previously disbursed (exclusive of amounts allocated to
pay for work completed even though the invoices covering such work have not yet
been received) shall be retained by Landlord. Upon the disbursement of the
entire Tenant Fund (or the portion thereof if upon completion of the Initial
Alterations and the payment of Soft Costs the Tenant Fund is not exhausted),
Landlord shall have no further obligation or liability whatsoever to Tenant for
further disbursement of any portion of the Tenant Fund to Tenant. It is
expressly understood and agreed that Tenant shall complete, at its sole cost and
expense, the Initial Alterations, and pay Soft Costs, whether or not the Tenant
Fund is sufficient to fund such completion and Soft Costs. Any costs to complete
the Initial Alterations and pay Soft Costs in excess of the Tenant Fund shall be
the sole responsibility and obligation of Tenant.
(E) Within sixty (60) days after completion of the Initial
Alterations, Tenant shall deliver to Landlord final waivers of lien from all
contractors, subcontractors and materialmen involved in the performance of the
Initial Alterations and the materials furnished in connection therewith, and a
certificate from Tenant's independent licensed architect certifying that (i) in
his opinion the Initial Alterations have been performed in a good and workerlike
manner and completed substantially in all material respects in
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accordance with the final detailed plans and specifications for such Initial
Alterations as approved by Landlord, and (ii) all contractors, subcontractors
and materialmen have been paid for the Initial Alterations and materials
furnished through such date.
Section 3.5 Tenant shall maintain comprehensive records and copies of all
plans, specifications, budgets and other appropriate documentation in connection
with any and all Alterations, copies of which shall be furnished to Landlord
promptly upon demand.
Section 3.6 As part of the Initial Alterations, Tenant hereby agrees to
(i) install a sprinkler loop, within the Premises and (ii) to perform the work
necessary to bring the existing bathrooms and common areas on the 18th floor of
the Building in compliance with all Requirements, including, without limitation,
ADA (the "Additional Initial Work"). Landlord shall contribute an additional
amount above the Tenant Fund, which additional amount shall not exceed
$11,750.00 (the "Additional Fund") solely toward the cost of the performance of
the Additional Initial Work (other than Soft Costs), which amount shall be
disbursed in the same manner and subject to the same conditions as disbursement
of the Tenant Fund.
Section 3.7 Tenant shall be responsible, at Tenants expense, for making
the appropriate connections to the Building's Class E System. Landlord shall
provide Tenant with reasonable access to the Class E System, at Tenant's cost,
to make the appropriate connections, subject to all of the terms and conditions
of this Lease.
ARTICLE 4
REPAIRS-FLOOR LOAD
Section 4.1 Landlord shall operate, maintain and make all necessary
repairs (both structural and nonstructural) to the part of Building Systems
which provide service to the Premises (but not to the distribution portions of
such Building Systems located within the Premises) and the public portions of
the Building, both exterior and interior, in conformance with standards
applicable to non-institutional first class office buildings in Manhattan.
Tenant, at Tenant's sole cost and expense, shall take good care of the Premises
and the fixtures, equipment, Alterations and appurtenances therein and the
distribution systems and shall make all repairs thereto as and when needed to
preserve them in good working order and condition. Notwithstanding the
foregoing, all damage or injury to the Premises or to any other part of the
Building and Building Systems, or to its fixtures, equipment and appurtenances,
whether requiring structural or nonstructural repairs, caused by or resulting
from negligent acts or omissions, neglect or improper conduct of, or Alterations
made by, Tenant, Tenant's agents, employees, invitees or licensees, shall be
repaired at Tenant's sole cost and expense, by (i) Tenant to the reasonable
satisfaction of Landlord (if the required repairs are nonstructural in nature
and do not affect any Building System), or (ii) Landlord (if the required
repairs are
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structural in nature or affect any Building System). Landlord shall be
responsible for repairs in the Building necessitated by the negligent acts or
omissions or willful misconduct of Landlord, or its agents, employees or
contractors, subject to the provisions of Section 10.5 hereof. All of the
aforesaid repairs shall be of good quality and of a class consistent with
non-institutional first class office building work or construction and shall be
made in accordance with the provisions of Article 3 hereof. If Tenant fails
after ten (10) days' notice (or such shorter period as may be required due to an
emergency) to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by Landlord at the expense of Tenant, and the
expenses thereof incurred by Landlord, with interest thereon at the Applicable
Rate, shall be forthwith paid to Landlord as additional rent after rendition of
a bill or statement therefor. Tenant shall give Landlord prompt notice of any
defective condition in the Building or in any Building System, located in,
servicing or passing through the Premises, as soon as Tenant becomes aware of
same.
Section 4.2 Tenant shall not place a load upon any floor of the Premises
exceeding the "live load" limitations set forth in the certificate of occupancy
for the Premises. Tenant shall not move any safe, heavy machinery, heavy
equipment, business machines, freight, bulky matter or fixtures into or out of
the Building without Landlord's prior consent, which consent shall not be
unreasonably withheld, and shall make payment to Landlord of Landlord's costs in
connection therewith. If such safe, machinery, equipment, freight, bulky matter
or fixtures requires special handling, Tenant shall employ at its sole cost and
expense only persons holding a Master Rigger's license to do said work and such
additional tradespeople as may be required to perform such work. All work in
connection therewith shall comply with all Requirements and the Rules and
Regulations, and shall be done during such hours as Landlord may reasonably
designate. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient in Landlord's
reasonable judgment to absorb and prevent vibration, noise and annoyance. There
Except as otherwise expressly provided in this Lease, there shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant or others making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Premises, or in or to fixtures, appurtenances or equipment thereof.
Section 4.3 Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy of the Premises in making any
repairs, alterations, additions or improvements; provided, however, that
Landlord shall have no obligation to employ contractors or labor at so-called
overtime or other premium pay rates or to incur any other overtime costs or
expenses whatsoever. Any materials required for the performance of any such
repairs, alterations, additions or improvements shall be stored at such
locations within the Premises as are reasonably designated by Tenant, except
that any such materials may be moved to the location of the repair, alteration,
addition or improvement during the course of performance of the work.
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Section 4.4 Both the design and decoration of the elevator areas of each
entire floor of the Premises and the public corridors of any floor of the
Premises occupied by more than one (1) occupant (as a result of a subletting or
occupancy arrangement, if any, in accordance with Article 12 hereof) shall be
subject to Landlord's approval, which approval shall not be unreasonably
withheld, and such elevator areas and public corridors shall be maintained and
kept in order by Tenant to Landlord's reasonable satisfaction.
ARTICLE 5
WINDOW CLEANING
Tenant shall not clean, nor require, permit, suffer or allow any window in
the Premises to be cleaned from the outside in violation of Section 202 of the
Labor Law, or any other Requirement, or of the rules of the Board of Standards
and Appeals, or of any other board or body having or asserting jurisdiction.
ARTICLE 6
REQUIREMENTS OF LAW
Section 6.1 A. Tenant, at its sole cost and expense, shall comply with all
Requirements applicable to the use and occupancy of the Premises, including,
without limitation, those applicable to the making of any Alterations or repairs
therein or the result of the making thereof, except that (other than with
respect to the making of Alterations or the result of the making thereof) Tenant
shall not be under any obligation to make any Alteration in order to comply with
any Requirement applicable to the mere general "office" use or occupancy (as
opposed to the manner of use) of the Premises, unless otherwise expressly
required herein. Tenant shall cause the Premises (including elevator call
buttons and bathrooms on the 12th floor) to comply with ADA. Tenant shall not do
or permit to be done any act or thing upon the Premises which will invalidate or
be in conflict with a standard "all-risk" insurance policy, and shall not do, or
permit anything to be done in or upon the Premises, or bring or keep anything
therein, except as now or hereafter permitted by the New York City Fire
Department, New York Board of Fire Underwriters, the Insurance Services Office
or other authority having jurisdiction and then only in such quantity and manner
of storage as not to increase the rate for fire insurance applicable to the
Building, or use the Premises in a manner (as opposed to mere use as general
"offices") which shall increase the rate of fire insurance on the Building or on
property located therein, over that in similar type buildings or in effect on
the Commencement Date. If by reason of Tenant's failure to comply with the
provisions of this Article, the fire insurance rate shall be higher than it
otherwise would be, then Tenant shall desist from doing or permitting to be done
any such act or thing and shall reimburse Landlord, as additional rent
hereunder, for that part of all fire insurance premiums thereafter paid by
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Landlord which shall have been charged because of such failure by Tenant, and
shall make such reimbursement upon demand by Landlord. Landlord shall furnish
Tenant with all bills for additional fire insurance premiums as to which Tenant
is required to make reimbursement hereunder. In any action or proceeding wherein
Landlord and Tenant are parties, a schedule or "make up" of rates for the
Building or the Premises issued by the Insurance Services Office, or other body
fixing such fire insurance rates, shall be conclusive evidence of the facts
therein stated and of the several items and charges in the fire insurance rates
then applicable to the Building.
B. Landlord, at its sole cost and expense (but subject to
recoupment as provided in Article 27 hereof ), shall comply with all other
Requirements applicable to the Premises and the Building, subject to Landlord's
right to contest the applicability or legality thereof.
C. If it is determined by a final adjudication or other
similar determination that the Building's core and public areas (including
elevator cabs, call buttons, fire doors and fire stairs) are not in compliance
with Title III of The Americans with Disabilities Act of 1990, Public Law
101-336, 42 U.S.C. ss.ss.12101 et seq. (the "ADA"), as of the date hereof,
Landlord shall, at its sole cost and expense (and without recoupment pursuant to
Article 27 if the core or public areas are not in compliance with Title III of
the ADA as in effect as of the date hereof, but otherwise subject to recoupment
pursuant to Article 27) (i) take such action as shall be reasonably achievable
to bring the Building's core and public areas into compliance with Title III of
the ADA, (ii) restore and repair any damage caused to the Premises or any
Alterations in connection with any such compliance work and (iii) reimburse
Tenant for any fines incurred by Tenant by reason of Landlord's non-compliance
with Title III of the ADA, as aforesaid. All of Tenant's Alterations shall
comply with Titles I and III of the ADA.
ARTICLE 7
SUBORDINATION
Section 7.1 This Lease shall be subject and subordinate to each and every
Superior Lease and to each and every Mortgage. This clause shall be
self-operative and no further instrument of subordination shall be required from
Tenant to make the interest of any Lessor or Mortgagee superior to the interest
of Tenant hereunder; however, Tenant shall execute and deliver promptly an
instrument, in recordable form, that Landlord, any Mortgagee or Lessor
reasonably may request to evidence and confirm such subordination. If the date
of expiration of any Superior Lease shall be the same day as the Expiration
Date, the Term shall end and expire twelve (12) hours prior to the expiration of
the Superior Lease. Tenant shall not knowingly do anything that would constitute
a default under any Superior Lease or Mortgage, or knowingly omit to do anything
that Tenant is obligated to do under the terms of this Lease so
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as to cause Landlord to be in default thereunder. If, in connection with the
financing of the Real Property, the Building or the interest of the lessee under
any Superior Lease, or if in connection with the entering into of a Superior
Lease, any lending institution or Lessor shall request reasonable modifications
of this Lease that do not increase Tenant's monetary obligations under this
Lease, or adversely affect or diminish the rights, or increase the other
obligations of Tenant under this Lease, Tenant shall make such modifications. A
requirement that Tenant give notice of any default on the part of Landlord to
any Mortgagee or Lessor and a reasonable opportunity to cure such default shall
not be deemed to increase the obligations of Tenant under this Lease.
Section 7.2 A. If at any time prior to the expiration of the Term, any
Superior Lease shall terminate or be terminated for any reason or any Mortgagee
comes into possession of the Real Property or the Building or the estate created
by any Superior Lease by receiver or otherwise, Tenant agrees, at the option of
any Superior Lessor or Mortgagee, to attorn to any such Lessor or Mortgagee or
any person acquiring the interest of Landlord as a result of any such
termination, or as a result of a foreclosure of the Mortgage or the granting of
a deed in lieu of foreclosure (a "Successor Landlord"), upon the then executory
terms and conditions of this Lease, subject to the provisions of Section 7.1
hereof and this Section 7.2, for the remainder of the Term, provided that such
owner, Lessor or Mortgagee, or receiver caused to be appointed by any of the
foregoing, as the case may be, shall then be entitled to possession of the
Premises and provided further that such Lessor or Mortgagee, as the case may be,
or anyone claiming by, through or under such owner, Lessor or Mortgagee, as the
case may be, including a purchaser at a foreclosure sale, shall not be:
(1) except as hereafter set forth, liable for any act or omission of
any prior landlord (including, without limitation, the then defaulting
landlord), or
(2) subject to any defense or offsets which Tenant may have against
any prior landlord (including, without limitation, the then defaulting
landlord), or
(3) bound by any payment of Rental which Tenant may have made to any
prior landlord (including, without limitation, the then defaulting landlord)
more than thirty (30) days in advance of the date upon which such payment was
due, or
(4) bound by any obligation to perform or fund any work or to make
improvements to the Premises, except for (i) repairs and maintenance pursuant to
the provisions of Article 4, (ii) repairs to the Premises or any part thereof as
a result of damage by fire or other casualty pursuant to Article 10 hereof, but
only to the extent required of Landlord, and (iii) repairs to the Premises as a
result of a partial condemnation pursuant to Article 11 hereof, but only to the
extent that such repairs can be reasonably made from the net proceeds of any
award made available to such owner, Lessor or Mortgagee, or
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(5) bound by any amendment or modification of this Lease made
without its consent (if such consent is required), or
(6) bound to return Tenant's security deposit, if any, until such
deposit has come into its actual possession and Tenant would be entitled to such
security deposit pursuant to the terms of this Lease.
B. The provisions of this Section 7.2 shall enure to the
benefit of any such owner, Lessor or Mortgagee, shall apply notwithstanding
that, as a matter of law, this Lease may terminate upon the termination of any
Superior Lease, shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions. Tenant, however,
upon demand of any such owner, Lessor or Mortgagee, shall execute, at Tenant's
expense, from time to time, instruments, in recordable form, in confirmation of
the foregoing provisions of this Section 7.2, satisfactory to any such owner,
Lessor or Mortgagee, acknowledging such attornment and setting forth the terms
and conditions of its tenancy. Nothing contained in this Section 7.2 shall be
construed to impair any right otherwise exercisable by any such owner, Lessor or
Mortgagee, or to excuse any such owner, Lessor or Mortgagee from performing
obligations of repair and maintenance required to be performed by it hereunder.
Section 7.3 From time to time, within ten (10) days next following request
by Landlord, any Mortgagee or any Lessor, Tenant shall deliver to Landlord, such
Mortgagee or such Lessor a written statement executed by Tenant, in form
satisfactory to Landlord, such Mortgagee or such Lessor, (1) stating that this
Lease is then in full force and effect and has not been modified (or if
modified, setting forth all modifications), (2) setting forth the date to which
the Fixed Rent, additional rent and other items of Rental have been paid, (3)
stating whether or not, to the best knowledge of Tenant (but without having made
any investigation), Landlord is in default under this Lease, and, if Landlord is
in default, setting forth the specific nature of all such defaults, and (4) as
to any other matters pertaining to this Lease reasonably requested by Landlord,
such Mortgagee or such Lessor. Tenant acknowledges that any statement delivered
pursuant to this Section 7.3 may be relied upon by any purchaser or owner of the
Real Property or the Building, or Landlord's interest in the Real Property or
the Building or any Superior Lease, or by any Mortgagee, or by an assignee of
any Mortgagee, or by any Lessor.
Section 7.4 From time to time, within ten (10) days next following request
by Tenant but not more frequently than once twice in any twelve (12) month
period, Landlord shall deliver to Tenant a written statement executed by
Landlord (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Fixed Rent, all additional rent and any
other items of Rental have been paid, (iii) stating whether or not, to the best
knowledge of Landlord (but without having made any investigation), Tenant is in
default under this Lease, and, if Tenant is
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in default, setting forth the specific nature of all such defaults, and (iv) as
to any other matters reasonably requested by Tenant and related to this Lease.
Section 7.5 As long as any Superior Lease or Mortgage shall exist, Tenant
shall not seek to terminate this Lease by reason of any act or omission of
Landlord until Tenant shall have given written notice of such act or omission to
all Lessors and Mortgagees at such addresses as shall have been furnished to
Tenant by such Lessors and Mortgagees and, if any such Lessor or Mortgagee, as
the case may be, shall have notified Tenant within ten (10) Business Days
following receipt of such notice of its intention to remedy such act or
omission, until a reasonable period of time shall have elapsed following the
giving of such notice, during which period such Lessors and Mortgagees shall
have the right, but not the obligation, to remedy such act or omission. If no
such notice is given by any such Lessor or Mortgagee within such ten (10)
Business Day period or, if the Lessor or Mortgagee giving such notice does not
undertake cure within ten (10) days following the giving of such notice to
Tenant, then Tenant may pursue all of its remedies hereunder or at law.
ARTICLE 8
RULES AND REGULATIONS
Tenant and Tenant's contractors, employees, agents, visitors, invitees and
licensees shall comply with the Rules and Regulations. Nothing in this Lease
contained shall be construed to impose upon Landlord any duty or obligation to
enforce the Rules and Regulations or terms, covenants or conditions in any other
lease against any other tenant, and Landlord shall not be liable to Tenant for
violation of the same by any other tenant, its employees, agents, visitors or
licensees, except that Landlord shall not enforce any Rule or Regulation against
Tenant which Landlord shall not then be enforcing against all other office
tenants in the Building.
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
Section 9.1 A. Any Building employee to whom any property shall be
entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's
agent with respect to such property and neither Landlord nor its agents shall be
liable for any damage to property of Tenant or of others entrusted to employees
of the Building, nor for the loss of or damage to any property of Tenant by
theft or otherwise. Neither Landlord nor its agents shall be liable for any
injury (or death) to persons or damage to property, or interruption of Tenant's
business, resulting from fire or other casualty, nor shall Landlord or its
agents be liable for any such injury (or death) to persons or damage caused by
other tenants or persons in the Building or caused by construction of any
private, public or quasi-public work, nor shall Landlord be liable
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for any injury (or death) to persons or damage to property or improvements, or
interruption of Tenant's business, resulting from any latent defect in the
Premises or in the Building.
B. If at any time any windows of the Premises are temporarily
closed, darkened or bricked-up due to any Requirement or by reason of repairs,
maintenance, alterations, or improvements to the Building, or any of such
windows are permanently closed, darkened or bricked-up due to any Requirement,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor, nor abatement or
diminution of Fixed Rent or any other item of Rental, nor shall the same release
Tenant from its obligations hereunder, nor constitute an actual or constructive
eviction, in whole or in part, by reason of inconvenience or annoyance to
Tenant, or injury to or interruption of Tenant's business, or otherwise, nor
impose any liability upon Landlord or its agents. If at any time the windows of
the Premises are temporarily closed, darkened or bricked-up, as aforesaid,
Landlord shall perform such repairs, maintenance, alterations or improvements
and comply with the applicable Requirements with reasonable diligence and
otherwise take such action as may be reasonably necessary to minimize the period
during which such windows are temporarily closed, darkened, or bricked-up.
C. Tenant shall immediately notify Landlord of any fire or
accident in the Premises, promptly upon becoming aware of same.
Section 9.2 Tenant shall obtain and keep in full force and effect (i) an
"all risk" insurance policy with a replacement cost endorsement for Alterations,
Specialty Alterations and Tenant's Property at the Premises, and (ii) a policy
of commercial general liability and property damage insurance on an occurrence
basis, with a contractual liability endorsement. Such policies shall provide
that Tenant is named as the insured. Landlord, Landlord's managing agent, and
any Lessors and any Mortgagees (whose names shall have been furnished to Tenant)
shall be added as additional insureds, as their respective interests may appear
with respect to the insurance required to be carried pursuant to clause (i)
above, and only to the extent of the named insured's negligence with respect to
the insurance required to be carried pursuant to clause (ii) above. Such policy
with respect to clause (ii) above shall include a provision under which the
insurer agrees to indemnify and hold Landlord, Landlord's managing agent, and
such Lessors and Mortgagees harmless from and against, subject to the limits of
liability set forth in this Section 9.2, all cost, expense and liability arising
out of, or based upon, any and all claims, accidents, injuries and damages
mentioned in Article 35. In addition, the policy required to be carried pursuant
to clause (ii) above shall contain a provision that (a) no act or omission of
Tenant shall affect or limit the obligation of the insurer to pay the amount of
any loss sustained, and (b) the policy shall be non-cancellable with respect to
Landlord, Landlord's managing agent, and such Lessors and Mortgagees (whose
names and addresses shall have been furnished to Tenant) unless thirty (30)
days' prior written notice shall have been given to Landlord and Landlord's
managing agent by certified mail, return receipt requested, which notice shall
contain the policy number and the names of the insured and additional insureds.
In addition,
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upon receipt by Tenant of any notice of cancellation or any other notice from
the insurance carrier which may adversely affect the coverage of the insureds
under such policy of insurance, Tenant shall immediately deliver to Landlord and
any other additional insured hereunder a copy of such notice. The minimum
amounts of liability under the policy of insurance required to be carried
pursuant to clause (ii) above shall be a combined single limit with respect to
each occurrence in an amount not less than Three Million Dollars ($3,000,000)
for injury (or death) to persons and damage to property, which amount shall be
increased from time to time to that amount of insurance which in Landlord's
reasonable judgment is then being customarily required by prudent landlords of
noninstitutional first-class buildings in New York City for office use. All
insurance required to be carried by Tenant pursuant to the terms of this Lease
shall be effected under valid and enforceable policies issued by reputable and
independent insurers permitted to do business in the State of New York, and
rated in Best's Insurance Guide, or any successor thereto (or if there be none,
an organization having a national reputation) as having a general policyholder
rating of "A" and a financial rating of at least "X".
Section 9.3 Upon the execution hereof, Tenant shall deliver to Landlord
appropriate certificates of insurance, including evidence of waivers of
subrogation required pursuant to Section 10.5 hereof, required to be carried by
Tenant pursuant to this Article 9. Evidence of each renewal or replacement of a
policy shall be delivered by Tenant to Landlord at least thirty (30) days prior
to the expiration of such policy.
Section 9.4 Tenant acknowledges that Landlord shall not carry insurance
on, and shall not be responsible for damage to, Tenant's Property or any
Alterations, (including Initial Alterations) and/or Specialty Alterations, and
that Landlord shall not carry insurance against, or be responsible for any loss
suffered by Tenant due to, interruption of Tenant's business; it being expressly
understood and agreed that the foregoing shall not affect Tenant's right, if
any, regarding an abatement of the Rental pursuant to Section 10.1 hereof.
ARTICLE 10
DESTRUCTION-FIRE OR OTHER CAUSE
Section 10.1 A. If the Premises (other than Alterations, Specialty
Alterations and Tenant's Property) shall be damaged by fire or other casualty,
and promptly following the giving of notice thereof to Landlord, the damage
(exclusive of damage to Alterations, Specialty Alterations and/or Tenant's
Property) shall, following completion of Landlord's insurance adjustment, be
diligently repaired by and at the expense of Landlord to substantially the
condition prior to the damage, and until the earlier of (i) sixty (60) days
after such repairs which are required to be performed by Landlord (excluding
Long Lead Work) shall be substantially completed (of which substantial
completion Landlord shall promptly notify Tenant), (ii) the date Tenant
substantially completes its work in the Premises after such casualty, or should
have substantially completed such work by exercising due diligence after such
casualty, and (iii) the
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date Tenant occupies the Premises for the conduct of its business after such
casualty, (x) the Fixed Rent and Space Factor shall be reduced in the proportion
which the ratio between the area of the part of the Premises which is not usable
by Tenant, as determined by Landlord in its reasonable discretion, bears to the
total area of the Premises immediately prior to such casualty, and (y) Tenant's
Share shall be redetermined based upon the proportion in which the ratio between
the rentable area of the Premises remaining after such casualty bears to the
rentable area of the Building remaining after such casualty. In the event that
Tenant is reasonably unable to conduct its business in the undamaged portion of
the Premises or Tenant does not have reasonable access to the Premises, then
Tenant may vacate the undamaged portion of the Premises and the Rental shall be
totally abated until the damage has been repaired and/or Tenant once again
Landlord's repair obligations have been substantially completed and Tenant has
reasonable access to the Premises. Upon the substantial completion of such
repairs (excluding Long Lead Work), Landlord shall diligently prosecute to
completion any items of Long Lead Work remaining to be completed. Landlord shall
have no obligation to repair any damage to, or to replace, any Alterations,
Specialty Alterations or Tenant's Property. Landlord shall use its reasonable
efforts to minimize interference with Tenant's use and occupancy in making any
repairs pursuant to this Section. Anything contained herein to the contrary
notwithstanding, if the Premises (including any Alterations) are damaged by fire
or other casualty at any time prior to the completion of the Initial
Alterations, Landlord's obligation to repair the Premises (and any Alterations)
shall be limited to repair of (w) the part of the Building Systems serving the
Premises on the Commencement Date, but not the distribution portions of such
Building Systems located within the Premises, (x) the floor and ceiling slabs of
the Premises, (y) the exterior walls of the Premises, and (z) the lavatories and
other core areas, all to substantially the same condition which existed on the
Commencement Date.
B. Prior to the substantial completion of Landlord's repair
obligations set forth in Section 10.1A. hereof, Landlord shall provide Tenant
and Tenant's contractor, subcontractors and materialmen access to the Premises
to perform Specialty Alterations (or Alterations, if Landlord is not obligated
to repair same pursuant to the provisions hereof), on the following terms and
conditions (but not to occupy the same for the conduct of business):
(1) Tenant shall not commence work in any portion of the
Premises until the date specified in a notice from Landlord to Tenant stating
that the repairs required to be made by Landlord have been or will be completed
to the extent reasonably necessary, in Landlord's discretion, to permit the
commencement of the Alterations and Specialty Alterations then prudent to be
performed in accordance with good construction practice in the portion of the
Premises in question without interference with, and consistent with the
performance of, the repairs remaining to be performed.
(2) Such access by Tenant shall be deemed to be subject
to all of the applicable provisions of this Lease, including, without
limitation, Tenant's obligation to
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pay to Landlord the Factor as more particularly set forth in Article 13 hereof,
except that there shall be no obligation on the part of Tenant solely because of
such access to pay any Fixed Rent (exclusive of the Factor) portion of the
Factor applicable to electrical usage during such construction) or Escalation
Rent with respect to the affected portion of the Premises for any period prior
to substantial completion of the repairs.
(3) It is expressly understood that if Landlord shall be
prevented from substantially completing the repairs due to any acts of Tenant,
its agents, servants, employees or contractors, including, without limitation,
by reason of the performance of any Alterations and Specialty Alteration by
reason of Tenant's failure or refusal to comply or to cause its architects,
engineers, designers and contractors to comply with any of Tenant's obligations
described or referred to in this Lease, or if such repairs are not completed
because under good construction scheduling practice such repairs should be
performed after completion of any Alterations and Specialty Alteration then such
repairs shall be deemed substantially complete on the date when the repairs
would have been substantially completed but for such delay and the expiration of
the abatement of the Tenant's obligations hereunder shall not be postponed by
reason of such delay. Any additional costs to Landlord to complete any repairs
occasioned by such delay shall be paid by Tenant to Landlord within ten (10)
days after demand, as additional rent.
Section 10.2 Anything contained in Section 10.1 hereof to the contrary
notwithstanding, if the Building shall be so damaged by fire or other casualty
that, in Landlord's reasonable opinion (confirmed by a reputable independent
architect or contractor retained by Landlord), substantial alteration,
demolition, or reconstruction of the Building shall be required (whether or not
the Premises shall have been damaged or rendered untenantable), then Landlord,
at Landlord's option, may, not later than sixty (60) days following the damage,
give Tenant a notice in writing terminating this Lease. If Landlord elects to
terminate this Lease, the Term shall expire upon a date set by Landlord, but not
sooner than the tenth (10th) day nor later than the thirtieth (30th) day after
such notice is given, and Tenant shall vacate the Premises and surrender the
same to Landlord in accordance with the provisions of Article 20 hereof. Upon
the termination of this Lease under the conditions provided for in this Section
10.2, the Rental shall be apportioned to the date that the Premises are no
longer usable or the date of termination (whichever date occurs sooner) and any
prepaid portion of Rental for any period after such date shall be refunded by
Landlord to Tenant.
Section 10.3 A. Within forty-five (45) days after notice to Landlord of
any damage described in Section 10.1 hereof, Landlord shall deliver to Tenant a
statement prepared by a reputable contractor setting forth such contractor's
estimate as to the time required to repair such damage, exclusive of time
required to repair any Alterations, Initial Alterations or Specialty Alterations
(which are Tenant's obligation to repair) or to perform Long Lead Work. If the
estimated time period exceeds nine (9) months from the date of such statement,
Tenant may elect to terminate this Lease by notice to Landlord not later than
thirty (30) days following
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receipt of such statement. If Tenant makes such election, the Term shall expire
upon the thirtieth (30th) day after notice of such election is given by Tenant,
and Tenant shall vacate the Premises and surrender the same to Landlord in
accordance with the provisions of Article 20 hereof. If Tenant shall not have
elected to terminate this Lease pursuant to this Article 10 (or is not entitled
to terminate this Lease pursuant to this Article 10), the damage shall be
diligently repaired by and at the expense of Landlord as set forth in Section
10.1 hereof. Except as expressly set forth in this Section 10.3A., Tenant shall
have no other options to cancel this Lease under this Article 10.
B. Notwithstanding the foregoing, if the Premises shall be
substantially damaged during the last two (2) years of the Term, either party
may elect by notice, given within thirty (30) days after the occurrence of such
damage, to terminate this Lease and if either party makes such election, the
Term shall expire upon the thirtieth (30th) day after notice of such election is
given, and Tenant shall vacate the Premises and surrender the same to Landlord
in accordance with the provisions of Article 20 hereof.
Section 10.4 This Article 10 constitutes an express agreement governing
any case of damage or destruction of the Premises or the Building by fire or
other casualty, and Section 227 of the Real Property Law of the State of New
York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
Section 10.5 The parties hereto shall procure an appropriate clause in, or
endorsement on, any fire or extended coverage insurance covering the Premises,
the Building and personal property, fixtures and equipment located thereon or
therein, pursuant to which the insurance companies waive subrogation or consent
to a waiver of right of recovery and having obtained such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, will not make any claim against or seek to recover from the other for
any loss or damage to its property or the property of others resulting from fire
or other hazards of the type covered by such fire and extended coverage
insurance. If the payment of an additional premium is required for the inclusion
of such waiver of subrogation provision, each party shall advise the other of
the amount of any such additional premiums and the other party at its own
election may, but shall not be obligated to, pay the same. If such other party
shall not elect to pay such additional premium, the first party shall not be
required to obtain such waiver of subrogation provision. If the payment of an
additional premium is required for naming the other party as an additional
insured, each party shall advise the other of the amount of any such additional
premium and the other party at its own election may, but shall not be obligated
to, pay the same. If such other party shall not elect to pay such additional
premium even with the payment of an additional premium, then such party shall so
notify the first party and the first party shall not have the obligation to name
the other party as an additional insured. In the event that Tenant shall be
unable to obtain a waiver of
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subrogation clause for Landlord's benefit for any reason whatsoever, then
Landlord shall have no obligation to obtain a waiver of subrogation clause for
the benefit of Tenant, even if one is readily available. Tenant acknowledges
that Landlord shall not carry insurance on and shall not be responsible for
damage to, Tenant's Property or Specialty Alterations or any other Alteration
prior to the completion of the Initial Alterations, and that Landlord shall not
carry insurance against, or be responsible for any loss suffered by Tenant due
to, interruption of Tenant's business.
ARTICLE 11
EMINENT DOMAIN
Section 11.1 If the whole of the Real Property, the Building or the
Premises shall be acquired or condemned for any public or quasi-public use or
purpose, this Lease and the Term shall end as of the date of the vesting of
title with the same effect as if said date were the Expiration Date. If only a
part of the Real Property (comprised of at least thirty percent (30%) of the
rentable area of the Building) and not the entire Premises shall be so acquired
or condemned then, (1) except as hereinafter provided in this Section 11.1, this
Lease and the Term shall continue in force and effect, but, if a part of the
Premises is included in the part of the Real Property so acquired or condemned,
from and after the date of the vesting of title, (x) the Fixed Rent and the
Space Factor shall be reduced in the proportion which the area of the part of
the Premises so acquired or condemned bears to the total area of the Premises
immediately prior to such acquisition or condemnation, (y) Tenant's Share shall
be redetermined based upon the proportion in which the ratio between the
rentable area of the Premises remaining after such acquisition or condemnation
bears to the rentable area of the Building remaining after such acquisition or
condemnation, and (z) the security deposit pursuant to Article 31 below shall be
reduced in the same proportion that the Fixed Rent and Space Factor are reduced;
(2) whether or not the Premises shall be affected thereby, Landlord, at
Landlord's option, may give to Tenant, within sixty (60) days next following the
date upon which Landlord shall have received notice of vesting of title, a
thirty (30) days' notice of termination of this Lease if Landlord shall elect to
terminate leases (including this Lease), affecting at least fifty percent (50%)
of the rentable area of the Building (excluding any rentable area leased by
Landlord or its Affiliates); and (3) if the part of the Real Property so
acquired or condemned shall contain more than fifteen percent (15%) of the total
area of the Premises immediately prior to such acquisition or condemnation, or
if, by reason of such acquisition or condemnation, Tenant no longer has
reasonable means of access to the Premises, Tenant, at Tenant's option, may give
to Landlord, within sixty (60) days next following the date upon which Tenant
shall have received notice of vesting of title, a thirty (30) days' notice of
termination of this Lease. If any such thirty (30) days' notice of termination
is given by Landlord or Tenant, this Lease and the Term shall come to an end and
expire upon the expiration of said thirty (30) days with the same effect as if
the date of expiration of said thirty (30) days were the Expiration Date. If a
part of the Premises shall be so acquired or condemned and this Lease and the
Term shall not be terminated pursuant to the foregoing provisions of this
Section 11.1, Landlord, at Landlord's expense, shall restore that part of the
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Premises not so acquired or condemned to a self-contained rental unit inclusive
of Tenant's Alterations (other than Specialty Alterations), except that if such
acquisition or condemnation occurs prior to completion of the Initial
Alterations, Landlord shall only be required to restore that part of the
Premises not so acquired or condemned to a self-contained rental unit exclusive
of Tenant's Alterations. Upon the termination of this Lease and the Term
pursuant to the provisions of this Section 11.1, the Rental shall be apportioned
and any prepaid portion of Rental for any period after such date shall be
refunded by Landlord to Tenant.
Section 11.2 In the event of any such acquisition or condemnation of all
or any part of the Real Property, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall have no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term and Tenant hereby expressly assigns to Landlord
all of its right in and to any such award. Nothing contained in this Section
11.2 shall be deemed to prevent Tenant from making a separate claim in any
condemnation proceedings for the then value of any Tenant's Property included in
such taking, and for any moving expenses.
Section 11.3 If the whole or any part of the Premises shall be acquired or
condemned temporarily during the Term for any public or quasi-public use or
purpose, Tenant shall give prompt notice thereof to Landlord and the Term shall
not be reduced or affected in any way and Tenant shall continue to pay in full
all items of Rental payable by Tenant hereunder without reduction or abatement,
and Tenant shall be entitled to receive for itself any award or payments for
such use, provided, however, that:
(i) if the acquisition or condemnation is for a period not extending
beyond the Term and if such award or payment is made less frequently than
in monthly installments, the same shall be paid to and held by Landlord as
a fund which Landlord shall apply from time to time to the Rental payable
by Tenant hereunder, except that, if by reason of such acquisition or
condemnation changes or alterations are required to be made to the
Premises which would necessitate an expenditure to restore the Premises,
then a portion of such award or payment considered by Landlord as
appropriate to cover the expenses of the restoration shall be retained by
Landlord, without application as aforesaid, and applied toward the
restoration of the Premises as provided in Section 11.1 hereof; or
(ii) if the acquisition or condemnation is for a period extending
beyond the Term, such award or payment shall be apportioned between
Landlord and Tenant as of the Expiration Date; Tenant's share thereof, if
paid less frequently than in monthly installments, shall be paid to
Landlord and applied in accordance with the provisions of clause (i)
above, provided, however, that the amount of any award or payment allowed
or retained for restoration of the Premises shall remain the property of
Landlord if this Lease shall expire prior to the restoration of the
Premises.
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ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
Section 12.1 Tenant, without the prior consent of Landlord in each
instance, shall not (a) assign its rights or delegate its duties under this
Lease (whether by operation of law, transfers of interests in Tenant or
otherwise), mortgage or encumber its interest in this Lease, in whole or in
part, (b) sublet, or permit the subletting of, the Premises or any part thereof,
or (c) permit the Premises or any part thereof to be occupied or used for desk
space, mailing privileges or otherwise, by any Person other than Tenant.
Notwithstanding anything to the contrary contained herein, Tenant may assign
this Lease or sublet the entire demised premises, upon prior notice to Landlord,
but not subject to Landlord's consent or the provisions of Sections 12.4, and
12.10 hereof, to an Affiliate, subject to all of the other terms and conditions
of this Lease. In addition, without Landlord's consent, Tenant may permit up to
25% of the Premises to be used by Affliates or business associates for desk
space, provided and on condition that: (i) such space is not (and is not
required by Requirements to be) separately divided, (ii) the occupancy of the
Premises is subject to all of the terms of this Lease, (iii) such occupant shall
have no right to or interest in the Premises, and (iv) Tenant does not receive a
profit from such arrangement.
Section 12.2 A. If Tenant's interest in this Lease is assigned in
violation of the provisions of this Article 12, such assignment shall be void
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy, and shall apply the net
amount collected to the Fixed Rent and other items of Rental reserved in this
Lease. If the Premises or any part thereof are sublet to, or occupied by, or
used by, any Person other than Tenant, whether or not in violation of this
Article 12, Landlord, after default by Tenant under this Lease, including,
without limitation, a subletting or occupancy in violation of this Article 12,
may collect any item of Rental or other sums paid by the subtenant, user or
occupant as a fee for its use and occupancy, and shall apply the net amount
collected to the Fixed Rent and other items of Rental reserved in this Lease. In
the event that any such default is cured, then any sums collected from any
subtenant, user or occupant in excess of the Fixed Rent and other items of
Rental reserved in this Lease shall forthwith be paid to Tenant after deducting
any fees and expenses payable by Tenant to Landlord in connection with such
default. No such assignment, subletting, occupancy or use, whether with or
without Landlord's prior consent, nor any such collection or application of
Rental or fee for use and occupancy, shall be deemed a waiver by Landlord of any
term, covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as Tenant hereunder. The consent by
Landlord to any assignment, subletting, occupancy or use shall not relieve
Tenant from its obligation to obtain the express prior consent of Landlord to
any further assignment, subletting, occupancy or use.
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B. Tenant shall reimburse Landlord on demand for any costs
that may be incurred by Landlord in connection with any proposed assignment of
Tenant's interest in this Lease or any proposed subletting of the Premises or
any part thereof, including, without limitation, any reasonable processing fee,
reasonable attorneys' fees and disbursements and the reasonable costs of making
investigations as to the acceptability of the proposed subtenant or the proposed
assignee.
C. Neither any assignment of Tenant's interest in this Lease
nor any subletting, occupancy or use of the Premises or any part thereof by any
Person other than Tenant, nor any collection of Rental by Landlord from any
Person other than Tenant as provided in this Section 12.2, nor any application
of any such Rental as provided in this Section 12.2 shall, in any circumstances,
relieve Tenant of its obligations under this Lease on Tenant's part to be
observed and performed.
Section 12.3. A. If Tenant is a partnership, the admission of new
Partners, the withdrawal, retirement, death, incompetency or bankruptcy of any
Partner, or the reallocation of partnership interests among the Partners, shall
not constitute an assignment of this Lease, provided that the principal purpose
of any such admission, withdrawal, or retirement is not to circumvent the
restrictions on assignment set forth in the provisions of this Article 12. The
reorganization of Tenant from a professional corporation or corporation into a
partnership or limited liability entity or the reorganization of a Tenant from a
partnership into a professional corporation or limited liability entity, shall
not constitute an assignment of this Lease, provided that immediately following
such reorganization the Partners, shareholders or members of Tenant shall be the
same as the shareholders or partners of Tenant existing immediately prior to
such reorganization, as the case may be. If Tenant shall become a professional
corporation or limited liability entity, each individual shareholder or member
of Tenant as the case may be, and each employee of a professional corporation
which is a shareholder in Tenant shall have the same personal liability as such
individual or employee would have under this Lease if Tenant were a partnership
and such individual or employee were a Partner in Tenant. If any individual
Partner in Tenant is or becomes an employee of a professional corporation, or a
member of a limited liability entity such individual shall have the same
personal liability under this Lease as such individual would have if he and not
the professional corporation or limited liability entity were a Partner of
Tenant.
B. A transfer (including the issuance of treasury stock or the
creation and issuance of new stock or a new class of stock) of fifty percent
(50%) or more of the shares of Tenant (if Tenant is a corporation or trust) or a
transfer of fifty percent (50%) or more of the total interest in Tenant (if
Tenant is a partnership or other entity) at any one time or through a series of
transfers over a twelve (12) month period, shall be deemed an assignment of this
Lease and shall be subject to all of the provisions of this Article 12,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of
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shares of Tenant (if Tenant is a corporation or trust) for purposes of this
Section 12.4 shall not include the sale of shares by persons other than those
deemed "insiders" within the meaning of the Securities Exchange Act of 1934, as
amended, which sale is effected through the "over-the-counter market" or through
any recognized stock exchange. The provisions of this Article 12 shall not apply
to any transaction with a corporation into which Tenant merges or with which
Tenant consolidates or to which all or substantially all of Tenant's assets are
transferred provided that (i) a principal purpose of the transaction is not the
assignment of this Lease, (ii) the surviving corporation, immediately after the
transaction, has a net worth equal to or greater than that of Tenant immediately
prior to the transaction, and Landlord is furnished with certified financial
statements confirming such net worth, and (iii) the surviving corporation
assumes all of Tenant's obligations under this Lease and Landlord is provided
with an executed copy of the assumption agreement.
Section 12.4 If Tenant shall at any time or times during the Term, desire
to assign this Lease or sublet all or any portion of the Premises (except to an
Affiliate as provided in Section 12.1), Tenant shall first give written notice
of such desire to Landlord, which notice shall contain the proposed effective
date of the desired assignment or commencement date of the desired sublease (and
the expiration date, if a sublease), and if only a portion of the Premises is to
be sublet, the notice shall be accompanied by a floor plan of the Premises on
which the area to be subleased is shown cross-hatched. Such notice (a "Leaseback
Notice") shall be deemed an offer from Tenant to Landlord whereby Landlord may,
at its option, (i) sublease such space (hereinafter called the "Leaseback
Space") from Tenant upon the terms and conditions hereinafter set forth (if the
proposed transaction is a sublease of part of the Premises), or (ii) terminate
this Lease or sublease such space for the term of the proposed sublease as set
forth in the Leaseback Notice (if the proposed transaction is an assignment or a
sublease of all or substantially all of the Premises). For purposes hereof, more
than one (1) transaction with the same party or related parties within a one (1)
year period shall be deemed one (1) transaction. Said options may be exercised
by Landlord by notice to Tenant at any time within sixty (60) days after such
notice has been given by Tenant to Landlord, and during such sixty (60) day
period Tenant shall not assign this Lease nor sublet such space to any person
nor entity or advertise, list or market said space. If Tenant does not
consummate an assignment or sublease within one hundred eighty (180) days
following the giving of the Leaseback Notice, Tenant shall be required to comply
again with the provisions of this Section 12.4 before assigning this Lease,
subletting such space or advertising, listing or marketing said space.
Section 12.5 If Landlord exercises its option to terminate this Lease in
the case where Tenant desires either to assign this Lease or sublet all or
substantially all of the Premises, then this Lease shall end and expire on the
date that such assignment or sublet was to be effective or commence, as the case
may be, and the Fixed Rent and Escalation Rent due hereunder shall be paid and
apportioned to such date.
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Section 12.6 If Landlord exercises its option to sublet the Leaseback
Space, such sublease to Landlord (as subtenant) shall be at the rental rate per
rentable square foot of Fixed Rent and additional rent then payable pursuant to
this Lease, and such sublease shall:
(a) be expressly subject to all of the covenants, agreements, terms,
provisions and conditions of this Lease except such as are irrelevant or
inapplicable, and except as otherwise expressly set forth to the contrary in
this Article;
(b) be for the same term as proposed by Tenant pursuant to Section
12.4 above;
(c) give the sublessee the unqualified and unrestricted right,
without Tenant's permission, to assign such sublease or any interest therein
and/or to sublet the Leaseback Space or any part or parts of the Leaseback Space
and to make any and all changes, alterations and improvements in the space
covered by such sublease as Landlord deems necessary or desirable, and if the
proposed sublease will result in all or substantially all of the Premises being
sublet, grant Landlord the option to extend the term of such sublease for the
balance of the Term less one (1) day;
(d) provide that any assignee or further subtenant of Landlord may,
at the election of Landlord, be permitted to make alterations, decorations and
installations in the Leaseback Space or any part thereof as Landlord deems
necessary or desirable and shall also provide in substance that any such
alterations, decorations and installations in the Leaseback Space therein made
by any assignee or subtenant of Landlord may be removed, in whole or in part, by
such assignee or subtenant, at its option, prior to or upon the expiration or
other termination of such assignment or sublease, provided that such assignee or
subtenant, at its expense, shall repair any damage and injury to that portion of
the Leaseback Space so sublet caused by such removal;
(e) also provide that (i) the parties to such sublease expressly
negate any intention that any estate created under such sublease be merged with
any other estate held by either of said parties, (ii) any assignment or
subletting by Landlord (as the subtenant) may be for any purpose or purposes
that Landlord, in Landlord's uncontrolled discretion, shall deem suitable or
appropriate, (iii) Tenant, at Landlord's expense, shall and will at all times
provide and permit reasonably appropriate means of ingress to and egress from
the Leaseback Space so sublet by Tenant to Landlord, (iv) Landlord, at Tenant's
expense, may make such alterations as may be required or deemed necessary by
Landlord to physically separate the Leaseback Space from the balance of the
Premises and to comply with any Requirements of Governmental Authorities
relating to such separation, and (v) that at the expiration of the term of such
sublease, Tenant will accept the space covered by such sublease in its then
existing condition, subject to the obligations of the sublessee to make such
repairs thereto as may be necessary to preserve the space demised by such
sublease in reasonable order and condition; and
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(f) Tenant shall have no obligation, at the expiration or earlier
termination of the Term, to remove any alteration, installation or improvement
made in the Leaseback Space by Landlord or to restore the Leaseback Space to its
original condition by removing any such alteration, installation or improvement.
Section 12.7 Performance by Landlord or its designee, under a sublease of
the Leaseback Space to Landlord, shall be deemed performance by Tenant of any
similar obligation under this Lease and any default under any such sublease
shall not give rise to a default under a similar obligation contained in this
Lease, nor shall Tenant be liable for any default under this Lease or deemed to
be in default hereunder if such default arises directly from any act or omission
of the subtenant under such sublease or arises directly from any act or omission
of any occupant holding under or pursuant to any such sublease.
Section 12.8 A. In the event Landlord does not exercise an option provided
to it pursuant to Section 12.4 or does not possess such option pursuant to
Section 12.1 or 12.3 above, and provided that Tenant is not in default (beyond
the expiration of any applicable notice and grace period) of any of Tenant's
obligations under this Lease, Landlord's consent (which must be in writing) to
the proposed assignment or sublease shall not be unreasonably withheld or
delayed, provided and upon condition that:
(a) Tenant shall have complied with the provisions of Section 12.4
and Landlord shall not have exercised any of its options under said Section 12.4
within the time permitted therefor;
(b) The proposed assignee or subtenant is engaged in a business and
the Premises, or the relevant part thereof, will be used in a manner which (i)
is in keeping with the then standards of the Building, and (ii) is limited to
the use expressly permitted under this Lease;
(c) The proposed assignee or subtenant is a reputable person of good
character and with sufficient financial worth considering the responsibility
involved, and Landlord has been furnished with reasonable proof thereof;
(d) The proposed assignee or sublessee, is not then (i) an occupant
or an Affiliate of any occupant of any part of the Building, or (ii) negotiating
with Landlord to lease space in the Building, in either case only if Landlord
has, or will have within six (6) months following receipt of Tenant's request
for consent, comparable space available for leasing.
(e) The form of the proposed sublease or assignment shall comply
with the applicable provisions of this Article and be reasonably acceptable to
Landlord;
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(f) The number of occupants in the Premises (including Tenant,
subtenants and Landlord or Landlord's designee) shall not exceed two (2); and
(g) Tenant shall not have (i) advertised or publicized in any way
the availability of the Premises without prior written notice to Landlord, nor
shall any advertisement state the name (as distinguished from the address) of
the Building or the proposed rental, or (ii) listed the Premises for subletting
or assignment with a broker, agent or representative at a rental rate less than
the Fixed Rent and Escalation Rent at which Landlord is then offering to lease
other comparable space in the Building, provided, however, the foregoing shall
not be construed as prohibiting Tenant from consummating an assignment or
sublease on any terms acceptable to it.
B. Except for any subletting by Tenant to Landlord pursuant to
the provisions of this Article, each subletting pursuant to this Article shall
be subject to all of the covenants, agreements, terms, provisions and conditions
contained in this Lease. Notwithstanding any such subletting to Landlord or any
such subletting to any other subtenant and/or acceptance of Fixed Rent or
additional rent by Landlord from any subtenant, Tenant shall and will remain
fully liable for the payment of the Rental due and to become due hereunder and
for the performance of all the covenants, agreements, terms, provisions and
conditions contained in this Lease on the part of Tenant to be performed and all
acts and omissions of any assignee, subtenant or other occupant permitted
hereunder or anyone claiming under or through any assignee, subtenant or other
occupant permitted hereunder which shall be in violation of any of the
obligations of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant further agrees that notwithstanding any such
assignment or subletting, no other and further assignment or subletting of the
Premises by Tenant or any person claiming through or under Tenant shall or will
be made except upon compliance with and subject to the provisions of this
Article. If Landlord shall decline to give its consent to any proposed
assignment or sublease, Tenant shall indemnify, defend and hold harmless
Landlord against and from any and all loss, liability, damages, costs and
expenses (including reasonable counsel fees) resulting from any claims that may
be made against Landlord by any brokers with whom Tenant dealt claiming a
commission or similar compensation in connection with the proposed assignment or
sublease.
Section 12.9 With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this Lease, it is further agreed:
(a) No subletting shall be for a term ending later than one (1) day
prior to the Expiration Date as the same may be extended;
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(b) No sublease shall be valid, and no subtenant shall take
possession of the Premises or any part thereof, until an executed counterpart of
such sublease has been delivered to Landlord and consented to by it;
(c) Each sublease shall provide that it is subject and subordinate
to this Lease and to the matters to which this Lease is or shall be subordinate,
and that in the event of termination, re-entry or dispossess by Landlord under
this Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not (i) be liable for
any previous act or omission of Tenant under such sublease, (ii) be subject to
any offset not expressly provided in such sublease, which theretofore accrued to
such subtenant against Tenant, or (iii) be bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
unless Landlord shall have consented to same; and
(d) The failure by Landlord to exercise its option under Section
12.4 with respect to any subletting shall not be deemed a waiver of such option
with respect to any extension of such subletting or any subsequent subletting of
the Premises affected thereby.
Section 12.10.A. Subject to the provisions of this Section 12.10, in
connection with any subletting of all or any portion of the Premises by Tenant,
Tenant shall pay to Landlord an amount equal to fifty percent (50%) of any
Sublease Profit derived therefrom, provided, however, that in no event shall
Tenant be entitled to any proceeds derived from or relating to (directly or
indirectly) any subletting of the Recapture Space by Landlord or its designee to
a subtenant. All sums payable hereunder by Tenant shall be calculated on an
annualized basis (equitably adjusted for partial years), and shall be paid to
Landlord, as additional rent, within ten (10) days after receipt thereof by
Tenant.
B. For purposes of this Lease:
(1) "Rent Per Square Foot" shall mean the sum of the then Fixed Rent
and Escalation Rent divided by the Space Factor.
(2) "Sublease Profit" shall mean the product of (x) the Sublease
Rent Per Square Foot less the Rent Per Square Foot, and (y) the number of
rentable square feet constituting the portion of the Premises sublet by Tenant.
(3) "Sublease Rent" shall mean any rent or other consideration paid
to Tenant directly or indirectly by any subtenant or any other amount received
by Tenant from or in connection with any subletting (including, but not limited
to, sums paid for the sale or rental, or consideration received on account of
any contribution, of Tenant's Property or sums paid in connection with the
supply of electricity less the Sublease Expenses.
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(4) "Sublease Expenses" shall mean: (i) in the event of a sale of
Tenant's Property, the then unamortized or undepreciated cost thereof determined
on the basis of Tenant's federal income tax returns, (ii) the reasonable
out-of-pocket costs and expenses of Tenant in making such sublease, such as
brokers' fees, attorneys' fees, and advertising fees paid to unrelated third
parties, (iii) any sums paid to Landlord pursuant to Section 12.2B. hereof, and
(iv) the cost of improvements or alterations made by Tenant expressly and solely
for the purpose of preparing that portion of the Premises for such subtenancy if
not used by Tenant subsequent to the expiration of the term of the sublease, as
determined by Tenant's federal income tax returns. In determining Sublease Rent,
the costs set forth in clauses (ii), (iii) and (iv) shall be amortized on a
straight-line basis over the term of such sublease.
(5) "Sublease Rent Per Square Foot" shall mean the Sublease Rent
divided by the rentable square feet of the space demised under the sublease in
question.
(6) Sublease Profit shall be recalculated from time to time to
reflect any corrections in the prior calculation thereof due to (i) subsequent
payments received or made by Tenant, (ii) the final adjustment of payments to be
made by or to Tenant, and (iii) mistake. Promptly after receipt or final
adjustment of any such payments or discovery of any such mistake, Tenant shall
submit to Landlord a recalculation of the Sublease Profit, and an adjustment
shall be made between Landlord and Tenant, on account of prior payments made or
credits received pursuant to this Section 12.10. In addition, if Sublease
Expenses utilized for the purpose of calculating Sublease Profit included an
amount attributable to the cost of the improvements made by Tenant expressly and
solely for the purpose of preparing the Premises or a portion thereof for the
occupancy of the subtenant and subsequent to the expiration of the sublease such
improvements and/or alterations were not demolished and/or removed, Sublease
Profits shall be recalculated as if the cost of such improvements and/or
alterations were not incurred by Tenant and Tenant promptly shall pay to
Landlord fifty percent (50%) of the additional amount of such Sublease Profit.
C. Tenant shall pay to Landlord, upon receipt thereof, fifty
percent (50%) of the Assignment Proceeds. For purposes of this Paragraph C.,
"Assignment Proceeds" shall mean all consideration payable to Tenant, directly
or indirectly, by any assignee, or any other amount received by Tenant from or
in connection with any assignment (including, but not limited to, sums paid for
the sale or rental, or consideration received on account of any contribution, of
Tenant's Property) after deducting therefrom: (i) in the event of a sale (or
contribution) of Tenant's Property, the then unamortized or undepreciated cost
thereof determined on the basis of Tenant's federal income tax returns, (ii) the
reasonable out-of-pocket costs and expenses of Tenant in making such assignment,
such as brokers' fees, attorneys' fees, and advertising fees paid to unrelated
third parties, (iii) any payments required to be made by Tenant in connection
with the assignment of its interest in this Lease pursuant to Article 31-B of
the Tax Law of the State of New York or any real property transfer tax of the
United States
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or the City or State of New York (other than any income tax), (iv) any sums paid
by Tenant to Landlord pursuant to Section 12.2B. hereof, and (v) the cost of
improvements or alterations made by Tenant expressly and solely for the purpose
of preparing the Premises for such assignment, as determined by Tenant's federal
income tax returns. If the consideration paid to Tenant for any assignment shall
be paid in installments, then the expenses specified in this Paragraph C. shall
be amortized over the period during which such installments shall be payable. If
Landlord exercises its right to take an assignment of or cancel this Lease
pursuant to the provisions of Section 12.4 hereof, in no event shall Tenant be
entitled to any proceeds derived from or relating to (directly or indirectly)
any lease or sublease of the Premises by Landlord or further assignment of this
Lease.
ARTICLE 13
ELECTRICITY
Section 13.1 As an incident to this Lease and as part of the Fixed Rent
payable hereunder, Landlord shall furnish to Tenant, subject to compliance with
Requirements, through transmission facilities installed by it in the Building,
alternating electric current to be used by Tenant in the Premises in such amount
as shall be sufficient during Business Hours of Business Days for the operation
of Tenant's lighting fixtures and customary small office machines; provided,
however, that Landlord shall not be obligated to provide electric current in an
amount in excess of five (5) watts (connected load) of electric current per
gross usable square foot of space in the Premises (inclusive of any
supplementary system installed by or on behalf of Tenant and exclusive of the
base Building air conditioning system) (the "Electric Capacity"). Landlord shall
not be liable in any way to Tenant for any failure or defect in supply or
character of electric current furnished to be Premises. At Landlord's option,
Landlord shall furnish and install all lighting tubes, ballasts, lamps and bulbs
used in the Premises and Tenant shall pay, promptly upon demand as additional
rent, Landlord's reasonable and competitive charges therefore. Tenant shall use
said electric current for lighting and, insofar as Landlord's facilities are not
burdened thereby and applicable laws and insurance regulations permit, for
operation of such equipment as is normally used in connection with the operation
of a business office. The portion of the Fixed Rent attributable to electric
current so furnished to Tenant, is hereinafter referred to as the "Factor". In
no event is the Factor to be less than the Factor on the date of this Lease
($16,156.25), as thereafter increased pursuant to Section 13.5 below.
Notwithstanding anything to the contrary contained herein, Tenant shall pay for
electricity consumed in the Premises from and after the Commencement Date.
Section 13.2 Tenant's use of electric current in the Premises shall not at
any time exceed the Electric Capacity. Tenant shall not make or perform, or
permit the making or performing of, any alterations to wiring installations or
other electrical facilities in or serving the Premises or any additions to the
business machines, office equipment or other appliances in the Premises which
utilize would have a material impact on Tenant's electrical energy usage in
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the Premises, without the prior written consent of Landlord in each instance.
Should Landlord grant any such consent, all additional risers or other equipment
required therefor shall be installed by Landlord and the reasonable cost thereof
plus all reasonable costs incurred by Landlord to any electrical engineer
retained by Landlord to review the electrical work required by Tenant shall be
paid by Tenant, as additional rent, promptly upon demand. As a condition to
granting any such consent, Landlord may require that Tenant agree to an increase
in the Fixed Rent payable hereunder by an amount which will reflect the value to
Tenant (as determined pursuant to Section 13.3 below) of the additional service
to be furnished by Landlord, that is, the potential additional electric current
to be made available to Tenant. If Landlord and Tenant cannot agree thereon,
such amount shall be determined by a reputable independent electrical engineer
or consultant, to be selected by Landlord and paid by Tenant. The findings of
the consultant or engineer in all such instances shall be conclusive and binding
upon the parties, subject to Tenant's right to contest such findings pursuant to
Section 13.7 below. When the amount of such increase is so determined, the
parties shall execute and exchange an agreement supplementary hereto to reflect
the increase in the amount of the Fixed Rent payable hereunder, effective from
the date such additional service is made available to Tenant, but such increase
shall be effective from such date even if such supplementary agreement is not
executed.
Section 13.3. Landlord may, at any time or from time to time, retain a
reputable independent electrical engineer or consultant, selected by Landlord
and paid by Landlord, to make a survey of the electrical wiring and power load
to determine what the value would be to Tenant if it were purchasing electricity
directly from the utility company at Landlord's rate schedule, provided,
however, that under no circumstances may the Factor be reduced below the amount
set forth in Section 13.1 above as thereafter increased pursuant to Section 13.5
below. The findings of the consultant or engineer in all such instances shall be
conclusive and binding upon the parties, subject to Tenant's right to contest
such findings pursuant to Section 13.7 below. When the amount of such value is
so determined, the parties shall execute and exchange an agreement supplementary
hereto to reflect any appropriate increase in the amount of the Fixed Rent
payable hereunder, effective from the date of such survey, but such increase
shall be effective from such date even if such supplementary agreement is not
executed.
Section 13.4 If any tax is imposed upon Landlord in connection with the
furnishing of electric current to Tenant by any Federal, State or Local
Government subdivision or authority, Tenant shall pay Landlord an amount equal
to such tax, where permitted by law.
Section 13.5 If, subsequent to May 8, 1997 the public utility rate
schedule or any portion of the charge for the supply of electric current the
Building is increased or decreased or such rate schedule is superseded by
another rate schedule, the Factor shall be increased or decreased by the same
percentage as the percentage of increase or decrease in Landlord's cost for
purchasing electricity for the Building and the Fixed Rent shall be adjusted
accordingly; provided, however, that under no circumstances may the Factor be
reduced below the amount
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set forth in Section 13.1 above as thereafter increased pursuant to this Section
13.5. If Landlord and Tenant cannot agree thereon, the amount of such adjustment
shall be determined by a reputable independent electrical engineer or
consultant, to be selected by Landlord and paid equally by both parties. The
findings of the consultant or engineer, in all such instances, shall be
conclusive and binding upon the parties. Whenever the amount of any such
adjustment is so determined, the parties shall execute and exchange an agreement
supplementary hereto to reflect such adjustment in the amount of the Factor (and
the Fixed Rent) payable hereunder, effective from the effective date of such
increase, decrease or change in such rate schedule or charge, but such
adjustment shall be effective from such date whether or not a supplementary
agreement is executed.
Section 13.6 Landlord reserves the right to discontinue furnishing
electric current to Tenant in the Premises at any time upon not less than thirty
(30) days' written notice to Tenant. If Landlord exercises such right of
termination, this Lease shall continue in full force and effect and shall not be
affected thereby, except that, from and after the effective date of such
termination, Landlord shall not be obligated to furnish electric current to
Tenant and the Fixed Rent payable hereunder shall be reduced by the Factor. If
Landlord so discontinues furnishing electric current to Tenant, Tenant shall
arrange to obtain electric current directly from the public utility company
furnishing electric current to the Building; provided, however, Landlord shall
not discontinue furnishing electricity to Tenant until Tenant is capable of
receiving electricity directly from the public utility or other applicable
source, except as otherwise required by Requirements. Such electric current may
be furnished to Tenant by means of the then existing Building system feeders,
risers and wiring to the extent that the same are available, suitable and safe
for such purposes. All meters and additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electric current directly from such public utility company shall be installed
and maintained by Landlord at Tenant's sole cost and expense; provided, however,
that if the discontinuance is voluntary and not as the result of Requirements or
changes in electric rates, then Landlord shall pay such cost of installation and
maintenance.
Section 13.7 Anything in Sections 13.3 and 13.5 to the contrary
notwithstanding, the finding of the consultants or engineers retained by
Landlord shall be conclusive unless within thirty (30) days after delivery of
such invoices or consultant's determination to Tenant, Tenant disputes such
determination. If Tenant so disputes the determination, it shall, at its own
expense, obtain from a reputable independent electrical engineer or consultant,
its own determination in accordance with the provisions of this Section 13.7. If
such determination differs from the determination of Landlord's engineer or
consultant, the two engineers or consultants shall choose a third reputable
electrical engineer or consultant whose cost shall be shared equally by Landlord
and Tenant to make a similar determination, which determination shall be
controlling. If they are unable to agree upon the identity of the third engineer
or consultant, then such appointment shall be made by the American Arbitration
Association or any successor. However, pending controlling determination, Tenant
shall pay to Landlord the
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amount in accordance with the determination of Landlord's engineer or
consultant. If the final determination differs from that of Landlord's engineer
or consultant, then the parties shall promptly made adjustment for any
deficiency owed by Tenant or overage paid by Tenant. If any amount is owed by
either party to the other, it shall be promptly paid to the other together with
interest at the Base Rate.
Section 13.8 A. Notwithstanding the foregoing, at Tenant's option at
anytime during the Term prior to the eighth (8th) anniversary of the
Commencement Date, upon at least ninety (90) days prior written notice, and at
Tenant's sole cost and expense, Tenant may elect to have Landlord furnish
electric energy to the Premises through the presently installed electrical
facilities and any electrical facilities installed by Tenant with Landlord's
approval for normal business office purposes. Tenant shall, commencing on the
installation of all applicable check meters (which shall be installed by Tenant
under Landlord's supervision (or at Landlord's option by Landlord), at Tenant's
sole expense) and continuing thereafter throughout the Term, pay to Landlord, as
additional rent ("Electricity Additional Rent"), a charge for electricity
furnished to the Premises determined by applying the aggregate KW demand and KW
hours of electricity consumed in the Premises, as registered by the check meters
and the equipment ancillary thereto, to the service classification applicable to
the Building with respect to the purchase of electricity and the consumption
level for which Tenant qualifies, and adding thereto a 8% charge to compensate
Landlord for administrative expenses and any transmission loss in transmitting
the electric energy from its source in the Building to the Premises. After
notice from Tenant of its election to receive electricity pursuant to this
Section 13.8 and upon the installation of the applicable check meters and
equipment ancillary thereto to measure Tenant's electric consumption, the Fixed
Rent for the remainder of the Term shall be reduced by the Factor.
B. In addition, Tenant shall pay when due all sales or other taxes, fuel
adjustments, surcharges, and any other charges or fees, which shall be payable
by Landlord or Tenant as a result of the electricity purchased by Landlord and
supplied to Tenant pursuant to this Section 13.8.
C. The meters installed in the Premises shall be read by an electrical
consultant retained by Landlord. Where more than one (1) meter measures the
electricity supplied to Tenant, each meter shall be read in conjunction with the
other and the totalized reading shall be computed and billed in accordance with
the provisions hereinabove set forth. Bills for the Electricity Additional Rent
shall be rendered to Tenant at such time or times as Landlord may elect and
Tenant shall pay the amount shown thereon to Landlord within twenty (20) days
after receipt of such bill.
D. All of the other terms and provisions of Article 13 shall apply to
Tenant's use of electricity in the Premises.
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E. Tenant shall maintain and keep any meters in the Premises in good
repair (including replacements, if necessary) and in good working order and
condition. All costs and expenses of maintaining, repairing, replacing and
reading the meters shall be borne by Tenant. During any period when a meter is
nonoperational, the Electricity Additional Rent shall be billed on the basis of
the Electricity Additional Rent payable during the comparable period in the
preceding year, but as adjusted for rate changes and changes in the Space Factor
and reasonably ascertainable changes in Tenant's electrical consumption.
F. If the public utility furnishing electric energy to the Building, or
any Laws and Ordinances require a modification or revision of this Article 13,
Tenant agrees to execute such modification as may be required, provided however,
that in no event shall the Fixed Rent be reduced to an amount below the amounts
thereof stated in Section 1.1 of this Lease. Tenant agrees to comply with all
rules and regulations of the public utility applicable to it.
G. Landlord's failure to render any statement under the provisions of this
Article 13 shall not prejudice its right thereunder to render such statement for
prior or subsequent periods. The obligations of Tenant pursuant to the
provisions of this Article shall survive the expiration or sooner termination of
the Term.
ARTICLE 14
ACCESS TO PREMISES
Section 14.1 A. Tenant shall permit Landlord, Landlord's agents,
representatives, contractors and employees and public utilities servicing the
Building to erect, use and maintain, concealed ducts, pipes and conduits in and
through the Premises. Landlord, Landlord's agents, representatives, contractors,
and employees and the agents, representatives, contractors, and employees of
public utilities servicing the Building shall have the right to enter the
Premises at all reasonable times upon reasonable prior notice (except in the
case of an emergency in which event Landlord and Landlord's agents,
representatives, contractors, and employees may enter without prior notice to
Tenant), which notice may be oral, to examine the same, to show them to
prospective purchasers, or prospective or existing Mortgagees or Lessors, and to
make such repairs, alterations, improvements, additions or restorations (i) as
Landlord may deem necessary or desirable to the Premises (if in compliance with
a Requirement or to fulfill an obligation to Tenant) or to any other portion of
the Building or Building Systems, or (ii) which Landlord may, pursuant to
Section 4.1 above, elect to perform following ten (10) days after notice, except
in the case of an emergency (in which event Landlord and Landlord's agents,
representatives, contractors, and employees may enter without prior notice to
Tenant), following Tenant's failure to make repairs or perform any work which
Tenant is obligated to make or perform under this Lease, or (iii) for the
purpose of complying with any Requirements, a Superior Lease or a Mortgage, and
Landlord shall be allowed to take all material into and upon the Premises that
may be required therefor without the same constituting an eviction or
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constructive eviction of Tenant in whole or in part and the Fixed Rent (and any
other item of Rental) shall under no circumstances abate (except to the extent
expressly set forth in Section 10.1 hereof) while said repairs, alterations,
improvements, additions or restorations are being made, by reason of loss or
interruption of business of Tenant, or otherwise.
B. Any work performed or installations made pursuant to this
Article 14 shall be made with reasonable diligence and otherwise pursuant to the
provisions of Section 4.3 hereof. Following completion of the work or
installations, Landlord shall promptly repair any damage to the Premises
resulting therefrom.
C. Except as hereinafter provided, any pipes, ducts, or
conduits installed in or through the Premises pursuant to this Article 14 shall
be concealed behind, beneath or within partitioning, column enclosures,
ceilings, floors or raised floors located or to be located in the Premises.
Notwithstanding the foregoing, any such pipes, ducts, or conduits may be furred
at points immediately adjacent to partitioning columns or ceilings located or to
be located in the Premises, provided that the same are completely furred and
that the installation of such pipes, ducts, or conduits, when completed, shall
not reduce the usable area of the Premises beyond a de minimis amount.
Section 14.2 During the twelve (12) month period prior to the Expiration
Date or the expiration of any renewal or extended term, Landlord may exhibit the
Premises to prospective tenants thereof.
Section 14.3 If Tenant shall not be present when for any reason entry into
the Premises shall be necessary or permissible, Landlord or Landlord's agents,
representatives, contractors or employees may enter the same without rendering
Landlord or such agents liable therefor if during such entry Landlord or
Landlord's agents shall accord reasonable care under the circumstances to
Tenant's Property, and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever, for the care,
supervision or repair of the Building or any part thereof, other than as herein
provided.
Section 14.4 Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, elevators, stairs, toilets,
or other public parts of the Building and to change the name, number or
designation by which the Building is commonly known, provided any such change
does not (a) unreasonably reduce, interfere with or deprive Tenant of access to
the Building or the Premises, or (b) reduce the rentable area (except by a de
minimis amount) of the Premises. All parts (except surfaces facing the interior
of the Premises) of all walls, windows and doors bounding the Premises
(including exterior Building walls, exterior core corridor walls, exterior doors
and entrances), all balconies, terraces and roofs adjacent to the Premises, all
space in or adjacent to the
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Premises used for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan
rooms, heating, air cooling, plumbing and other mechanical facilities, service
closets and other Building facilities are not part of the Premises, and Landlord
shall have the use thereof, as well as access thereto through the Premises for
the purposes of operation, maintenance, alteration and repair.
Section 14.5 A. Tenant understands and agrees that Landlord may, at any
time or from time to time during the Term, perform substantial renovation work
in and to the Building or the mechanical systems serving the Building (which
work may include, but need not be limited to, the repair or replacement of the
Building's exterior facade, setbacks, exterior window glass, elevators,
electrical systems, air conditioning and ventilating systems, plumbing system,
common hallways, or lobby), any of which work may require access to the same
from within the Premises.
B. Tenant agrees that:
(i) Landlord shall have access to the Premises at all
reasonable times, upon reasonable notice, for the purpose of performing
such work.
(ii) Landlord shall incur no liability to Tenant, nor
shall Tenant be entitled to any abatement of Rental on account of any
noise, vibration, or other disturbance to Tenant's business at the
Premises (provided that Tenant is not denied access to the Premises) which
shall arise out of said access by Landlord or by the performance by
Landlord of the aforesaid renovations at the Building.
C. Landlord shall use reasonable efforts (which shall not
include any obligation to employ labor at overtime rates except to avoid
material interference with Tenant's use of the Premises) to avoid disruption of
Tenant's business during any such entry upon the Premises by Landlord.
D. It is expressly understood and agreed by and between
Landlord and Tenant that if Tenant shall commence any action or proceeding
seeking injunctive, declaratory, or monetary relief in connection with the
rights reserved to Landlord under this provision, or if Landlord shall commence
any action or proceeding to obtain access to the Premises in accordance with
this provision, then the reasonable legal fees, costs and disbursements incurred
by the prevailing party relating to or arising out of such action or proceeding
shall be paid by the other party. Any payment to be made by Tenant to Landlord
pursuant to this provision shall be deemed additional rent.
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ARTICLE 15
CERTIFICATE OF OCCUPANCY
Tenant shall not at any time use or occupy the Premises in violation of
the certificate of occupancy at such time issued for the Premises or for the
Building and in the event that any department of the City or State of New York
shall hereafter contend or declare by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose which is a violation
of such certificate of occupancy, Tenant, upon five (5) Business Days' written
notice from Landlord or any Governmental Authority, shall immediately
discontinue such use of the Premises.
ARTICLE 16
DEFAULT
Section 16.1 Each of the following events shall be an "Event of Default"
hereunder:
A. If Tenant shall default in the payment when due of any
installment of Fixed Rent and such default shall continue for five (5) Business
Days after notice of such default is given to Tenant, or in the payment when due
of any other item of Rental and such default shall continue for five (5)
Business Days after notice of such default is given to Tenant, except that if
Landlord shall have given two (2) such notices in any twelve (12) month period,
Tenant shall not be entitled to any further notice of its delinquency in the
payment of Rental until such time as twelve (12) consecutive months shall have
elapsed without Tenant having defaulted in any such payment; or
B. if Tenant shall default in the observance or performance of
any term, covenant or condition on Tenant's part to be observed or performed
under any other lease with Landlord or Landlord's predecessor in interest of
space in the Building and such default shall continue beyond any grace period
set forth in such other lease for the remedying of such default; or
C. if the Premises shall become abandoned (the Premises shall
not be deemed abandoned if, notwithstanding that Tenant shall have vacated the
Premises, the Premises are actively and continuously marketed for subletting or
assignment and Tenant shall continue to fulfill its obligations under this
Lease); or
D. if Tenant's interest or any portion thereof in this Lease
shall devolve upon or pass to any person, whether by operation of law or
otherwise, except as expressly permitted under Article 12 hereof; or
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E. (1) if Tenant shall commence or institute any case,
proceeding or other action (a) seeking relief on its behalf as debtor, or to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property and same is not discontinued within thirty (30)
days; or
(2) if Tenant shall make a general assignment for the
benefit of creditors; or
(3) if any case, proceeding or other action shall be
commenced or instituted against Tenant (a) seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or (b) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, which in either of such
cases (i) results in any such entry of an order for relief, adjudication of
bankruptcy or insolvency or such an appointment or the issuance or entry of any
other order having a similar effect or (ii) remains undismissed for a period of
ninety (90) days; or
(4) if a trustee, receiver or other custodian is
appointed for any substantial part of the assets of Tenant which appointment is
not vacated or stayed within thirty (30) Business Days; or
F. if Tenant shall default in the observance or performance of
any other term, covenant or condition of this Lease on Tenant's part to be
observed or performed and Tenant shall fail to remedy such default within twenty
(20) days after notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of twenty (20) days and Tenant shall not commence within said
period of twenty (20) days, or shall not thereafter diligently prosecute to
completion, all steps necessary to remedy such default; provided, however, that
such extension of time shall not be effective if Landlord or any Lessor or
Mortgagee would thereby become subject to any civil or criminal liability or if
the interest of any Lessor in its Superior Lease would be jeopardized by reason
thereof or if the default would constitute a default under any Mortgage; or
G. if Tenant shall fail more than two (2) times during any
twelve (12) month period to pay any installment of Fixed Rent when due or any
other item of Rental
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when due, after receipt of notice and the expiration of the applicable grace
period pursuant to the provisions of Section A. above, if such notice and grace
period are then required; or
H. if Tenant shall fail to pay any installment of Fixed Rent
or items of Rental within the time period specified in Section A. above, and
Landlord shall bring more than one (1) summary dispossess proceeding during any
twelve (12) month period.
Section 16.2 A. If an Event of Default (i) described in Section 16.1E.
hereof shall occur, or (ii) described in Sections 16.1A., B., C., D., F., G. or
H. shall occur and Landlord, at any time thereafter, at its option gives written
notice to Tenant stating that this Lease and the Term shall expire and terminate
on the date specified in such notice (which date shall not be less than five (5)
days after the date of such notice), then this Lease and the Term and all rights
of Tenant under this Lease shall expire and terminate as if the date on which
the Event of Default described in clause (i) above occurred or the date set
forth in such notice, pursuant to clause (ii) above, as the case may be, were
the Fixed Expiration Date and Tenant immediately shall quit and surrender the
Premises, but Tenant shall nonetheless be liable for all of its obligations
hereunder, as provided for in Articles 17 and 18 hereof. Anything contained
herein to the contrary notwithstanding, if such termination shall be stayed by
order of any court having jurisdiction over any proceeding described in Section
16.1E. hereof, or by federal or state statute, then, following the expiration of
any such stay, or if the trustee appointed in any such proceeding, Tenant or
Tenant as debtor-in-possession shall fail to assume Tenant's obligations under
this Lease within the period prescribed therefor by law or within one hundred
twenty (120) days after entry of the order for relief or as may be allowed by
the court, or if said trustee, Tenant or Tenant as debtor-in-possession shall
fail to provide adequate protection of Landlord's right, title and interest in
and to the Premises or adequate assurance of the complete and continuous future
performance of Tenant's obligations under this Lease as provided in Section
12.3B., Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on five (5) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said five (5)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession or said trustee shall immediately quit and surrender the
Premises as aforesaid.
B. If an Event of Default described in Section 16.1A. hereof
shall occur, and this Lease shall be terminated as provided in Section 16.2A.
hereof, Landlord, without notice, may reenter and repossess the Premises and may
dispossess Tenant by summary proceedings or otherwise.
Section 16.3 If at any time, (i) Tenant shall comprise two (2) or more
persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
Lease shall have been assigned, the word "Tenant", as used in Section 16.1E.,
shall be deemed to mean any one or more of the persons primarily or
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secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 16.1E. shall be deemed paid as
compensation for the use and occupation of the Premises and the acceptance of
any such compensation by Landlord shall not be deemed an acceptance of Rental or
a waiver on the part of Landlord of any rights under Section 16.2.
ARTICLE 17
REMEDIES AND DAMAGES
Section 17.1 A. If there shall occur any Event of Default, and or this
Lease and the Term shall expire and come to an end as provided in Article 16
hereof:
(1) Tenant shall quit and peacefully surrender the
Premises to Landlord, and Landlord and its agents may immediately, or at any
time after such default or after the date upon which this Lease and the Term
shall expire and come to an end, re-enter the Premises or any part thereof,
without notice, either by summary proceedings, or by any other applicable action
or proceeding, (without being liable to indictment, prosecution or damages
therefor), and may repossess the Premises and dispossess Tenant and any other
persons from the Premises and remove any and all of their property and effects
from the Premises; and
(2) Landlord, at Landlord's option, may relet the whole
or any portion or portions of the Premises from time to time, either in the name
of Landlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the Expiration Date, at such rental or rentals and
upon such other conditions, which may include concessions and free rent periods,
as Landlord, in its sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability.
B. Tenant hereby waives the service of any notice of intention
to re-enter to that end which may otherwise be required to be given under any
present or future law. Tenant, on its own behalf and on behalf of all persons
claiming through or under Tenant, including all creditors, does further hereby
waive any and all rights which Tenant and all such persons might otherwise have
under any present or future law to redeem the Premises, or to re-enter or
repossess the Premises, or to restore the operation of this Lease, after (a)
Tenant
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shall have been dispossessed by a judgment or by warrant of any court or judge,
or (b) any re-entry by Landlord, or (c) any expiration or termination of this
Lease and the Term, whether such dispossess, re-entry, expiration or termination
shall be by operation of law or pursuant to the provisions of this Lease. The
words "re-enter," "re-entry" and "re-entered" as used in this Lease shall not be
deemed to be restricted to their technical legal meanings. In the event of a
breach or threatened breach by Tenant, or any persons claiming through or under
Tenant, of any term, covenant or condition of this Lease, Landlord shall have
the right to enjoin such breach and the right to invoke any other remedy allowed
by law or in equity as if re-entry, summary proceedings and other special
remedies were not provided in this Lease for such breach. The right to invoke
the remedies hereinbefore set forth are cumulative and shall not preclude
Landlord from invoking any other remedy allowed at law or in equity.
Section 17.2 A. If this Lease and the Term shall expire and come to an end
as provided in Article 16 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent,
Escalation Rent and other items of Rental payable under this Lease by Tenant to
Landlord to the date upon which this Lease and the Term shall have expired and
come to an end or to the date of re-entry upon the Premises by Landlord, as the
case may be, and Tenant shall repay to Landlord all rent concessions and/or work
allowances or reimbursements given to Tenant and brokerage commissions paid by
Landlord with respect to this Lease;
(2) Tenant also shall be liable for and shall pay to
Landlord, as damages, any deficiency (referred to as "Deficiency") between the
Rental for the period which otherwise would have constituted the unexpired
portion of the Term had this Lease not been terminated prior to the Fixed
Expiration Date, and the net amount, if any, of rents collected under any
reletting effected pursuant to the provisions of clause (2) of Section 17.1 A.
for any part of such period (first deducting from the rents collected under any
such reletting all of Landlord's expenses in connection with the termination of
this Lease, Landlord's re-entry upon the Premises and with such reletting,
including, but not limited to, all repossession costs, brokerage commissions,
legal expenses, attorneys' fees and disbursements, alteration costs,
contribution to work and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent,
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any
monthly Deficiency as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall
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pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
Rental for the period which otherwise would have constituted the unexpired
portion of the Term exceeds the then fair and reasonable rental value of the
Premises for the same period, both discounted to present worth at the Base Rate
less the aggregate amount of Deficiencies theretofore collected by Landlord
pursuant to the provisions of clause A. (2) of this Section 17.2 for the same
period; if, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the Premises, or any part thereof, shall have
been relet by Landlord for the period which otherwise would have constituted the
unexpired portion of the Term, or any part thereof, the amount of rent reserved
upon such reletting shall be deemed, prima facie, to be the fair and reasonable
rental value for the part or the whole of the Premises so relet during the term
of the reletting.
B. If the Premises, or any part thereof, shall be relet
together with other space in the Building, the rents collected or reserved under
any such reletting and the expenses of any such reletting shall be equitably
apportioned for the purposes of this Section 17.2. Tenant shall in no event be
entitled to any rents collected or payable under any reletting, whether or not
such rents shall exceed the Fixed Rent reserved in this Lease. Solely for the
purposes of this Article 17, the term "Escalation Rent" as used in Section
17.2A. shall mean the Escalation Rent in effect immediately prior to the
Expiration Date, or the date of reentry upon the Premises by Landlord, as the
case may be, adjusted to reflect any increase pursuant to the provisions of
Article 27 hereof for the Operating Year immediately preceding such event.
Nothing contained in Article 16 hereof or this Article 17 shall be deemed to
limit or preclude the recovery by Landlord from Tenant of the maximum amount
allowed to be obtained as damages by any statute or rule of law, or of any sums
or damages to which Landlord may be entitled in addition to the damages set
forth in this Section 17.2.
ARTICLE 18
LANDLORD FEES AND EXPENSES
Section 18.1 If Tenant shall be in default (whether or not the time to
cure the same has elapsed) under this Lease or if Tenant shall knowingly do or
permit to be done any act or thing upon the Premises which would cause Landlord
to be in default under any Superior Lease or Mortgage, Landlord may (1) as
provided in Section 14.1 hereof, perform the same for the account of Tenant, or
(2) make any expenditure or incur any obligation for the payment of money,
including, without limitation, reasonable attorneys' fees and disbursements in
instituting, prosecuting or defending any action or proceeding, and the
reasonable cost thereof, with interest thereon at the Applicable Rate, shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Landlord
within ten (10) days of rendition of any bill or statement to Tenant therefor,
and if the Term shall have expired at the time of making of such expenditures or
incurring of such obligations, such sums shall be recoverable by Landlord as
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damages. Landlord shall give Tenant such notice as may be appropriate under the
circumstances before undertaking any performance or making any expenditure
hereunder.
Section 18.2 If Tenant shall fail to pay any installment of Fixed Rent,
Escalation Rent or any other item of Rental within five (5) days of the date
when due, Tenant shall pay to Landlord, in addition to such installment of Fixed
Rent, Escalation Rent or other item of Rental, as the case may be, as a late
charge and as additional rent, a sum equal to interest at the Applicable Rate on
the amount unpaid, computed from the date such payment was due to and including
the date of payment.
ARTICLE 19
NO REPRESENTATIONS BY LANDLORD
Landlord and Landlord's agents and representatives have made no
representations or promises with respect to the Building, the Real Property or
the Premises and no rights, easements or licenses are acquired by Tenant by
implication or otherwise except as expressly set forth herein. Tenant shall
accept possession of the Premises in the condition which shall exist on the
Commencement Date "as is" and Landlord shall have no obligation to perform any
work or make any installations in order to prepare the Premises for Tenant's
occupancy, except as otherwise provided in Section 1.1 hereof. All references in
this Lease to the consent or approval of Landlord shall be deemed to mean the
written consent or approval of Landlord and no consent or approval of Landlord
shall be effective for any purpose unless such consent or approval is set forth
in a written instrument executed by Landlord. Notwithstanding the foregoing,
Landlord shall, to the extent not already performed, clean the convectors of the
HVAC system serving the Premises in a Building standard manner.
ARTICLE 20
END OF TERM
Upon the expiration or other termination of this Lease, Tenant shall quit
and surrender to Landlord the Premises, vacant, broom clean, in good order and
condition, ordinary wear and tear and damage for which Tenant is not responsible
under the terms of this Lease excepted, and otherwise in compliance with the
provisions of Article 3 hereof. Tenant expressly waives, for itself and for any
person claiming through or under Tenant, any rights which Tenant or any such
person may have under the provisions of Section 2201 of the New York Civil
Practice Law and Rules and of any successor law of like import then in force in
connection with any holdover summary proceedings which Landlord may institute to
enforce the foregoing provisions of this Article 20 with respect to the
originally stated Expiration Date. Tenant acknowledges that possession of the
Premises must be surrendered to Landlord on the Expiration Date. Tenant agrees
to indemnify and save Landlord harmless from and against all
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claims, losses, damages, liabilities, costs and expenses (including, without
limitation, attorneys' fees and disbursements) resulting from delay by Tenant in
so surrendering the Premises, including, without limitation, any claims made by
any succeeding tenant founded on such delay. The parties recognize and agree
that the damage to Landlord resulting from any failure by Tenant to timely
surrender possession of the Premises as aforesaid will be extremely substantial,
will exceed the amount of the monthly installments of the Fixed Rent and
Escalation Rent theretofore payable hereunder, and will be impossible to measure
accurately. Tenant therefore agrees that if possession of the Premises is not
surrendered to Landlord on or before the Expiration Date, in addition to any
other rights or remedies Landlord may have hereunder or at law, and without in
any manner limiting Landlord's right to demonstrate and collect any damages
suffered by Landlord and arising from Tenant's failure to surrender the Premises
as provided herein, Tenant shall pay to Landlord on account of use and occupancy
of the Premises for each month and for each portion of any month during which
Tenant holds over in the Premises after the Expiration Date, a sum equal to one
and one-half for the first sixty days of such holdover and thereafter, two (2)
times the aggregate of that portion of the Fixed Rent, Escalation Rent and other
items of Rental which were payable under this Lease during the last month of the
Term. Nothing herein contained shall be deemed to permit Tenant to retain
possession of the Premises without written consent after the Expiration Date or
to limit in any manner Landlord's right to regain possession of the Premises
through summary proceedings, or otherwise, and no acceptance by Landlord of
payments from Tenant after the Expiration Date shall be deemed to be other than
on account of the amount to be paid by Tenant in accordance with the provisions
of this Article 20. The provisions of this Article 20 shall survive the
Expiration Date.
ARTICLE 21
QUIET ENJOYMENT
Provided no Event of Default has occurred and is continuing, Tenant may
peaceably and quietly enjoy the Premises subject, nevertheless, to the terms and
conditions of this Lease.
ARTICLE 22
FAILURE TO GIVE POSSESSION
Tenant waives any right to rescind this Lease under Section 223-a of the
New York Real Property Law or any successor statute of similar nature and
purpose then in force and further waives the right to recover any damages which
may result from Landlord's failure for any reason to deliver possession of the
Premises on the date set forth in Section 1.1 hereof as the Commencement Date.
If Landlord shall be unable to give possession of the Premises on the
Commencement Date, and provided that Tenant is not responsible for such
inability to give possession, the Commencement Date shall be deemed to be the
date upon which Landlord shall
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have delivered possession of the Premises to Tenant. No such failure to give
possession on the Commencement Date shall in any way affect the validity of this
Lease or the obligations of Tenant hereunder or give rise to any claim for
damages by Tenant or claim for rescission of this Lease, nor shall the same be
construed in any way to extend the Term. Notwithstanding anything to the
contrary contained herein, in the event Landlord fails to deliver possession of
the Premises to Tenant by September 1, 1998, then Tenant may cancel this Lease
by delivering written notice of such cancellation to Landlord on or before
September 15, 1998 (time being of the essence with respect to the delivery of
such cancellation notice).
ARTICLE 23
NO WAIVER
Section 23.1 No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises. In the
event Tenant at any time desires to have Landlord sublet the Premises for
Tenant's account, Landlord or Landlord's agents are authorized to receive said
keys for such purpose without releasing Tenant from any of the obligations under
this Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's effects in connection with such subletting.
Section 23.2 The failure of Landlord or Tenant to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or any of the Rules and Regulations set forth or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation of the provisions of this Lease, from
having all of the force and effect of an original violation of the provisions of
this Lease. The receipt by Landlord or payment by Tenant of Fixed Rent,
Escalation Rent or any other item of Rental with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to enforce any of the Rules and Regulations set forth, or hereafter
adopted, against Tenant or any other tenant in the Building shall not be deemed
a waiver of any such Rules and Regulations No provision of this Lease shall be
deemed to have been waived by Landlord or Tenant, unless such waiver be in
writing signed by the party to be charged. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly Fixed Rent or other item of Rental
herein stipulated shall be deemed to be other than on account of the earliest
stipulated Fixed Rent or other item of Rental, or as Landlord may elect to apply
same, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Fixed Rent or other item of Rental be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to
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Landlord's right to recover the balance of such Fixed Rent or other item of
Rental or to pursue any other remedy provided in this Lease. This Lease contains
the entire agreement between the parties and all prior negotiations and
agreements are merged herein. Any executory agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this Lease
in whole or in part unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
The respective parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, or for the enforcement of any remedy under any
statute, emergency or otherwise. If Landlord commences any summary proceeding
against Tenant, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding (unless failure to impose such counterclaim
would preclude Tenant from asserting in a separate action the claim which is the
subject of such counterclaim), and will not seek to consolidate such proceeding
with any other action which may have been or will be brought in any other court
by Tenant.
ARTICLE 25
INABILITY TO PERFORM
This Except as otherwise expressly provided to the contrary in this Lease,
this Lease and the obligation of Tenant to pay Rental hereunder and perform all
of the other covenants and agreements hereunder on the part of Tenant to be
performed shall in no wise be affected, impaired or excused because Landlord is
unable to fulfill any of its obligations under this Lease expressly or impliedly
to be performed by Landlord, or because Landlord is unable to make, or is
delayed in making any repairs, additions, alterations, improvements or
decorations, or is unable to supply, or is delayed in supplying any equipment or
fixtures, if Landlord is prevented or delayed from so doing by reason of
strikes, lockouts, acts of labor unions or other labor troubles, or by accident,
or due to Acts of God, fire, earthquake, flood, explosion, action of the
elements, war, hostilities, invasion, acts of terrorism, insurrection, riot, mob
violence, sabotage, inability to procure or general shortage of labor,
equipment, facilities, materials, services or supplies in the open market,
failure of transportation or utilities, condemnation, requisition, laws,
preemption by Governmental Authorities in connection with a national emergency
or acts of terrorism, or by reason of any Requirements of any Governmental
Authority, or by reason of
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failure of the VAC, electrical, plumbing, or other Building Systems in the
Building not attributable to Landlord's negligence, or by any cause whatsoever
beyond Landlord's reasonable control (collectively, " Unavoidable Delays" or
"Force Majeure").
ARTICLE 26
BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease shall be in writing and shall be deemed
sufficiently given or rendered if delivered by hand (against a signed receipt)
or if sent by registered or certified mail or overnight courier (e.g. Federal
Express) (return receipt requested) addressed:
(i) if to Tenant (a) at Tenant's address set forth in this Lease, if
mailed prior to Tenant's taking possession of the Premises for the conduct
of business, or (b) at the Building if mailed subsequent to Tenant's
taking possession of the Premises, or (c) at any place where Tenant or any
agent or partner of Tenant may be found if mailed subsequent to Tenant's
vacating, deserting, abandoning or surrendering the Premises; and
(ii) if to Landlord at Landlord's address set forth in this Lease,
Attn.: Vice President-Asset Management with copies to (i) Equitable Life
Assurance Society of the United States, 787 Seventh Avenue, New York, New
York 10019 Attn: Legal Dept. and (ii) each Mortgagee and Lessor which
shall have requested same, by notice given in accordance with the
provisions of this Article 26 at the address designated by such Mortgagee
or Lessor, or
to such other or additional address(es) as Landlord, Tenant or any Mortgagee or
Lessor may designate as its new address(es) for such purpose by notice given to
the other in accordance with the provisions of this Article 26. Any such bill,
statement, consent, notice, demand, request or other communication shall be
deemed to have been rendered or given on the date when it shall have been hand
delivered or three (3) days from when it shall have been mailed or on the next
Business Day if sent by overnight courier as provided in this Article 26.
Anything contained herein to the contrary notwithstanding, any Operating
Statement, Tax Statement or any other bill, statement, consent,
notice, demand, request or other communication from Landlord to Tenant with
respect to any item of Rental (other than any "default notice" if required
hereunder) or Building-wide communications given to all tenants or other
occupants of the Building may be sent to Tenant by regular United States mail or
hand delivered without obtaining a receipt therefor. Any notice, demand or
request sent by Landlord to Tenant may be sent by Landlord's managing agent or
attorneys.
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ARTICLE 27
ESCALATION
Section 27.1 For the purposes of this Article 27, the following terms
shall have the meanings set forth below:
A. "Base Operating Expenses" shall mean the Operating Expenses
for the 1997 calendar year.
B. "Base Tax Year" shall mean the tax year ending June 30,
1998.
C. (1) "Operating Expenses" shall mean the aggregate of those
costs and expenses (and taxes, if any, thereon, including without limitation,
sales and value added taxes) paid or incurred by or on behalf of Landlord
(whether directly or through independent contractors) in respect of the
Operation of the Property which, are properly chargeable to the Operation of the
Property together with and including (without limitation) the costs of gas, oil,
steam, water, sewer rental, electricity (for the portions of the Real Property
not leased to and occupied by tenants or available for occupancy), VAC, heat and
other utilities furnished to the Building and utility taxes, and the expenses
incurred in connection with the Operation of the Property such as insurance
premiums, reasonable attorneys' fees and disbursements (exclusive of any such
fees and disbursements incurred in applying for any reduction of Taxes) and
management, auditing and other professional fees and expenses, but specifically
excluding:
(i) Taxes,
(ii) franchise or income taxes imposed upon Landlord,
(iii) debt service on Mortgages,
(iv) leasing commissions,
(v) capital improvements (except as otherwise provided
herein),
(vi) the cost of tenant installations incurred in
connection with preparing space for a new tenant,
(vii) salaries of personnel above the grade of property,
(viii) rent paid under Superior Leases,
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(ix) any expense for which Landlord is otherwise
compensated through the proceeds of insurance or is otherwise compensated
by any tenant (including Tenant) of the Building for services in excess of
the services Landlord is obligated to furnish to Tenant hereunder,
(x) legal fees incurred in connection with any
negotiation or enforcement of, any space lease in the Building,
(xi) costs and expenses incurred in connection with the
creation of a Mortgage or Superior Lease or in connection with the
refinancing of a Mortgage or the sale of the Building,
except, however, that if Landlord is not furnishing any particular work or
service (the cost of which if performed by Landlord would constitute an
Operating Expense) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which reasonably would have been incurred during such period by
Landlord if it had at its own expense furnished such work or services to such
tenant. Any costs incurred in performing work or furnishing services for any
tenant (including Tenant) whether at such tenant's or Landlord's expense, to the
extent that such work or service is in excess of any work or service that
Landlord is obligated to furnish to Tenant at Landlord's expense shall be
deducted from Operating Expenses otherwise chargeable to the Operation of the
Property. Any insurance proceeds received with respect to any item previously
included as an Operating Expense shall be deducted from Operating Expenses for
the Operating Year in which such proceeds are received; provided, however, to
the extent any insurance Proceeds are received by Landlord in any Operating Year
with respect to any item which was included in Operating Expenses during the
1995 or 1996 calendar years, the amount of insurance proceeds so received shall
be deducted from Base Operating Expenses and (x) the Base Operating Expenses
shall be retroactively adjusted to reflect such deduction and (y) all
retroactive Operating Payments resulting from such retroactive adjustment shall
be due and payable when billed by Landlord.
(2) In determining the amount of Operating Expenses for
any Operating Year, if less than all of the Building rentable area shall have
been occupied by tenant(s) at any time during any such Operating Year, Operating
Expenses shall be determined for such Operating Year to be an amount equal to
the like expenses which would normally be expected to be incurred had all such
areas been occupied throughout such Operating Year.
(3) (a) If any capital improvement is made during any
Operating Year in compliance with a Requirement whether or not such Requirement
is valid or mandatory, or in lieu of a repair, then the cost of such improvement
shall be amortized over the useful economic life of such improvement as
reasonably estimated by Landlord, and the annual
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amortization, together with interest thereon at the then Base Rate, of such
improvement shall be deemed an Operating Expense in each of the Operating Years
during which such cost of the improvement is amortized. For purposes hereof, the
removal of Hazardous Materials (other than ACMs) shall be deemed capital
improvements.
(b) If any capital improvement is made during any
Operating Year either for the purpose of saving or reducing Operating Expenses
(as, for example, a labor-saving improvement), and Landlord reasonably believes
that the capital improvement in question will, in fact, save or reduce Operating
Expenses, then the cost of such improvement shall be included in Operating
Expenses for the Operating Year in which such improvement was made; provided,
however, such cost shall be amortized over such period of time as Landlord
reasonably estimates such savings or reduction in Operating Expenses will equal
the cost of such improvement and the annual amortization, together with interest
thereon at the then Base Rate, of such improvement shall be deemed an Operating
Expense in each of the Operating Years during which such cost of the improvement
is amortized.
D. "Operating Statement" shall mean a statement in reasonable
detail setting forth a comparison of the Operating Expenses for an Operating
Year with the Base Operating Expenses and the Escalation Rent for the preceding
Operating Year pursuant to Article 27.
E. "Operating Year" shall mean the calendar year within which
the Commencement Date occurs and each subsequent calendar year for any part or
all of which Escalation Rent shall be payable pursuant to this Article 27.
F. "Taxes" shall mean the aggregate amount of real estate
taxes and any general or special assessments (exclusive of penalties and
interest thereon) imposed upon the Real Property (including, without limitation,
(i) assessments made upon or with respect to any "air" and "development" rights
now or hereafter appurtenant to or affecting the Real Property, (ii) any fee,
tax or charge imposed by any Governmental Authority for any vaults, vault space
or other space within or outside the boundaries of the Real Property, and (iii)
any taxes or assessments levied after the date of this Lease in whole or in part
for public benefits to the Real Property or the Building) without taking into
account any discount that Landlord may receive by virtue of any early payment of
Taxes; provided, that if because of any change in the taxation of real estate,
any other tax or assessment, however denominated (including, without limitation,
any franchise, income, profit, sales, use, occupancy, gross receipts or rental
tax) is imposed upon Landlord or the owner of the Real Property or the Building,
or the occupancy, rents or income therefrom, in substitution for or in addition
to any of the foregoing Taxes, such other tax or assessment shall be deemed part
of Taxes computed as if Landlord's sole asset were the Real Property. With
respect to any Tax Year, all expenses, including attorneys' fees and
disbursements, experts' and other witnesses' fees, incurred in contesting the
validity or amount of any Taxes or in obtaining a refund of Taxes shall be
considered as part of the Taxes for such
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Tax Year. Anything contained herein to the contrary notwithstanding, Taxes shall
not be deemed to include (w) any taxes on Landlord's income, (x) franchise
taxes, (y) estate or inheritance taxes, or (z) any similar taxes imposed on
Landlord, unless such taxes are levied, assessed or imposed in lieu of or as a
substitute for or in addition to the whole or any part of the taxes,
assessments, levies, impositions which now constitute Taxes.
G. "Tax Statement" shall mean a statement in reasonable detail
setting forth a comparison of the Taxes for a Tax Year with the Base Taxes.
H. "Tax Year" shall mean the period July 1 through June 30 (or
such other period as hereinafter may be duly adopted by the Governmental
Authority then imposing taxes as its fiscal year for real estate tax purposes),
any portion of which occurs during the Term.
Section 27.2 A. If the Taxes payable for any Tax Year (any part or all of
which falls within the Term) shall represent an increase above the Taxes for the
Base Tax Year, then Tenant shall pay as additional rent for such Tax Year and
continuing thereafter until a new Tax Statement is rendered to Tenant, Tenant's
Share of such increase (the "Tax Payment") as shown on the Tax Statement with
respect to such Tax Year. Tenant hereby waives any rights that Tenant may have
to be exempt from the payment of Taxes or the Tax Payment by virtue of
diplomatic status or otherwise.
B. At any time during or after the Term, Landlord may render
to Tenant a Tax Statement or Statements showing (i) a comparison of the Taxes
for the Tax Year with the Taxes for the Base Tax Year and (ii) the amount of the
Tax Payment resulting from such comparison. Tenant shall pay to Landlord the Tax
Payment, in advance, on the first day of the calendar month
within fifteen (15) days after Landlord furnishes Tenant with a Tax Statement
for such Tax Year. If the Tax Year established by the applicable Governmental
Authority shall be changed, any Taxes for the Tax Year prior to such change
which are included within the new Tax Year and which were the subject of a prior
Tax Statement shall be apportioned for the purpose of calculating the Tax
Payment payable with respect to such new Tax Year. Landlord's failure to render
a Tax Statement during or with respect to any Tax Year shall not prejudice
Landlord's right to render a Tax Statement during or with respect to any
subsequent Tax Year, and shall not eliminate or reduce Tenant's obligation to
make Tax Payments for such Tax Year. Whenever so requested, but no more than
once a year, Landlord shall furnish Tenant with a reproduced copy of the tax
bill (or receipted bill) for the Taxes for the current or next succeeding Tax
Year (if theretofore issued by the Governmental Authority).
Section 27.3 A. Only Landlord shall be eligible to institute tax
reduction or other similar proceedings. In the event that after a Tax Statement
has been sent to Tenant, a refund of Taxes with respect to a Tax Year during the
Term is actually received by or on behalf of Landlord, then, promptly after
receipt of such refund, Landlord shall send Tenant a Tax
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Statement adjusting the Taxes for such Tax Year (taking into account the
expenses mentioned in Section 27.1(G) hereof) and setting forth Tenant's Share
of such refund and Tenant shall be entitled to receive such Share either at
Landlord's option, by way of a credit against the Fixed Rent next becoming due
after the sending of such Tax Statement, or by a refund, to the extent no
further Fixed Rent is due; provided, however, that Tenant's Share of such refund
shall be limited to the portion of the Tax Payment, if any, which Tenant had
theretofore paid to Landlord attributable to increases in Taxes for the Tax Year
to which the refund is applicable.
B. In the event that, after a Tax Statement has been sent to
Tenant, the Base Taxes for the Base Tax Year (the "Base Taxes") are reduced (as
a result of settlement, final determination of legal proceedings or otherwise)
then, and in such event: (i) the Base Taxes shall be retroactively adjusted to
reflect such reduction, and (ii) all retroactive Tax Payments resulting from
such retroactive adjustment of Base Taxes shall be appropriately adjusted, as
well. If there shall be a reduction or refund of Taxes for the Base Tax Year
Landlord shall furnish to Tenant a statement indicating the amount thereof and
all prior and future payments of Escalation Rent Tax Payments provided for in
this Article 27 shall be recalculated accordingly. Any additional payment due
for any Tax Year as a result of such recalculation shall be made by Tenant
within fifteen (15) days after the furnishing of the revised statement.
Section 27.4 A. If the Operating Expenses for any Operating Year (any part
or all of which falls within the Term shall be greater than the Base Operating
Expenses, then Tenant shall pay as additional rent for such Operating Year and
continuing thereafter until a new Operating Statement is rendered to Tenant,
Tenant's Share of such increase (the "Operating Payment ") as hereinafter
provided.
B. At any time during or after the Term, Landlord may render
to Tenant an Operating Statement or Statements showing (i) a comparison of the
Operating Expenses for the Operating Year, in question (for which no statement
has previously been rendered by Landlord and full payment made by Tenant), with
the Base Operating Expenses, and (ii) the amount of the Operating Payment
resulting from such comparison. Landlord's failure to render an Operating
Statement during or with respect to such year or to any Operating Year in
question shall not prejudice Landlord's right to render an Operating Statement
during or with respect to any subsequent Operating Year, and shall not eliminate
or reduce Tenant's obligation to make payments of the Operating Payment pursuant
to this Article 27 for such Operating Year.
C. On the first day of the month, or fifteen (15) days
following the furnishing to Tenant of an Operating Statement, whichever is
later, Tenant shall pay to Landlord a sum equal to 1/12th of the Operating
Payment shown thereon to be due for the Operating Year which is the subject of
such Operating Statement, multiplied by the number of months (and any fraction
thereof) of the Term then elapsed since the commencement of such
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Operating Year in which such Operating Statement is delivered, less Operating
Payments theretofore made by Tenant for such Operating Year and thereafter,
commencing with the then current monthly installment of Fixed Rent and
continuing monthly thereafter until rendition of the next succeeding Operating
Statement, Tenant shall pay on account of the Operating Payment for such Year an
amount equal to 1/12th of the Operating Payment shown thereon to be due for the
preceding Operating Year. Any Operating Payment shall be collectible by Landlord
in the same manner as Fixed Rent.
D. (1) As used in this Section 27.4, (i) "Tentative Monthly
Escalation Charge" shall mean a sum equal to 1/12th of the product of (a)
Tenant's Share, and (b) the difference between (x) the Base Operating Expenses
and (y) Landlord's estimate of Operating Expenses for the Current Year, and (ii)
"Current Year" shall mean the Operating Year in which a demand is made upon
Tenant for payment of a Tentative Monthly Escalation Charge.
(2) At any time in any Operating Year, Landlord, at its
option, in lieu of the payments required under Section 27.4C. hereof, may demand
and collect from Tenant and Tenant shall pay within fifteen (15) days after
demand, as additional rent, a sum equal to the Tentative Monthly Escalation
Charge multiplied by the number of months in said Operating Year preceding the
demand and reduced by the sum of all payments theretofore made under Section
27.4C. with respect to said Operating Year, and thereafter, commencing with the
month in which the demand is made and continuing thereafter for each month
remaining in said Operating Year, the monthly installments of Fixed Rent shall
be deemed increased by the Tentative Monthly Escalation Charge. Any amount due
to Landlord under this Section 27.4D. may be included by Landlord in any
Operating Statement rendered to Tenant as provided in Section 27.4B. hereof.
E. After the end of the Current Year and at any time that
Landlord renders an Operating Statement or Statements to Tenant as provided in
Section 27.4B. hereof with respect to the comparison of the Operating Expenses
for said Operating Year or Current Year, with the Base Operating Expenses, as
the case may be, the amounts, if any, collected by Landlord from Tenant under
Section 27.4C. or D. on account of the Operating Payment or the Tentative
Monthly Escalation Charge, as the case may be, shall be adjusted, and, if the
amount so collected is less than or exceeds the amount actually due under said
Operating Statement for the Operating Year, a reconciliation shall be made as
follows: Tenant shall be debited with any Operating Payment shown on such
Operating Statement and credited with the amounts, if any, paid by Tenant on
account in accordance with the provisions of subsection C. and subsection D.(2)
of this Section 27.4 for the Operating Year in question. Tenant shall pay any
net debit balance to Landlord within fifteen (15) days next following rendition
by Landlord of an invoice for such net debit balance; any net credit balance
shall be applied against the next accruing monthly installments of Fixed Rent,
unless same cannot be fully credited against the remaining installments of Fixed
Rent, then, provided Tenant is not then in default under the terms of this
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Lease, Landlord shall pay to Tenant any such rent credit balance not so applied,
within thirty (30) days after the expiration of the Term.
Section 27.5 Any Operating Statement sent to Tenant shall be conclusively
binding upon Tenant unless, within thirty (30) days after such Statement is
sent, Tenant shall send a written notice to Landlord objecting to such Statement
and specifying the respects in which such Statement is disputed. If such notice
is sent, Tenant (together with its independent certified public accountants) may
examine Landlord's books and records relating to the Operation of the Property
to determine the accuracy of the Operating Statement. Tenant recognizes the
confidential nature of such books and records and agrees to maintain the
information obtained from such examination in strict confidence. If after such
examination, Tenant still disputes such Operating Statement, either party may
refer the decision of the issues raised to a reputable independent firm of
certified public accountants, selected by Landlord and approved by Tenant, which
approval shall not be unreasonably withheld or delayed as long as such certified
public accounting firm is one of the so-called "big-six" public accounting
firms, and the decision of such accountants shall be conclusively binding upon
the parties. The fees and expenses involved in such decision shall be borne by
the unsuccessful party (and if both parties are partially successful, such fees
and expenses shall be apportioned between Landlord and Tenant in inverse
proportion to the amount by which such decision is favorable to each party).
Notwithstanding the giving of such notice by Tenant, and pending the resolution
of any such dispute, Tenant shall pay to Landlord when due the amount shown on
any such Operating Statement, as provided in Section 27.4 hereof.
Section 27.6 The expiration or termination of this Lease during any
Operating Year or Tax Year shall not affect the rights or obligations of the
parties hereto respecting any payments of Operating Payments for such Operating
Year and any payments of Tax Payments for such Tax Year, which have not been
previously been paid by Tenant, and any Operating Statement relating to such
Operating Payment and any Tax Statement relating to such Tax Payment, may be
sent to Tenant subsequent to, and all such rights and obligations shall survive,
any such expiration or termination. In determining the amount of the Operating
Payment for the Operating Year or the Tax Payment for the Tax Year in which the
Term shall expire, the payment of the Operating Payment for such Operating Year
or the Tax Payment for the Tax Year shall be prorated based on the number of
days of the Term which fall within such Operating Year or Tax Year, as the case
may be. Any payments due under such Operating Statement or Tax Statement shall
be payable within twenty (20) days after such Statement is sent to Tenant.
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ARTICLE 28
SERVICES
Section 28.1 So long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall, without charge (except as specified
herein):
A. Provide elevator service on Business Days, holidays excepted,
during Business Hours, and subject to Section 28.3, have one elevator on
call at all other days and times. Tenant agrees that Landlord may, at its
election, install elevators with or without operators and may change the
same from time to time.
B. (1) Maintain and keep in good order and repair the central
air-conditioning, heating and ventilating system installed by Landlord,
except for those repairs which are the obligation of Tenant pursuant to
Article 4 of this Lease. The aforesaid system will be operated by Landlord
during the applicable seasons on Business Days, and shall be in operation
during Business Hours only and on Saturdays from 8:00 A.M. - 1:00 P.M.,
except holidays. Tenant hereby expressly waives any claims against
Landlord arising out of the cessation of operation of the central air
conditioning, heating and ventilating systems, or the suitability of the
Premises when the same are not in operation, whether due to normal
scheduling or for the reasons set forth in Section 28.3. Landlord will not
be responsible for the failure of the air conditioning system if such
failure results from the occupancy of the Premises by more than an average
of one person for each 100 square feet in any separate room or area or if
Tenant installs and operates machines, incandescent lighting and
appliances the total connected electrical load of which exceeds 2
volt-amperes per square foot of usable area in any separate room or area.
If Tenant desires to install a supplemental HVAC unit within the Premises,
such unit shall be air-cooled and vented out the east side of the Building
subject to and in compliance with Landlord's rules and regulations and all
of the terms, covenants and conditions of this Lease, including without
limitation Articles 3 and 6 hereof.
(2) The Fixed Rent does not reflect or include any charge to
Tenant for the furnishing of any HVAC to the Premises during periods
("Overtime Periods") other than during Business Hours on Business Days.
Accordingly, if Landlord shall furnish such HVAC to the Premises during
Overtime Periods, Tenant shall pay, as additional rent, Landlord's then
current Building charges for such services, as such amounts may be
increased from time to time based on increases in Operating Expenses, with
a minimum charge for four (4) hours usage if required by applicable union
contracts or any other minimum period required by applicable union
contracts. Landlord shall not be required to furnish any such services
during any Overtime Periods unless Landlord has received reasonable
advance notice (which may be by telephone) from Tenant requesting such
services but in no event shall such advance notice be later
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than 12:00 P.M. of the Business Day upon which such services are requested
or 12:00 P.M. of the last preceding Business Day if such Overtime Periods
are to occur on a day other than a Business Day.
C. Furnish hot and cold New York City water for lavatory and
drinking and office cleaning purposes. If Tenant requires, uses or
consumes water for any other purpose, or installation becomes required by
applicable Requirements or Landlord so elects for the Building generally,
Tenant agrees that Tenant shall (or Landlord may at Tenant's cost) install
a meter or meters or other means to measure Tenant's water consumption,
and Tenant further agrees to pay for the cost of the meter or meters and
the installation thereof, and to pay for the maintenance of said meter
equipment and/or to pay Landlord's cost of other means of measuring such
water consumption by Tenant. Tenant shall reimburse Landlord for the cost
of all water consumed (including costs of generating hot water) as
measured by said meter or meters or as otherwise measured, including sewer
rents, as additional rent within ten (10) days after bills are rendered.
D. Furnish, either directly or through the Building cleaning
contractor, standard office cleaning service during the evenings following
Business Days, substantially in accordance with the standards set forth in
Schedule B annexed hereto. Landlord may modify the cleaning standards from
time to time provided that the cleaning service is at all times befitting
a first-class non-institutional office building in midtown Manhattan.
Tenant shall pay to Landlord the reasonable costs incurred by Landlord for
(x) extra cleaning work in the Premises required because of (i) misuse or
neglect by Tenant or its employees or business visitors, (ii) use of
portions of the Premises for preparation, serving or consumption of food
or beverages or other special purposes (except mail room) requiring
greater or more difficult cleaning work than office areas, (iii) unusual
quantity of interior glass surfaces, (iv) nonbuilding standard materials
or finishes installed by Tenant or at its request, and (y) removal from
the Premises and the Building of (i) so much of any refuse or rubbish of
Tenant as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy and (ii) refuse and rubbish of Tenant's vending
machines and other eating facilities requiring special handling (known in
the trade as "wet garbage"). Tenant may arrange for removal of such wet
garbage by its own personnel or by contractors approved by Landlord,
subject to such rules and regulations as Landlord may reasonably impose
for the proper operation and maintenance of the Building. Tenant may also
arrange directly with Landlord's cleaning contractor to pay for any or all
of the costs of extra cleaning and rubbish removal referred to in this
Section. Landlord and its cleaning contractor and their employees shall
have after hours access to the Premises and the free use of light, power
and water facilities in the Premises as shall be reasonably required for
the purpose of cleaning the Premises in accordance with Landlord's
obligations hereunder.
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Section 28.2 Except as provided in Section 28.1D., Tenant shall, at
Tenant's expense, keep the Premises clean and in order, to the satisfaction of
Landlord, and for that purpose shall employ a person, firm or corporation who or
which shall be subject to the prior written approval of Landlord. In order to
insure effective security in the Building, Tenant acknowledges the
reasonableness of Landlord's right at its option to designate a party to be so
employed by Tenant and to act as maintenance and cleaning contractor for any
waxing, polishing, lamp replacement, cleaning and maintenance work in the
Premises, so long as such party is a reputable person, firm or corporation that
charges no more than the rates in effect for comparable services in similar type
buildings. Landlord expressly reserves the right to exclude from the Building
any person, firm or corporation attempting to perform any such work or furnish
any of such services without Landlord's prior written approval or not so
designated by Landlord.
Section 28.3 Landlord reserves the right to stop the furnishing of the
Building services and to stop service of the Building Systems, when necessary by
reason of accident, or emergency, or for repairs and alterations in the judgment
of Landlord desirable or necessary to be made, until said repairs and
alterations, shall have been completed; and Landlord shall have no
responsibility or liability for failure to supply air-conditioning, heat,
elevator, plumbing, electric or other services during said period (unless such
failure is caused by the gross negligence or willful misconduct of Landlord or
its agents or employees) or when prevented from so doing by strikes, lockouts,
difficulty of obtaining materials, accidents or by any cause beyond Landlord's
reasonable control, or by Requirements or failure of electricity, water, steam,
coal, oil or other suitable fuel or power supply, or inability by exercise of
reasonable diligence to obtain electricity, water, steam, coal, oil or other
suitable fuel or power. No diminution or abatement of Rental or other
compensation shall or will be claimed by Tenant as a result therefrom, nor shall
this Lease or any of the obligations of Tenant be affected or reduced by reason
of such interruption, curtailment or suspension, nor shall the same constitute
an actual or constructive eviction.
Section 28.4 Tenant agrees to abide by all requirements which Landlord may
prescribe for the proper protection and functioning of its Building Systems and
the furnishing of the Building services. Tenant agrees to keep all windows
closed and the blinds drawn while the air-conditioning, heating and ventilating
System is in operation. Tenant further agrees to cooperate with Landlord in any
energy conservation effort pursuant to a program or procedure promulgated or
recommended by ASHRAE or any Requirements.
Section 28.5 In the event any governmental entity promulgates or revises
any Requirement, or issues mandatory controls relating to the use or
conservation of energy, water, gas, light or electricity, or the provision of
any other utility or service furnished by Landlord in the Building, Landlord may
take any appropriate action to comply with such provision of law or mandatory
controls, including the making of alterations to the Building subject, however,
to the terms and conditions of this Lease. Neither Landlord's actions nor its
failure to act shall
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entitle Tenant to any damages, abate or suspend Tenant's obligation to pay fixed
rent and additional rent or constitute or be construed as a constructive or
other eviction of Tenant except as otherwise specifically set forth herein.
Section 28.6 If the New York Board of Fire Underwriters or the Insurance
Services Office or any Governmental Authority, department or official of the
state or city government shall require or recommend that any changes,
modifications, alterations or additional sprinkler heads or other equipment be
made or supplied by reason of Tenant's business, or the location of the
partitions, trade fixtures, or other contents of the Premises, Landlord, at
Tenant's cost and expense, shall promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment. At
Tenant's option, Tenant may contest any such requirement or recommendation in
the same manner as it may contest Requirements pursuant to Section 6.2 above or
make such changes to the Premises in order to obviate the requirement or
recommendation in question. If Tenant elects to take either of the foregoing
actions, it must do so before the failure of Landlord to make and supply such
changes, modifications, alterations, additional sprinkler heads or other
equipment, adversely affects Landlord's insurance coverage or increases the
premiums therefor.
Section 28.7 Subject to compliance with Requirements and the provisions of
this Lease, Tenant shall have access to the Premises twenty-four (24) hours a
day, seven (7) days a week.
ARTICLE 29
PARTNERSHIP TENANT
If Tenant is a partnership or a professional corporation (or is comprised
of two (2) or more Persons, individually or as co-partners of a partnership or
shareholders of a professional corporation) or if Tenant's interest in this
Lease shall be assigned to a partnership or a professional corporation (or to
two (2) or more Persons, individually or as co-partners of a partnership or
shareholders of a professional corporation) pursuant to Article 12 hereof (any
such partnership, professional corporation and such persons are referred to in
this Article 29 as "Partnership Tenant"), the following provisions shall apply
to such Partnership Tenant: (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several; (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by (x) any written instrument which may hereafter be executed by
Partnership Tenant or any successor entity, changing, modifying, extending or
discharging this Lease, in whole or in part, or surrendering all or any part of
the Premises to Landlord, and (y) any notices, demands, requests or other
communications which may hereafter be given by Partnership Tenant or by any of
the parties comprising Partnership Tenant; (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of such parties shall be binding upon Partnership Tenant and
all such parties; (d) if Partnership Tenant
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shall admit new partners or shareholders, as the case may be, all of such new
partners or shareholders, as the case may be, shall, by their admission to
Partnership Tenant, be deemed to have assumed joint and several liability for
the performance of all of the terms, covenants and conditions of this Lease on
Tenant's part to be observed and performed; and (e) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners or
shareholders, as the case may be, and upon demand of Landlord, shall cause each
such new partner or shareholder, as the case may be, to execute and deliver to
Landlord an agreement in form reasonably satisfactory to Landlord and Tenant,
wherein each such new partner or shareholder, as the case may be, shall assume
joint and several liability for the observance and performance of all the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed (but neither Landlord's failure to request any such agreement nor the
failure of any such new partner or shareholder, as the case may be, to execute
or deliver any such agreement to Landlord shall vitiate the provisions of clause
(d) of this Article 29).
ARTICLE 30
VAULT SPACE
Notwithstanding anything contained in this Lease or indicated on any
sketch, blueprint or plan, any vaults, vault space or other space outside the
boundaries of the Real Property are not included in the Premises. Landlord makes
no representation as to the location of the boundaries of the Real Property. All
vaults and vault space and all other space outside the boundaries of the Real
Property which Tenant may be permitted to use or occupy are to be used or
occupied under a revocable license, and if any such license shall be revoked, or
if the amount of such space shall be diminished or required by any Governmental
Authority or by any public utility company, such revocation, diminution or
requisition shall not constitute an actual or constructive eviction, in whole or
in part, or entitle Tenant to any abatement or diminution of Rental, or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord. Any fee, tax or charge imposed by any Governmental Authority for
any such vaults, vault space or other space occupied by Tenant shall be paid by
Tenant.
ARTICLE 31
SECURITY DEPOSIT
Section 31.1 Subject to Section 31.2 below, Tenant has deposited with
Landlord the sum of $131,208.00 as security for the faithful performance and
observance by Tenant of the terms, provisions, covenants and conditions of this
Lease, and it is agreed that in the event Tenant defaults in respect of any of
the terms, provisions, covenants and conditions of this Lease, including, but
not limited to, the payment of Rental, Landlord may use, apply or retain the
whole or any part of the security so deposited to the extent required for the
payment of any Rental or any other sum as to which Tenant is in default or for
any sum which Landlord
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may expend or may be required to expend by reason of Tenant's default,
including, but not limited to, any damages or deficiency accrued before or after
summary proceedings or other re-entry by Landlord. In the event that Tenant
shall fully and faithfully comply with all of the terms, provisions, covenants
and conditions of this Lease, the security shall be returned to Tenant after the
date fixed as the end of the Term and not later than thirty (30) days after
delivery of entire possession of the Premises to Landlord as provided hereunder.
In the event of a sale of the Land and Building or leasing of the Building, of
which the Premises form a part, Landlord shall have the right to transfer the
security to the vendee or lessee and Landlord shall thereupon be released by
Tenant from all liability for the return of such security, and Tenant agrees to
look solely to the new Landlord for the return of said security, and it is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new Landlord. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the monies deposited
herein as security and that neither Landlord nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. In the event Landlord applies or retains any portion or all of the
security deposited, Tenant shall forthwith restore the amount so applied or
retained so that at all times the amount deposited shall be the full amount of
the security deposit required at the relevant time. The cash security shall be
placed in an interest bearing account with interest accruing for the benefit of
Tenant (less a 1% administrative charge, if lawful), provided Tenant is not then
in default hereunder after notice and the expiration of applicable cure periods.
Section 31.2 In lieu of the cash security deposit referred to in Section
31.1 above, Tenant may deliver to Landlord, and shall maintain in effect at all
times during the Term (and through the period which is thirty (30) days
following the Expiration Date), a clean, unconditional and irrevocable letter of
credit, in substantially the form annexed hereto as Exhibit B in the amount of
$131,208.00 issued by a banking corporation ("Bank") reasonably satisfactory to
Landlord or which is a member of the New York Clearing House Association or
successor thereto and which may be presented at a Bank in Manhattan. Such letter
of credit shall have an expiration date no earlier than the first anniversary of
the date of issuance thereof and it shall be automatically renewed from
year-to-year unless terminated by the Bank by notice to Landlord given not less
than sixty (60) days prior to the then expiration date therefor. It is agreed
that in the event Tenant defaults in respect of any of the terms, covenants or
provisions of this Lease, including, but not limited to, the payment of any
Rental, or the letter of credit is terminated by the Bank and is not replaced
within forty-five (45) days prior to its expiration that (i) Landlord shall have
the right to require the Bank to make payment to Landlord of so much of the
entire proceeds of the letter of credit as shall be reasonably necessary to cure
the default (or the entire proceeds if notice of termination is given as
aforesaid and the letter of credit is not replaced as aforesaid), and (ii)
Landlord may apply said sum so paid to it by the Bank to the extent required for
the payment of any Rental or any other sum as to which Tenant is in default or
for any sum which Landlord may expend or may be required to expend by reason of
Tenant's default, including, but not limited to, any
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damages or deficiency in the reletting of the Premises, whether such damages or
deficiency accrues before or after summary proceedings or other re-entry by
Landlord, without thereby waiving any other rights or remedies of Landlord with
respect to such default. If Landlord applies any part of the proceeds of a
letter of credit, Tenant, upon demand, shall deposit with Landlord promptly the
amount so applied or retained (or increase the amount of the letter of credit)
so that the Landlord shall have the full deposit on hand at all times during the
Term. If, subsequent to a letter of credit being drawn upon, a new letter of
credit meeting all the requirements set forth in this Section 31.2 is delivered
to Landlord, any proceeds of the former letter of credit then held by Landlord
shall be promptly returned to Tenant. If a letter of credit is drawn upon, any
proceeds received by Landlord which are not applied to the curing of the default
shall be held by Landlord subject to the provision of Section 31.1 above. If
Tenant shall fully and faithfully comply with all of the terms, covenants and
provisions of this Lease, any letter of credit, or any remaining portion of any
sum collected by Landlord hereunder from the Bank, together with any other
portion or sum held by Landlord as security shall be returned to Tenant within
thirty (30) days after the Expiration Date of this Lease and after delivery of
the entire possession of the Premises to Landlord. In the event of an assignment
by Landlord of its interest under this Lease, Landlord shall have the right to
transfer the security to the assignee, and Tenant agrees to look to the new
Landlord solely for the return of said security and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Landlord. Tenant shall have the right to substitute one letter
of credit for another provided that at all times the letter of credit shall meet
the requirements of this Section 31.2.
ARTICLE 32
CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
ARTICLE 33
PARTIES BOUND
The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective legal
representatives, successors, and, except as otherwise provided in this Lease,
their assigns.
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ARTICLE 34
BROKER
Each party represents and warrants to the other that it has not dealt with
any broker or Person in connection with this Lease other than Insignia/Edward S.
Gordon Co., Inc. (the "Broker"). The execution and delivery of this Lease by
each party shall be conclusive evidence that such party has relied upon the
foregoing representation and warranty. Tenant shall indemnify and hold Landlord
harmless from and against any and all claims for commission, fee or other
compensation by any person (other than the Broker) who shall claim to have dealt
with Tenant in connection with this Lease and for any and all costs incurred by
Landlord in connection with such claims, including, without limitation,
reasonable attorneys' fees and disbursements. Tenant shall have the right, at
Tenant's sole cost and expense, to defend any such claim with counsel reasonably
satisfactory to Landlord and settle or compromise any such claim provided that
Landlord shall have no financial responsibility therefor or be otherwise
prejudiced by any such compromise or settlement. The provisions of this Article
34 shall survive the expiration or sooner termination of this Lease.
ARTICLE 35
INDEMNITY
Section 35.1 Tenant shall not do or permit any act or thing to be done
upon the Premises which may subject Landlord to any liability or responsibility
for injury, damages to persons or property or to any liability by reason of any
violation of any Requirement, and shall exercise such control over the Premises
as to fully protect Landlord against any such liability. To the extent not
covered by insurance obtained by Tenant at its sole cost and expense in which
the Indemnitees are named as additional insureds, Tenant shall indemnify and
save the Indemnitees harmless from and against (a) all claims of whatever nature
against the Indemnitees arising from any (i) act, omission or negligence of
Tenant, its contractors, licensees, agents, servants, employees, invitees or
visitors or (ii) violation by Tenant of any Requirement, including, without
limitation, the ADA, (b) all claims against the Indemnitees arising from any
accident, injury or damage whatsoever caused to any person or to the property of
any person and occurring during the Term in or about the Premises, (c) all
claims against the Indemnitees arising from any accident, injury or damage
occurring outside of the Premises but anywhere within or about the Real
Property, where such accident, injury or damage results or is claimed to have
resulted from an act, omission or negligence of Tenant or Tenant's contractors,
licensees, agents, servants, employees, invitees or visitors, and (d) any
breach, violation or non-performance of any covenant, condition or agreement in
this Lease set forth and contained on the part of Tenant to be fulfilled, kept,
observed and performed. This indemnity and hold harmless agreement shall include
indemnity from and against any and all liability, fines, suits, demands, costs
and expenses of any kind or nature (including, without limitation, attorneys'
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fees and disbursements) incurred in or in connection with any such claim or
proceeding brought thereon, and the defense thereof.
Section 35.2 If any claim, action or proceeding is made or brought against
Landlord, which claim, action or proceeding Tenant shall be obligated to
indemnify Landlord against pursuant to the terms of this Lease, then, upon
demand by Landlord, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in Landlord's name, if necessary, by such
attorneys as Landlord shall approve, which approval shall not be unreasonably
withheld. Attorneys for Tenant's insurer are hereby deemed approved for purposes
of this Section 35.2. Notwithstanding the foregoing, Landlord may retain its own
attorneys to defend or assist in defending any claim, action or proceeding
involving potential liability of Five Million Dollars ($5,000,000) or more, and
Tenant shall pay the reasonable fees and disbursements of such attorneys. The
provisions of this Article 35 shall survive the expiration or earlier
termination of this Lease.
ARTICLE 36
ADJACENT EXCAVATION-SHORING
If an excavation shall be made upon land adjacent to the Premises, or
shall be authorized to be made, Tenant, upon reasonable advance notice, shall
afford to the Person causing or authorized to cause such excavation, a license
to enter upon the Premises for the purpose of doing such work as said Person
shall deem necessary to preserve the wall or the Building from injury or damage
and to support the same by proper foundations, without any claim for damages or
indemnity against Landlord, or diminution or abatement of Rental, provided that
Tenant shall continue to have access to the Premises and the Building.
ARTICLE 37
MISCELLANEOUS
Section 37.1 This Lease is offered for signature by Tenant and it is
understood that this Lease shall not be binding upon Landlord or Tenant unless
and until Landlord and Tenant shall have executed and delivered a fully executed
copy of this Lease to each other.
Section 37.2 The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent Landlord after the sale,
conveyance, assignment or transfer by such subsequent Landlord) or its interest
in the Building or the Real Property, as the case may be, and in the event of
any such sale, conveyance, assignment or transfer, Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder. The partners, shareholders, directors, officers and principals,
direct and indirect, of Landlord
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(collectively, the "Parties") shall not be liable for the performance of
Landlord's obligations under this Lease. Tenant shall look solely to Landlord to
enforce Landlord's obligations hereunder and shall not seek any damages against
any of the Parties. The liability of Landlord for Landlord's obligations under
this Lease shall be limited to Landlord's interest in the Real Property and
Tenant shall not look to any other property or assets of Landlord or the
property or assets of any of the Parties in seeking either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations.
Section 37.3 Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Escalation Rent,
additional rent or Rental, shall constitute rent for the purposes of Section 502
(b) (7) of the Bankruptcy Code.
Section 37.4 Tenant's liability for all items of Rental and Landlord's
liability for any sums due Tenant shall survive the Expiration Date.
Section 37.5 Tenant shall reimburse Landlord as additional rent, within
ten (10) days after rendition of a statement, for all expenditures made by, or
damages or fines sustained or incurred by, Landlord, due to any default by
Tenant under this Lease, with interest thereon at the Applicable Rate.
Section 37.6 This Lease shall not be recorded.
Section 37.7 Tenant hereby waives any claim against Landlord which Tenant
may have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any consent or approval requested by Tenant, and Tenant
agrees that its sole remedy shall be an action or proceeding to enforce any
related provision or for specific performance, injunction or declaratory
judgment or an arbitration proceeding as hereinafter provided. In the event of a
determination that such consent or approval has been unreasonably withheld or
delayed, the requested consent or approval shall be deemed to have been granted;
however, Landlord shall have no liability to Tenant for its refusal or failure
to give such consent or approval. Tenant's sole remedy for Landlord's
unreasonably withholding or delaying consent or approval shall be as provided in
this Section 37.7. Any dispute relating to the withholding or delay of consent
by Landlord may be determined, at Tenant's option, under the Expedited
Procedures provisions of the Commercial Arbitration Rules of the American
Arbitration Association (presently Rules 54 through 58); provided, however, that
with respect to any such arbitration, (i) the list of arbitrators referred to in
Rule 55 shall be returned within five (5) business days from the date of
mailing, (ii) the parties shall notify the American Arbitration Association, by
telephone, within four (4) days of any objections to the arbitrator appointed
and will have no right to object if the arbitrator so appointed was on the list
submitted by the American Arbitration Association and was not objected to in
accordance with the second sentence of Rule 55, (iii) the Notice of Hearing
referred to in Rule 56 shall be four (4) days in
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advance of the hearing, (iv) the hearing shall be held within seven (7) days
after the appointment of the arbitrator, and (v) the arbitrator shall have no
right to award damages.
Section 37.8 This Lease contains the entire agreement between the parties
and supersedes all prior understandings, if any, with respect thereto. This
Lease shall not be modified, changed or supplemented, except by a written
instrument executed by both parties.
Section 37.9 Tenant hereby (a) irrevocably consents and submits to the
jurisdiction of any Federal, state, county or municipal court sitting in the
State of New York in respect to any action or proceeding brought therein by
Landlord against Tenant concerning any matters arising out of or in any way
relating to this Lease; (b) irrevocably waives all objections as to venue and
any and all rights it may have to seek a change of venue with respect to any
such action or proceedings; (c) agrees that the laws of the State of New York
shall govern in any such action or proceeding and waives any defense to any
action or proceeding granted by the laws of any other country or jurisdiction
unless such defense is also allowed by the laws of the State of New York; and
(d) agrees that any final judgment rendered against it in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law; and (e) represents
that the Lease has been authorized by all necessary corporate action on the part
of Tenant, the person signing this Lease is duly authorized by the Tenant to
execute this Lease on the Tenant's behalf and the provisions of the Lease are
binding and enforceable upon Tenant. Tenant further agrees that any action or
proceeding by Tenant against Landlord in respect to any matters arising out of
or in any way relating to this Lease shall be brought only in the State of New
York, County of New York.
Section 37.10 A. All of the Schedules and Exhibits attached hereto are
incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Schedules and Exhibits hereto, the terms and provisions of
this Lease shall control. Wherever appropriate in this Lease, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural. All Article and Section references set forth herein shall, unless the
context otherwise specifically requires, be deemed references to the Articles
and Sections of this Lease.
B. If any term, covenant, condition or provision of this
Lease, or the application thereof to any person or circumstance, shall ever be
held to be invalid or unenforceable, then in each such event the remainder of
this Lease or the application of such term, covenant, condition or provision to
any other Person or any other circumstance (other than those as to which it
shall be invalid or unenforceable) shall not be thereby affected, and each term,
covenant, condition and provision hereof shall remain valid and enforceable to
the fullest extent permitted by law.
Section 37.11 Tenant shall comply with any recycling program and/or refuse
disposal program (including, without limitation, any program related to the
recycling, separation or
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other disposal of paper, glass or metals) which Landlord shall voluntarily
impose or which shall be required pursuant to any Requirements.
Section 37.12 In the event any Governmental Authority promulgates or
revises any law, or issues mandatory controls relating to the use or
conservation of energy, water, gas, light or electricity, or the provision of
any other utility or service furnished by Landlord in the Building, Landlord
may, in its reasonable discretion take any appropriate action to comply with
such provision of law, mandatory controls, including the making of alterations
to the Building. Neither Landlord's actions nor its failure to act shall entitle
Tenant to any damages, abate or suspend Tenant's obligation to pay any item of
Rental or constitute or be construed as a constructive or other eviction of
Tenant, except as otherwise expressly provided to the contrary in this Lease.
Section 37.13 Tenant shall not cause or permit any Hazardous Materials
(hereinafter defined) to be used, stored, transported, released, handled,
produced or installed in, on or from the Premises or the Building. "Hazardous
Materials", as used herein, shall mean any flammables, explosives, radioactive
materials, hazardous wastes, hazardous and toxic substances or related
materials, asbestos or any material containing asbestos, or any other substance
or material as defined by any Federal, state or local environmental law,
ordinance, rule or regulation including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, and in the regulations adopted and publications
promulgated pursuant to each of the foregoing. In the event of a breach of the
provisions of this Section 37.13, Landlord shall have the right, in addition to
all other rights and remedies of Landlord under this Lease or at law, to require
Tenant to remove any such Hazardous Materials from the Premises in the manner
prescribed for such removal by any Requirements. The provisions of this Section
37.13 shall survive the expiration or termination of this Lease.
Section 37.14 If Tenant shall request the consent or approval of Landlord
to the making of any Alterations, to any assignment or subletting or to any
other thing, then Tenant shall reimburse Landlord as additional rent, promptly
upon demand, for all reasonable out-of-pocket costs and expenses of Landlord
incurred in connection therewith, including, without limitation, (i) in case of
any Alteration, costs and expenses of Landlord in (a) reviewing said plans and
specifications and (b) inspecting the Alterations to determine whether the same
are being performed in accordance with the approved plans and specifications and
all Requirements, including, without limitation, the fees and expenses of any
architect and engineer retained by Landlord for such purpose, and (ii) in case
of any assignment or subletting, the costs of making investigations as to the
acceptability of the proposed assignee or subtenant and legal costs incurred in
connection with the request for any consent. Landlord shall furnish Tenant with
copies of all bills for which reimbursement is requested hereunder.
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ARTICLE 38
RENT CONTROL
If at the commencement of, or at any time or times during the Term, the
Rental reserved in this Lease shall not be fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
(without additional expense to Tenant) as Landlord may request and as may be
legally permissible to permit Landlord to collect the maximum rents which may
from time to time during the continuance of such legal rent restriction be
legally permissible (and not in excess of the amounts reserved therefor under
this Lease). Upon the termination of such legal rent restriction prior to the
expiration of the Term, (a) the Rental shall become and thereafter be payable
hereunder in accordance with the amounts reserved in this Lease for the periods
following such termination, and (b) Tenant shall pay to Landlord, if legally
permissible, an amount equal to (i) the items of Rental which would have been
paid pursuant to this Lease but for such legal rent restriction, less (ii) the
rents paid by Tenant to Landlord during the period or periods such legal rent
restriction was in effect.
ARTICLE 39
EXPANSION OPTION
Section 39.1 Provided that this Lease shall then be in full force and
effect without default on the part of the Tenant hereunder, after notice and
expiration of the applicable cure periods, if any, then Tenant named herein
shall have the option (hereinafter referred to as the "Option Right") with
respect to the leasing of the entire rentable portion of the 19th floor in the
Building (hereinafter referred to as the "Expansion Space"). The Option Right
shall be exercisable in accordance with and shall be subject to and governed by,
the terms, covenants and conditions contained in the balance of this Article 39.
Section 39.2 If Tenant shall desire to exercise the Option Right, Tenant
shall send Landlord written notice thereof (hereinafter referred to as the
"Acceptance Notice") on or before December 15, 1997 (time being of the essence
with respect to the delivery of said notice).* If Tenant shall timely send an
Acceptance Notice to Landlord in the form and manner referred to above, the
Expansion Space shall be deemed a part of the Premises and Tenant shall lease
same upon all of the same terms, covenants and conditions contained in this
Lease, except that:
(i) the term of the leasing of such Expansion Space shall
commence (the "Expansion Space Commencement Date") upon the day that Landlord
delivers such space to Tenant broom clean, with the tenant installations therein
demolished in a Building standard manner, and shall expire on the last day of
the calendar month in which the tenth (10th)
* Notwithstanding the foregoing, in the event that the Commencement Date
occurs later than November 1, 1997, then the date for exercising tenant's
Expansion Option shall be extended for a period of days that is equal to
the number of days after November 1, 1997 until the Commencement Date
occurs. The date for exercising the Expansion Option shall not extend
beyond February 28, 1998.
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anniversary of the Expansion Space Commencement Date occurs (the "Expansion
Space Expiration Date");
(ii) the Fixed Rent with respect to the Expansion Space shall
be equal to the greater of (i) the then escalated Fixed Rent payable under this
Lease, and (ii) the fair market rent (as determined pursuant to Section 40.4
below) with respect to the Expansion Space;
(iii) Sections 1.3, 3.4 and 3.6 hereof shall apply to the
Expansion Space;
(iv) (a) except as otherwise specified above Tenant shall
accept the Expansion Space in its then as is condition and Landlord shall not be
obligated to perform, or pay the cost and expense of performing, any work in or
to the Expansion Space in order to prepare the same for Tenant's occupancy
(provided, however, upon approval of Tenant's plans with respect to the initial
construction of the Expansion Space, Landlord shall assist Tenant in obtaining
an ACP-5 certificate for the Expansion Space, to the extent an ACP-5 Certificate
is required by the Building Department with respect to the furnishing of a
building permit) and if Landlord shall be unable to give possession of the
Expansion Space to Tenant on the anticipated delivery date, Landlord shall not
be subject to any liability for failure to give possession on such date and the
validity of this Lease shall not be impaired under such circumstances, but the
commencement of the leasing of such Expansion Space shall not occur until
Landlord delivers possession of same to Tenant;
(v) the Factor shall be increased by the product of (i) the
rentable square foot area of the Expansion Space, as reasonably determined by
Landlord, and (ii) $2.75; and
(vi) provided Tenant is not then in default under the terms of
this Lease, Tenant shall not be required to pay the portion of the monthly
installment of Fixed Rent exclusive of the Factor payable with respect to the
Expansion Space for the first six (6) months immediately following the Expansion
Space Commencement Date, and the thirty-second, thirty-third, thirty-fourth,
thirty-fifth, and forty-second months immediately following the Expansion Space
Commencement Date.
Section 39.3 In the event that Tenant shall fail to send an Acceptance
Notice to Landlord in the form and manner, and within the period provided
herein, such failure shall constitute a waiver of the Option Right and Tenant
shall have waived its right to lease the Expansion Space pursuant to this
Article 39.
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Section 39.4 In the event Tenant leases the Expansion Space pursuant to
this Article 39, then the Fixed Expiration Date shall be deemed to be the
Expansion Space Expiration Date.
ARTICLE 40
EXTENSION OF TERM
Section 40.1 Tenant named herein shall have the option (the "renewal
option") to extend the Term for an additional period (the "renewal term"), which
shall commence on the day immediately following the Fixed Expiration Date and
shall end on the fifth (5th) anniversary of the Fixed Expiration Date. The
renewal option may be exercised with respect to the entire Premises only and
shall be exercisable by Tenant delivering the renewal notice to Landlord with
respect to the renewal term no later than twelve (12) full calendar months prior
to the Fixed Expiration Date. Time is of the essence with respect to the giving
of the renewal notice. Tenant may not exercise its renewal option if it is in
default hereunder after notice and expiration of the applicable grace period on
the date of the giving of the renewal notice or the commencement of the renewal
term, or if it is in occupancy of less than 75% of the Premises on the first day
of the renewal term.
Section 40.2 If Tenant exercises the renewal option, the renewal term
shall be upon the same terms, covenants and conditions as those contained in
this Lease, except that (i) the Fixed Rent shall be the Fixed Rent as determined
pursuant to Subsection 40.3 hereof, (ii) Tenant shall continue to pay Escalation
Rent pursuant to Article 27 hereof, and (iii) Landlord shall have no obligation
to perform any work and/or contribute any funds to Tenant for alterations to the
Premises or to grant Tenant any rent concession or abatement therefor.
Section 40.3 For the renewal term, the Fixed Rent (the "renewal rent")
shall be an amount equal to the greater of (i) ninety-five percent (95%) of the
fair market rent (as hereinafter defined) per annum, and (ii) the then fully
escalated Fixed Rent and Escalation Rent payable per annum payable by Tenant
during the last year of the Term.
Section 40.4 For purposes hereof, the term "fair market rent" shall mean a
rent per square foot per annum for comparable space in comparable buildings in
midtown Manhattan bounded by Third and Sixth Avenues on the East and West and
42nd Street and 60th Street on the South and North for five (5) year leases
entered into at or about the Expansion Space Commencement Date, or the beginning
of the renewal term, as applicable, without consideration of either improvements
made by Tenant or by Landlord to the Premises (except improvements to be made by
Landlord to the Expansion Space) but otherwise considering the (i) terms and
conditions of this Lease, including those in Section 39.2 or 40.2, as
applicable, (ii) whether or not Tenant shall receive any rent credit, free rent,
work allowance or rent concession for the Expansion Space or renewal term, as
applicable, and (iii) any other
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factors deemed relevant by either party, including the terms of leases entered
into at the time for comparable spaces with comparable terms. Said rent per
square foot per annum shall be multiplied by the rentable square foot area of
the Expansion Space, with respect to the Expansion Space and the Space Factor
with respect to the renewal term, and the product thereof shall be the fair
market rent. In the event that Landlord and Tenant are unable to agree on the
fair market rent at least one hundred twenty (120) days prior to the Expansion
Space Commencement Date or commencement of the renewal term, as the case may be,
then either party may request arbitration by giving notice to the other party,
and each party shall promptly choose an arbitrator who is a senior officer of a
recognized New York City leasing brokerage or real estate consulting firm who
shall have at least ten (10) years experience in (i) the leasing of office space
in midtown Manhattan or (ii) the appraisal of first-class office buildings in
New York County. The two arbitrators shall then determine the fair market rent
within sixty (60) days after the appointment of each , and if the two
arbitrators are unable to agree upon the fair market rent within such sixty (60)
day period, then a third arbitrator with the same qualifications as the first
two arbitrators shall be selected by the two arbitrators (or if they are unable
to agree then the selection shall be made by the American Arbitration
Association or any organization successor thereto), and the third arbitrator
shall determine the fair market rent within thirty (30) days thereafter in
accordance with the following procedure. The arbitrator selected by Landlord and
the arbitrator selected by Tenant shall each make a separate determination of
the fair market rent. The determination made by Landlord's arbitrator is
hereinafter referred to as "Landlord's Determination" and the determination made
by Tenant's arbitrator is hereinafter referred to as "Tenant's Determination".
Each arbitrator shall deliver a copy of its determination to the third
arbitrator and to the other of the two arbitrators. Each of the two arbitrators
may, within five (5) days following receipt of the other's determination, change
it's determination and deliver a copy of such changed determination to the third
arbitrator and to the other of the two arbitrators. No further changes in the
determinations will be allowed. The determination of fair market rent by the
third arbitrator shall be either the amount set forth in Landlord's
Determination or the amount set forth in Tenant's Determination. The third
arbitrator may not select any other amount as the fair market rent. The fair
market rent as so determined by the third arbitrator shall be binding upon the
parties. Each party shall be responsible for the fees and expenses of the
arbitrator selected by it and the parties shall share equally the fees and
expenses of the third arbitrator and of the American Arbitration Association. It
is expressly understood that any determination of the fair market rent pursuant
to this Lease shall be based on the criteria stated in this Article 40.
Section 40.5 After a determination has been made of the fair market rent,
the parties shall execute and deliver to each other an instrument setting forth
the same, however, the determination shall be valid and enforceable whether or
not such instrument is executed and delivered.
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Section 40.6 If the final determination of fair market rent shall not be
made on or before the Expansion Space Commencement Date or the first day of the
renewal term, as applicable, then pending such final determination, Tenant shall
pay, as the rent the fully escalated Fixed Rent and Escalation Rent per annum
payable under the Lease immediately prior to the expiration of the Term. If,
based upon the determination by the third arbitrator hereunder of the fair
market rent, the payments made by Tenant on account of such rent for such period
were (i) less than the actual fair market rent, Tenant shall pay to Landlord the
amount of such deficiency within ten (10) days after demand therefore, or (ii)
greater than the actual fair market rent payable for the period, Landlord shall
at its option either (i) credit such excess against the next occurring monthly
installments of Fixed Rent and Escalation Rent hereunder, or (ii) refund to
Tenant the amount of such excess within ten (10) days after demand therefor.
IN WITNESS WHEREOF, Landlord and Tenant have each executed and delivered
this Lease as of the day and year first above written.
THE EQUITABLE-NISSEI MADISON CO.
BY: The Equitable Life Assurance Society
of the United States
By:
-------------------------------
Name: Randolph J. Wolpert
Title: Investment Officer
BUSINESS LOAN CENTER, INC.
By: /s/ Robert F. Tannenhauser
-------------------------------
13 - 3568801
- - ---------------------
Federal Employer
Identification Number
79
<PAGE>
Schedule A
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by Tenant
or used for any purpose other than ingress and egress to and from the Premises
and for delivery of merchandise and equipment in prompt and efficient manner,
using elevators and passageways designated for such delivery by Landlord.
(2) No awnings, air-conditioning units, fans or other projections shall be
attached to the outside walls of the Building. No curtains, blinds, shades, or
screens, other than those which conform to Building standards as established by
Landlord from time to time, shall be attached to or hung in, or used in
connection with, any window or door of the Premises, without the prior written
consent of Landlord which shall not be unreasonably withheld or delayed. Such
awnings, projections, curtains, blinds, shades, screens or other fixtures must
be of a quality, type, design and color, and attached in the manner reasonably
approved by Landlord. All electrical fixtures hung in offices or spaces along
the perimeter of the Premises must be of a quality, type, design and bulb color
approved by Landlord, which consent shall not be withheld or delayed
unreasonably unless the prior consent of Landlord has been obtained for other
lamping.
(3) No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Tenant on any part of the outside of the
Premises or Building or on the inside of the Premises if the same can be seen
from the outside of the Premises without the prior written consent of Landlord
except that the name of Tenant may appear on the entrance door of the Premises.
In the event of the violation of the foregoing by Tenant, if Tenant has refused
to remove same after reasonable notice from Landlord, Landlord may remove same
without any liability, and may charge the expense incurred by such removal to
Tenant. Interior signs on doors and directory tablet shall be of a size, color
and style reasonably acceptable to Landlord.
(4) The exterior windows and doors that reflect or admit light and air
into the Premises or the halls, passage ways or other public places in the
Building, shall not be covered or obstructed by Tenant.
(5) No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules, nor shall any article obstruct any air-conditioning supply or
exhaust without the prior written consent of Landlord.
<PAGE>
(6) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by Tenant.
(7) Subject to the provisions of Article 3 of this Lease, Tenant shall not
mark, paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires shall be permitted, except
with the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed, and as Landlord may direct.
(8) No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction.
(9) Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of the Building or
neighboring buildings or premises or those having business with them whether by
the use of any musical instrument, radio, television set, talking machine,
unmusical noise, whistling, singing, or in any other way.
(10) Tenant, or any of Tenant's employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Premises any flammable, combustible
or explosive fluid, chemical or substance except such as are incidental to usual
office occupancy, provided, however, such items are stored in approved
containers in compliance with all applicable Requirements.
(11) No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in existing locks
or the mechanism thereof, unless Tenant promptly provides Landlord with the key
or combination thereto. Tenant must, upon the termination of its tenancy, return
to Landlord all keys of stores, offices and toilet rooms, and in the event of
the loss of any keys furnished at Landlord's expense, Tenant shall pay to
Landlord the cost thereof.
(12) No bicycles, vehicles or animals of any kind except for seeing eye
dogs shall be brought into or kept by Tenant in or about the Premises or the
Building.
(13) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place in the manner and
during the hours which Landlord or its agent reasonably may determine from time
to time. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
<PAGE>
(14) Tenant shall not occupy or permit any portion of the Premises demised
to it to be occupied as an office for a public stenographer or typist, or for
the possession, storage, manufacture, or sale of liquor, narcotics, dope, or as
a barber or manicure shop, or as an employment bureau. Tenant shall not engage
or pay any employees on the Premises, except those actually working for Tenant
at the Premises, nor advertise for labor giving an address at the Premises.
(15) Tenant shall not purchase spring water, ice, towels or other like
service, or accept barbering or bootblacking services in the Premises, from any
company or persons not approved by Landlord, which approval shall not be
withheld or delayed unreasonably and at hours and under regulations other than
as reasonably fixed by Landlord.
(16) Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
(17) Landlord reserves the right to exclude from the Building (i) between
the hours of 6:00 P.M. and 8:00 A.M. on Business Days and (ii) between the hours
of 1:00 P.M. and 12:00 Midnight on Saturdays and (iii) during all hours on
Sundays and Holidays and, if Landlord so elects, during Business Hours and
Saturdays between 8:00 A.M. and 1:00 P.M., all persons who do not present a pass
(if required) to the Building signed or approved by Landlord. Tenant shall be
responsible for all persons for whom a pass shall be issued at the request of
Tenant and shall be liable to Landlord for all acts of such persons.
(18) Tenant shall, at its expense, provide artificial light for the
employees of Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in the Premises.
(19) The requirements of Tenant will be attended to only upon written
application by Tenant's Designated Representative at the office of the Building.
Building employees shall not perform any work or do anything outside of the
regular duties, unless under special instructions from the office of Landlord,
and provided Tenant pays the then Building standard rates for same.
(20) Canvassing, soliciting and peddling in the Building is prohibited and
Tenant shall cooperate to prevent the same, including, but not limited to,
providing Landlord with notice of any such acts when Tenant becomes aware of
same.
(21) There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
side guards.
<PAGE>
(22) Except as specifically provided in Section 2.2 of this Lease, Tenant
shall not do any cooking, conduct any restaurant, luncheonette or cafeteria for
the sale or service of food or beverages to its employees or to others, or cause
or permit any odors of cooking or other processes or any unusual or
objectionable odors to emanate from the Premises. Tenant shall not permit the
delivery of any food or beverage to the Premises, except by such persons
delivering the same as shall be approved by Landlord, which approval shall not
be unreasonably withheld or delayed.
(23) Tenant shall keep the entrance door to the Premises closed at all
times.
(24) Landlord shall have the right to require that all messengers and
other Persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such packages, papers and other materials to a person
designated by Landlord who will distribute the same to Tenant, or (ii) be
escorted by a person designated by Landlord to deliver the same to Tenant.
<PAGE>
Schedule B
CLEANING SPECIFICATIONS
NIGHTLY
All services are to be performed nightly (Monday - Friday) except for
Legal/Union holidays.
Tenant Areas:
Sweep clean all uncarpeted flooring and interior stairs using
chemically treated dust mops. Vacuum all carpeted areas.
Empty and damp wipe clean all ashtrays, cigarette urns and waste
receptacles.
Remove all gum and foreign matter on sight.
All waste material shall be bagged and removed to designated
receptacles in freight lobby (plastic bags to be supplied by
Contractor).
Wipe clean with chemically treated cloths all furniture, telephones,
office equipment, ash trays, cigarette urns, fixtures, louvers,
grilles, window sills, ledges, and convector tops within hand high
reach.
Damp wipe clean all water coolers and fountains. Remove all standing
water.
Wipe clean all smudges, fingermarks, scuff marks, etc. from painted
door and wall surfaces on and around wall light switch plates and
door jambs (spot cleaning) as needed.
All janitor closets, slop sink and storage areas are to be kept neat
and clean at all times.
Public Lavatories:
Scour, wash and disinfect all basins, bowls and urinals, including
tile walls near urinals with an approved germicidal detergent
solution.
Wash and disinfect both sides of all toilet seats with an approved
germicidal detergent solution.
<PAGE>
Nickel and/or chrome fixtures to be cleaned and polished with a
non-acid polish.
Damp wipe clean all mirrors, bright work and basin shelves.
Hand dust and clean, washing where necessary, all partitions,
dispensers and receptacles.
Sweep and wash all lavatory flooring with an approved disinfectant.
Empty and damp wipe clean all paper towel waste and sanitary
disposal receptacles, transporting waste to the designated location.
Fill toilet tissue holders, soap dispensers and paper towel
dispensers (supplies to be provided by Contractor).
Damp wipe clean all smudges, fingermarks, scuff marks, etc. from
painted door and wall surfaces, door jambs and on and around wall
light switchplates (spot cleaning) as needed.
Refill sanitary napkin dispenser as required (supplies to be
provided by Contractor).
PERIODIC SERVICES
Public Lavatories
Clean and wash using an approved disinfectant all partitions and
partition doors as required or as directed by Building Manager, but
no less than weekly.
Wash clean all tile wall surfaces monthly.
Machine scrub floors as required or as directed by Building Manager,
but not less than quarterly.
Wipe clean all diffusers, grills, louvers, lights, ledges, sills,
mirror tops, dispensers, etc. above hand high reach monthly (high
dusting).
Tenant Cleaning
<PAGE>
Dust all pictures, frames, charts, graphs and similar hangings,
walls, partitions, ventilating louvers, fresh air grills, window
blinds, window frames, overhead pipes, sprinklers, etc. not reached
in nightly cleaning (high dusting) quarterly.
Window Cleaning
Clean (inside and outside) all windows quarterly.
<PAGE>
EXHIBIT A
FLOOR PLAN
[Attached]
<PAGE>
[Graphic Omitted]
FLOOR PLAN
<PAGE>
EXHIBIT B
LETTER OF CREDIT
New York, New York _____
Re: Irrevocable Clean Letter of Credit
Gentlemen:
By order of our client, ______________ ("____________"), we hereby
open our clean irrevocable Letter of Credit No. ____ in your favor for an amount
not to exceed in the aggregate $_________ US Dollars effective immediately.
Funds under this credit are available to you against your sight
draft drawn on us mentioning thereon our Credit No. ____.
This Letter of Credit shall expire twelve months from the date
hereof; provided, however, that it is a condition of this Letter of Credit that
it shall be deemed automatically extended, from time to time, without amendment,
for one year from the expiration date hereof and from each and every future
expiration date, unless at least sixty (60) days prior to any expiration date we
shall notify you by registered mail that we elect not to consider this Letter of
Credit renewed for any such additional period, in which event unless a
substitute Letter of Credit in conformity with the provisions hereof is
delivered to you within fifteen (15) days following your receipt of our notice
of nonrenewal you may, at any time thereafter, upon presentation of a sight
draft accompanied by a certificate purportedly signed by an officer of your
company stating "a replacement letter of credit has not been delivered" draw on
the entire amount of this Letter of Credit. The final expiration date hereof
shall be no earlier than _____ [thirty (30) days following the Expiration Date].
This Letter of Credit is transferable and may be transferred one or
more times. However, no transfer shall be effective unless advice of such
transfer is received by us in the form attached signed by you, with signature
guaranteed by a commercial bank or member firm of a national stock exchange.
We hereby agree with you that all drafts drawn or negotiated in
compliance with the terms of this Letter of Credit will be duly and promptly
honored upon presentment and delivery of your draft to our office at
_________________________ accompanied by a
<PAGE>
certificate purportedly signed by an officer of your company confirming that you
are entitled to draw the amount represented by the sight draft pursuant to the
Lease between you and _______________ if negotiated on or prior to the
expiration date as the same may from time to time be extended.
Except as otherwise specified herein, this Letter of Credit is
subject to the Uniform Customs and Practice for Documentary Credits (1983)
Revision), International Chamber of Commerce Publication No. 400.
Very truly yours,
(Name of Bank)
By:
-------------------------------
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
between
BUSINESS LOAN CENTER, INC. and
BLC FINANCIAL SERVICES, INC.
and
STERLING NATIONAL BANK
Dated as of August 27, 1997
<PAGE>
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of August
27, 1997, among BUSINESS LOAN CENTER, INC., a Delaware corporation ("BLC Inc.")
and BLC FINANCIAL SERVICES, INC. a Delaware corporation (which owns all of the
issued and outstanding shares of stock of Business Loan Center, Inc.) (jointly
and severally with the others, the "Borrowers"), and STERLING NATIONAL BANK
formerly known as STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK (the
"Bank").
WHEREAS, the Borrowers, Business Loan Center, a New York general
partnership (which was a small business lender under the Small Business Act)
("BLC Partnership") and the Bank entered into a certain Revolving Credit
Agreement dated as of December 19, 1994, as amended, restated, supplemented or
otherwise modified from time to time (the "Revolving Credit Agreement"), a
certain Security Agreement dated as of December 19, 1994, and related
documentation pursuant to which the Bank has made certain advances to Borrowers;
WHEREAS, on the date hereof the Bank has assigned to Transamerica Business
Credit Corporation ("Transamerica") all of its right, title and interest to the
portions of the Revolving Credit Loans previously advanced by the Bank against
the Unguaranteed Portions of Eligible SBA Loans, and certain related
Obligations, Collateral and other assets and has further assigned to
Transamerica all of its rights and obligations to make future loans or advances
against the Unguaranteed Portions of Eligible SBA Loans (the "Assignment");
WHEREAS, as provided in the Assignment, Transamerica has paid to the Bank
$________________;
WHEREAS, the Bank will continue to make Advances hereunder against the
Guaranteed Portions of Eligible SBA Loans, but will no longer make Advances
against the Unguaranteed Portions thereof; and
WHEREAS, the Borrowers and the Bank desire to amend and restate the
Revolving Credit Agreement to reflect the foregoing and such other amendments as
provided for herein.
NOW, THEREFORE, in consideration of the promises and of the mutual
representations, covenants and agreements herein set forth, the Borrowers and
the Bank do hereby amend and restate the Agreement as follows:
The Borrowers have applied to the Bank for a revolving credit loan in an
aggregate principal amount at any one time outstanding not to exceed $8,000,000,
the proceeds of which will be used to finance loans by the Borrowers to small
businesses. The Bank is willing to make such loan to the Borrowers pursuant to
this Agreement upon the terms and subject to the conditions hereinafter set
forth.
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ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used herein, the following words and terms
shall have the meanings designated below:
"Advance" shall mean each separate advance or readvance of funds pursuant
to this Agreement by the Bank to the Borrowers.
"Advance Amount" shall mean, with respect to each Advance hereunder, an
amount equal to 100% of the Guaranteed Amount of each SBA Loan securing such
Advance, as set forth in the Advance Request for such Advance, or such lesser
amount as the Bank may determine pursuant to Section 2.1(a) hereof.
"Advance Portion" shall mean a Guaranteed Portion.
"Advance Request" shall mean a written request for an Advance hereunder,
delivered by the Borrowers to the Bank not later than two (2) Business Days
prior to the Borrowing Date for such Advance, consisting of (i) a Notice of
Advance in the form of Exhibit C attached hereto, (ii) a Schedule of
Identification in the form of Exhibit D attached hereto for any SBA Loan to be
funded in whole or in part with the proceeds of such Advance, and (iii) if
applicable, copies of the Authorization and Loan Agreement (Guaranty Loans) on
SBA Form 529B, or such other form as the SBA shall from time to time prescribe,
for each SBA Loan being funded by such Advance, duly executed and completed by
the Borrowers and the SBA and setting forth the SBA Loan Number for such SBA
Loan and otherwise in form and substance satisfactory to the Bank.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean this Amended and Restated Revolving Credit
Agreement, as the same may be supplemented, modified or amended from time to
time in accordance with the terms hereof.
"Auditors" shall have the meaning assigned to that term in Section 5.7(b)
hereof.
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"Availability" shall mean an amount equal to 100% of the Guaranteed Amount
of each SBA Loan securing such Advances, as set forth in the Advance Request for
such Advances, or such lesser amount as the Bank may determine pursuant to
Section 2.1(a) hereof.
"Authorized Representative" with respect to any Person means any
individual designated in writing to the Bank and duly authorized by such Person
to act on its behalf.
"Base Rate" shall mean the rate of interest publicly announced by the Bank
at its principal office from time to time as its prime rate, which rate need not
be the best rate available. For purposes of this Agreement, any change in the
Base Rate shall be effective as of the opening of business on the date each such
change is announced.
"Borrowers" shall mean jointly and severally Business Loan Center, Inc., a
Delaware corporation and BLC Financial Services, Inc., a Delaware corporation
(which owns all of the issued and outstanding shares of stock of Business Loan
Center, Inc.).
"Borrowers' Account" shall mean a demand account established by the
Borrowers on or prior to the date set forth in Section 4.10 hereof and
maintained by the Borrowers with the Bank in accordance with this Agreement.
"Borrowing Date" shall mean the date upon which any Advance is made by the
Bank.
"Business Day" shall mean any day which is not a Saturday, Sunday or legal
holiday or any other day on which banking institutions in the State are
authorized by law or executive order to close.
"Chief Financial Officer" shall mean the Person with the primary
responsibility for the financial operations of the Borrowers including, without
limitation, the Financial Vice President, President or Treasurer and if more
than one such Person, each of them.
"Closing" shall mean the closing of this Agreement and all other Loan
Documents and the Multi-Party Agreement on the Closing Date.
"Closing Date" shall mean December 19, 1994.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor legislation, and any Treasury Regulations and administrative
pronouncements promulgated, from time to time, thereunder.
"Commitment" shall mean, with respect to the obligation of the Bank to
lend pursuant to this Agreement, $8,000,000.
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"Collateral" shall mean the "Collateral" defined as such in the Security
Agreement, and any other property now or hereafter pledged or delivered to the
Bank or in which the Bank has been granted a security interest as collateral for
the Obligations.
"Consolidated Subordinated Debt" shall mean all indebtedness of the
Borrowers and their Subsidiaries (if any) which is subordinated by its terms (in
a manner satisfactory in form and substance to, approved in writing by the Bank)
to the prior payment in full of the Obligations and providing, among other
things, for suspension of principal and interest payments and redemption rights,
if at any time an Event of Default hereunder shall have occurred.
"Consolidated Tangible Net Worth" shall mean, at any date, the amount by
which "Consolidated Total Assets" shall exceed "Consolidated Total Liabilities".
As used herein, "Consolidated Total Assets" means, at any date, the aggregate
amount shown on the books and records of the Borrowers and their Subsidiaries
(if any), determined in accordance with Generally Accepted Accounting
Principles, of all property, both real and personal, of the Borrowers and their
Subsidiaries (if any), exclusive of franchises, copyrights, trademarks, service
marks, trade names, good will, patents and other like intangibles, treasury
stock and after deducting reserves for depreciation, depletion, obsolescence and
amortization and all other proper reserves which are or should be, in accordance
with Generally Accepted Accounting Principles, established in connection with
the business conducted by the Borrowers and their Subsidiaries (if any). As used
herein, "Consolidated Total Liabilities" means, at any date, the amount of all
liabilities which, in accordance with Generally Accepted Accounting Principles,
should be included in determining total liabilities as shown on a liabilities
side of a balance sheet of the Borrowers and their Subsidiaries (if any), at
such date, exclusive of all amounts in respect of deferred taxes.
"Effective Date" shall mean the date on which all of the conditions to
lend set forth in Sections 4.1 through 4.9 shall have been satisfied.
"Defaulted SBA Loan" shall mean, at any time, any SBA Loan with respect to
which a default or event of default has occurred and is continuing whether or
not the Borrower or the SBA, as applicable, has exercised any or all of its
rights and remedies under the documents evidencing, securing or guaranteeing
such SBA Loan.
"Eligible SBA Loans" shall mean any SBA Loan other than a Defaulted SBA
Loan and an SBA Loan with respect to which one or more monthly or other periodic
payment due from the borrower thereunder to the lender thereunder is in arrears.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall mean any Event of Default set forth in Article
VII hereof.
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"Executive Officer" shall mean the President or Chief Financial Officer or
Executive Vice President of the Borrowers, and if more than one such Person,
each of them.
"Financing Statements" shall mean the Uniform Commercial Code financing
statements executed by the debtors named therein simultaneously herewith or
which may be executed hereafter in order to more specifically identify or in
order to maintain, continue, amend or otherwise perfect any security interest
granted in and to the Collateral.
"Fiscal Quarter" shall mean each of the three month periods ending on the
last day of March, June, September and December of each year.
"Fiscal Year" shall mean the twelve month period ending June 30 of each
year.
"Generally Accepted Accounting Principles" shall have the meaning assigned
to that term in Section 1.2 hereof.
"Guaranteed Amount" shall mean that portion of the original principal
amount of an SBA Loan the repayment of which the SBA has agreed to guaranty
pursuant to an Authorization and Loan Agreement (Guaranty Loans) on SBA Form
529B and Loan Guaranty Agreement (Deferred Participation) Form 750 or such other
form as the SBA shall from time to time prescribe, but in no event to exceed
eighty percent (80%) of the original principal amount of such SBA Loan.
"Guaranteed Portion" shall mean that portion of an Advance or the
Outstanding Balance, as applicable, which was used to fund the Guaranteed Amount
of SBA Loans.
"Guarantor" shall mean Robert Tannenhauser.
"Guaranty" shall mean that certain Guaranty Agreement, dated as of
December 19, 1994 and reaffirmed on the date hereof, between the Guarantor and
the Bank.
"Indebtedness" shall mean all items which would properly be included as
liabilities on a balance sheet as at the date Indebtedness is to be determined,
including, without limitation, the full principal amount of any guarantees of
the obligations of any other Person, but not including capital stock, capital
surplus, retained earnings, minority interests and valuation and contingency
reserves.
"Investor" shall mean a Person that purchases, or commits to purchase
pursuant to a Purchase Commitment, the Guaranteed Amount of one or more SBA
Loans from the Borrowers.
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"Loan Documents" shall mean, collectively, this Agreement, the Revolving
Credit Note, the Security Agreement, the Guaranty, and all other documents
executed by the Borrowers or the Guarantor in connection with the Revolving
Credit Loan.
"Maturity Date" shall mean June 30, 1998, subject to extension as set
forth in Section 8.12 below.
"Multi-Party Agreement" shall mean the Multi-Party Agreement (Relating to
SBA Loan Documentation and Administration) dated December 19, 1994 by and among
Business Loan Center, the Bank and the SBA.
"Note" shall mean any promissory note evidencing the Revolving Credit Loan
made by the Bank pursuant to this Agreement substantially in the form attached
hereto as Exhibit A, including any replacements, restatements or substitutions
therefor and amendments thereto.
"Obligations" shall mean any and all of the obligations of the Borrowers
under this Agreement and any of the other Loan Documents.
"Obligors" shall mean the Borrowers.
"Outstanding Balance" shall mean, on any date, the aggregate principal
amount of Advances made on or prior to such date which have not been repaid on
or prior to such date.
"Payment Date" shall have the meaning assigned to that term in Section
2.3(a) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean, as of any particular time, (a) liens
for taxes and assessments not then delinquent or then being contested in good
faith by the Borrowers and for which the Borrowers has maintained adequate
reserves satisfactory to the Auditors; (b) liens permitted pursuant to Sections
6.4(b) or (c) hereof; (c) any mechanic's, laborer's, materialman's, supplier's
or vendor's lien or right in respect thereof if payment is not yet due and
payable or is being contested in good faith by the Borrowers; (d) any defects,
irregularities, encumbrances, easements, rights of way, leases, subleases and
clouds on title which do not, in the opinion of the Bank, materially impair the
property affected thereby for the purpose for which it was acquired or is held
by the Borrowers; (e) liens in existence as of the date hereof listed on
Schedule III annexed hereto and all renewals and extensions thereof; (f) liens
in favor of, or consented to in writing, by the Bank; (g) liens subordinated as
a matter of law or otherwise upon terms and conditions reasonably satisfactory
to the Bank to the lien of the Bank under the Security Agreement; and (h) liens
to Transamerica granted pursuant to its security agreement with the Borrowers
and pursuant to the Partial Assignment Agreement of even date between the Bank
and Transamerica, as amended, restated, supplemented or otherwise modified from
time to time (the
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"Partial Assignment Agreement"), in each case subject to the terms of the
Intercreditor Agreement of even date, as amended, restated, supplemented or
otherwise modified from time to time (the "Intercreditor Agreement").
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" shall have the meaning ascribed to that term in ERISA.
"Purchase Commitment" shall mean a Secondary Participation Guaranty and
Certification Agreement on SBA Form 1086, or such other form as the SBA shall
from time to time prescribe, pursuant to which an Investor agrees to purchase,
and Borrowers agrees to sell, the Guaranteed Amount of an SBA Loan with respect
to which an Advance has been made hereunder, duly executed and completed by the
Borrowers, the investor and the SBA.
"Purchase Money Mortgage" shall mean a mortgage or security interest given
by a purchaser of property to the seller thereof in partial payment of the
purchase price.
"Reportable Event" shall mean a Reportable Event as defined in section
4043(b) of ERISA.
"Required Filings" shall mean Uniform Commercial Code financing statements
filed in those locations which the Bank and its counsel deem necessary or
advisable in order to perfect a security interest in the Collateral pursuant to
said Code.
"Revolving Credit Loan" shall mean an Advance, or collectively, all such
Advances, made by the Bank pursuant to Section 2.1 hereof.
"SBA" shall mean the United States Small Business Administration and any
successor agency.
"SBA Loan" shall mean a loan by the Borrowers, as lender, to a borrower
eligible to participate in the SBA guaranteed loan program, as borrower, up to
eighty percent (80%) of the original principal amount of which is guaranteed by
the SBA.
"SBA Loan Documents "shall mean all documents, instruments and
certificates executed and delivered in connection with an SBA Loan.
"Security Agreement" shall mean the Security Agreement dated December 19,
1994 and amended on the date hereof, from the Borrowers to the Bank, and as may
be amended, restated, supplemented or otherwise modified from time to time
thereafter.
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"State" shall mean the State of New York.
"Subsidiary" shall mean any corporation, the majority of the voting stock
(including shares arising out of other securities convertible, at the option of
the holder, into shares of voting stock) of which is owned by any one or more of
the Borrowers either directly or through Subsidiaries.
"Unguaranteed Amount" shall mean that portion of the original principal
amount of an SBA Loan the repayment of which the SBA has not agreed to guaranty.
"Unguaranteed Portion" shall mean that portion of an Advance or
Outstanding Balance, as applicable, which was used to fund the Unguaranteed
Amount of SBA Loans or which was used for general working capital purposes of
any of the Borrowers.
SECTION 1.2 Accounting Terms. Except as otherwise herein specifically
provided each accounting term used herein shall have the meaning given to it
under Generally Accepted Accounting Principles. "Generally Accepted Accounting
Principles" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, and the results of operations and
changes in financial position, of the Borrowers, their Subsidiaries, if any, and
the Guarantor, except that any accounting principle or practice required to be
changed by the said Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of the said Boards) in
order to continue as a Generally Accepted Accounting Principle or practice may
be so changed. Any dispute or disagreement between the Borrowers and/or the
Guarantor, as applicable and the Bank relating to the determination of Generally
Accepted Accounting Principles shall, in the absence of manifest error, be
conclusively resolved for all purposes hereof by the written opinion of the
Auditors with respect thereto, delivered to the Bank.
ARTICLE II
THE LOAN
SECTION 2.1 The Revolving Credit Loan. (a) The Bank agrees, upon the terms
and subject to the conditions hereof, to make one or more Advances to the
Borrowers at any time and from time to time upon receipt of an Advance Request,
from the Closing Date to the Maturity Date, in an aggregate principal amount at
any one time outstanding not to exceed the Commitment; provided that the amount
of any Advance shall not exceed the Advance Amount thereof.
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(b) The Borrowers may request the Bank to make an Advance by
delivering an Advance Request to the Bank at least two (2) Business Days prior
to the requested Borrowing Date, together with such other information as the
Bank may reasonably request in connection with such Advance. Any Advance Request
received after 12:00 noon on such date shall be deemed to be received by the
Bank on the immediately succeeding Business Day. If the Bank's computation of
the Advance Amount of any Advance shall conflict with the Borrowers' computation
thereof set forth in the Advance Request therefor for any reason, the Bank shall
deliver written telecopy or telephonic notice to Borrowers of such conflict, and
shall not be obligated to make such Advance until it shall receive a corrected
Advance Request.
(c) Each Advance to the Borrowers under this Agreement shall be made
at the Bank's Office at 430 Park Avenue, 4th Floor, New York, New York 10022,
not later than 2:00 p.m., New York City time, on the Borrowing Date with respect
to such Advance, by the Bank's crediting (not later than the close of business
on such date) the Borrowers' Account, in the Advance Amount. During the period
from the Closing Date to and including the Maturity Date (or until the earlier
termination of the Commitment), the Borrowers may borrow, pay, repay and
reborrow hereunder, subject to all the terms and provisions of this Agreement
provided that at no time shall the principal amount of the Outstanding Balance
exceed the Commitment.
SECTION 2.2 The Note. The Revolving Credit Loan made by the Bank
(including the principal amount and all accrued interest and other amounts due
under the Revolving Credit Loan as of the Effective Date) shall be evidenced by
the Note, duly executed by the Borrowers, dated the Effective Date, and payable
to the Bank in the principal amount of $8,000,000. The Note shall bear interest
from the Effective Date on the outstanding principal balance thereof as set
forth in Section 2.3 hereof. The Bank shall, and is hereby authorized by the
Borrowers to, record on the schedule attached to the Note (or on a continuation
of such schedule attached to the Note) and made a part thereof, an appropriate
notation evidencing the date of each Advance, as well as the date and amount of
each payment (including any prepayment) of principal and interest by the
Borrowers with respect thereto and the amount of all interest accrued but unpaid
under the Revolving Credit Loan as of the Effective Date; provided, however,
that the failure of the Bank to make such insertion shall not affect the
obligations of the Borrowers hereunder or under the Note.
SECTION 2.3 Interest on the Revolving Credit Loan. Interest on the
Revolving Credit Loan shall be payable monthly in arrears on the first day of
each month and ending on the Maturity Date (each, a "Payment Date") and shall be
computed (on the basis of a year of 360 days consisting of twelve (12) thirty
(30) day months) at an annual rate equal to the sum of the Base Rate as in
effect from time to time plus 1.25%.
If the Borrowers shall default in the payment of the principal of or interest on
any Advance or on any other amount becoming due hereunder, the Borrowers shall,
on demand, from time to time pay interest on such unpaid amounts, to the extent
permitted by applicable law, to and including the date of actual payment (after
as well as before judgment), at a rate per annum equal to the sum
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of the Base Rate plus four percent (4%), for the period during which such
principal, interest or other amount shall be unpaid.
SECTION 2.4 Optional Prepayment of Revolving Credit Loan. The Borrowers
shall have the right at any time and from time to time to prepay any Advance in
whole or in part in an amount equal to or greater than $50,000, without premium
or penalty, upon at least two (2) Business Days' prior written, or telecopy
notice (any such telecopy notice to be confirmed promptly in writing) to the
Bank in accordance with Section 8.01 hereof. All prepayments shall be
accompanied by accrued interest on the principal amount being prepaid to and
including the date of prepayment and shall be applied to the outstanding
principal amount of the Advance being prepaid.
SECTION 2.5 Mandatory Prepayment of Revolving Credit Loan. (a) The
Borrowers shall prepay any Advance in part, without premium or penalty, in an
amount equal to the Advance Amount of such Advance secured by an SBA Loan
promptly upon Borrowers receipt of payment with respect to any SBA Loan from the
ultimate borrower, such payment to be allocated among all Investors, the SBA (if
applicable), and the Borrowers in accordance with their respective interests in
each SBA Loan, the Bank being entitled to receive 100% of the Borrowers'
interest therein. In addition, the Borrowers shall prepay the Advances in part,
without premium or penalty, upon (i) an Executive Officer of any of the
Borrowers obtaining actual knowledge that either (1) a default or event of
default under such SBA Loan has occurred and is continuing beyond any applicable
grace period plus ten (10) days in the event of a monetary default or plus
thirty (30) days in the event of a non-monetary default (or in either case such
longer period as set forth in the SBA Loan Documents), or (2) the SBA has
withdrawn and terminated its guarantee of the Guaranteed Amount of such SBA Loan
for any reason whatsoever (a "Non Conforming SBA Loan") and (ii) as a result of
either (1) or (2) the aggregate amount of all then outstanding Advances exceeds
an amount equal to the Availability, in which event the Borrower shall pay to
the Bank that amount which is equal to the difference between the aggregate
amount of all then outstanding Advances and the Availability.
All prepayments shall (i) be accompanied by (x) accrued interest on the
principal amount being prepaid to and including the date of prepayment and (y)
written notice from the Borrowers identifying the related SBA Loan, if
applicable, the Nonconforming SBA Loan, and explaining in reasonable detail the
reason for such prepayment, and (ii) be applied to the outstanding principal
amount of the Advance being prepaid. Upon receipt of any such prepayment the
Bank shall release its lien on the Nonconforming SBA Loan.
(b) Each Advance hereunder shall be payable in full on the earlier
of (i) the Maturity Date or (ii) the date on which Colson Services (or such
other independent service agency retained by the SBA to service the SBA Loans on
behalf of the SBA) records on its books and records the sale, assignment or
transfer by the Borrowers to an Investor of the Guaranteed Amount of the SBA
Loans securing such Advance and records on its books and records the purchase
price therefore (the "Purchase Date"), in each case together with accrued
interest on such
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Advance to and including the date of payment. The Borrowers covenant and agree
with the Bank that (x) the Borrowers shall deliver to the Bank, promptly upon
the execution and delivery thereof, a copy of the Purchase Commitment for any
SBA Loan securing an Advance hereunder, which shall identify the Investor, and
(y) the Borrowers shall deliver to the Investor instructions to pay the total
purchase price of such SBA Loan including without limitation any and all
premiums above the face amount of the Guaranteed Amount) on the Purchase Date
set forth in the Purchase Commitment with respect thereto (the "Purchase Price")
to the Borrowers' Account so as to constitute immediately available funds on the
Purchase Date, such payment to be accompanied by information sufficient to
identify the Investor, the Purchase Price, and the SBA Loan purchased by the
Investor on such date. If the Purchase Price received by the Bank on any
Purchase Date is less than the amount required to pay the Guaranteed Portion of
the related Advance in full, together with accrued interest thereon to, and
including, the date of payment (the "Payment Amount"), then the Bank shall debit
the Borrowers' Account in the amount of such deficiency; provided, however, that
if there shall be insufficient funds in the Borrowers' Account prior to 2:00
P.M., New York City time, on the Purchase Date, the Borrowers shall deposit
funds into the Borrowers' Account so that by 2:00 P.M., New York City time, on
such date, sufficient funds shall be available in the Borrowers' Account. If the
Purchase Price received by the Bank on any Purchase Date exceeds the Payment
Amount, then the Bank shall credit the amount of such excess to the Borrowers'
Account.
SECTION 2.6 Funds; Manner of Payment. Each payment and prepayment of
principal of the Note and each payment of interest on the Note shall be made by
the Borrowers to the Bank in the following manner: at 430 Park Avenue, 4th
floor, New York, New York 10022, not later than 2:00 P.M., New York City time,
on the date on which payable, by debiting the Borrowers' Account in the amount
of such payment; provided, however, that if there shall be insufficient funds in
the Borrowers' Account prior to 2:00 P.M., New York City time on such date, the
Borrowers shall deposit funds into the Borrowers' Account so that by 2:00 P.M.,
New York City time on such date, sufficient funds shall be available in the
Borrowers' Account.
SECTION 2.7 Administrative Fee. The Borrowers shall pay to the Bank at the
closing of each SBA Loan an administrative fee which shall equal 1/4 of 1% of
each Advance as set forth on the Schedule of Identification (annexed hereto as
Exhibit D) delivered to the Bank in connection with such loan (the
"Administrative Fee").
SECTION 2.8 Collateral. (a) As security for the timely and full payment
and performance of all Obligations, concurrently herewith the Borrowers are
granting to the Bank a lien and security interest in the Collateral pursuant to
and as more fully set forth in the Security Agreement, which lien and security
interest is a first priority lien and security interest except as otherwise set
forth herein or in the Security Agreement.
(b) In the case of the sale pursuant to this Agreement and the
Purchase Commitment by the Borrowers of the Guaranteed Amount of any SBA Loan,
then the Bank's security interest and lien against such Guaranteed Amount shall
be deemed to be released at
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9:00 a.m., New York City time on the business day in which the sale is to be
settled, prior to the closing for such sale (i.e., the time at which the
purchaser pursuant to such Purchase Commitment has been paid to the Fiscal and
Transfer Agent, as provided in SBA Form 1086, the purchase price for such
Guaranteed Amount, and the Borrower has delivered to the Fiscal and Transfer
Agent all documents required to be delivered to it pursuant to such Purchase
Commitment); provided, however, if the Bank's security interest and lien against
such Guaranteed Amount is released as provided above, but such sale is not
finally settled on such settlement date, then the Bank's security interest and
lien against such Guaranteed Amount shall be deemed to reattach against such
Guaranteed Amount as if such security interest and lien had not been released,
and the Bank's security interest and lien against such Guaranteed Amount shall
be deemed to be released at 9:00 a.m., New York City time on the business day to
which the settlement of such sale has been adjourned.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
The Borrowers represent and warrant to the Bank that:
SECTION 3.1 Organization; Power; Authorization. Each of the Borrowers is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of the Borrowers is duly qualified to transact
business in each state where any of the Collateral is located or in which the
character of its properties or the nature of the business conducted by it makes
such qualification necessary, except in jurisdictions where the failure to so
qualify will not materially adversely affect its business or operations or where
the failure to so qualify would not have an adverse effect on the Borrowers'
ability to collect any SBA Loans or enforce any collateral therefor in a state
where any account debtor of the Borrowers or such collateral may be located.
Each of the Borrowers has the power to borrow hereunder and has the power,
authority, franchises and licenses (a) to own their respective properties and
assets and to carry on and conduct their respective businesses and (b) to
execute and deliver this Agreement, the Note and all other Loan Documents to
which each is a party and to perform each and every obligation hereunder and
thereunder. The execution, delivery and performance by the Borrowers of this
Agreement, the Note and each of the other Loan Documents have been duly
authorized by all requisite action.
SECTION 3.2 No Conflict with, Violation of or Default under Laws or other
Agreements. Neither the execution or delivery of this Agreement or any other
Loan Document to which any of the Borrowers is a party, nor the consummation of
the transactions contemplated hereby or thereby, nor the compliance with or
performance of the terms and conditions of this Agreement or any other Loan
Document by the Borrowers is prevented or limited by, conflicts with, or will
result in the breach or violation of, or a material default under
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the terms, conditions or provisions of (a) any material mortgage, security
agreement, indenture, evidence of indebtedness, loan or financing agreement,
partnership agreement, certificate of incorporation, by-laws or other material
agreement or material instrument to which any of the Borrowers is a party or by
which any of them is bound or (b) any provision of law, any order of any court
or administrative agency or any rule or regulation applicable to the Borrowers
or their respective businesses. None of Borrowers is in material default under,
or in violation of, any of its obligations under any material contract,
agreement, undertaking or instrument to which any of them is a party or by which
any of them is bound.
SECTION 3.3 Litigation; Official Approvals. (a) Except as set forth on
Schedule V hereto, there is no action, proceeding or investigation pending or
threatened against the Borrowers before any court or administrative agency that
might (i) materially and adversely affect its ability to perform their
obligations under this Agreement or any of the other Loan Documents, (ii)
involve the possibility of any judgment or liability which is uninsured and
would result in any material adverse change in the business, properties or
assets of any of the Borrowers, or (iii) materially and adversely affect the
enforceability of this Agreement, the Note, or any Loan Document. Except for any
necessary SBA approvals and as disclosed in writing to the Bank, all
authorizations, consents and approvals of and filings with governmental bodies
and agencies required in connection with the execution and delivery of this
Agreement, the Note and the other Loan Documents and the performance by the
Borrowers of their obligations hereunder and thereunder have been obtained. The
judgment creditor in connection with the judgment described on Schedule IX does
not have a security interest or other encumbrance in the assets of any Borrower
which is senior or pari passu to that of the Bank and has not levied upon any
Borrower or upon any Borrower's assets or taken any other action which has
granted or shall grant to it a security interest or other encumbrance pari passu
or senior to that of the Bank.
(b) Neither the Borrowers nor any of their Subsidiaries (if any) is
in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would have a materially adverse effect on the condition
(financial or otherwise) of the Borrowers or any of their Subsidiaries (if any).
SECTION 3.4 Information and Financial Data Accurate; Financial Statements;
No Adverse Changes. All information and financial and other data delivered to
the Bank in connection with or as an inducement to the making of the Revolving
Credit Loan (collectively, the "Application") relating to the Borrowers is true,
correct and complete as of the date hereof and no information has been omitted
therefrom which would make the Application misleading in any material respect.
The financial statements included in the Application or otherwise supplied to
the Bank (a) present fairly the financial position of the Borrowers as at their
respective dates and the results of operations and changes in financial position
for the periods to which they apply and (b) have been prepared in conformity
with Generally Accepted Accounting Principles applied on a consistent basis
throughout the periods involved. Since March 31, 1997, there has not been any
adverse change in the financial condition, assets, liabilities, business or
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operations of the Borrowers, other than changes, none of which (either by itself
or in conjunction with all other changes) has been materially adverse. The
balance sheet referred to in Section 4.5(f) hereof accurately reflects the
financial position of the Borrowers as of its date and there has been no change
which would have a material adverse effect on the Borrowers.
SECTION 3.5 Title to Properties and Collateral. Each of the Borrowers has
good and marketable title to all of its properties and assets subject only to
(i) such liens, encumbrances and restrictions as are disclosed on the financial
statements previously delivered to the Bank or have been otherwise previously
disclosed in writing to the Bank and (ii) Permitted Encumbrances. Each of the
Borrowers has or will acquire good title to the Collateral that it is pledging
to the Bank on the date hereof or will be pledging to the Bank from time to time
in accordance with the terms of this Agreement and the other Loan Documents. The
Borrowers have possession of all original SBA Loan Documents other than those
delivered to a person or entity who has entered into a written agreement with
the Bank to hold such documents as bailee for and as agent for perfection
purposes for the Bank. All SBA Loans represent undisputed, unconditional, bona
fide indebtedness owed to the Borrowers by the account debtor named in the SBA
Loan Documentation with respect thereto and there are and shall be no setoffs or
counterclaims or rights of recoupment against such obligations. All SBA Loan
Documentation is true, complete and correct evidence of the obligations of the
account debtors to the Borrowers and signatories and endorsements that appear
thereon are genuine and all signatories and endorsers have full capacity to
contract.
SECTION 3.6 Taxes. The Borrowers have filed (or have extensions of the
time within which to file) returns for and paid in full all federal, state and
local taxes to the extent such filings and payments were required prior to the
date of this Agreement. All of such returns are true, correct and complete.
SECTION 3.7 Agreements Legal, Valid, Binding and Enforceable. This
Agreement, the Note and the other Loan Documents to which any of the Borrowers
is a party have been duly executed and delivered by, and are the legal, valid
and binding obligations of the Borrowers enforceable against the Borrowers in
accordance with their respective terms.
SECTION 3.8 No Untrue Statements. The representations, statements and
warranties of the Borrowers set forth in this Agreement and the other Loan
Documents (a) are true, correct and complete, (b) do not contain any untrue
statement of a material fact, and (c) do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading or incomplete. The Borrowers understand that all such statements,
representations and warranties have been relied upon as an inducement by the
Bank to make the Revolving Credit Loan.
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SECTION 3.9 Employee Benefit Plans. Each of the Borrowers is in compliance
in all material respects with the applicable provisions of ERISA and the
regulations and published interpretations thereunder and the Borrowers have not
received, and the Borrowers have no reason to relieve that they will receive,
any notification of non-compliance thereunder. No Reportable Event has occurred
with respect to any Plan administered by the Borrowers or any administrator
designated by the Borrowers.
SECTION 3.10 Payment of Obligations. None of the Borrowers is in material
default under the terms of any indebtedness, liability or obligation of any of
the Borrowers with respect to any material loan or material borrowing of any of
the Borrowers of any nature whatsoever.
SECTION 3.11 Governmental Regulations. (a) None of the Borrowers is
engaged principally in, nor has as one of its important activities, the business
of extending credit for the purpose of purchasing or carrying any "margin stock"
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System of the United States, as amended to the date hereof). If
requested by the Bank, the Borrowers or any Subsidiary will furnish to the Bank
a statement on Federal Reserve Form U-1.
(b) No part of the proceeds of the Revolving Credit Loan will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately (i) to purchase or to carry margin stock (as defined in subsection
(a) of this Section) or to extend credit to others for the purpose of purchasing
or carrying margin stock, or to refund indebtedness originally incurred for such
purpose, or (ii) for any purpose which violates, or is inconsistent with, any of
the provisions of Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System.
SECTION 3.12 Subsidiaries. Except as set forth on Schedule I hereto on the
Effective Date, and except as disclosed to the Bank on any subsequent Borrowing
Date, the Borrowers have no Subsidiaries.
SECTION 3.13 SBA Relationship. BLC Partnership transferred all of its
assets and obligations to BLC Inc. with the consent of the SBA. BLC Partnership
is no longer conducting any business as a SBA qualified lender or otherwise and
will not conduct any such business hereafter. BLC Inc. is now and has been since
______________ __, 199_ a qualified "non-bank lender" or "small business lending
company" eligible to participate with the SBA in making loans to qualifying
small business, within the meaning of Part 120 of Title 13 of the Code of
Federal Regulations, as amended.
SECTION 3.14 Use of Proceeds. Existing SBA Loans (a) The proceeds of the
Revolving Credit Loan will be used to finance loans by the Borrowers to small
businesses eligible to participate in the SBA's guaranteed loan program.
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ARTICLE IV
CONDITIONS OF LENDING
The obligation of the Bank to lend hereunder is subject to the following
conditions precedent:
SECTION 4.1 Representations and Warranties. The representations and
warranties set forth in Article III hereof shall be true and correct on and as
of each Borrowing Date and on the Effective Date with the same effect as though
each such representation and warranty had been made on and as of each such date,
except to the extent that any of such representations and warranties expressly
relate to earlier dates.
SECTION 4.2 No Default. On each Borrowing Date and on the Effective Date,
the Borrowers shall be in compliance with all the terms and provisions set forth
herein on its part to be observed or performed and no Event of Default specified
in Article VII hereof, nor any event which upon notice or lapse of time or both
would constitute such an Event of Default, shall have occurred as of such
Borrowing Date or on the Effective Date.
SECTION 4.3 Officer's Certificate. On each Borrowing Date, the Bank shall
have received a certificate dated such date, and signed by an Executive Officer
of each of the Borrowers to the effect that the Borrowers are in compliance with
the conditions precedent set forth in Sections 4.1 and 4.2 hereof.
SECTION 4.4 Litigation. On each Borrowing Date and on the Effective Date,
there shall be no action, suit, arbitration or other proceeding, inquiry or
investigation, at law or in equity, or before or by any court, public board or
body, arbitrator or arbitral body, pending against any of the Borrowers or of
which the Borrowers have otherwise received official notice or, which to the
best knowledge of the Borrowers, is threatened against any of the Borrowers,
wherein any Person is challenging any of the transactions contemplated by this
Agreement or any of the other Loan Documents or wherein an unfavorable decision,
ruling or finding would materially adversely affect the ability of any of the
Borrowers to perform its obligations under this Agreement, the Note or any of
the other Loan Documents.
SECTION 4.5 Supporting Documents. On the Effective Date, the Bank shall
have received, as applicable, (a) copies of each Borrowers' Certificate of
Incorporation, as amended, certified by the Secretary of State of Delaware; (b)
certificates as to the good standing of the Borrowers in the State, dated a
recent date; (c) certificates of an Authorized Representative of each of the
Borrowers dated the Closing Date and certifying (i) that (A) attached thereto is
a copy of the By-laws in existence as of the date of such certificate and since
the day before the date of the resolutions referenced in clause (ii) below, and
(B) there have been no amendments to the
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Certificate of Incorporation of such Borrowers since the date of the last
amendment thereto indicated on the certificates furnished pursuant to clause (a)
above; (ii) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors or partners of the Borrowers authorizing the
execution and delivery of this Agreement, the Security Agreement, the Note, and
each of the other Loan Documents; (iii) the incumbency and specimen signature of
the Authorized Representative of the Borrowers executing this Agreement, the
Security Agreement, the Note, and any other Loan Documents and any other
documents and instruments furnished pursuant hereto or thereto and a
certification by another officer or partner of the Borrowers as to the
incumbency and signature of the Authorized Representative of the Borrowers; (iv)
that the representations and warranties set forth in Article III hereof are
true, correct and complete as of the date of the certificate except for changes,
none of which either alone or in conjunction with other changes materially
adversely affects any of the Borrowers, its business or its ability to perform
any of the Obligations; (v) that the Borrowers have performed and complied with
all of the agreements in the Loan Documents required to be performed or complied
with by it on or prior to the date of the certificate; and (vi) that no Event of
Default, or any condition, event or act which with the giving of notice or the
lapse of time, or both, would constitute an Event of Default, exists under this
Agreement or any of the Loan Documents; (d) certificates of insurance evidencing
compliance with Section 5.15 hereof, and, within thirty (30) days of the Closing
Date, copies of such insurance policies; (e) the Required Filings, naming the
Borrowers as debtor, the Bank as secured party and the Collateral as collateral;
(f) consolidated financial statements for the Borrowers as of March 31, 1997;
(g) evidence satisfactory to the Bank and its counsel that all of the assets of
BLC Partnership have been transferred to BLC Inc. and that the SBA approved such
transaction and that BLC Inc. is a qualified lender as set forth in Section 3.13
above; and (h) written a Purchase Commitment, with respect to the Guaranteed
Amount of any SBA Loan against which the Bank has been requested to advance a
Guaranteed Portion on the Closing Date.
SECTION 4.6 Effectuance of Assignment. On or prior to the Effective Date
the following shall have occurred: (a) the Bank and Transamerica shall have
entered into the Partial Assignment Agreement in a form satisfactory to Bank and
its counsel, and Transamerica shall have paid to the Bank all amounts due to the
Bank thereunder; (b) the Bank and Transamerica shall have entered into an
Intercreditor Agreement in a form satisfactory to Bank and its counsel; and (c)
the Borrowers shall have paid to the Bank, or on the Bank's behalf to Mr. Sidney
Yoskowitz, or the Bank shall have received from Transamerica in addition to all
other amounts to be paid by Transamerica pursuant to the Partial Assignment
Agreement, the entire portion of the Obligations which the Bank has assigned to
Mr. Yoskowitz pursuant to the Amended and Restated Junior Participation
Agreement dated as of February 7, 1996 (the "Amended and Restated Junior
Participation Agreement").
SECTION 4.7 Approval of Counsel for the Bank. All legal matters incident
to this Agreement shall be satisfactory to Baer Marks & Upham, special counsel
for the Bank, and the Borrowers shall have paid the reasonable fees and expenses
of such counsel in connection with the preparation and negotiation of this
Agreement and the other Loan Documents and the closing of the Revolving Credit
Loan, subject to the provisions of Section 8.3 hereof.
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SECTION 4.8 Administrative Fee. On the Effective Date, the Borrowers shall
have paid the Administrative Fee.
SECTION 4.9 Other Documents. On or prior to the Effective Date, the Bank
shall have received any additional documents, affidavits or certificates of the
Borrowers or any other Person as it may reasonably require.
SECTION 4.10 Additional Conditions to First Advance and Additional
Advances. On or prior to the later to occur of the Effective Date or the date of
the first Advance hereunder, in addition to any other requirements hereunder,
the Bank shall have received, in each case in form and substance satisfactory to
the Bank and its counsel: (a) evidence that the Required Filings have been made;
and (b) all documents, certificates and instruments required to be delivered to
the Bank on or prior to the Effective Date pursuant to this Article IV or
Section 5.15 hereof which are not so delivered. Concurrently with or prior to
the making of any Advance, in addition to any other requirement hereunder, the
Borrowers shall have paid to the Bank any Administrative Fee and other fees
required to be paid hereunder and with respect to any Advance of a Guaranteed
Portion after the Effective Date, evidence of the type required to be provided
pursuant to Section 4.5(n). In the event that such conditions are not satisfied
on a timely basis the Bank shall not be obligated to make any Advances or
perform any of its other obligations hereunder.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWERS
The Borrowers covenant and agree that, unless the Bank otherwise consents
in writing, so long as this Agreement shall remain in effect or the Note or any
of the Obligations shall be outstanding, the Borrowers shall, and shall cause
each of their Subsidiaries (if any) to:
SECTION 5.1 Preservation of Properties. Preserve and protect the
usefulness and value of the Collateral and its properties and assets including
without limitation the maintenance and preservation of all guarantees and
collateral for the SBA Loans.
SECTION 5.2 Corporate Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate or
partnership, as applicable, existence, rights and franchises and comply with all
laws applicable to it and at all times be qualified to do business in the
jurisdictions where each is required to be so qualified.
SECTION 5.3 Payment of Debts. Pay their debts, liabilities and obligations
when due, except those which are contested in good faith and for which the
Borrowers have maintained adequate reserves satisfactory to the Bank, provided
that such contest shall not result
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in a lien other than a Permitted Encumbrance being placed on the Collateral or
any part thereof or result in the Collateral or any part thereof being subject
to forfeiture.
SECTION 5.4 Accounts and Records. Keep and maintain full and accurate
accounts and records in accordance with Generally Accepted Accounting
Principles, consistently applied.
SECTION 5.5 Payment of Taxes and Claims. Prepare and timely file all
federal, state and local tax returns required to be filed by the Borrowers and
pay and discharge all taxes, assessments and other governmental charges or
levies imposed upon the Borrowers or in respect of any of the Borrowers'
property and assets before the same shall become in default, as well as all
lawful claims (including, without limitation, claims for labor, materials and
supplies) which, if unpaid, might become a lien or charge upon the Collateral or
the Borrowers' property and assets or any part thereof, except those which are
contested in good faith by the Borrowers and for which the Borrowers have
maintained adequate reserves satisfactory to the Bank; provided that such
contest shall not result in a lien other than a Permitted Encumbrance being
placed on the Collateral or any part thereof being subject to forfeiture. The
Borrowers shall establish, to the extent necessary, reserves which are
reasonably believed by the Auditors to be adequate for the payment of additional
taxes for years which have not been audited by the respective taxing
authorities.
SECTION 5.6 Compliance with Law. Comply with all applicable federal,
state, county and municipal laws, ordinances, rules, orders and regulations now
in force or hereafter enacted.
SECTION 5.7 Financial Statements and Reports. Furnish, or cause to be
furnished, to the Bank the following financial statements:
(a) As soon as available and in any event within forty five (45)
days after the close of each of the first three fiscal quarters in each Fiscal
Year of the Borrowers, unaudited consolidated and consolidating financial
statements of the Borrowers and each Subsidiary (if any) on a comparative basis
(including financial position, earnings and retained earnings statements)
prepared by the Chief Financial Officer of each of the Borrowers;
(b) As soon as available and in any event within ninety (90) days
after the close of each Fiscal Year of the Borrowers a copy of the annual
audited consolidated financial statements of the Borrowers and each Subsidiary
on a comparative basis (including financial position, earnings and retained
earnings statements), prepared by Richard Eisner & Co. or other independent
certified public accountants selected by the Borrowers and acceptable to the
Bank (the "Auditors"), together with the unqualified opinion of such Auditors to
the effect that such financial statements present fairly the consolidated
financial position of the Borrowers as at their respective dates and results of
operations and changes in consolidated financial position for the respective
periods to which they apply, in accordance with Generally Accepted Accounting
Principles,
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together with such other information in connection with the financial statements
supplied pursuant to this subsection as the Bank reasonably may request;
(c) Concurrently with the delivery of the statements set forth in
(a) and (b) above, a certificate signed by the Chief Financial Officer of each
of the Borrowers setting forth the computations as to compliance with the
financial covenants set forth in Section 6.9 hereof;
(d) Within ten (10) days after the end of each month, a report as to
all SBA Loans setting forth the following information, on a loan-by-loan basis:
the original principal amount, interest rate, Guaranteed Portion, payments
received through the beginning of the month, payments received during the month
and the distribution of such payments, and whether such loan is in default or
whether the Borrowers know of any event which, with the passage of time or the
giving of notice or both, would constitute an event of default thereunder,
certified by the Chief Financial Officer of each of the Borrowers;
(e) Copies of all documents filed with the Securities Exchange
Commission or the SBA, or sent to shareholders of any of the Borrowers;
(f) Copies of all reports, forms, information statements and/or
documents filed with the PBGC with respect to any Plan of the Borrowers, other
than any such reports, forms, information statements and/or documents prepared
and/or submitted solely in the ordinary course of the Borrowers' business;
(g) Information and schedules relating to all other indebtedness and
obligations of the Borrowers as the Bank reasonably may request;
(h) Copies of all instruments and documents regarding any SBA Loan,
contemporaneously with the submission of any Advance Request with respect
thereto; and
(i) As soon as practicable, any other information regarding the
operations, business affairs and condition (financial or otherwise) of the
Borrowers or filings with any governmental authorities other than those to be
provided pursuant to (e) and (f) above, as the Bank reasonably may request.
SECTION 5.8 Access to Books and Records. Permit the Bank, and its duly
authorized agents, officers and independent auditors, during normal business
hours and upon prior notice (except upon an Event of Default, in which
circumstance no notice shall be required) to (a) examine the books and records
of the Borrowers and to make copies and extracts therefrom, and (b) discuss the
affairs, finances and accounts of the Borrowers, and be advised as to the same
by, the officers of the Borrowers, as shall be relevant to the performance or
observance of the terms, covenants or conditions of this Agreement or the
financial condition of the Borrowers.
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SECTION 5.9 Notification of Event of Default. (a) Give prompt written
notice to the Bank of (i) any Event of Default or of any condition, event or act
which with the giving of notice or the lapse of time, or both, would constitute
an Event of Default, specifying the same and the steps being taken to remedy the
same and (ii) any default, event of default or any condition, event or act
which, with the giving of notice or the lapse of time or both, would constitute
such a default or event of default under any SBA Loan, other agreement or
contract to which any of the Borrowers is a party or by which any of its
property or assets is bound which would have a material and adverse effect on
the business or condition (financial or otherwise) of any of the Borrowers,
which notice shall include a description of the default and any action being
taken with respect thereto by the Borrowers or their account debtors.
(b) Promptly notify the Bank in writing of (i) any change in, the
business or the operations which may be materially adverse to the Borrowers or
any of their Subsidiaries (if any), disclosing the nature thereof, (ii) any
modification, change or amendment to the Guaranty Agreement on SBA Form 750
between the Borrowers and the SBA, and (iii) any information which indicates
that any financial statements which are the subject of any representation
contained in this Agreement, or which are furnished to the Bank in connection
with this Agreement, fail, in any material extent, to present fairly the
financial condition and results of operations purported to be presented therein,
disclosing the nature thereof.
SECTION 5.10 Certificate of No Default. Deliver to the Bank on each
Borrowing Date and concurrently with the delivery of the financial statements
set forth in Sections 5.7(a) and (b) hereof, a certificate of an Authorized
Representative of each of the Borrowers either stating that he or she is not
aware of any condition, event or act which constitutes an Event of Default or
any condition, event or act which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default, or, if any such condition,
event or act exists, specifying the same and the steps being taken to remedy the
same. In addition, upon twenty (20) days' prior request by the Bank, an
Authorized Representative of each of the Borrowers shall execute, acknowledge
and deliver to the Bank a certificate of such Authorized Representative either
stating that to his or her knowledge no default or breach exists hereunder or
under any other Loan Document, or specifying each such default or breach of
which he or she has knowledge and the steps being taken to remedy the same.
SECTION 5.11 Payment of Costs and Expenses. Pursuant and subject to
Section 8.3 hereof, promptly pay the costs and expenses of the Bank, including,
without limitation, the reasonable fees and disbursements of any counsel for the
Bank, incurred from time to time, in connection with the transactions
contemplated by this Agreement and the other Loan Documents.
SECTION 5.12 Notification of Litigation and Adverse Business Development.
Give prompt written notice to the Bank of (a) any action, proceeding or
investigation pending or threatened against any of the Borrowers before any
court or governmental instrumentality or other administrative agency which
involves the possibility of any judgment or liability which would
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result in any material adverse changes in the business, properties or assets of
any of the Borrowers, either individually or in the aggregate, or (b) any
materially adverse change in the financial condition, assets, liabilities,
business or operations of any of the Borrowers, either individually or in the
aggregate.
SECTION 5.13 Compliance with ERISA. (a) Comply in all material respects
with the applicable provisions of ERISA and (b) furnish to the Bank (i) as soon
as possible, and in any event within five (5) Business Days after any Executive
Officer of any of the Borrowers knows or has reason to know that any Reportable
Event with respect to any Plan of the Borrowers has occurred, a statement of the
Chief Financial Officer of each of the Borrowers setting forth details as to
such Reportable Event and the action which the Borrowers propose to take with
respect thereto, together with a copy of the notice of such Reportable Event, if
any, given to the PBGC, and (ii) promptly after receipt thereof, a copy of any
notice the Borrowers or any Subsidiary of the Borrowers may receive from the
PBGC relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any Plan.
SECTION 5.14 New Subsidiaries. Promptly notify the Bank of any newly
formed or acquired Subsidiary.
SECTION 5.15 Insurance. Keep their insurable properties adequately insured
at all times, by financially sound and reputable insurers, and maintain
insurance against employee theft and such other insurance to such extent and
against such loss, damage, liability (including liability to third parties) and
risks (including fire and other risks insured against by extended coverage) as
is customary with companies in the same or similar business of comparable size
to the Borrowers, and maintain in full force and effect public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties owned,
occupied or controlled by it in an amount not less than $1,000,000, including a
minimum of $1,000,000 in primary insurance, and maintain such other insurance as
may be required by applicable law, or as reasonably may be required by the Bank.
SECTION 5.16 Federal Reserve Regulations, Etc.. (a) No part of the
proceeds of the Revolving Credit Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately (a) to purchase
or to carry margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock, or to refund indebtedness originally
incurred for such purpose, or (b) for any purpose which violates, or is
inconsistent with, any of the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
(b) The proceeds of the Revolving Credit Loan will be used solely
for the purposes set forth in Section 3.14 hereof.
SECTION 5.17 Notification of Adverse Legal Development. Give prompt
written notice to the Bank of any change in any Federal, state or local law,
statute, rule or
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regulation, which change would have a material adverse effect (or, in the case
of a change in any statute, rule or regulation of or relating to the SBA, an
adverse effect) on the business or condition (financial or otherwise) of any of
the Borrowers, and of which change any of the Borrowers has knowledge.
SECTION 5.18 SBA Funding Eligibility. At all times during the term of this
Agreement remain a "non-bank lender" or "small business lending company"
eligible to participate with the SBA in making loans to qualifying small
businesses, within the meaning of Part 120 of Title 13 of the Code of Federal
Regulations, as amended. All SBA Loans shall conform in all respects with all
applicable rules, regulations and requirements of the SBA, and shall be
evidenced by documents, instruments and certificates on such forms as the SBA
shall from time to time prescribe for use by the Borrowers or their account
debtors or such other forms as shall be expressly approved in writing by the
SBA.
SECTION 5.19 Handling of SBA Loans. In furtherance of the continuing
assignment and security interest contained in the Security Agreement, the
Borrowers will, upon the creation of any SBA Loans, or at such intervals as the
Bank may require, provide the Bank with confirmatory assignments in form
satisfactory to the Bank, copies of invoices to customers, evidence of shipment
and delivery, and such further information and documentation as the Bank may
require and the Borrowers, at the Bank's request, shall deliver to the Bank all
documents and written instruments constituting or relating to the SBA Loans. The
Borrowers will take any and all steps and observe such formalities and will
execute and deliver all papers and instruments and do all things necessary to
effectuate this agreement and facilitate collection of the SBA Loans.
Until the Borrowers' authority so to do is terminated by written notice
from the Bank (which notice the Bank may give at any time in its discretion or
at any time after default by the Borrowers under this Agreement) the Borrowers
will, at their own cost and expense, but on the Bank's behalf and for the Bank's
account, collect and otherwise enforce as the Bank's property and in trust for
the Bank, all amounts unpaid on SBA Loans and shall not commingle such
collections with the Borrowers own funds or use the same except to pay the
Borrowers obligations to the Bank. The Borrowers shall forthwith remit all
amounts so collected in kind whether in the form of cash, checks, drafts, notes,
acceptances or other evidence of payment, including all prepayments by account
debtors to the Borrowers in the form received.
ARTICLE VI
NEGATIVE COVENANTS OF THE BORROWERS
The Borrowers covenant and agree that, so long as this Agreement shall
remain in effect or the Note or any of the Obligations shall be outstanding,
neither they nor any of their Subsidiaries (if any) shall, without the prior
written consent of the Bank:
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SECTION 6.1 ERISA. Permit any Plan to engage in a prohibited transaction
within the meaning of section 406 of ERISA or section 4975 of the Code, except
in those cases for which there is a statutory or administrative exemption
available under section 408 of ERISA or section 4975(d) of the Code, or permit
to exist with respect to any Plan any accumulated funding deficiency within the
meaning of section 412 of the Code, or incur any liability to the PBGC other
than for required insurance premiums.
SECTION 6.2 Merger. (a) Merge into, acquire or consolidate with or into
any Person unless (i) one of the Borrowers is the surviving or resulting Person
and (ii) after giving effect to such merger, acquisition or consolidation no
Event of Default shall exist, or (b) sell, assign, lease, transfer or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) except
for sale of the Guarantee Portion of any SBA Loan in the ordinary course of
business of the Borrowers.
SECTION 6.3 Indebtedness. Incur, create or assume, directly or indirectly,
any indebtedness or liability of any kind whatsoever including, but not limited
to, advances or any other indebtedness or liability evidenced by notes, bonds,
debentures or any conditional sale or similar title retention agreements or
capitalized leases, except for (a) the Note; (b) Consolidated Subordinated Debt;
(c) existing indebtedness as disclosed on Schedule II annexed hereto, provided
that such indebtedness shall not be renewed, extended or refinanced without the
prior written consent of the Bank; (d) indebtedness of the Borrowers and their
Subsidiaries (if any) to the Bank; (e) purchase money indebtedness incurred in
connection with consolidated capital expenditures, and which indebtedness
fulfills the requirements of Section 6.4(c) hereof; (f) indebtedness of
Borrowers and their Subsidiaries (if any) to Transamerica; and (g) indebtedness
incurred in the ordinary course of business; provided, however, that all
indebtedness incurred in the ordinary course of the business of the BLC Inc.
together with all outstanding indebtedness referred to in clause (c) shall not
exceed $200,000 at any time:
SECTION 6.4 Liens. Create, assume, permit or suffer to exist any mortgage,
pledge, encumbrance, security interest or other lien securing an obligation on
any property, real, personal, or mixed, whether now owned or hereafter acquired
("Encumbrances"), except for (a) Permitted Encumbrances; (b) existing
Encumbrances as disclosed on Schedule III annexed hereto, as the same may be
renewed or extended; and (c) Purchase Money Mortgages granted in connection with
indebtedness incurred for consolidated capital expenditures, provided that after
giving effect to the creation of such Purchase Money Mortgage(s) (i) the
Borrowers are not in violation of any other covenant or agreement contained in
this Agreement and (ii) the Guarantor is not in violation of any covenant or
agreement contained in the Guaranty, and provided further that such Purchase
Money Mortgages do not exceed 100% of the purchase price of the asset being so
financed, and provided finally that no asset (other than the asset being
acquired) secures the indebtedness secured by such Purchase Money Mortgage.
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<PAGE>
SECTION 6.5 Guaranties. (a) Guarantee, endorse, become surety for, or
otherwise in any way become or be responsible for, the obligations of any other
Person, including, without limitation, by agreement to maintain net worth or
working capital of any other Person or agreement for the furnishing of funds to
any other Person, directly or indirectly, through the purchase of goods,
supplies or services (or by way of stock purchase, capital contribution, advance
or loan) or for the purpose of paying or discharging the liabilities of any
other Person, or otherwise, (b) enter into or be a party to any contract for the
purchase of merchandise, materials, supplies or other property if such contract
provides that payment for such merchandise, materials, supplies or other
property shall be made regardless of whether delivery of such merchandise,
materials, supplies or other property is ever made or tendered, or (c) obtain
upon its credit the issuance of any letter or letter of credit for the discharge
of the obligations of any other Person, except (i) the Borrowers and their
Subsidiaries (if any) may endorse negotiable instruments for deposit or
collection in the normal course of their respective businesses; (ii) guaranties
issued in favor of the Bank; and (iii) existing guaranties as disclosed on
Schedule IV annexed hereto, as the same may be renewed or extended.
SECTION 6.6 Nature of Business. Materially change, alter or amend the
nature or conduct of its business from that engaged in by it on the Effective
Date.
SECTION 6.7 Investments. Make or permit to exist any loans or advances to,
or purchase or repurchase any stock, other securities or evidences of
indebtedness of, or make or permit to exist any investment or acquire any
interest whatsoever in (by capital contribution or otherwise), any other Person,
except for investments of its cash in (a) full faith and credit obligations of
the United States Government or any agency thereof maturing within one year of
the date of purchase; (b) dollar denominated certificates of deposit issued by
the Bank; (c) commercial paper rated A-1 or P-1; (d) any other investment
expressly permitted by the SBA; and (g) subject to Section 6.2 hereof,
investments in connection with acquisitions of entities engaged in businesses
substantially similar to that engaged in by the Borrowers as of the Closing
Date, provided that after giving effect to any such investment (i) the Borrowers
shall not be in violation of any other covenant or agreement contained in this
Agreement and (ii) the Guarantor shall not be in violation of any covenant or
agreement contained in the Guaranty.
SECTION 6.8 Handling of SBA Loans. Sell, lease, transfer, assign or
otherwise dispose of or amend or waive any provisions of any Guaranteed Portion
of SBA Loans, notes, accounts receivable or other obligations owed to the
Borrowers or any Subsidiary by any Person, or release any collateral therefor or
amend or waive any documents with respect to the collateral therefor, except (a)
for the purpose of collection in the ordinary course of their respective
businesses, and (b) for sales of the Guaranteed Portion of SBA Loans as
expressly permitted by this Agreement.
SECTION 6.9 Financial Covenants. (a) The Borrowers shall maintain at all
times a reserve against losses on SBA Loans equal to four percent (4%) of the
Borrowers' residual interest in the outstanding principal balance of all SBA
Loans outstanding.
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(b) The Borrowers shall not permit their Consolidated Tangible Net
Worth (excluding Consolidated Subordinated Debt) to be less than $1,800,000 at
any time.
SECTION 6.10 Location of Collateral. Change its chief executive office or
the places where any Collateral is kept except upon sixty (60) days prior
written notice to Bank.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES; APPLICATION OF PROCEEDS
SECTION 7.1 Events of Default. Any one or more of the following events
shall constitute an Event of Default:
(a) if any payment of all or any part of the principal or interest
thereon due pursuant to this Agreement and/or the Note, whether at the stated
maturity thereof or at any date fixed for payment by acceleration, by notice of
prepayment or otherwise shall not be paid as and when due and such non-payment
shall continue for ten (10) days;
(b) if any of the Borrowers shall default in the performance or
observance of any covenant contained in Article VI;
(c) if any of the Borrowers shall default in the performance or
observance of any covenant, agreement or condition (other than such referred to
in Section 7.1(a) or (b) hereof) set forth in this Agreement and continuance of
such default for a period of thirty (30) days after notice thereof to the
Borrowers;
(d) if any representation or warranty made by any of the Borrowers
herein or in any other Loan Document shall prove to have been false, incorrect
or misleading in any material respect on the date as of which made;
(e) if any of the Borrowers or any of their Subsidiaries (if any)
shall (i) generally not be paying its debts as they come due, (ii) file a
petition in bankruptcy or a petition to take advantage of any insolvency act,
(iii) become insolvent or make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a custodian or receiver of itself or of the
whole or any substantial part of its property, (v) on a petition in bankruptcy
filed against it, have an order for relief entered against it, or (vi) file a
petition or answer seeking reorganization or arrangement under the federal
Bankruptcy Code or any other applicable law or statute of the United States of
America or any other jurisdiction;
(f) if a petition in bankruptcy shall be filed against any of the
Borrowers or any of their Subsidiaries and not be dismissed within forth five
(45) days from the date of the filing;
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(g) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Borrowers or any of
their Subsidiaries, a custodian or receiver of any of the Borrowers or such
Subsidiary, or of the whole or any substantial part of its property, or
approving a petition filed against any of the Borrowers or any of their
Subsidiaries seeking reorganization or arrangement of any of the Borrowers or
such Subsidiary under the federal Bankruptcy Code or any other applicable law or
statute of the United States of America or any other jurisdiction, and such
order, judgment or decree shall not be set aside or stayed within forth five
(45) days from the date of its entry;
(h) if, under the provisions of any other law for the relief or aid
of debtors, any court of competent jurisdiction shall assume custody or control
of any of the Borrowers or any of their Subsidiaries or of the whole or any
substantial part of its property and such custody or control shall not be
terminated or stayed within forth five (45) days from the date of assumption of
custody or control;
(i) if a final judgment, a fine or other order for the payment of
money in excess of $50,000 shall be rendered by a court or administrative agency
against any of the Borrowers and/or any of their Subsidiaries and the applicable
Person shall not discharge the same or provide for its discharge in accordance
with its terms, obtain an adequate bond with respect thereto, or procure a stay
of execution thereof within sixty (60) days from the date of its entry and
within the sixty (60)-day period, or any longer period during which execution of
such judgment, fine or other order shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during the appeal;
(j) if there shall occur any Reportable Event with respect to any
Plan of the Borrowers or any of their Subsidiaries;
(k) if Robert Tannenhauser shall cease to hold his management
position with respect to the Borrowers and shall not have been replaced within
ninety (90) days of such cessation with a Person approved by the Bank (such
approval not to be unreasonably withheld or delayed); or
(l) if an Event of Default (as defined therein) shall occur under
any or all of the Loan Documents.
SECTION 7.2 Bank's Remedies. In case one or more Events of Default shall
have occurred, the Bank may terminate the Commitment and declare the entire
Outstanding Balance to be immediately due and payable, whereupon the maturity of
the then Outstanding Balance shall be accelerated and all principal, interest
accrued thereon and all other amounts due hereunder shall forthwith become due
and payable, and the Bank shall have the following rights and remedies, all such
rights and remedies and the actions contemplated by Sections 7.3 - 7.6 hereof
being specifically subject to and modified by the Multi-Party Agreement:
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<PAGE>
(a) at any time thereafter and so long as such Event of Default
shall be continuing, to declare the entire Outstanding Balance and the other
Obligations to be immediately due and payable, whereupon the maturity of the
then Outstanding Balance and other Obligations shall be accelerated and the
same, interest accrued thereon, and all other amounts due hereunder shall
forthwith become due and payable without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived, anything contained herein
or in the Note or other Obligations to the contrary notwithstanding;
(b) to take any action at law or in equity to collect the payments
due under the Note or to enforce performance and observance of the Obligations
of the Borrowers and the Guarantor under this Agreement, the Guaranty and the
other Loan Documents, or to recover damages for breach thereof;
(c) to exercise any and all rights under the Security Agreement; and
(d) to exercise any and all rights and remedies conferred upon
secured parties by the Uniform Commercial Code and other applicable laws.
SECTION 7.3 Specific Performance. In addition to the above remedies, if
any of the Borrowers commits a breach or threatens to commit a breach of this
Agreement or any other Loan Document, the Bank shall have the right and remedy,
without posting bond or other security, to have the provisions of this Agreement
or such other Loan Document specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause immediate and irreparable injury to the Bank and
that money damages will not provide an adequate remedy therefor.
SECTION 7.4 Agreement to Pay Attorneys' Fees and Expenses. If there shall
exist an Event of Default as defined in this Agreement and/or any other Loan
Document and the Bank shall employ attorneys, or incur other costs and expenses
for the collection of payments due or to become due or for the enforcement or
performance or observance of any obligation or agreement on the part of the
Borrowers under this Agreement and/or any other Loan Document, or enforcement of
the Note, the Borrowers agree that they will pay to the Bank, on demand, the
reasonable fees and disbursements of such attorneys together with all other
costs and expenses incurred by the Bank.
SECTION 7.5 Application of Proceeds. All payments received after an Event
of Default shall be applied as follows:
(a) First: to the payment of all fees, costs and expenses described
in the preceding Section 7.4;
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<PAGE>
(b) Second: to the payment in full of the Note and the other
Obligations with all such payments being applied first to the payment of
interest, with any balance first to the payment and reduction of principal, and
then to other amounts due; and
(c) Third: the balance, if any, of such proceeds remaining after
payment in full of the foregoing items, to the Borrowers or as a court of
competent jurisdiction may otherwise direct.
If the amount of the proceeds received from the sale or other disposition
of the Collateral shall be insufficient to satisfy in full the amounts referred
to in paragraphs (a) and (b) above, the Borrowers shall remain and be liable for
any such deficiency.
SECTION 7.6 No Remedy Exclusive. Except as otherwise expressly.provided
herein, no remedy herein conferred or reserved to the Bank is intended to be
exclusive of any other available remedy, but each and every remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or any other Loan Document or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any Event of Default shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Bank to exercise any remedy reserved to it in this Agreement, it
shall not be necessary to give notice.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, certificates or other communications
permitted or required hereunder shall be conclusively deemed to have been
received and shall be effective on the day on which delivered (i) in the case of
the Borrowers, addressed to 919 Third Avenue, New York, New York 10150,
Attention: Robert Tannenhauser with copy to: Weil, Gotshal & Manges, 767 Fifth
Avenue, New York, New York 10153, Attn: Simeon Gold, Esq. and (ii) in the case
of the Bank, addressed to 430 Park Avenue, 4th Floor, New York, New York 10022,
Attention: Leonard Rudolph, Senior Vice President, or if sent by registered or
certified mail, return receipt requested, postage prepaid, on the third Business
Day after the day on which mailed, addressed to the Borrowers or the Bank, as
the case may be, at its address set forth above. Either party, by notice given
hereunder, may designate a further or different address to which subsequent
notices, certificates or communications shall be sent.
SECTION 8.2 Survival. All covenants, agreements, obligations,
representations and warranties made by the Borrowers herein and in the
certificates delivered pursuant hereto shall be deemed to have been relied upon
by the Bank and shall survive the making by the Bank of the Revolving Credit
Loan and the execution and delivery to the Bank of
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<PAGE>
the Note regardless of any investigation made by the Bank or on its behalf and
without regard to any modification extension renewal, amendment or waiver of any
provision of any Loan Document, and shall continue in full force and effect
until such time as the principal of, premium, if any, interest on and all other
amounts due under the Note shall have been paid, and all fees, costs and
expenses due under the Loan Documents have been paid and any liability to the
Bank under the Loan Documents shall have been discharged in a manner
satisfactory to the Bank.
SECTION 8.3 Expenses of the Bank. At all times, the Borrowers will pay all
out-of-pocket expenses incurred by the Bank in connection with (a) the
preparation of this Agreement and the other Loan Documents (whether or not the
transactions hereby contemplated shall be consummated) including without
limitation, the reasonable fees and disbursements of Baer Marks & Upham, special
counsel to the Bank, (b) the making of the Advances hereunder and (c) the
enforcement and protection of the rights of the Bank in connection with this
Agreement or the other Loan Documents, or with the Advances made or the Note
issued hereunder, and with respect to any action which may be instituted against
the Bank in respect of the foregoing, including, without limitation, the
reasonable fees and disbursements of counsel for the Bank.
SECTION 8.4 Applicable Law. This Agreement and the Note shall be construed
in accordance with and governed by the laws of the State of New York and
applicable federal law.
SECTION 8.5 Amendments, Changes and Modifications. Except as otherwise
provided in this Agreement or in the other Loan Documents, subsequent to the
issuance of the Note and prior to payment in full of the Note, no modification,
amendment, alteration, release or termination of any provision of this Agreement
or of the Note, nor consent to any departure by the Borrowers from the
provisions hereof, shall in any event be effective unless the same shall be in
writing and signed by the parties, their successors or assigns, on whom the same
shall be binding. Any such modification, amendment, release, termination or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Borrowers in any case shall entitle
the Borrowers to any other or further notice or demand in the same, similar or
other circumstance.
SECTION 8.6 Waivers. No waiver of any of the provisions of this Agreement
(a) shall be valid unless evidenced by a writing executed by each party to be
bound thereby, (b) shall be deemed or shall constitute a waiver of any other
provision of this Agreement or any other provisions hereof (whether or not
similar), or (c) shall constitute a continuing waiver unless otherwise expressly
provided. The failure or delay on the part of the Bank at any time or times in
exercising any right or remedy hereunder shall not operate as a waiver thereof
nor shall any single or partial exercise of any power or right or remedy
preclude other or further exercise thereof or the exercise of any other right or
remedy.
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<PAGE>
SECTION 8.7 Extension of Maturity. Subject to Article II hereof, should
any installment of principal of or interest on the Note become due and payable
on a day other than a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day, and, in the case of principal, shall be
payable with interest accrued to such date.
SECTION 8.8 Separability. In case any one or more of the provisions
contained in this Agreement or in the Note should be determined to be
superseded, invalid, illegal or otherwise unenforceable in any respect, pursuant
to applicable law, such determination shall not affect the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby, and such provisions shall
be enforced as if the invalid provision were deleted.
SECTION 8.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one and the same Agreement.
SECTION 8.10 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as specifically set forth or
incorporated herein.
SECTION 8.11 Headings; Interpretation. Section and paragraph headings and
the table of contents are not to be considered part of this Agreement, are
included solely for convenience, are not intended to be full or accurate
descriptions of the contents thereof, and shall not affect its meaning,
construction or effect. Sections and paragraphs mentioned by number only are the
respective sections and paragraphs of this Agreement. The use of the terms
"herein", "hereunder", "hereof", and like terms shall be deemed to refer to this
entire Agreement and not merely to the particular provision in which the term is
contained, unless the context clearly indicates otherwise. Capitalized terms
used and not otherwise defined herein shall have the meanings given to them in
the other Loan Documents or the Uniform Commercial Code adopted by the State of
New York, as amended from time to time in accordance therewith.
SECTION 8.12 Term. This Agreement shall become effective upon the
Effective Date and shall remain in full force and effect from the date thereof
until the Maturity Date, provided however that this Agreement shall be
automatically renewed and extended for successive periods of one year each,
subject, however, to the right of either party to terminate it as at the
Maturity Date or at the end of any succeeding one year term upon at least sixty
(60) days prior written notice and subject to early termination upon the
occurrence of any Event of Default hereunder. Termination of this Agreement
shall not affect any of the Debtor's obligations incurred prior to the effective
date of such termination and the provisions hereof shall continue
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<PAGE>
to be fully operative until all transactions entered into, rights created, or
obligations incurred prior to the termination have been fully disposed of,
concluded or liquidated.
SECTION 8.13 Successors and Assigns. (a) Whenever in this Agreement
reference is made to any party, such reference shall be deemed to include the
successors or assigns thereof. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, legal representatives, heirs, successors and
assigns. The provisions of this Agreement are intended to be for the benefit of
the Bank, its successors and assigns as holder of the Note.
(b) The Bank, in its sole discretion, shall have the right, at any
time and from time to time, to sell participation interests in any or all of the
Advances to other lenders or, upon notice to the Borrowers, to assign all or any
portion of, or sell participation interests in, its beneficial interest in the
Note to any other lender or lenders acceptable to the Bank; provided, however,
the Bank shall not sell its entire interest in all of the Advances and Note
without the prior consent of the SBA, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary contained in this subsection,
such sale or assignment by the Bank of any such participation or interest shall
in no manner increase or modify the Obligations pursuant to this Agreement, the
Note or any other Loan Document.
SECTION 8.14 Gender and Number. Words importing a particular gender mean
and include every other gender and words importing the singular number mean and
include the plural number and vice-versa.
SECTION 8.15 Exhibits and Schedules. Exhibits and Schedules, if any, to
this Agreement are an integral part of this Agreement.
SECTION 8.16 No Conflict with SBA Regulations. Notwithstanding any other
provision in his Agreement to the contrary, in the event any provision of this
Agreement is deemed to conflict or be inconsistent with any SBA rule, regulation
or policy, whether currently in effect or hereafter promulgated (an "SBA Rule"),
the provision of such SBA Rule shall govern and shall be deemed controlling for
all purposes of this Agreement. The parties hereto agree to be bound by the oral
or written opinion of the SBA's Chief Counsel for Business Loans in Washington,
D.C., as to the construction or interpretation of any SBA Rule.
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<PAGE>
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Revolving
Credit Agreement to be duly executed by their duly authorized officers, all as
of the day and year first above written.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
----------------------------------------
Robert Tannenhauser, President
BLC FINANCIAL SERVICES, INC.
By: /s/ Robert Tannenhauser
----------------------------------------
Robert Tannenhauser, President
STERLING NATIONAL BANK
By: /s/ Leonard Rudolph
----------------------------------------
Leonard Rudolph, Senior Vice President
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EXHIBIT A
[FORM OF REVOLVING CREDIT NOTE]
$8,000,000 New York, New York
August 27, 1997
FOR VALUE RECEIVED, BUSINESS LOAN CENTER, INC., a Delaware corporation and
BLC FINANCIAL SERVICES, INC., a Delaware corporation (jointly and severally the
"Borrowers"), hereby jointly and severally promise to pay to the order of
STERLING NATIONAL BANK (the "Bank"), at its office located at 430 Park Avenue,
4th Floor, New York, New York 10022, on the Maturity Date the lesser of (i) the
principal sum of Eight Million Five Hundred Thousand Dollars ($8,000,000) and
(ii) the aggregate unpaid principal amount of all Advances (as defined in the
Agreement) to the Borrowers from the Bank pursuant to Section 2.01 of the
Amended and Restated Revolving Credit Agreement dated as of August 27, 1997,
between the Borrowers and the Bank (the "Agreement"), in lawful money of the
United States of America in immediately available funds on June 30, 1998,
subject to acceleration as set forth in the Agreement and subject to extension
as set forth in the Agreement.
This Revolving Credit Note is one of the Revolving Credit Notes referred
to in the Agreement. All capitalized terms used herein and not defined herein
which are defined in the Agreement, shall have the same meaning in this Note as
in the Agreement.
The Borrowers shall pay interest on the outstanding principal balance of
this Note on a monthly basis, on the first day of each month (on the basis of a
year of 360 days consisting of twelve (12) thirty (30) day months) at an annual
rate equal to the sum of the Base Rate, as in effect from time to time, plus
1.25%.
"Base Rate" shall mean the rate of interest publicly announced by the Bank
at its principal office from time to time as its prime rate, which rate need not
be the best rate available; any change in the Base Rate shall be effective as of
the opening of business on the date each such change is announced. The Borrowers
promise to pay interest, payable on demand, on any overdue principal and, to the
extent permitted by applicable law, overdue interest, from the respective due
dates of such amounts at a rate or rates determined as set forth in the
Agreement.
A-1
<PAGE>
The Bank may charge any amount due under this Note to the Borrowers'
account with the Bank. Such amount shall be deemed paid out of the first
collections (other than the amounts then payable by the Bank to the SBA's
collection agent for ultimate payment to a party other than the Bank pursuant to
the Loan Documentation) in the account subsequent to the date of the charge. If
the Bank's Base Rate shall be increased, the compensation to be paid by the
Borrowers to the Bank shall be increased by 1/4 of 1% per annum for each 1/4 of
1% per annum of increase in said Base Rate. If the Bank's Base Rate shall be
decreased, the compensation to be paid to the Bank shall be reduced by 1/4 of 1%
per annum for each 1/4 of 1% per annum reduction in the said Base Rate.
The Borrowers hereby waive diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder hereof of any of
its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Revolving Credit Note and all payments
and prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be recorded by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof; provided, however, that the failure by
the holder to make such insertion shall not affect the joint and several
obligations of the Borrowers hereunder.
Reference is made to the Agreement, which, among other things, contains
provisions for the acceleration of the maturity hereof upon the happening of
certain events and for optional and mandatory prepayment of the principal hereof
prior to the maturity hereof, all upon the terms and conditions therein
specified. This Revolving Credit Note is secured by the Collateral referred to
in the Agreement and in the Security Agreement. This Revolving Credit Note shall
be construed in accordance with and governed by the laws of the State of New
York and applicable federal law.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
----------------------------------------
Robert Tannenhauser, President
BLC FINANCIAL SERVICES, INC.
By: /s/ Robert Tannenhauser
----------------------------------------
Robert Tannenhauser, President
A-2
<PAGE>
A-3
<PAGE>
Schedule of Advances/Repayments
Initials of Guaranteed Amount of
Entering Portion of Principal Outstanding
Date Officer Advance* Repayment Balance
- - ---- ------- -------- --------- -------
* including accrued but unpaid outstanding interest under Revolving Credit Loan
A-4
<PAGE>
EXHIBIT B
NOTICE OF ADVANCE AND
BORROWING BASE CERTIFICATE
(LETTERHEAD OF BORROWERS)
Date:_______
Sterling National Bank
430 Park Avenue,
4th Floor
New York, New York 10022
Attention: Leonard Rudolph, Senior Vice President
Gentlemen:
THE UNDERSIGNED HEREBY APPLY for an Advance in the amount of $_________ to
be made on [Borrowing Date] pursuant to the Amended and Restated Revolving
Credit Agreement dated as of August 27, 1997 (the "Agreement"), between Sterling
National Bank and the undersigned. The capitalized terms used herein and not
defined shall have the same meanings as are set forth in the Agreement.
WE HEREBY CERTIFY that as of the date hereof and as of the Borrowing Date
as follows:
Total Value Of All Loans $__________
Less: Amount guaranteed by SBA ................ $__________
Total residual loans where one or
more monthly payments are in
arrears (on a maturity basis).................. $__________
___________
(Borrowing Base) A__________
Loan prior to this advance ___________
Net available prior to this advance ===========
Advance Request ===========
The purposes of the above Advance Request are:
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$_______________ to fund the
Guaranteed Portion
of the SBA Loan
identified on the
annexed Schedule
of Identification;
The undersigned hereby certify to Sterling National Bank ("Sterling") that
each representation and warranty set forth in the Amended and Restated Revolving
Credit Agreement and the Amended Security Agreement ("Agreements") is true and
correct and the undersigned are in full compliance with all the terms and
conditions of the Agreements. The Agreements are in full force and effect and no
event which, with the passage of time or the giving notice would constitute an
Event of Default under the Agreements has occurred or is continuing.
BUSINESS LOAN CENTER, INC.
By:____________________________
Name and Title:
BLC FINANCIAL SERVICES, INC.
By:____________________________
Name and Title:
BUSINESS LOAN CENTER
By:____________________________
A General Partner
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EXHIBIT C
SCHEDULE OF IDENTIFICATION
(LETTERHEAD OF Borrowers)
Date:_________
Sterling National Bank
430 Park Avenue
4th Floor
New York, New York 10022
Attention: Leonard Rudolph, Vice President
Gentlemen:
We hereby identify the following SBA Loan in connection with the within
Notice of Advance and Borrowing Base Certificate to which this Schedule is
attached. Capitalized terms used herein but not defined shall have the same
meanings as set forth in the Amended and Restated Revolving Credit Agreement,
dated as of August 27, 1997, between the undersigned and Sterling National Bank
("Sterling")
SBA Loan No.:_____________________
Borrower(s):______________________
Interest Rate:____________________
Original Note Amount:_____________
Guaranteed Amount:________________
Maturity Date:____________________
As required by the Amended and Restated Revolving Credit Agreement, we
have attached hereto a copy of the Authorization and Loan Agreement (Guaranty
Loans) on SBA Form 529B for the above-described SBA Loan. Further, as required
by the Amended and Restated Revolving Credit Agreement, the original Note with
respect to said Loan will be delivered
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immediately to Sterling's agent pursuant to the Multi-Party Agreement dated as
of December 19, 1994 and all other original SBA Loan Documentation with respect
thereto will be held by us at our principal office at 919 Third Avenue, New York
City, New York.
Very truly yours,
BUSINESS LOAN CENTER, INC.
By:___________________________
Name and Title:
BLC FINANCIAL SERVICES, INC.
By:____________________________
Name and Title:
* One such form shall be completed and submitted for each SBA Loan funded in
whole or in part with an Advance under the Amended and Restated Revolving
Credit Agreement.
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LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A Note
Exhibit B Notice of Advance and
Borrowing Base Certificate
Exhibit C Schedule of Identification
Schedules
Schedule I Existing Subsidiaries
Schedule II Existing Indebtedness
Schedule III Existing Encumbrances
Schedule IV Existing Guaranties
Schedule V Litigation
Schedule VI Permitted Transfers of Assets
Schedule VII SBA Loans funded by New York Federal
Savings Bank loans being pledged to the
Bank.
Schedule VIII State by state breakdown of all existing SBA Loans
Schedule IX UCC financing statements to be terminated; Judgments to be
satisfied
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS............................................. 2
SECTION 1.1 Definitions............................................. 2
SECTION 1.2 Accounting Terms........................................ 8
ARTICLE II
THE LOAN................................................ 8
SECTION 2.1 The Revolving Credit Loan............................... 8
SECTION 2.2 The Note................................................ 9
SECTION 2.3 Interest on the Revolving Credit Loan................... 9
SECTION 2.4 Optional Prepayment of Revolving Credit Loan............ 9
SECTION 2.5 Mandatory Prepayment of Revolving Credit Loan........... 10
SECTION 2.6 Funds; Manner of Payment................................ 11
SECTION 2.7 Administrative Fee 11
SECTION 2.8 Collateral.............................................. 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS......... 12
SECTION 3.1 Organization; Power; Authorization...................... 12
SECTION 3.2 No Conflict with, Violation of or Default under Laws or
other Agreements............................... 12
SECTION 3.3 Litigation; Official Approvals.......................... 13
SECTION 3.4 Information and Financial Data Accurate; Financial
Statements; No Adverse Changes................. 13
SECTION 3.5 Title to Properties and Collateral...................... 14
SECTION 3.6 Taxes................................................... 14
SECTION 3.7 Agreements Legal, Valid, Binding and Enforceable........ 14
SECTION 3.8 No Untrue Statements.................................... 14
SECTION 3.9 Employee Benefit Plans.................................. 14
SECTION 3.10 Payment of Obligations.................................. 14
SECTION 3.11 Governmental Regulations................................ 15
SECTION 3.12 Subsidiaries............................................ 15
SECTION 3.13 SBA Relationship........................................ 15
SECTION 3.14 Use of Proceeds......................................... 15
ARTICLE IV
CONDITIONS OF LENDING................................... 16
SECTION 4.1 Representations and Warranties.......................... 16
SECTION 4.2 No Default.............................................. 16
SECTION 4.3 Officer's Certificate................................... 16
SECTION 4.4 Litigation.............................................. 16
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SECTION 4.5 Supporting Documents.................................... 16
SECTION 4.6 Effectuance of Assignment.
SECTION 4.7 Approval of Counsel for the Bank........................ 17
SECTION 4.8 Administrative Fee...................................... 18
SECTION 4.9 Other Documents......................................... 18
SECTION 4.10 Additional Conditions to First Advance and Additional
Advances....................................... 18
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWERS.................. 18
SECTION 5.1 Preservation of Properties.............................. 18
SECTION 5.2 Corporate Existence..................................... 18
SECTION 5.3 Payment of Debts........................................ 18
SECTION 5.4 Accounts and Records.................................... 19
SECTION 5.5 Payment of Taxes and Claims............................. 19
SECTION 5.6 Compliance with Law..................................... 19
SECTION 5.7 Financial Statements.................................... 19
SECTION 5.8 Access to Books and Records............................. 20
SECTION 5.9 Notification of Event of Default........................ 20
SECTION 5.10 Certificate of No Default............................... 21
SECTION 5.11 Payment of Costs and Expenses........................... 21
SECTION 5.12 Notification of Litigation and Adverse Business
Development.................................... 21
SECTION 5.13 Compliance with ERISA................................... 22
SECTION 5.14 New Subsidiaries........................................ 22
SECTION 5.15 Insurance............................................... 22
SECTION 5.16 Federal Reserve Regulations, Etc........................ 22
SECTION 5.17 Notification of Adverse Legal Development............... 22
SECTION 5.18 SBA Funding Eligibility................................. 23
SECTION 5.19 Handling of SBA Loans................................... 23
ARTICLE VI
NEGATIVE COVENANTS OF THE BORROWERS..................... 23
SECTION 6.1 ERISA................................................... 23
SECTION 6.2 Merger.................................................. 24
SECTION 6.3 Indebtedness............................................ 24
SECTION 6.4 Liens................................................... 24
SECTION 6.5 Guaranties.............................................. 24
SECTION 6.6 Nature of Business...................................... 25
SECTION 6.7 Investments............................................. 25
SECTION 6.8 Handling of SBA Loans................................... 25
SECTION 6.9 Financial Covenants..................................... 25
SECTION 6.10 Location of Collateral.................................. 26
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ARTICLE VII
EVENTS OF DEFAULT; REMEDIES; APPLICATION OF PROCEEDS.... 26
SECTION 7.1 Events of Default....................................... 26
SECTION 7.2 Bank's Remedies......................................... 27
SECTION 7.3 Specific Performance.................................... 28
SECTION 7.4 Agreement to Pay Attorneys' Fees and Expenses........... 28
SECTION 7.5 Application of Proceeds................................. 28
SECTION 7.6 No Remedy Exclusive..................................... 29
ARTICLE VIII
MISCELLANEOUS........................................... 29
SECTION 8.1 Notices................................................. 29
SECTION 8.2 Survival................................................ 29
SECTION 8.3 Expenses of the Bank.................................... 30
SECTION 8.4 Applicable Law.......................................... 30
SECTION 8.5 Amendments, Changes and Modifications................... 30
SECTION 8.6 Waivers................................................. 30
SECTION 8.7 Extension of Maturity................................... 30
SECTION 8.8 Separability............................................ 30
SECTION 8.9 Counterparts............................................ 31
SECTION 8.10 Entire Agreement........................................ 31
SECTION 8.11 Headings; Interpretation................................ 31
SECTION 8.12 Term.................................................... 31
SECTION 8.13 Successors and Assigns.................................. 31
SECTION 8.14 Gender and Number....................................... 32
SECTION 8.15 Exhibits and Schedules.................................. 32
SECTION 8.16 No Conflict with SBA Regulations........................ 32
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REVOLVING CREDIT NOTE
$25,000,000 Chicago, Illinois August 27, 1997
BUSINESS LOAN CENTER, INC., a Delaware corporation ("Borrower"), for value
received, promises and agrees to pay to the order of TRANSAMERICA BUSINESS
CREDIT CORPORATION, a Delaware corporation ("Lender"), at its offices located at
9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018, in coin or currency
of the United States of America which at the time of payment is legal tender for
the payment of public and private debts, the principal sum of TWENTY-FIVE
MILLION AND NO/100 DOLLARS ($25,000,000), or so much thereof as may be advanced
pursuant to the Loan Agreement hereinafter mentioned.
All capitalized terms which are used but not defined in this Revolving
Credit Note ("Note") shall have the same meanings as in the Restated and Amended
Loan Agreement of even date herewith, between Borrower, BLC Financial Services,
Inc., a Delaware corporation, and Lender (such Restated and Amended Loan
Agreement, together with all amendments or supplements thereto, being referred
to herein as the "Loan Agreement").
In addition to the principal sum referred to in the first paragraph of
this Note, Borrower also agrees to pay interest at the rates, and calculated in
the manner, provided in the Loan Agreement. In no event shall the interest rate
exceed the Highest Lawful Rate. In the event that the interest rate payable
hereunder would, without giving effect to the previous sentence, exceed the
Highest Lawful Rate, then, should any interest payable hereunder thereafter fall
below the Highest Lawful Rate, interest shall continue to accrue at the Highest
Lawful Rate until such time as Lender has received an amount of interest equal
to what Lender would have received but for the limitation on the interest rate
contained in this paragraph, at which time the interest payable shall again
accrue at the rate otherwise provided for in the Loan Agreement until such
interest rate again exceeds the Highest Lawful Rate, in which event the terms of
this paragraph shall again apply.
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Accrued interest is due and payable monthly, the first such payment being
due and payable on the first Business Day of the month next succeeding the month
in which the date of this Note falls, and the remaining payments being due and
payable on the first Business Day of each and every succeeding calendar month
thereafter and at the maturity of this Note.
Borrower may, at its option, prepay this Note at any time. Prepayment of
this Note is subject to the terms and conditions set forth in the Loan
Agreement, including Sections 2.6 and 2.11 thereof.
Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waive demand and presentment for payment, notice of nonpayment, notice
of intent to accelerate, notice of acceleration, protest, notice of protest,
notice of dishonor, bringing of suit, and diligence in taking any action to
collect amounts called for hereunder and in the handling of Collateral at any
time existing as security in connection herewith, and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder or in connection
with any Lien at any time had or existing as security for any amount called for
hereunder; provided, that the foregoing waivers shall not constitute a waiver of
any notice that the holder hereof or Lender, as the case may be, is specifically
required to deliver to Borrower under the Loan Agreement, the Security
Agreement, or applicable law.
If default is made in the payment of this Note (whether of
principal, interest or other amounts) when due (regardless of how the maturity
of this Note may be brought about) and the same is placed in the hands of an
attorney for collection, or suit is filed hereon, or proceedings are had in
bankruptcy, probate, receivership, or other judicial proceedings for the
establishment or collection of any amount called for hereunder, or any amount
payable or to be payable hereunder is collected through any such proceedings, or
the holder of this Note otherwise attempts to enforce Borrower's Liabilities or
such holder's rights hereunder, then Borrower agrees to pay to the holder of
this Note all
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<PAGE>
reasonable costs and expenses incurred by the holder, including, without
limitation, reasonable attorneys' fees.
This Note is issued pursuant to the Loan Agreement and is entitled to the
benefits of the Loan Agreement and the Security Documents. Reference is made to
the Loan Agreement for provisions for the acceleration of the maturity hereof on
the occurrence of certain events specified therein, for interest rate provisions
and computations and for all other pertinent purposes. Prior to the initial
Revolving Loan hereunder or by reason of payments hereon, there may be times
when no Liabilities are owing hereunder; but notwithstanding any such
occurrence, this Note shall remain valid and shall be in full force and effect
as to Revolving Loans made pursuant to the Loan Agreement subsequent to each
such occurrence.
This Note is secured by the Collateral described in the Security Documents
executed in connection herewith for the benefit of Lender.
THIS NOTE, THE LOAN AGREEMENT, AND THE OTHER LOAN 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 LENDER 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; PROVIDED, THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN
UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT
OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE
DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS. IT IS THE INTENT OF
BORROWER AND LENDER THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THIS
NOTE, THE LOAN AGREEMENT, AND THE OTHER SECURITY INSTRUMENTS, AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
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This Note has been delivered as of the date first written above.
BUSINESS LOAN CENTER, INC.,
a Delaware corporation.
By: /s/ Robert F. Tannenhauser
------------------------------
Robert F. Tannenhauser
President
4
CONFIRMATION AGREEMENT
THIS CONFIRMATION AGREEMENT dated this 27th day of August, 1997 (the
"Agreement") by and among ROBERT F. TANNENHAUSER ("RT") in favor of STERLING
NATIONAL BANK, a national banking association formerly known as Sterling
National Bank & Trust Company of New York ("Lender").
PREAMBLES
WHEREAS, RT executed and delivered a Guaranty of All Liabilities and
Security Agreement dated as of December 19, 1994 (as amended, restated,
supplemented or otherwise modified from time to time, the "Guaranty") to the
Lender with respect to present and future obligations due and owing to the
Lender by BLC Financial Services, Inc. and Business Loan Center, Inc.,
(together, the "Principal Obligors") pursuant to a certain Revolving Credit
Agreement dated as of December 19, 1994, as amended, restated, supplemented or
otherwise modified from time to time (the "Revolving Credit Agreement") and
related documentation;
WHEREAS, concurrently with the execution of this Agreement, Lender and
Principal Obligors have entered into a certain Amended and Restated Revolving
Credit Agreement (as amended, restated, supplemented or otherwise modified from
time to time, the "Restated Credit Agreement") pursuant to which, among other
things, the Lender and Principal Obligors agree to do the following: (i) the
Business Loan Center, a New York general partnership, shall no longer be a
"Borrower" and (ii) Lender shall no longer make certain advances against the
Unguaranteed Portions of Eligible SBA Loans, as defined therein;
WHEREAS, concurrently with the execution of this Agreement, the Lender and
Transamerica Business Credit Corporation ("Transamerica") have entered into a
certain Partial Assignment Agreement (as amended, restated, supplemented or
otherwise modified from time to time, the "Partial Assignment") pursuant to
which the Lender has transferred and assigned to Transamerica all of its rights,
title and interest to and all of its obligations under the portions of the
Revolving Credit Loans previously advanced by the Lender against the
Unguaranteed Portion of Eligible SBA Loans, and certain related Obligations,
Collateral and other assets and Transamerica is assuming all rights and
obligations of Lender with respect to future loans against the Unguaranteed
Portion of Eligible SBA Loans, as more particularly set forth therein; and
<PAGE>
NOW, THEREFORE, in order to induce Lender to enter into the Restated
Credit Agreement and the Partial Assignment, RT hereby:
(a) ratifies and confirms his Guaranty,
(b) ratifies and confirms that the "Liabilities" covered by the
Guaranty include, without limitation, all present and future obligations of the
Obligors under or in connection with the Restated Credit Agreement,
(c) agrees that the Reference in the Guaranty to the "Revolving
Credit Agreement between the Obligors and the Bank dated the date of this
Agreement" shall refer to the Restated Credit Agreement, as now or hereafter
amended, restated or replaced,
(d) acknowledges that the Bank has changed its name to Sterling
National Bank and
(e) agrees, covenants, represents and warrants that, as of the date
hereof, he does not have any offset, defense or counter claim or any kind,
nature or description against the Lender with respect to his Guaranty.
IN WITNESS WHEREOF, the RT has executed and delivered this Agreement as of
the date first written above.
/s/ Robert F. Tannenhauser
--------------------------
ROBERT F. TANNENHAUSER
PARTIAL ASSIGNMENT AGREEMENT
This Partial Assignment Agreement (this "Agreement") is made as of August
27, 1997, by and between STERLING NATIONAL BANK, a national banking association
formerly known as Sterling National Bank & Trust Company of New York ("Assignor
Lender"), and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation
("Assignee Lender"). All capitalized terms used in this Agreement and not
otherwise defined herein will have the respective meanings set forth in the
Credit Agreement (as hereinafter defined).
RECITALS:
A. Business Loan Center, Inc., a Delaware corporation ("BLC"), BLC
Financial Services, Inc., a Delaware corporation ("Parent"), and Business Loan
Center, a New York general partnership ("Partnership," and collectively with BLC
and Parent, the "Borrowers"), and Assignor Lender have entered into that certain
Revolving Credit Agreement dated as of December 19, 1994 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which Assignor Lender has agreed to make certain Advances to
Borrowers.
B. Assignor Lender desires to assign to Assignee Lender a portion of its
interest in the Revolving Credit Loan, the Obligations, the Loan Documents and
the Collateral, and to delegate to Assignee Lender a portion of its Commitment
and all of its other duties and obligations with respect to the Revolving Credit
Loan, the Obligations, the Loan Documents and the Collateral, all to the extent
and on the terms set forth below. Assignee Lender desires to accept such partial
assignment and delegation from Assignor Lender.
C. Contemporaneously with the execution and delivery of this Agreement,
Assignor Lender and Assignee Lender are entering into that certain Intercreditor
Agreement of even date herewith to determine their relative rights and
priorities with respect to the Collateral and the Revolving Credit Loan (the
"Intercreditor Agreement").
<PAGE>
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions, and covenants herein contained, Assignor Lender and Assignee Lender
agree as follows:
1. ASSIGNMENT, DELEGATION, AND ACCEPTANCE
1.1 Assignment. Assignor Lender hereby transfers and assigns to Assignee
Lender, without recourse and without representations or warranties of any kind
(except as set forth in Section 3.2 hereof), a portion of Assignor Lender's
right, title, and interest in and obligations under the Revolving Credit Loan,
the Obligations, the Multi-Party Agreement, the Loan Documents and the
Collateral consisting of: (a) the portion of the aggregate outstanding Revolving
Credit Loan, as of the Effective Date (as defined below), advanced by Assignor
Lender against the Unguaranteed Portion of Eligible SBA Loans (as hereinafter
defined), including, but not limited to, the amount of all Junior Participation
Amounts as such term is defined in the Amended and Restated Junior Participation
Agreement dated February 7, 1996 (the "Junior Participation Agreement") between
Assignor Lender and Sydney Yoskowitz (the "Assigned Portion of the Revolving
Credit Loan"); (b) a Pro Rata Percentage (as defined below) of the Obligations;
(c) an undivided interest in the rights and remedies under Multi-Party Agreement
and the Loan Documents with respect to the Assigned Portion of the Revolving
Credit Loan; and (d) an undivided interest in the Collateral, subject to the
terms of the Intercreditor Agreement. A list of the Loan Documents is attached
as Schedule 1.1 hereto. As used herein "Unguaranteed Portion of Eligible SBA
Loans" means that portion of the Outstanding Balance which was used to fund the
Unguaranteed Amount. As used herein, "Pro Rata Percentage" means the percentage
obtained by dividing the Assigned Portion of the Revolving Credit Loan by the
aggregate outstanding amount of the Revolving Credit Loan as of the Effective
Date. The calculation of the Pro Rata Percentage is set forth on Schedule 2.1
attached hereto.
1.2 Delegation. Assignor Lender hereby irrevocably assigns and delegates
to Assignee Lender, without recourse, representations or warranties of any kind
(except as set forth in Section 3.2 hereof), the portion of its Commitment with
respect to Advances against the Unguaranteed Portion of Eligible SBA Loans.
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1.3 Acceptance by Assignee Lender. By its execution of this Agreement,
Assignee Lender irrevocably purchases, assumes and accepts the transfer,
assignment and delegation from Assignor Lender with respect to the Revolving
Credit Loans, the Obligations, the Multi-Party Agreement, the Loan Documents,
the Collateral and the Commitment on the terms and conditions provided in this
Agreement (the "Assignment and Delegation"), and agrees to be bound by the terms
and conditions thereof. Assignee Lender hereby unconditionally and absolutely
releases and discharges Assignor Lender and agrees to indemnify and hold
harmless Assignor Lender, from and against any and all duties, liabilities and
other obligations of any kind whatsoever arising from, under or in connection
with the Revolving Credit Loans, the Obligations, the Multi-Party Agreement, the
Loan Documents, the Collateral and the Commitment assigned to, and/or assumed by
Assignee Lender hereunder, to the extent that such duties, liabilities or other
obligations relate to actions taken or omitted to be taken by or on behalf of
Assignee Lender after the effectiveness of the Assignment and Delegation;
provided, that such release and indemnification shall not apply to any duties,
liabilities or other obligations arising from a breach of Assignor Lender's
representations, warranties and covenants under Section 3.2 hereof. By its
execution of this Agreement, Assignor Lender agrees, to the extent provided
herein, to relinquish its rights and be released from those obligations and
duties under the Multi-Party Agreement, the Loan Documents and the Commitment
that have been assigned and delegated to Assignee Lender hereunder.
1.4 Effective Date. The Assignment and Delegation by Assignor Lender and
acceptance by Assignee Lender will be effective as of the date of this Agreement
("Effective Date") and upon payment by Assignee Lender of the Assigned Amount
(as defined below).
2. PAYMENT BY ASSIGNEE LENDER; DELIVERIES BY ASSIGNOR LENDER AND ASSIGNEE
LENDER
2.1 Payment of the Assigned Amount. Assignee Lender will pay to Assignor
Lender, in immediately available funds, not later than 3:00 p.m. (New York time)
on the Effective Date, an amount equal to the Pro Rata Percentage of (a) the
then outstanding principal amount of the Revolving Credit Loan, and (b) accrued
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interest, fees and other amounts, all as set forth on Schedule 2.1 (the
"Assigned Amount").
2.2 Amendment and Restatement of Loan Documents; Further Assurances. Each
of Assignor Lender and Assignee Lender confirms that (a) upon payment of the
Assigned Amount, it will execute and deliver amendments or amendments and
restatements of the Credit Agreement and other relevant Loan Documents amending
or restating its respective rights and obligations with respect to the
Borrowers, after giving effect to this Agreement, and (b) it has provided to the
other full and complete copies of each such amendment or amendment and
restatement. Each of Assignor Lender and Assignee Lender agrees to execute and
deliver such certificates, documents of assignment, and other documents, and
take such other steps, as the other may reasonably request to evidence or
effectuate the terms of this Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Assignee Lender's Representations, Warranties and Covenants. Assignee
Lender hereby represents, warrants, and covenants the following to Assignor
Lender:
(a) This Agreement is a legal, valid, and binding agreement of
Assignee Lender, enforceable according to its terms;
(b The execution and performance by Assignee Lender of its duties
and obligations under this Agreement and the Loan Documents will not require any
registration with, notice to, or consent or approval by any Federal, state or
local governmental authority, agency or court, or any other person or entity;
(c) Assignee Lender is familiar with transactions of the kind and
scope reflected in the Loan Documents and in this Agreement;
(d) Assignee Lender has made its own independent investigation and
appraisal of the financial condition and affairs of each of Borrowers, has
conducted its own evaluation of the Revolving Credit Loans and the Obligations,
the Collateral, the Loan Documents and each Borrower's creditworthiness, has
made its decision to become a lender to Borrowers independently and
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without reliance upon Assignor Lender, and will continue to do so; and
(e) Assignee Lender has full power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill the
obligations hereunder and to consummate the transactions contemplated hereby.
3.2 Assignor Lender's Representations, Warranties and Covenants. Assignor
Lender hereby represents, warrants and covenants the following to Assignee
Lender:
(a) The Assigned Amount is the total amount of the Obligations owed
to Assignor Lender as of the Effective Date with respect to Advances against the
Unguaranteed Portion of Eligible SBA Loans;
(b) This Agreement is a legal, valid and binding agreement of
Assignor Lender, enforceable according to its terms;
(c) The execution and performance by Assignor Lender of its duties
and obligations under this Agreement and the Loan Documents will not require any
registration with, notice to or consent or approval by any Federal, state or
local governmental authority, agency or court, or any other person or entity;
(d) Assignor Lender has full power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill the
obligations hereunder and to consummate the transactions contemplated hereby;
(e) Subject to the payment in full by Assignor Lender of the amounts
owing under the Junior Participation Agreement with respect to the Junior
Participation Amount, which amounts are included in and will be paid by Assignor
Lender from the Assigned Amount, Assignor Lender is the legal and beneficial
owner of the interests in the Revolving Credit Loan, the Obligations, the
Multi-Party Agreement, the Loan Documents, and the security interest in the
Collateral being assigned hereby, free and clear of any adverse claim, lien,
encumbrance, security interest, restriction on transfer, purchase option, call
or similar right of a third party; and
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(f) This Assignment by Assignor Lender to Assignee Lender complies,
in all material respects, with the terms of the Loan Documents.
4. LIMITATIONS OF LIABILITY
Except as provided in Section 3.2 hereof, Assignor Lender makes no
representations or warranties of any kind, and assumes no responsibility or
liability whatsoever, with regard to (a) the Multi-Party Agreement, the Loan
Documents or any other document or instrument furnished pursuant thereto or the
Revolving Credit Loan or other Obligations, (b) the creation, validity,
genuineness, enforceability, sufficiency, value or collectibility of any of
them, (c) the amount, value or existence of the Collateral, (d) the perfection
or priority of any security interest or lien upon the Collateral, or (e) the
financial condition of any of Borrowers or other obligor or the performance or
observance by any of Borrowers of its obligations under the Multi-Party
Agreement or any of the Loan Documents. Assignor Lender does not and will not
have any duty, either initially or on a continuing basis, to make any
investigation, evaluation, appraisal of, or any responsibility or liability with
respect to, the accuracy or completeness of any information provided to Assignee
Lender that has been provided to Assignor Lender by any of Borrowers. Nothing in
this Agreement, the Multi-Party Agreement or the Loan Documents shall impose
upon Assignor Lender any fiduciary relationship in respect of Assignee Lender.
5. FAILURE TO ENFORCE
No failure or delay on the part of either party in the exercise of any
power, right, or privilege under this Agreement will impair such power, right,
or privilege or be construed to be a waiver of any default or acquiescence
therein. No single or partial exercise of any such power, right, or privilege
will preclude further exercise thereof or of any other right, power, or
privilege. All rights and remedies existing under this Agreement are cumulative
with, and not exclusive of, any rights or remedies otherwise available.
6. NOTICES
6
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Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given will be in writing and addressed
to the respective party as set forth below its signature hereunder, or to such
other address as the party may designate in writing to the other.
7. AMENDMENTS AND WAIVERS
No amendment, modification, termination, or waiver of any provision of
this Agreement will be effective without the written concurrence of Assignor
Lender and Assignee Lender.
8. SEVERABILITY
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law. In the event any
provision of this Agreement is or is held to be invalid, illegal, or
unenforceable under applicable law, such provision will be ineffective only to
the extent of such invalidity, illegality, or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of the
Agreement. In addition, in the event any provision of or obligation under this
Agreement is or is held to be invalid, illegality, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations in any other jurisdictions will not in any way be
affected or impaired thereby.
9. SECTION TITLES
Section and Subsection titles in this Agreement are included for
convenience of reference only, do not constitute a part of this Agreement for
any other purpose, and have no substantive effect.
10. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
7
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11. Entire Agreement
This Agreement and the Intercreditor Agreement of even date herewith
between Assignor Lender and Assignee Lender 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.
12. APPLICABLE LAW; CONSENT TO JURISDICTION AND VENUE
THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. The
parties hereto irrevocably agree that any suit, action or other proceeding
arising out of this Agreement shall be brought only in the courts of the State
of New York or the courts of the United States located within the State of New
York, in each case in the county of New York, consent and submit to the
exclusive jurisdiction of each such court in any such suit, action or proceeding
and waive any objection which they, or any of them, may have to personal
jurisdiction or the laying of venue of any such suit, action or proceeding in
any such courts and agree not to seek to change venue.
13. 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, ASSIGNOR LENDER AND
ASSIGNEE LENDER 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 DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED HEREBY. THE SCOPE OF THIS
WAIVER IS
8
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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. ASSIGNOR LENDER AND ASSIGNEE LENDER 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.
ASSIGNOR LENDER AND ASSIGNEE LENDER 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 OR ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. COUNTERPARTS
This Agreement and any amendments, waivers, consents, or supplements may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, will be
deemed an original and all of which shall together constitute one and the same
instrument.
9
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
"Assignee Lender" "Assignor Lender"
TRANSAMERICA BUSINESS CREDIT STERLING NATIONAL BANK
CORPORATION
By: /s/ Sam V.LoBosco By: /s/ Leonard Rudolph
-------------------- ----------------------
Sam V. LoBosco Leonard Rudolph
Vice President - Credit Executive Vice President
Notice Address Notice Address
8750 W. Bryn Mawr Avenue 430 Park Avenue
Suite 720 4th Floor
Chicago, Illinois 60631 New York, New York 10022
Attn.: Account Executive - BLC Attn.: Leonard Rudolph
10
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ACKNOWLEDGEMENT AND WAIVER AND RELEASE
Each of the undersigned Borrowers hereby acknowledges and consents to the
terms of the foregoing Partial Assignment Agreement and confirms that it will
execute any and all amendments, amendments and restatements, and other
instruments and documents necessary or appropriate to evidence or effectuate the
terms of such Partial Assignment Agreement and will take no actions contrary to
the terms of such Partial Assignment Agreement.
Each of the undersigned Borrowers further hereby waives, and releases both
Assignee Lender and Assignor Lender from, any and all claims, causes of actions,
demands, debts, obligations, liabilities, and any and all other claims which any
of Borrowers may now or hereafter have against Assignee Lender or Assignor
Lender arising from any actions taken or omitted to be taken prior to the date
of such Partial Assignment Agreement in connection with the Revolving Credit
Loans, Obligations, Loan Documents, Collateral and Commitments assigned to,
and/or assumed by Assignee Lender under such Partial Assignment Agreement. Each
of the undersigned Borrowers hereby further agrees and acknowledges that
Assignor Lender no longer has any rights, obligations or liabilities regarding
loans to Borrowers with respect to the Unguaranteed Portion of Eligible SBA
Loans and that only Assignee Lender shall have any rights, obligations or
liabilities with respect thereto as more fully set forth in its documents with
Borrowers. Each of the undersigned Borrowers acknowledges and agrees that such
waiver and release extends to
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and includes even those claims which it does not know or suspect to exist in its
favor at the time of executing this waiver and release.
Dated:August 27, 1997 BUSINESS LOAN CENTER, INC.
By: /s/ Jennifer Napier
--------------------------
Jennifer Napier
Chief Financial Officer
BLC FINANCIAL SERVICES, INC.
By: /s/ Robert F. Tannenhauser
--------------------------
Robert F. Tannenhauser
President
BUSINESS LOAN CENTER
By: Business Loan Center, Inc.,
a general partner
By: /s/ Jennifer Napier
--------------------------
Jennifer Napier
Chief Financial Officer
12
<PAGE>
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
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<PAGE>
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
List of Loan Documents
SEE ATTACHED.
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SCHEDULE 2.1
Calculation of Pro Rata Percentage
A. Aggregate Outstanding
Revolving Credit Loan $______________
B. Aggregate Outstanding
Revolving Credit Loan
Against Unguaranteed
Portion of Eligible
SBA Loans (includes all
Junior Participation Amounts) $_______________
C. Quotient of A divided by B ____%
(the "Pro Rata Percentage")
Calculation of Assigned Amount
Pro Rata Percentage of
Revolving Credit Loan $________________
Pro Rata Percentage of
Accrued Interest ________________
Pro Rata Percentage of
Reimbursable Expenses ________________
Pro Rata Percentage of
Other + or - ________________
================
TOTAL $________________
All of the foregoing amounts have been determined as of the Effective Date.
Payment of the Assigned Amount is to made to:
15
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Sterling National Bank
ABA No. ________________
Account No. ____________
For Account of Sterling National Bank
16
AMENDMENT NO. 1 TO
SECURITY AGREEMENT
Amendment No. 1 dated August 27, 1997 to the Security Agreement dated as
of December 19, 1994, by and between BUSINESS LOAN CENTER, INC., a Delaware
corporation, BLC FINANCIAL SERVICES, INC., a Delaware corporation (which owns
all of the issued and outstanding shares of stock of Business Loan Center, Inc.)
(jointly and severally, the "Debtors") and STERLING NATIONAL BANK, a national
banking association located 430 Park Avenue, 4th Floor, New York, New York
10022, formerly known as Sterling National Bank & Trust Company of New York (the
"Secured Party").
RECITALS:
WHEREAS, the Debtors and the Secured Party with the BUSINESS LOAN CENTER
entered into a certain Security Agreement dated as of December 19, 1994 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Agreement") to secure obligations of the Debtors under the Revolving Credit
Agreement dated December 19, 1994 between the Debtors and Secured Party and the
other Loan Documents entered into in connection therewith; and
WHEREAS, in connection with the Amended and Restated Revolving Credit
Agreement dated as of the date hereof, the Debtors and Secured Party desire to
amend the Agreement as provided herein.
NOW, THEREFORE, this will confirm that effective as of the date hereof,
the Debtors and Secured Party hereby modify and amend the Agreement as follows:
1. All capitalized terms used herein but not defined herein which are
defined in the Agreement, shall have the same meanings herein as in the
Agreement.
2. The Secured Party has changed its name from STERLING NATIONAL BANK &
TRUST COMPANY OF NEW YORK to STERLING NATIONAL BANK. All references made in the
Agreement to "STERLING NATIONAL BANK & TRUST COMPANY" shall be deleted and
replaced with "STERLING NATIONAL BANK" to reflect such change.
3. The defined term the "Loan Agreement" as used in the Agreement is
hereby modified to mean and refer to the Amended and Restated Revolving Credit
Agreement of even date among Secured Party and Debtors as subsequently amended,
restated or supplemented from time to time.
4. The Debtors hereby jointly represent and warrant that all of the assets
of Business Loan Center, a New York general partnership ("BLC Partnership"),
have been
<PAGE>
transferred to Business Loan Center, Inc., which transfer was consented to by
the SBA, and that BLC Partnership is no longer conducting business; the Debtors
hereby further jointly and severally agree and covenant that BLC Partnership
will no longer conduct any business. In reliance upon said representations and
agreements, Secured Party hereby agrees that the definition of "Debtors" in
Section 1.1 of the Agreement is deleted in its entirety and replaced by the
following: ""Debtors" means, jointly and severally, Business Loan Center, Inc.,
a Delaware corporation and BLC Financial Services, Inc., a Delaware corporation
(which owns all of the issued and outstanding shares of stock of Business Loan
Center, Inc.)" and that the security interest previously granted to Secured
Party by BLC Partnership shall be released upon written request of the Debtors.
5. Section 4.2(a) is amended to add the following: " (iii) Notwithstanding
anything to the contrary in the foregoing, the Secured Party hereby acknowledges
and consents to the granting by the Debtors to Transamerica Business Credit
Corporation ("Transamerica") of a security interest in the Collateral, together
with the proceeds thereof, as security for Debtors' obligations to Transamerica
for loans assumed or made by Transamerica against the Unguaranteed Portions of
Eligible SBA Loans as contemplated in a certain Partial Assignment Agreement of
even date herewith and related documentation thereunder and confirms that the
rights, obligations and remedies of the Secured Party under this Agreement are
subject to the terms and conditions of a certain Intercreditor Agreement dated
as of August 27, 1997, as amended, restated, supplemented or otherwise modified
from time to time".
6. The fifth, sixth and seventh lines in Section 6.1(i) are deleted in
their entirety and replaced by the following: "Tannenhauser with a copy to:
Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153, Attn: Simeon
Gold, Esq., and (ii) in the case of the Secured Party, addressed to 430 Park
Avenue, Fourth Floor,".
7. The Agreement is supplemented, amended and modified hereby, remains in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Debtors and Secured Party have executed this
Amendment as of the day and year first written above.
STERLING NATIONAL BANK BUSINESS LOAN CENTER, INC.
By: By: /s/ Robert Tannenhauser
---------------------- ------------------------------
Name:__________________ Robert Tannenhauser, President
Title:_________________
By: /s/ Leonard Rudolph BLC FINANCIAL SERVICES, INC.
-----------------------
Leonard Rudolph
Senior Vice President
By: /s/ Robert Tannenhauser
------------------------------
Robert Tannenhauser, President
RELEASE
This RELEASE dated as of August 27, 1997 (the "RELEASE"), among Sydney
Yoskowitz (the "RELEASOR") and Sterling National Bank, a national banking
association formerly known as Sterling National Bank & Trust Company of New York
(the "RELEASEE").
WHEREAS, RELEASOR and RELEASEE entered into a certain Amended and Restated
Junior Participation Agreement dated as of February 7, 1996, as restated,
supplemented or otherwise modified from time to time (the "Junior Participation
Agreement") pursuant to which the RELEASOR acquired a junior participation
interest in certain loans and advances made and to be made by Releasee to
Business Loan Center, Business Loan Center, Inc. and BLC Financial Services Inc.
pursuant to a Revolving Credit Agreement dated December , 1994 and related
documents and amendments; and
WHEREAS, the RELEASEE and RELEASOR desire to settle all claims under the
Junior Participation Agreement;
NOW, THEREFORE, in consideration of the terms and considerations provided
herein, the RELEASOR and RELEASEE agree as follows:
In consideration of the sum of $4,694,285.06, received from RELEASEE,
receipt of which is hereby acknowledged, RELEASOR hereby waives, releases and
discharges the RELEASEE, its representatives, employees, agents, affiliates,
subsidiaries, successors and assigns, from and for all manner, actions, and
causes of action, suits, claims, debts, sums of money, claims for attorney's
fees, interest, expenses and costs, covenants, contracts, controversies,
agreements, promises, damages, claims and demands of any nature whatsoever, in
law or in equity, civil or criminal, which against the RELEASEE, the RELEASOR,
his heirs, executors, representatives, employees, agents, affiliates,
subsidiaries, successors and assigns, and all persons acting by, through, under
or in concert with any of them, ever had, now have or hereafter can, shall or
may, have for, upon, or by reason of any matter, cause or thing whatsoever, from
the beginning of the world to the day of the date of this RELEASE arising out of
or relating in any way, directly or indirectly, to the Junior Participation
Agreement. This RELEASE may not be changed, amended or modified orally.
IN WITNESS WHEREOF, the RELEASOR has hereunto set RELEASOR'S hand on this 27th
day of August, 1997
/s/ Sydney Yoskowitz
--------------------
Sydney Yoskowitz
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 27th day of August, 1997, before me personally appeared Sydney
Yoskowitz, to me known, who being by me duly sworn, did depose and say that he
is the individual described in, and who executed the foregoing RELEASE, and duly
acknowledged to me that he executed the same.
--------------------------
Notary Public
Consulting Agreement
Agreement effective as of the 1st Day of April 1997 by and between BLC
Capital Corp., a Delaware Corporation with offices at 919 Third Avenue, New
York, N.Y. 10022 (the "Company") and R. Matthew McGee residing at 9405 Avalon
Drive, Richmond, Va. 23229 (the "Consultant").
WHEREAS, the Company was formed to originate, place and/or fund loans
Small Real Estate Loans ( as hereinafter defined), and Non Qualifying Small
Business Loans (as hereinafter defined), or portions thereof, that are not
eligible for funding or that are not accepted for funding in whole or in part as
an SBA Loan (as hereinafter defined) by Business Loan Center under its United
States Small Business Administration ("SBA") 7a Guaranteed Lending Program; and
WHEREAS, the Consultant has experience in originating , underwriting and
packaging Small Real Estate Loans, Non Qualifying Small Business Loans as well
as Small Business Loans; and
WHEREAS, the Company wishes to employ Consultant for the purposes set
forth hereinbelow and Consultant wishes to accept said employment in accordance
with the terms and conditions hereof.
NOW THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency
thereof is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Employment and Term
Company shall employ Executive for a period of five years commencing
on the effective date hereof and ending on March 31, 2002, subject to the
termination provisions hereinafter set forth. Thereafter this Agreement shall be
automatically extended for additional successive one year periods, unless the
Company or Consultant notifies the other at least 90 days prior to the end of
the initial term or any extension thereof that it or he does not wish to extend
the Agreement.
2. Compensation
(a) As compensation for Consultant's performance of all required
duties hereunder, and conditioned upon full, faithful and diligent performance
of all promises and undertakings herein, the Company shall pay to Consultant the
sum of One Hundred Thirty-Six Thousand Dollars ($136,000) per year.
(b) All payments made by the Company to the Consultant hereunder
shall be subject to such tax, FICA and other deductions or withholdings as the
Company shall be required
1
<PAGE>
to make by law or which the Company uniformly makes as a matter of policy from
compensation paid to other employees.
(c ) Consultant will be provided the employee benefits such as
health insurance in accordance with the programs available to the other
employees of the Company or its affiliates.
(d) Consultant will be entitled to reasonable periods of vacation,
not to exceed two weeks per year for each of the first two years of this
Agreement, three weeks per year thereafter, to be taken at times which do not
unreasonably interfere with the performance of his duties hereunder.
(e) The Company may at its option provide Consultant with an
automobile for use in connection with the services he is to provide hereunder.
3. Duties
(a) Consultant shall primarily be responsible for originating,
screening and underwriting and Small Real Estate Loans and Non Qualifying Small
Business Loans for the Company to determine whether they meet the Company's
lending criteria (for purposes of this Agreement Small Real Estate Loans and Non
Qualifying Small Business Loans shall sometimes be jointly referred to as
"Loans") . In connection therewith and without limiting the generality of the
foregoing, Consultant shall actively seek out and refer Loans to the Company and
actively seek to promote, coordinate and expand the Company's network of loan
brokers, loan representatives and other loan sources. Consultant agrees to
perform such other duties of an executive nature for the Company or its
affiliates, as may be requested from time to time by the Board of Directors of
the Company. Consultant agrees to travel as reasonably required in performing
his functions hereunder.
(b) Consultant will devote all of his skill, knowledge and working
time to the conscientious performance of his duties pursuant to this Agreement.
He may not otherwise engage in other business activities for his own account or
for others.
4. Prohibitions
(a) Anything contained herein to the contrary notwithstanding,
Consultant shall not participate in the loan process on any SBA guaranteed loan
and shall not Conduct Business with the SBA. The term "Conduct Business" with
the SBA means:
(i ) Preparing or submitting on behalf of an applicant an
application with the SBA for (a) financial assistance of any
kind, (b) assistance from
2
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the Investment Division of SBA, or (c) assistance in
procurement and technical matters;
(ii) Preparing or processing on behalf of a lender or a
participant in any of SBA's programs an application for
federal financial assistance;
(iii) Participating with or communicating in any way with
officers or employees of SBA on an applicant's, participant's,
or lender's behalf;
(iv) Acting as a "Lender Service Provider". A Lender Service
Provider is an agent who carries out lender functions in
originating, disbursing, servicing or liquidating a specific
SBA business loan or portfolio; and
(v) Such other activity as SBA reasonably shall determine of
which the Company provides Consultant written notice.
(b) Without limiting the foregoing the Consultant shall not Conduct
Business with the SBA in connection with any SBA Loan in which Business Loan
Center, its successors or assigns, is in any way involved.
5. Definitions
(a) SBA Loan - A loan authorized by section 7(a) of the Small
Business Act (the "Act") 15 U.S.C. 636(a), a loan authorized by section 7(m) of
the Act 15 U.S.C. 636(m) or a "504" loan authorized by Title V of the Act 15
U.S.C. 695-697(f).
(b) Small Real Estate Loan - A loan in a principal amount equal to
or less than $2,500,000 that is not an SBA Loan and is secured by real estate.
(c ) Non Qualifying Small Business Loans - A loan that is not an SBA
Loan or a loan once it has not been accepted for funding by Business Loan
Center, its successors or assigns.
(d) Confidential Information - Confidential Information includes,
but is not limited to, loan sources, mailing lists, customer lists, data bases,
loan underwriting criteria and procedures, loan closing and servicing
procedures, loan administration procedures, sources of financing and terms
thereof, loan sales and securitization procedures and agreements, confidential
technical information, information concerning loan procurement or sales
activities or procedures, promotion or pricing techniques, credit or financial
data (including data concerning customers of the Company or its affiliates.
(e) Affiliates - Affiliate or affiliates shall mean BLC Financial
Services, Inc. ("BLCF") and every subsidiary thereof and any entity in which
BLCF and any of its subsidiaries
3
<PAGE>
holds an equity interest and any licensee of BLCF and its subsidiaries.
(f) Associate(s) - Shall mean any person, corporation or other
entity that has entered into or enters into an Associates Agreement with the
Company or any of its affiliates prior to or during the term of this Agreement.
6. Non-Competition
(a) Consultant covenants and agrees to promptly deliver to the
Company, upon termination of his employment or at any other time the Company may
so request, all memoranda, notes, records, reports, mailing lists, customer
lists, data bases and other documents (and all copies thereof) relating to the
Company's business or that of its Affiliates.
(b) During the term of this Agreement and for two years after the
termination of this Agreement (the "Non-Competition Term"), in order to preserve
the goodwill and ongoing business value of the Company and its Affiliates, and
in view of Consultant's experience and access to unique and proprietary
information with respect to the current and proposed business activities of the
Company and its Affiliates, Consultant will not directly or indirectly:
(i) Disclose to any third party any trade secrets or
Confidential Information of the Company or its Affiliates.
(ii) Use any Confidential Information for his own purposes or
for the benefit of any firm, corporation, person or other
entity except the Company or its Affiliates.
(iii) The restrictions contained in this subparagraph (b)
shall be inapplicable to any Confidential Information which
becomes generally available to the public other than as a
result of disclosure by Consultant. In addition this
restriction shall not apply if Consultant is compelled to
disclose the Confidential Information required by a
governmental regulatory authority or court order.
(iv) Divert, solicit or interfere with any loans originated by
or for any person, corporation or other entity which has been
a loan broker, loan representative, loan originator, loan
source, associate, borrower or customer of the Company or its
Affiliates prior to the date hereof or at any time during the
term hereof.
(v) Interfere with the employment, contractual or business
relationships of the Company or its Affiliates which currently
exist, or which shall have arisen or been developed at any
time during the term of this Agreement or which has been or is
being negotiated during the term of
4
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this Agreement by and between the Company or its Affiliates
any other person, corporation or other business entity,
including, but not limited to, loan brokers, loan
representatives, associates and other loan sources.
(vi) In any city, village, town or the like in which the
Company or any of its Affiliates or Associates maintained or
maintains an office on the date of termination of this
Agreement or at any time two years prior to such date, and
within a five mile radius from the center thereof, act in any
manner or capacity, as principal, agent, partner, officer,
director, employee, consultant, advisor or investor in or for
any person or business entity or enterprise which is engaged
in or which during the Non Competition Term becomes engaged in
the making, origination, underwriting and/ or placement of
Small Real Estate Loans, Non Qualifying Small Business Loans
or SBA Loans. The restrictions contained in this subparagraph
(vi) shall apply during the term of this Agreement and for
eighteen (18) months after the termination of this Agreement.
(vii) Consultant has carefully reviewed the above restrictions
on his future business activities with his legal counsel and
represents to the Company that they will not unreasonably
interfere with his future ability to be gainfully employed.
However, if the scope of any restriction contained herein is
too broad to permit enforcement of such restriction to its
full extent, then such restriction shall be enforced to the
maximum extent permitted by law and Consultant hereby consents
and agrees that such scope may be judicially modified
accordingly in any proceedings to enforce such restrictions.
7. Consultant's Work Product
All of the results and proceeds of Consultant's services under this
Agreement, including without limitation, any and all programs, written
procedures, trade names, trademarks, service marks, inventions, improvements,
technical information, software, suggestions and the like, relating to the
Company's and its affiliate's business, which Consultant, during the term of
this Agreement, creates, develops or acquires (whether or not during usual
business hours and whether alone or in collaboration with others), together with
all patent applications, letters patent, trademarks, copyrights, and reissues
and renewals thereof, that during the term hereto are filed or granted for or
upon any such invention, improvement, trade name, trademark, service mark,
materials or technical information, shall at all times be and remain the sole
and exclusive property of the Company.
8. Termination of Employment
5
<PAGE>
(a) Default - This Agreement may be terminated for Cause by the
Company. "Cause" shall mean (i ) the willful failure or refusal by Consultant to
substantially perform his duties hereunder promptly after written demand for
performance has been given to the Consultant by the Company's Board of
Directors, specifying the manner in which the Board believes the Consultant has
failed to perform his duties; (ii) the Consultant's breach of any
representation, covenant or warranty hereunder, including but not limited to the
covenants and agreements set forth in paragraph 6 hereof and the Prohibitions
set forth in paragraph 4 hereof; (iii) gross negligence, fraud, material
misrepresentation or malfeasance; (iv) the Consultant's conviction of, or
entering into a plea of nolo contendere to a crime after the date hereof or the
violation of his "supervised release" obligations; or (v) a determination by the
Company, in its sole and absolute discretion, that the continued employment of
the Consultant by the Company may jeopardize the ability of any affiliate(s) of
the Company involved in the SBA lending business to continue to participate in
the SBA lending program(s) or the ability of the Company or any affiliate(s) to
sell their loans, or participations therein, in the securitization market.
(b) Disability - This Agreement may be terminated by the Company in
the event of Disability of the Consultant. The term "Disability" shall mean a
physical or mental disability that prevents the substantial performance by
Consultant of his duties hereunder that lasts for a period of four and one half
(4 1/2) months or longer. The reasoned good faith judgment of the Company as to
Consultant's Disability shall be final and shall be based upon such competent
medical evidence as shall be presented to the Company by Consultant or by any
physician(s) or other competent medical experts on behalf of the Consultant
and/or the company. Prior to termination, the Company shall be entitled to
deduct from all payments to be made to Consultant during any disability period
(whether or not there has been a reduction in Consultant's compensation) an
amount equal to all disability payments received by Consultant from Worker's
Compensation, Social Security and/or disability insurance policies, if any,
maintained by the Company.
(c) Death - In the event of the death of the Consultant, this
Agreement shall automatically terminate upon the date thereof.
(d) Termination by Consultant - The Consultant may terminate this
Agreement in the event of a material breach by the Company of its obligations
hereunder, which breach remains uncured for thirty days after receipt of written
notice specifying in reasonable detail the nature of the breach.
(e) Notice of Termination - Any termination by the Company or
Consultant shall be communicated by a written "Notice of Termination" addressed
to the other parties to this Agreement. A "Notice of Termination" shall mean a
notice stating that the Consultant's employment has been or will be terminated,
indicating the specific termination provisions of this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination. The termination of Consultant's employment
shall be effective as of the date specified in the Notice of Termination.
6
<PAGE>
(f) Consequences of Termination - In the event of termination of
this Agreement, the Company shall be released and discharged of and from all
further obligations hereunder other than for payment of compensation due up to
the date of termination. Consultant's obligations, agreements and restrictions
imposed upon Consultant under paragraphs 6 and 7 hereof shall remain in effect
for the period(s) specified therein.
9. Injunctive Relief and Non Waiver of Other Rights
It is mutually understood and agreed that Consultant's services are
special, unique, unusual, extraordinary and of an intellectual character giving
them a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in an action at law, and therefore in the event of any
breach by Consultant, Company shall be entitled to equitable relief by way of
injunction or otherwise without the necessity of posting of a bond or other
security, or the necessity of proving actual damages. This provision shall not,
however be construed as a waiver of any rights which the Company or any of its
affiliates may have for damages under this Agreement or otherwise.
10. Life Insurance
Consultant will permit the Company to purchase "key man" or similar
insurance coverage on his life for he exclusive benefit of the Company, in
amounts that it determines, and Consultant will cooperate with the Company and
the insurance carrier(s) in obtaining such insurance.
11. Miscellaneous
(a) Assignment - This Agreement shall not be assignable by either
party, except the Company shall be entitled to assign this Agreement to, and it
shall thereafter be binding upon any entity with which the Company may merge or
consolidate or any existing or future affiliate of the Company or to any entity
to which the substantially all of the assets of the Company are transferred,
provided that such successor assumes all of the Company's obligations hereunder.
(b) Entire Agreement - This Agreement sets forth the entire
Agreement and understanding of the parties hereto, and supersedes all prior
agreements, arrangements and understandings.
(c ) Partial Invalidity - Nothing contained herein shall be
construed to require the commission of any act contrary to law. Where there is a
conflict between a provision of this Agreement and any present or future
statute, law, ordinance or regulation, the latter shall prevail, but in such
event, the provision of this Agreement affected shall be curtailed and limited
only to the extent necessary to bring it within legal requirements.
7
<PAGE>
(d) Representations - No representation, promise or inducement has
been made by either party that is not embodied in this Agreement, and neither
party shall be bound by or liable for any alleged representation, promise or
inducement not set forth herein. Consultant warrants that he is free to enter
into this Agreement and to render his services pursuant hereto.
(e) Benefit - The provisions of the Agreement shall inure to the
benefit of the parties hereto, their heirs , legal representatives, successors
and assigns.
(f) Governing Law - This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
(g) Modification - This Agreement may be amended, modified,
superseded, renewed or extended and the covenants, representations, warranties
or terms hereof may be waived only by a written instrument executed by the
parties hereto. The failure of a party at any time or times to require
performance of any provision hereof shall not affect the party's right at a
later time to enforce or act upon the same. No waiver by either party of the
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, shall be deemed to be or construed as a continuing or further
waiver of any such breach or a waiver of the breach of any other term or
covenant contained in this Agreement.
(h) Section Headings - The section headings contained herein are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(i ) Notices - All notices, requests, demands or other
communications required, or as may be given, under this Agreement shall be in
writing and shall be deemed to have been duly received three (3) days thereafter
if delivered or mailed, certified mail, return receipt requested, first class,
postage prepaid, if to Consultant, to R. Matthew McGee, 9405 Avalon Drive,
Richmond, Virginia 23229, if to the Company to BLC Capital Corp., 919 Third
Avenue, New York, N.Y. 10022 Attention Robert Tannenhauser; or to such other
address as Consultant or the Company may designate in writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first hereinabove written.
CONSULTANT: COMPANY:
BLC Capital Corp.
/s/ R.Matthew McGee /s/Robert F. Tannenhauser
------------------- -----------------------------
R. Matthew McGee Robert F. Tannenhauser, Pres.
8
PARTICIPATION AGREEMENT
This Participation Agreement ("Agreement") between Business Loan Center
(the "Bank"), and GE Capital Small Business Finance Corporation (the
"Participant") is entered into this 20th day of March, 1997.
Preliminary Statement
The Bank has entered into the Authorization and Loan Agreements ("Loans")
identified in Exhibit A attached with the borrower or borrowers identified in
said Exhibit A attached hereto and made a part hereof. The Loans will be
evidenced by a note or notes payable to the Bank (collectively, the "Notes").
Unless the context clearly indicates otherwise, all terms used in this Agreement
shall have the meanings given them by, and shall be construed as set forth in,
the Loans notwithstanding any termination thereof.
In consideration of the premises and the mutual covenants contained
herein, the Bank and the Participant hereby covenant and agree as follows:
Section 1. Purchase and Sale of Participation Interests. The Bank hereby
sells to the Participant and the Participant hereby purchases from the Bank, for
the Participant's own accounts, a participation comprising an undivided interest
in the Bank's Loans Agreements and Notes existing as of March 21, 1997 (the
"Purchase Date") in the percentage of the relevant Bank Loan set forth in
Exhibit A, for the applicable loan (the "Participant's Percentage") of each
loan. The total interest which the Participant purchases in the Loans which are
outstanding is hereinafter referred to as the ("Participant's Participation").
Section 2. The Participant's Right to Payments . The Participant shall be
entitled to receive: (a) the Participant's Percentage of all funds received and
applied on account of a payment of principal, and (b) interest on the
Participant's Percentage of principal at the rate applicable under the Loan.
These funds shall include all payments received on these Loans from any source
whatsoever.
Section 3. Payment and Disbursement of Proceeds. On the Purchase Date, the
Participant shall transfer funds in an amount of the aggregate sum of column I
set forth in Exhibit A, to the Bank. Wire transfer to be sent to:
Sterling National Bank
ABA #026 007773
For Credit to: BUSINESS LOAN CENTER
Account #31 50696 01
Section 4. Participation Certificates. The Participant's interest in the
Loans identified as Exhibit A shall be evidenced by a Participation Certificate
substantially in the form attached hereto as Exhibit B, which Participation
Certificate shall be mailed to the Participant and a copy sent to the
Participant by telex, telefax, or other means of telecommunication upon receipt
by the Bank of immediately available funds representing the principal amount of
the Participant's Participation in such Loans.
Section 5. Collection of Payments. The Bank shall have the right to
collect all payments of interest due on, and all payments of principal of, the
Loans, together with any service charges, premiums, fees, late charges and any
and all other amounts due on or in connection with the Loans or the Notes. The
Participant's share of payments on account of principal, interest and fees as
provided hereunder shall be paid to the Participant by wire transfer of
immediately available funds on the 10th, 20th and last business days of each
month. Payments not received by the Bank within five (5) business days of the
due date must be remitted to the Participant within five (5) business days of
receipt by the Bank. Wire transfers are to be sent to:
Bankers Trust, New York, NY
ABA #021001033
<PAGE>
For Further Credit To:
GE Capital Small Business Finance Corp.
Acct. No. 50256717
The Bank will send by fax and on a diskette, to the Participant, on the same day
the wire transfer is sent, a breakdown and application of payment (Exhibit C) on
all accounts listed on Exhibit A. This breakdown and application of payment
shall be an Excel spreadsheet in the format found on Exhibit C and shall list
ALL loans whether or not a payment has been received. For any account listed on
Exhibit A in which the Bank did not receive a payment, the reason for
non-payment and prognosis for future payments must be indicated on Exhibit C. As
used herein, the term "Business Day" shall mean and include any calendar day
other than a day on which all commercial banks in New York City are required or
authorized to be closed. Each Exhibit C sent on the 10th business day of each
month shall be accompanied by a copy of the Bank's Colson Report, Form 1502,
from the most recent month.
Section 6. Late Payments. In the event the Bank collects late charges on
any loan listed on Exhibit A, the Participant shall be entitled to receive the
Participant's Percentage of said late charge.
Section 7. Information. The Bank shall furnish to the Participant an
executed or conformed copy of the Loan and Note for each loan listed on Exhibit
A and, if so requested by the Participant in writing, copies of such of the
documents pertaining to the Loan (including, without limitation, financial
information required to be delivered to the Bank under the Loan and all
applicable Small Business Administration ("SBA") approvals relating to such
Loans) which the Bank has in its possession subject only the Participant's
compliance with applicable law and any applicable confidentiality requirements.
Section 8. Agreements by the Bank. The Bank expressly acknowledges and
agrees that it will repurchase the Participant's Percentage in any loan listed
on Exhibit A in the event of a loss due to: (a) fraud on the part of the Bank or
(b) any failure to recover from any borrower, obligor or collateral as a result
of any deficiency in documenting or servicing any loan. Bank further agrees to
repurchase Participant's interest if: (i) all the Bank's remaining unguaranteed
interest is sold to other than the Participant or (ii) the Bank no longer
services the Loans. Bank further grants to the Participant, at the Participant's
option, the right to purchase additional participating interests in the Loans,
subject to SBA consent, if required, and pursuant to SBA regulations, upon the
same terms and conditions as said participating interests offered to other third
parties. In the event that Participant acquires all of the Bank's interest in
said Loans then Participant shall, subject to SBA consent and Participant's
option, be entitled to assume servicing of said Loans. In the event the Bank is
ordered and is required to sell its interest in said Loans, then the provisions
of the preceding sentence apply. The Bank further acknowledges and agrees that
the sale of the Participation 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.
Section 9. Action by the Bank. The Participant expressly understands and
agrees that (a) the Bank may use its discretion with respect to exercising or
refraining from exercising any rights which it may have or taking or refraining
from taking any actions it may be entitled to take in connection with the Loans,
any Note, or any other document related to the Loans or any collateral therefor
or any obligor thereunder; (b) in exercising such discretion, the Bank will use
the same care to protect the interest of the Participant as it does to protect
its own. The Participant further expressly understands and agrees that the Bank
may, in its sole discretion in each instance, without prior notice to or consent
of the Participant, agree to take or refrain from taking, any action with
respect any Notes, the Loans or any document (including, without limitation, any
security agreement or guaranty) relative to the Loans, except that the Bank will
not, without the consent of the Participant which will not be unreasonably
withheld, agree to any amendment, modify or waive, or release any provision or
collateral of any borrower with respect to the Notes, Loans or any document
(including, without limitation, any security agreement or guaranty) relative to
the Loans, or take any extension of the final scheduled maturity of, or
reduction of the effective interest rate on the Loans or forgiveness of any
principal of or interest on the Loans. The Bank may without prior consent of the
Participant, take any action which SBA defines as being within the
<PAGE>
Bank's "Unilateral Servicing Authority", provided the Bank advises the
Participant of this action in writing. If the Participant is unwilling to
consent to any amendment, modification, waiver, release or consent which
requires its consent, the Bank shall have the right, but not the obligation, to
repurchase the Participant's Participation in the Loan(s) affected by such
change, at such time for a purchase price equal to the Participant's Percentage
share of the then unpaid principal balance of the Loans being repurchased (with
interest accrued to the date of such repurchase being payable to the Participant
as if such repurchase had not occurred) and terminate the Participant's
obligations hereunder with respect to the repurchased Loans.
Section 10. Knowledge of Default. Upon the Bank's actual knowledge of the
occurrence of any Event of Default (as defined in the Loans, the Notes or any
other loan documents pertaining to the Loans), the Bank shall give the
Participant notice thereof within five (5) Business Days of the Bank's actual
knowledge of such Event of Default.
Section 11. Confidentiality. Except as may be required by law, or as may
occur as a result of the operation of law, or as may be requested by any
regulatory authority having authority over the Bank or the Participant, the Bank
and the Participant shall maintain the confidentiality of all information
hereunder or in connection with any document relative to the Loans, except that
the Bank and the Participant shall have no obligation of confidentiality with
respect to information that may be generally available to the public, or becomes
generally available to the public through no fault of the Bank or the
Participant.
Section 12. Subparticipation. The Participant's Additional Participation
may not be subdivided or transferred without the Bank's prior written consent,
which consent shall not be unreasonably withheld.
Section 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Bank and the
Participant.
Section 14. Notices. Notices required hereunder shall be in writing and
given to the parties hereto at the addresses set forth opposite their names
below.
Section 15. Applicable Law. This Agreement shall be a contract made under
and governed by the laws of the State of Missouri. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
Section 16. Amendments, Changes and Modifications. This Agreement may only
be amended, changed, modified, altered, or terminated by an agreement in writing
signed by the Bank and the Participant (or their successors or assigns).
Section 17. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes any and all prior agreements,
arrangements, and understandings relating to the subject matter hereof. No
representation, promise, inducement, or statement of intent has been made by
either party which is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise, inducement or
statement of intention not expressly set forth herein.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly authorized officers as of the 22nd day of March,
1997:
Address: BUSINESS LOAN CENTER
919 Third Ave., 17th Floor By: /s/ Robert F. Tannenhauser
New York, NY 10022 ---------------------------
Attention: President Robert F. Tannenhauser
Telephone No.: 212-751-5626 Title: Managing Director
Facsimile No., 212.751-9345
Address: GE CAPITAL SMALL BUSINESS FINANCE
CORPORATION
635 Maryville Centre Dr., Ste. 120
St. Louis, MO 63141 By: /s/ Gerald D. Sullivan
Attention: Executive Vice President --------------------------
Telephone No.: 314-205-3502 Gerald D. Sullivan
Facsimile No.: 314205-3691 Title: Executive Vice President
<PAGE>
BUSINESS LOAN CENTER
EXHIBIT A
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
A B C D E F G
- - -------------------------------------------------------------------------------------------------------------------------
Participation Participation Purchase
Principal Participation Percent (90% Amount Price
Borrower SBA Loan Number Balance Guaranty - D) (C X E) (3% of F)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATE LINE, LC 930-578-3001Balt 994,558.65 75% 15% 149,183.80 4,475.51
- - -------------------------------------------------------------------------------------------------------------------------
BUTCHER BLOCK 916-824-3006Mia 571,142.99 75% 15% 85,671.45 2,570.14
- - -------------------------------------------------------------------------------------------------------------------------
FOR KIDS SAKE 969-485-3001Mia 898,355.26 75% 15% 134,753.29 4,042.60
- - -------------------------------------------------------------------------------------------------------------------------
MISS BUNNY'S CHILDCARE 969-501-3009Mia 284,319.76 75% 15% 42,647.96 1,279.44
- - -------------------------------------------------------------------------------------------------------------------------
NEIL & SHELIA JURINSKI 973-835-3007DC 346,362.58 75% 15% 51,954.39 1,558.63
- - -------------------------------------------------------------------------------------------------------------------------
JOY ENTERPRISES, INC. 868-080-3002 208,126.92 75% 15% 31,219.04 936.57
- - -------------------------------------------------------------------------------------------------------------------------
COPPER ARTS CORP. 938-578-3000Rich 995,962.68 75% 15% 149,394.40 4,481.83
- - -------------------------------------------------------------------------------------------------------------------------
MYPHEDUH FILMS, INC. 980-175-3002De 529,031.78 75% 15% 79,354.77 2,380.64
- - -------------------------------------------------------------------------------------------------------------------------
DAYS INN DELAWARE 929-007-3007De 995,640.88 75% 15% 149,346.13 4,480.38
- - -------------------------------------------------------------------------------------------------------------------------
POE'S PUB 977-934-3000 234,782.96 75% 15% 35,217.44 1,056.52
- - ----------------------------------------------============---------------------------------------------------------------
TOTALS 6,058,284.46
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - ------------------------------------------------------------------
A H I J
- - ------------------------------------------------------------------
Wire
Gross Loss Transfer
Purchase Reserve Amount
Borrower Price (F+G) (3% of F) (H-I)*
- - ------------------------------------------------------------------
STATE LINE, LC 153,659.31 4,475.51 149,183.80
- - ------------------------------------------------------------------
BUTCHER BLOCK 88,241.59 2,570.14 85,671.45
- - ------------------------------------------------------------------
FOR KIDS SAKE 138,795.89 4,042.60 134,753.29
- - ------------------------------------------------------------------
MISS BUNNY'S CHILDCARE 43,927.40 1,279.44 42,647.96
- - ------------------------------------------------------------------
NEIL & SHELIA JURINSKI 53,513.02 1,558.63 51,954.39
- - ------------------------------------------------------------------
JOY ENTERPRISES, INC. 32,155.61 936.57 31,219.04
- - ------------------------------------------------------------------
COPPER ARTS CORP. 153,876.23 4,481.83 149,394.40
- - ------------------------------------------------------------------
MYPHEDUH FILMS, INC. 81,735.41 2,380.64 79,354.77
- - ------------------------------------------------------------------
DAYS INN DELAWARE 153,826.51 4,480.38 149,346.13
- - ------------------------------------------------------------------
POE'S PUB 36,273.96 1,056.52 35,217.44
- - --------------------------------------------------------==========
TOTALS 908,742.67
- - ------------------------------------------------------------------
* Purchase amount is based upon Participant receiving a yield of Prime + 1.75%.
AGREEMENT, made this 3rd day of February 1997, among BLC Management
Consulting Services, Inc., with an address at 919 Third Avenue, New York, New
York 10022 ("BLCS"), Business Loan Center, Inc., with an address at 919 Third
Avenue, New York, New York 10022 ("BLC Inc.") and Business Loan Center, a New
York general partnership, with an address at 919 Third Avenue, New York, New
York 10022 (the "Partnership").
WHEREAS, In September 1997, BLCS acquired an 11.8% interest in the
Partnership which was formed to operate a Small Business Lending Company under
the United States Small Business Administration ("SBA") Section 7a Guaranteed
Lending Program; and
WHEREAS, BLC Inc. is the owner of the remaining partnership interest in
the Partnership; and
WHEREAS, BLC Inc. and BLCS are both wholly owned subsidiaries of BLC
Financial Services, Inc. ; and
WHEREAS, Pursuant to the consent received from the SBA on or about
September 12, 1996 (copy attached - the "Consent") the parties hereto desire to
complete the restructuring of the transaction so that BLC, Inc. will become the
Small Business Lending Company and the Partnership will cease to exist as a
small business lending company upon the terms set forth below.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements set forth hereinbelow, do hereby agree as follows:
1. Transfer of Partnership Interest. BLCS hereby agrees to sell, transfer
and convey all of its interest in the Partnership to BLC Inc.
2. Transfer of Partnership Assets and Assumption of Partnership
Liabilities. Immediately after the transfer of the Partnership interest referred
to in Article 1 above the Partnership agrees to transfer title to all of its
assets referred to on Schedule 1 annexed hereto to BLC Inc. and BLC Inc. agrees
to assume all of the liabilities of the Partnership referred to on Schedule 2
annexed hereto.
<PAGE>
3. Closing. The closing of the transactions set forth above shall occur
simultaneously with receipt of written acknowledgment from the SBA that its
records now reflect the true structure of the Small Business Lending Company as
required by the Consent. The documents referred to below have been executed
simultaneously and will be held in escrow until the closing occurs.
At closing, the escrow agent shall deliver to the respective parties the
following executed documents :
3.1 The Assignment attached hereto as Exhibit 3.1;
3.2. Resolutions of shareholders and Directors approving the sale
attached hereto as Exhibit 3.2;
3.3. An Incumbency Certificate signed by the President of each
respective corporation in the form annexed hereto as Exhibit 3.3.
3.4. The Assignment and Assumption Agreement attached hereto as
Exhibit 3.4.
4. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto.
5. Notices. Notices required hereunder shall be in writing and given to
the parties hereto at the addresses set forth above.
6. Applicable Law. This Agreement has been made under and shall be
governed by the laws of the State of New York.
7. Amendments, Changes and Modifications. This Agreement may only be
changed, amended, modified or altered by an agreement in writing signed by the
parties hereto.
2
<PAGE>
8. Entire Agreement. This Agreement sets forth the entire understanding of
the parities and supersedes any and all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intent has been made by either party which
is not embodied in this Agreement, and neither party shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not expressly set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly-authorized officers as of the date first above
written.
BLC MANAGEMENT CONSULTING
SERVICES, INC.
By: /s/ Jennifer Napier
--------------------------------
Jennifer Napier Vice President
BUSINESS LOAN CENTER INC.
By: /s/ Robert Tannenhauser
--------------------------------
Robert Tannenhauser President
BUSINESS LOAN CENTER
By: BUSINESS LOAN CENTER INC.
General Partner
By: /s/ Robert Tannenhauser
--------------------------------
Robert Tannenhauser President
3
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT, made as of this 3rd day of February 1997, among Business Loan
Center, Inc., with an address at 919 Third Avenue, New York, New York 10022
("BLC Inc.") and Business Loan Center, a New York general partnership, with an
address at 919 Third Avenue, New York, New York 10022 (the "Partnership").
WHEREAS, pursuant to an agreement dated simultaneously herewith the
Partnership agreed to assign all of the assets of the Partnership listed on
Schedule 1 attached hereto to BLC Inc. and BLC Inc. agreed to assume all of the
liabilities of the Partnerhip listed on Schedule 2 annexed hereto.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements set forth hereinbelow, do hereby agree as follows:
1. Transfer of Assets. The Partnership does hereby grant, assign and
convey unto BLC Inc. all right title and interest of the Partnership in and to
the assets listed on Schedule 1 annexed hereto .
2. Assumption of Partnerhip Liabilities. BLC Inc. does hereby assume all
of the liabilities of the Partnership listed on Schedule 2 annexed hereto and
agrees to and does hereby hold the Partnership harmless from any claim or
liability with respect thereto.
3. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto.
4. Notices. Notices required hereunder shall be in writing and given to
the parties hereto at the addresses set forth above.
5. Applicable Law. This Agreement has been made under and shall be
governed by the laws of the State of New York.
<PAGE>
6. Amendments, Changes and Modifications. This Agreement may only be
changed, amended, modified or altered by an agreement in writing signed by the
parties hereto.
7. Entire Agreement. This Agreement sets forth the entire understanding of
the parities and supersedes any and all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intent has been made by either party which
is not embodied in this Agreement, and neither party shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not expressly set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly-authorized officers as of the date first above
written.
BUSINESS LOAN CENTER INC.
By: /s/ Jennifer Napier
--------------------------------
Jennifer Napier Vice President
BUSINESS LOAN CENTER
By: BUSINESS LOAN CENTER INC.
General Partner
By: /s/ Robert Tannenhauser
--------------------------------
Robert Tannenhauser President
2
SCHEDULE 1
LIST OF ASSETS
1. All right, title and interest of the Partnership in and to all loans
receivable, accounts receivable, security deposits, rights of action, loan
documents and collateral with respect to the aforementioned loans
receivable.
2. All proceeds from the sale of loans receivable, if any.
3. All Bank accounts maintained by the Partnership.
4. All furniture, fixtures and equipment owned or leased by the Partnership.
5. All trademarks, trade names, copyrights, licenses etc.
6. All rights and benefits under existing employment contracts, consulting
agreements, broker agreements, service agreements and leases.
SCHEDULE 2
LIST OF LIABILITIES
1. All liabilities and obligations of the Partnership to the United States
Small Business Administration arising any agreements with the United
States Small Business Administration or otherwise incurred.
2. All obligations of the Partnership to Sterling National Bank.
3. All obligations of the Partnership pursuant to any employment contracts,
consulting agreements, brokerage agreements, service contracts or leases.
4. All accounts payable of the Partnership.
AGREEMENT, made this 5th day of August, 1996, among BLC Management
Consulting Services, Inc., with an address at 919 Third Avenue, New York, New
York 10022 ("BLCS"), Eastland National Corp. ("ENC"), EBLC, Inc. ("EBLC") and
Salim El Hage ("El Hage" , ENC, EBLC & El Hage are hereinafter jointly referred
to as "Sellers") all with offices at 163 rue de la Pompe , Paris, France 75116.
WHEREAS, on December 20, 1991, EBLC and Business Loan Center, Inc. ("BLC")
entered into a Restated and Amended Partnership Agreement ("Agreement") pursuant
to which were set forth terms and conditions relating to the operation of
Business Loan Center, a New York general partnership ("Partnership") which was
formed to operate a small business lending company; and
WHEREAS, EBLC is wholly owned subsidiary of ENC and Salim El Hage ("El
Hage") is the sole shareholder of ENC; and
WHEREAS, Sellers have requested that BLCS purchase their interest in the
Partnership upon the terms set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Sale of Partnership Interest.Sellers hereby agree to sell, transfer and
convey all of their interest in the Partnership to BLCS for cash consideration
of $380,000.00 to be paid by BLCS by wire transfer in accordance with
instructions to be furnished by Sellers at closing.
2. Representation and Warranties of ENC, El Hage and EBLC. ENC, El Hage
and EBLC hereby jointly and severally represent and warrant to BLCS that:
2.1 The Partnership interest currently owned by Sellers is 11.8%
having been diluted from 45% as a result of the failure of EBLC to
meet capital calls all in accordance with the terms of the
Agreement;
2.2 Except for the aforementioned dilution, Sellers' interest in the
Partnership has not been sold, assigned, transferred, pledged or
hypothecated, and is not subject to any lien or encumbrance;
2.3 ENC and EBLC are New York Corporations in good standing, are
solvent, have the requisite net worth and assets to meet all of
their obligations as they become due and Sellers
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have taken all corporate action necessary to ratify and complete
this sale;
2.4 Sellers have been granted the opportunity to examine the books
and records of the Partnership and to ask questions as to the
current operations and financial affairs of the Partnership and in
that connection Sellers acknowledge having received from BLC
Financial Services, Inc. its June 30, 1995 Form 10-K, Form 10-Q
Reports for the quarters ending September 30, 1995, December 31,
1995 and March 31, 1996; Form 8-K Report dated February 5, 1996;
press release dated June 3, 1996.
2.5 Sellers have consulted legal counsel with respect to this sale
and said legal counsel has reviewed this agreement on their behalf.
3. Closing. The closing of the transactions set forth above shall occur on
or about August 9, 1996, at the offices of the Partnership, 919 Third Avenue,
New York, New York, on the 17th Floor, or such other date and place as the
parties may mutually-agree to. In order to avoid inconveniencing the Sellers by
requiring them to come to New York, the Sellers may forward the executed closing
documents to BLCS or its attorneys to be held in escrow until the closing
occurs. To the extent that the Partnership deems it necessary, the closing may
be adjourned until the United States Small Business Administration has granted
its consent to this transaction.
At the closing, Sellers shall deliver to BLCS:
3.1 An Assignment in the form annexed hereto as Exhibit 3.1;
3.2 A General Release in favor of BLCS, BLC, Partnership and BLC
Financial Services, Inc. in the form annexed hereto as Exhibit 3.2;
3.3. Resolutions of shareholders and Directors approving the sale in
the form annexed hereto as Exhibit 3.3;
3.4 An Incumbency Certificate signed by the President of each
respective corporation in the form annexed hereto as Exhibit 3.4.
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BLC and BLCS shall deliver to ENC and EBLC:
3.5 A bank check payable to Sellers in the amount of $380,000.00.
3.6 A General Release in favor Sellers in the form annexed hereto as
Exhibit 3.6;
4. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto.
5. Notices. Notices required hereunder shall be in writing and given to
the parties hereto at the addresses set forth above.
6. Applicable Law. This Agreement has been made under and shall be
governed by the laws of the State of New York.
7. Amendments, Changes and Modifications. This Agreement may only be
changed, amended, modified or altered by an agreement in writing signed by the
parties hereto.
8. Entire Agreement. This Agreement sets forth the entire understanding of
the parities and supersedes any and all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intent has been made by either party which
is not embodied in this Agreement, and neither party shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not expressly set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly-authorized officers as of the date first above
written.
BLC MANAGEMENT CONSULTING
SERVICES, INC.
By: /s/ Robert F. Tannenhauser
--------------------------------
Robert F. Tannenhauser
President
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EASTLAND NATIONAL CORP.
By: /s/ Salim El Hage
- - -------------------------------- --------------------------------
F. KAYROUZ Vice President SALIM EL HAGE President
EBLC, INC.
By: /s/ Salim El Hage
- - -------------------------------- --------------------------------
F. KAYROUZ Vice President SALIM EL HAGE President
--------------------------------
SALIM EL HAGE
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
August 27, 1997 between BUSINESS LOAN CENTER, INC., a Delaware corporation with
its principal place of business located at 919 Third Avenue, 17th Floor, New
York, New York 10022 ("Debtor"), 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 ("Secured Party"), with
reference to the following facts:
RECITALS
A. Debtor, BLC Financial Services, Inc., a Delaware corporation
("Parent"), and Business Loan Center, a New York general partnership
(collectively, the "Original Borrowers"), and Sterling National Bank (formerly
known as Sterling National Bank & Trust Company of New York), a national banking
association ("Sterling"), have entered into that certain Revolving Credit
Agreement dated as of December 19, 1994, as amended, restated, supplemented or
otherwise modified from time to time (the "Original Credit Agreement"), pursuant
to which Sterling has made certain advances to Original Borrowers prior to the
date hereof.
B. Original Borrowers and Sterling have entered into that certain Security
Agreement dated as of December 19, 1994, as amended, restated, supplemented or
otherwise modified from time to time (the "Original Security Agreement"), to
secure the obligations of Original Borrowers to Sterling under the Original
Credit Agreement.
C. Sterling and Secured Party have entered into that certain Partial
Assignment Agreement of even date herewith, pursuant to which Sterling has
assigned to Secured Party all of Sterling's right, title and interest to and all
of its obligations under the portions of the "Revolving Credit Loans" (as
defined in the Original Credit Agreement) previously advanced by Sterling to
Original Borrowers against the "Unguaranteed Portions" of "Eligible SBA Loans"
(each as defined in the Original Credit Agreement), and certain related
obligations,
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"Collateral" (as defined in the Original Security Agreement) and other assets
(the "Assignment").
D. Debtor, Parent and Sterling are entering into that certain Amended and
Restated Credit Agreement of even date herewith (the "Restated Sterling Credit
Agreement"), to amend and restate the Original Credit Agreement and to reflect
certain amendments to that portion of the financing arrangements thereunder that
will continue to be in effect between Debtor, Parent and Sterling immediately
after the Assignment.
E. Debtor, Parent and Secured Party are entering into that certain
Restated and Amended Loan Agreement of even date herewith (as amended, restated,
supplemented or otherwise modified from time to time,the "Loan Agreement"), to
amend and restate the Original Credit Agreement and to reflect certain
amendments to that portion of the financing arrangements thereunder that will
continue to be in effect between Debtor, Parent and Secured Party immediately
after the Assignment.
F. Debtor, Parent and Secured Party are entering into this Agreement to
restate and amend the terms of the Original Security Agreement with respect to
the financing arrangements that will continue to be in effect between Debtor,
Parent and Secured Party under the Loan Agreement immediately after the
Assignment.
G. Secured Party and Sterling are entering into that certain Intercreditor
Agreement of even date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement"), to clarify their
respective rights with respect to the obligations of Debtor and Parent to each
of them and their respective collateral therefor.
ARTICLE I
GENERAL TERMS
1.1 Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to them in the Loan Agreement, and the
following terms shall have the following meanings, unless the context otherwise
requires (such meanings being equally applicable to both the singular and plural
form of the terms defined):
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"Accounts" means all accounts, Notes Receivable, contract rights,
chattel paper, instruments and documents (as such terms are defined in the
UCC), including all accounts receivable, other receivables, and other
forms of obligations, whether now owned or hereafter created or acquired
by Debtor or in which Debtor now has or hereafter acquires any interest.
"Account Debtor" means any Person liable (whether directly or
indirectly, or primarily or secondarily) for the payment or performance of
any obligations or undertakings included in the Collateral, whether as an
account debtor (as defined in the UCC), obligor in respect of instruments
or Investment Property, issuer of documents or securities, guarantor or
otherwise.
"Agreement" means this Security Agreement, as the same may from time
to time be amended, modified or supplemented.
"Assignment" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Collateral" shall have the meaning assigned to such term in Section
2.1.
"Debtor" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Event of Default" means any event specified in Section 6.1.
"General Intangibles" means all personal property other than goods,
accounts, chattel paper, documents, instruments, Investment Property, and
money. Such personal property shall include all letters of credit, bonds,
guaranties, and other contractual rights (whether similar or dissimilar),
rights to performance, and claims for damages, rights to refunds
(including tax refunds) or other monies due or to become due; all orders,
franchises, permits, certificates, licenses (excluding Debtor's license to
make SBA 7(a) Loans), consents, exemptions, variances, authorizations or
other approvals by any governmental agency or court; literary rights,
patents, patent applications, copyrights, trademarks, trademark
applications, labels, trade names and trade styles and goodwill; all
customer lists, business
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records, computer programs and tapes and computer software; all claims
under guaranties, security interests, liens, or other security held by or
granted to Debtor to secure payment of any of the Accounts or loans made
to an Account Debtor; deposit accounts and other bank accounts, and all
rights to indemnification and all other intangible property of every kind
and nature, whether similar or dissimilar to the foregoing.
"Intercreditor Agreement" shall have the meaning assigned to such
term in the Recitals of this Agreement.
"Investment Property" all investment property (as such term is
defined in the UCC), including all securities, whether certificated or
uncertificated, all security entitlements, all security accounts, all
commodity contracts and all commodity accounts.
"Loan Agreement" shall have the meaning assigned to such term in the
Recitals of this Agreement.
"Secured Party" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Sterling" shall have the meaning assigned to such term in the
preamble of this Agreement.
1.2 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 II
SECURITY INTEREST
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2.1 Grant of Security Interest. To secure the prompt payment and
performance to Secured Party of the Liabilities, Debtor hereby irrevocably
grants to Secured Party, subject to Section 2.3 hereof, a first, prior and
continuing security interest in and Lien upon the following property of Debtor
to the extent of Debtor's interest therein (the "Collateral") whether now owned
or existing or hereafter acquired, owned, existing or arising (whether acquired
by contract or operation of law) and wherever located, which shall be retained
by Secured Party until all of the Liabilities have been paid in full and this
Agreement has been terminated:
(a) All Accounts;
(b) All inventory, equipment (including any and all computer
hardware and components), machinery and fixtures of Debtor in
all forms and wherever located, and all parts and products
thereof, all accessories thereto, and all documents therefor;
(c) All General Intangibles;
(d) All Investment Property;
(e) All monies, residues and property of any kind, now or at any
time or times hereafter, in the possession or under the
control of Secured Party or a bailee of Secured Party;
(f) All leasehold interests in real property now owned or
hereafter acquired by Debtor as lessee or sublessor;
(g) All books and records (including any and all customer lists,
credit files, computer programs, printouts, and other computer
materials and records) of Debtor pertaining to any of the
foregoing;
(h) All other goods and personal property of Debtor, whether
tangible or intangible and whether now or hereafter owned or
existing, leased, or acquired by Debtor and wherever located;
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(i) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of the foregoing,
including proceeds of insurance policies insuring the
Collateral (including claims paid and premium refunds).
2.2 Additional Security. Additional property may from time to time be
pledged, assigned or granted to Secured Party as additional security for the
Liabilities, and the term "Collateral" as used herein shall be deemed for all
purposes hereof to include all such additional property, together with all other
property of the types described above related thereto.
2.3 Effect of Intercreditor Agreement. The security interest and Lien of
Secured Party in any Collateral is subject to the terms of the Intercreditor
Agreement and Sterling's rights to the extent provided for thereunder. In the
event any provision of this Agreement conflicts or is inconsistent with the
Intercreditor Agreement, the relevant provisions of the Intercreditor Agreement
shall be controlling.
ARTICLE III
DEBTOR'S REPRESENTATIONS AND WARRANTIES
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
shall survive the creation and payment of the Liabilities) that, after giving
effect to the transactions, rights, and obligations contemplated and created by
the Multi-Party Agreement:
3.1 Ownership of Collateral; Encumbrances; Valid and Binding Agreement.
Debtor is the legal and beneficial owner of the Collateral free and clear of any
adverse claim, lien, security interest, option or other charge or encumbrance
except for Permitted Liens and the security interest created by this Agreement,
and Debtor has full right, power and authority to assign and grant a security
interest in the Collateral to Secured Party. This Agreement creates a valid
first-priority security interest in the Collateral (except for the interest of
Sterling to the extent provided in the Intercreditor Agreement), securing the
payment of the Liabilities and constitutes a legal, valid and binding obligation
of Debtor enforceable against Debtor in
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<PAGE>
accordance with its terms. The execution, delivery and performance of this
Agreement shall not violate the terms of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which Debtor is
subject and, except for consents and approvals which have previously been
obtained, does not require the consent or approval of any other Person.
3.2 No Required Consent. No authorization, consent, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body (other than the filing of financing statements) is required for
(i) the due execution, delivery and performance by Debtor of this Agreement,
(ii) the grant by Debtor of the security interest granted by this Agreement,
other than the consent of SBA to the granting of a security interest in the
Collateral, which consent has previously been obtained pursuant to the
Multi-Party Agreement, or (iii) the perfection of such security interest or the
exercise by Secured Party of its rights and remedies under this Agreement.
3.3 No Filings by Third Parties. Except for financing statements filed or
recorded in connection with Permitted Liens, no financing statement or other
public notice or recording covering the Collateral is on file in any public
office (other than any financing statement or other public notice or recording
naming Secured Party as the secured party therein), and Debtor shall not execute
any such financing statement or other public notice or recording in favor of any
Person other than Secured Party or, to the extent permitted by the Intercreditor
Agreement, Sterling, so long as any of the Liabilities are outstanding.
3.4 No Name Changes. Debtor has not, during the preceding five (5) years,
entered into any contract, agreement, security instrument or other document
using a name other than, or been known by or otherwise used any name other than,
Business Loan Center or the name used by Debtor herein.
3.5 Location of Debtor. Debtor's chief executive office and Debtor's books
and records concerning the Collateral are located at the address or location set
forth in the preamble of this Agreement.
3.6 Information Regarding Collateral. All information supplied by Debtor
to Sterling or Secured Party in connection with the Liabilities or the
Collateral (either prior or subsequent to the execution of this Agreement) is or
(in the case
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of subsequently furnished information) shall be true, correct, complete, valid
and genuine to the best knowledge of Debtor after due inquiry. The delivery at
any time by Debtor to Secured Party of Collateral or of additional specific
descriptions of certain Collateral shall constitute a representation and
warranty by Debtor to Secured Party hereunder that the representations and
warranties of this Section 3.6 are true and correct, to the best knowledge of
Debtor after due inquiry, with respect to each item of Collateral.
3.7 Status of Accounts. All instruments comprising Accounts shall be
properly issued, drawn, made and/or accepted and shall be genuine; Debtor shall
have delivered possession of all such instruments to Lender's Agent within three
(3) Business Days of Debtor's receipt thereof; the issuer, drawer, maker, and/or
acceptor thereof shall have no defenses (including defenses of any party which
would be available in an action on a simple contract and the defenses of want or
failure of consideration, nonperformance of any condition precedent,
non-delivery, or delivery for a special purpose), right of set-off or claims to
the Accounts; Debtor shall have good title to the Accounts; Debtor shall have no
knowledge that the signature of the issuer, drawer, maker and/or acceptor is
unauthorized; the Accounts shall not have been materially altered; all
signatures shall be genuine and authorized; no defense of any party shall be
good against Debtor; Debtor's transfer of the instruments comprising the
Accounts to Secured Party shall be effective and rightful; and Debtor does not
know of any fact which might impair the validity of the instruments comprising
the Accounts or of Secured Party's Lien thereon.
3.8 Federal Taxpayer Identification Number. Debtor's federal taxpayer
identification number is 13-3568801.
ARTICLE IV
COVENANTS AND AGREEMENT
Debtor shall at all times comply with the covenants and agreements
contained in this Article IV, from the date hereof and for so long as any part
of the Liabilities are outstanding.
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4.1 Change in Location of Debtor. Debtor shall provide written
notification to Secured Party thirty (30) days before the date of any proposed
change in the location of the chief executive office of Debtor.
4.2 Change in Debtor's Name. Debtor shall not change its name, its
identity or its corporate structure without notifying Secured Party of such
change in writing at least thirty (30) days prior to the effective date of such
change. Without the express written consent of Secured Party, however, Debtor
shall not engage in any other business or transaction under any name other than
Business Loan Center or Debtor's name hereunder.
4.3 Delivery of SBA 7(a) Loan Notes. Debtor shall, within three (3)
Business Days of Debtor's receipt thereof, deliver possession of all SBA 7(a)
Loan Notes to Lender's Agent, for the benefit of Secured Party.
4.4 Maintenance of Existence. Debtor shall maintain Debtor's corporate
existence and remain in good standing and qualified to do business in all
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.
4.5 Sale, Disposition or Encumbrance of Collateral. Except to the extent
authorized pursuant to Sections 6.3 and 6.13 of the Loan Agreement, Debtor shall
not in any way encumber any of the Collateral (or permit or suffer any of the
Collateral to be encumbered) or sell, assign, lend, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party, without the prior written consent of Secured Party.
4.6 Proceeds of Collateral. Except as otherwise provided under Section
2.13 of the Loan Agreement or under the Intercreditor Agreement, Debtor shall
deliver to Secured Party promptly upon receipt all proceeds delivered to Debtor
from the sale or disposition of any Collateral. If instruments are received as
proceeds, they shall be, immediately upon receipt, properly endorsed or assigned
and delivered to Lender's Agent as Collateral. This Section 4.6 shall not be
construed to permit sales or dispositions of Collateral except as may be
elsewhere expressly permitted by this Agreement or the Loan Agreement.
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4.7 Records Concerning Collateral, Financial Condition. Debtor shall keep
accurate and complete records of the Collateral (including proceeds). These
records shall reflect all facts concerning each Account including those
pertaining to Debtor's warranties, representations and agreements under this
Agreement. Secured Party may at all reasonable times have access to, examine,
audit, make extracts from and inspect without hindrance or delay Debtor's
records, files and the Collateral.
4.8 Performance of Obligations. Debtor shall promptly perform all of its
obligations under any other agreement or contract of any kind now or hereafter
existing as security for or in connection with the payment of the Liabilities.
4.9 Reimbursement of Expenses. Debtor shall pay to Secured Party all
advances, charges, costs and expenses (including all reasonable costs and
expenses of retaking, holding, preparing for sale and selling or otherwise
realizing upon the Collateral in the event of any default by Debtor and all
reasonable attorneys' fees, legal expenses and court costs), incurred by Secured
Party in connection with the transaction which gives rise to this Agreement or
the exercise of Secured Party's rights and remedies hereunder. Debtor hereby
assumes all liability for the Collateral and any use, possession, maintenance
and management by Debtor of any or all of the Collateral. Debtor shall indemnify
and hold Secured Party harmless from and against and covenants to defend Secured
Party against any and all losses, damages, claims, costs, penalties, liabilities
and expenses, including court costs and attorneys' fees incurred because of,
incident to, or with respect to the Collateral or any use, possession,
maintenance or management thereof by Debtor. All amounts for which Debtor is
liable pursuant to this Section 4.9 shall be due and payable by Debtor to
Secured Party within three (3) Business Days after demand is made therefor. If
Debtor fails to make such payment upon demand, Secured Party may pay such amount
and the same shall be due and payable by Debtor to Secured Party, together with
interest accruing thereon at the rate applicable from time to time to the
Revolving Loans.
4.10 Further Assurances.
(a) Debtor agrees that from time to time, at the expense of Debtor,
provided that such action would not violate applicable SBA rules or regulations,
Debtor shall promptly execute and deliver all further instruments and documents,
and take
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all further action, that may be necessary or desirable, or that Secured Party
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Secured Party to exercise
and enforce its rights and remedies hereunder with respect to the Collateral.
(b) Debtor shall furnish to Secured Party from time to time
statements and schedules further identifying and describing its Collateral and
such other reports in connection with such Collateral as Secured Party may
reasonably request, all in reasonable detail and all in form and substance
satisfactory to Secured Party.
4.11 Insurance. Debtor shall maintain, with financially sound and
reputable insurers, insurance to the extent required under Section 5.6 of the
Loan Agreement.
4.12 Accounts.
(a) Debtor shall immediately notify Secured Party in writing in the
event that any Account ceases to meet the requirements of this Agreement or any
other Loan Document, including any material change, in any fact or circumstance
warranted or represented by Debtor herein or in any other Loan Document at any
time furnished by Debtor to Secured Party in connection with the Liabilities.
(b) Subject to the provisions of the Multi-Party Agreement, the Loan
Guaranty Agreement, and Section 6.13 of the Loan Agreement, Debtor shall not
modify, extend or substitute any contract, the terms of which shall at any time
have given rise to an Account, or adjust, settle, discount or compromise any of
the Accounts.
(c) Debtor shall duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying
transactions giving rise to the Accounts.
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ARTICLE V
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are applicable
regardless of whether an Event of Default shall have occurred and be continuing:
5.1 Non-judicial Enforcement. Secured Party may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by applicable law Debtor expressly waives any and all legal rights
which might otherwise require Secured Party to enforce its rights by judicial
process.
5.2 Discharge Encumbrances. Secured Party may at its option but without
any obligation to do so, and after written notice to Debtor of its intent to do
so, discharge any uncontested taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral, may pay for
insurance on the Collateral and may pay for the maintenance and preservation of
the Collateral, in each case, only to the extent that Debtor does not do so.
Debtor agrees to reimburse secured Party immediately and without demand for any
payment so made, plus interest thereon at the rate applicable from time to time
to the Revolving Loans.
5.3 Attorney-in-Fact. Debtor hereby appoints Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense, and with notice in due course to
Debtor:
(a) to receive, endorse and collect all instruments made payable to
Debtor representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same;
(b) to endorse any draft drawn by insurers of the Collateral, and
Secured Party may apply any proceeds of such insurance to the Liabilities
(whether or not due);
(c) to take any action and execute any assignment, certificate,
financing statement, notification, document or instrument, which Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement;
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(d) to execute, assign and endorse negotiable and other instruments
for the payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on behalf of and
in the name of Debtor;
(e) upon the occurrence and during the continuance of an Event of
Default, to obtain, adjust, sell and cancel any insurance with respect to
the Collateral.
5.4 Transfer of Collateral. Secured Party may assign any or all of the
Indebtedness evidenced by the Liabilities to the extent permitted by Section 9.2
of the Loan Agreement, and upon any such assignment Secured Party may assign any
or all of the Collateral and shall be fully discharged thereafter from all
liability therefor. Upon becoming a party to or assignee under the Multi-Party
Agreement or otherwise receiving the written approval of the SBA, any transferee
of the Collateral shall be vested with all rights, powers and remedies of
Secured Party hereunder.
5.5 Cumulative and Other Rights. The rights, powers and remedies of
Secured Party hereunder shall be in addition to all rights, powers and remedies
given by law or in equity. The exercise by Secured Party of any one or more of
the rights, powers and remedies herein shall not be construed as a waiver of any
other rights, powers and remedies.
5.6 Disclaimer of Certain Duties. The powers conferred upon Secured Party
by this Agreement are to protect its interest in the Collateral and shall not
impose any duty upon Secured Party to exercise any such powers. Debtor hereby
agrees that Secured Party shall not be liable for, nor shall the Indebtedness
evidenced by the Liabilities be diminished by, Secured Party's failure to
collect upon, foreclose, sell, take possession of or otherwise obtain value for
the Collateral.
5.7 Waiver of Notice, Demand, Presentment, etc. Except as otherwise
provided in the Loan Agreement, Debtor hereby waives any demand, notice of
default, notice of acceleration of the maturity of the Liabilities, notice of
intention to accelerate the maturity of the Liabilities, presentment, protest
and notice of dishonor as to any action taken by Secured Party in connection
with this Agreement, any note or other document.
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5.8 Account Debtors. To the extent and so long as Secured Party does not
elect to invoke its remedies under Section 2.14 of the Loan Agreement, Debtor
shall continue to collect the Accounts and place such collections into the
Blocked Account or the Servicer Account, or to instruct Account Debtors to make
deposits directly into the Blocked Account or the Servicer Account, as set forth
in Section 2.13 of the Loan Agreement. Secured Party or its designee shall also
have the right (i) to request Accountant to send a request for verification of
Liabilities or Accounts to any Account Debtor, provided, that Secured Party
simultaneously sends notice to Debtor that such request for verification has
been sent to Accountant and, if Accountant fails to send such verification in a
manner satisfactory to Secured Party within thirty (30) days of Secured Party's
request to do so, to send such request for verification; and (ii) to do all
other acts and things necessary to carry out the intent of this Agreement. No
Account Debtor on any Account shall ever be bound to make inquiry as to the
termination of this Agreement or the rights of Secured Party to act hereunder,
but shall be fully protected by Debtor in making payment directly to Secured
Party.
ARTICLE VI
EVENTS OF DEFAULT
6.1 Events of Default. Any event constituting an Event of Default under
the Loan Agreement shall also constitute an Event of Default under this
Agreement.
ARTICLE VII
REMEDIES
7.1 Remedies. Upon the occurrence and during the continuance of any Event
of Default, and subject to the provisions of the Multi-Party Agreement and the
Intercreditor Agreement, Secured Party may take any or all of the following
actions without notice (except where expressly required below) or demand to
Debtor:
(a) Declare all or part of the Indebtedness pursuant to the
Liabilities immediately due and payable and enforce payment of the same by
Debtor.
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(b) Exercise in respect of the Collateral all of the rights and
remedies of a Secured Party on default under the UCC.
(c) Take possession of the Collateral, or at Secured Party's request
Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. The risk of accidental
loss or damage to or diminution in value of Collateral shall be on Debtor,
and Secured Party shall have no liability whatsoever for failure to obtain
or maintain insurance, nor to determine whether any insurance ever in
force is adequate as to amount or as to risk insured.
(d) Sell or lease, in one or more sales or leases and in one or more
parcels, or otherwise dispose of any or all of the Collateral in its then
condition or in any other commercially reasonable manner as Secured Party
may elect, in a public or private transaction, at any location as deemed
reasonable by Secured Party (including Debtor's premises), either for cash
or credit or for future delivery and (unless prohibited by the UCC, as
adopted in any applicable jurisdiction) Secured Party may be the purchaser
of any or all Collateral so sold and may apply against the purchase price
therefor any Liabilities secured hereby. Any such sale or transfer by
Secured Party either to itself or to any other Person shall be absolutely
free from any claim or right by Debtor, including any equity or right of
redemption, stay or appraisal which Debtor has or may have under any rule
of law, regulation or statute now existing or hereafter adopted. Upon any
such sale or transfer, Secured Party shall have the right to deliver,
assign and transfer to the purchaser or transferee thereof the Collateral
so sold or transferred. It shall not be necessary that the Collateral or
any part thereof be present at the location of any such sale or transfer.
Secured Party may, at its discretion, provide for a public sale, and any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Secured Party may fix in the
notice of such sale. Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale by announcement at any
time and place fixed for such sale, and such sale may be made at any
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time or place to which the same may be so adjourned. In the event any sale
or transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. In the
event that any of the Collateral is sold or transferred on credit, or to
be held by Secured Party for future delivery to a purchaser or transferee,
the Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the purchaser
or transferee thereof, but in the event that such purchaser or transferee
fails to pay for the Collateral so sold or transferred or to take delivery
thereof, Secured Party shall incur no liability in connection therewith.
If only part of the Collateral is sold or transferred such that the
Liabilities remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or modified,
and Secured Party is specifically empowered to make one or more successive
sales or transfers until all the Collateral shall be sold or transferred
and all the Liabilities are paid. In the event that Secured Party elects
not to sell the Collateral, Secured Party retains its rights to lease or
otherwise dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in equity, and to
apply the proceeds of the same towards payment of the Liabilities. Each
and every method of disposition of the Collateral described in this
Subsection 7.1(d) shall constitute disposition in a commercially
reasonable manner.
(e) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon, and remove the same therefrom
without liability.
(f) Apply proceeds of the disposition of Collateral to the
Liabilities in any manner elected by Secured Party and permitted by the
UCC or otherwise permitted by law or in equity. Such application may
include the reasonable expenses of retaking, holding, preparing for sale
or other disposition, and the reasonable attorneys' fees and legal
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expenses incurred by Secured Party. Any surplus of proceeds held by
Secured Party after payment in full of all Liabilities shall be paid over
to Debtor or to whomsoever may be lawfully entitled to receive such
surplus.
(g) Appoint any party as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
(h) Subject to the provisions of Section 7.3(a) of the Loan
Agreement, apply and set-off (i) any deposits of Debtor held by Secured
Party; (ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other property, rights or interests of Debtor which
come into the possession or custody or under the control of Secured Party;
and (iv) the proceeds of any of the foregoing as if the same were included
in the Collateral. Secured Party agrees to notify Debtor promptly after
any such set-off or application; provided, that the failure of Secured
Party to give any such notice shall not affect the validity of such
set-off or application. The rights of Secured Party under this Subsection
7.1(h) are in addition to any other rights and remedies, including any
other rights of set-off.
(i) Demand, collect, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due or to become due by virtue of, the Accounts;
(j) Sell, transfer or assign or otherwise deal in the Accounts or
the proceeds thereof, as fully and effectively as if Secured Party were
the absolute owner thereof;
(k) Extend the time of payment of any of the Accounts, to grant
waivers and make any allowance or other adjustment with reference thereto;
and
(l) Endorse the name of Debtor on notes, checks or other evidences
of payments on Collateral that may come into possession of Secured Party
and deliver the same to Document Agent.
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7.2 Settlement of Accounts. In the event that Secured Party exercises its
right to settle or adjust any disputes or claims with Account Debtors on behalf
of Debtor for an amount less than the original Account in dispute, Secured Party
shall not be obligated to credit the Liabilities in an amount in excess of the
amount that Secured Party receives as payment on such disputed Account. Any
exercise by Secured Party of its rights in and to the Accounts shall, as may be
applicable, be a full and complete release, discharge and acquittance of the
Account Debtor with respect to such Account, and Debtor shall take any action as
may be reasonably required by Secured Party in connection therewith.
7.3 Servicing of SBA Loans. Upon the occurrence and during the continuance
of any Event of Default, subject to the provisions of the Multi-Party Agreement
and the Intercreditor Agreement, Secured Party, or its designee, may monitor,
manage, and service any or all of the Notes Receivable, including the Sold Notes
Receivable, and Debtor's relationship with the Term Loan Debtors and other
customers of Debtor, on the terms and conditions set forth in Section 7.3(d) of
the Loan Agreement.
7.4 Liability for Deficiency. If any action of Secured Party hereunder
results in a partial reduction of the Liabilities, such action shall not release
Debtor from its liability to Secured Party for any unpaid Liabilities, including
costs, charges and expenses incurred in the liquidation of Collateral, together
with interest thereon, and the same shall be immediately due and payable to
Secured Party at Secured Party's address set forth in the opening paragraph
hereof.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
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 (a) in person with receipt acknowledged, or (b)
by facsimile with
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receipt confirmed, or (c) by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to Secured Party, 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 Debtor, 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
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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 Amendments and Waivers. Secured Party's acceptance of partial or
delinquent payments or any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any Obligation of Debtor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any default hereunder or in
connection with the Liabilities without waiving the default so remedied. Debtor
hereby agrees that if Secured Party agrees to a waiver of any provision
hereunder, or an exchange of or release of the Collateral, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
Liabilities hereunder. This Agreement represents the final Agreement between the
parties with respect to the subject matter hereof and may be amended only by an
instrument in writing executed jointly by Debtor and Secured Party and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
8.3 Subrogation. Until all Indebtedness in connection with the Liabilities
shall have been paid in full, Debtor shall have no right to subrogation or to
enforce any remedy or participate in any Collateral or security whatsoever now
or hereafter held by Secured Party.
8.4 Continuing Security Agreement.
(a) This Agreement shall constitute a continuing security agreement,
and all representations and warranties, covenants and agreements shall, as
applicable, apply to all
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future as well as existing transactions. Provisions of this Agreement, unless by
their terms exclusive, shall be in addition to other agreements between the
parties.
(b) To the extent that any payments on the Liabilities or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other party under any bankruptcy law, common law or
equitable cause, then to such extent the Liabilities so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, and Secured Party's security interests, rights, powers and
remedies hereunder shall continue in full force and effect.
(c) In the event that the Liabilities are structured such that there
are times when no Indebtedness is owing thereunder, this Agreement shall remain
valid and in full force and effect as to all subsequent Indebtedness included in
the Liabilities, provided Secured Party has not in the interim period executed a
written release or termination statement or returned possession or reassigned
the Collateral to Debtor.
8.5 Termination. When all Liabilities secured hereby shall have been paid
in full and Secured Party's obligation to make Revolving Loans has terminated,
this Agreement and the Liens created hereby shall terminate. Promptly
thereafter, Secured Party shall reassign and deliver to Debtor, without
recourse, all Collateral in its possession, and shall execute a written release
or termination statement.
8.6 CONSTRUCTION. THIS AGREEMENT, THE LOAN AGREEMENT, THE REVOLVING CREDIT
NOTE, AND THE OTHER LOAN 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 SECURED PARTY 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; PROVIDED,
THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN
ILLINOIS, THE LAWS OF SUCH
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JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
SECURED PARTY'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF SECURED PARTY'S
OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS. IT IS
THE INTENT OF ALL OF THE PARTIES HERETO THAT THE LAWS OF THE STATE OF ILLINOIS
SHALL GOVERN THIS AGREEMENT, THE REVOLVING CREDIT NOTE, AND THE OTHER LOAN
DOCUMENTS, AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
8.7 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, DEBTOR AND SECURED PARTY HEREBY WAIVE, TO THE FULL 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, THE REVOLVING CREDIT NOTE
OR THE LOAN AGREEMENT 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. SECURED PARTY AND DEBTOR 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 SHALL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. SECURED PARTY AND DEBTOR
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 LOAN AGREEMENT, THE REVOLVING CREDIT NOTE, OR ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE REVOLVING LOANS. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
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8.8 Successors and Assigns. This Agreement shall be binding on Debtor,
Debtor's successors and assigns, and inure to the benefit of Secured Party and
its successors and assigns. Debtor shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of Secured Party.
8.9 Conflict with Multi-Party Agreement. In the event any provision of
this Agreement conflicts or is inconsistent with the Multi-Party Agreement, as
amended from time to time, the relevant provisions of the Multi-Party Agreement
shall be controlling.
8.10 Severability. In the event that any one or more of the provisions
contained in this Agreement 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 this Agreement.
8.11 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 as original, but
all of such counterparts together shall constitute one and the same instrument.
8.12 Partial Restatement of Original Security Agreement. This Agreement
restates and amends the Original Security Agreement to the extent that the
provisions thereof apply to the financing arrangements under the Original Credit
Agreement that will continue to be in effect between Debtor, Parent and Secured
Party pursuant to the Loan Agreement immediately after the Assignment. The
Original Security Agreement shall continue to be effect with respect to the
financing arrangements under the Original Credit Agreement that will continue to
be in effect between Debtor, Parent and Sterling pursuant to the Restated
Sterling Credit Agreement immediately after the Assignment.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
DEBTOR:
BUSINESS LOAN CENTER, INC.,
a Delaware corporation
By: /s/ Robert Tannenhauser
---------------------------------
Robert F. Tannenhauser
President
SECURED PARTY:
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By: /s/ Sam V. LoBosco
---------------------------------
Sam V. LoBosco
Vice President - Credit
24
<PAGE>
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)
<PAGE>
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)
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Agreement") dated as of August 27, 1997, made by
BLC FINANCIAL SERVICES, INC., a Delaware corporation ("Guarantor"), in favor of
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation ("Lender"), is
based on the following facts:
RECITALS
A. Business Loan Center, Inc., a Delaware corporation ("Borrower"),
Guarantor and Lender have entered into that certain Restated and Amended Loan
Agreement dated as of August 27, 1997 (as amended, modified, or supplemented
from time to time, the "Loan Agreement"), pursuant to which Lender has agreed to
make certain loans and financial accommodations to or for the benefit of
Borrower; and
B. It is a condition to the obligations of Lender to extend credit under
the Loan Agreement that Guarantor execute this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and to induce Lender to make Revolving Loans pursuant to the
Loan Agreement, it is agreed as follows:
1. DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION
1.1 Definitions. Unless otherwise defined herein, (a) capitalized terms
used herein shall have the respective meanings ascribed to them in the Loan
Agreement, and (b) the following terms shall have, unless otherwise provided
elsewhere in this Agreement, the meanings set forth below (such meanings being
equally applicable to both the singular and plural forms of the terms defined):
"Agreement" shall mean this Guaranty Agreement, including any and
all amendments, modifications and supplements
<PAGE>
and any exhibits and schedules to any of the foregoing, as the same may be in
effect at the time such reference becomes operative.
"Event of Default" shall have the meaning set forth in Section 4.1
hereof.
"Guaranty Obligations" shall mean (a) the Liabilities and (b) all
obligations, indebtedness or liabilities of Guarantor to Lender whether now
existing or hereafter arising under this Agreement or any other Loan Document.
"Permitted Payments" shall mean (a) reasonable amounts with respect
to payment of servicing fees, reimbursement of origination expenses, and funding
of operating expenses in the ordinary course of business, to the extent that
Borrower is permitted under the Loan Agreement to make such payments to
Guarantor, and (b) the amount actually used by Parent to make interest payments
on the Parent Debentures, to the extent that Borrower is permitted under the
Loan Agreement to make such payments to Guarantor and Guarantor is permitted to
make such interest payments to the holders of the Parent Debentures.
"Subordinated Indebtedness" shall have the meaning ascribed to such
term in Section 2.8.
1.2 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.
2. The Guaranty
2.1 Guaranty of the Liabilities. In consideration of the Revolving Loans
and all other financial accommodations to or for
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the benefit of Borrower, and for other valuable consideration, receipt of which
Guarantor hereby acknowledges, Guarantor hereby unconditionally guarantees to
Lender, and its successors, endorsees, transferees, and assigns, the prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of the Liabilities.
2.2 Absolute Guaranty. The Guaranty Obligations are the immediate, direct,
primary, and absolute obligations of Guarantor, shall not be subject to any
condition precedent, and are independent of and not co-extensive with the
Liabilities. The Guaranty Obligations shall remain in full force and effect
without regard to, and shall not be impaired or affected by, or be deemed to be
satisfied by, nor shall Guarantor or the Collateral be exonerated, discharged,
or released by, any of the following events:
(a) Lender's exercise or enforcement of, or failure or delay in
exercising or enforcing, legal proceedings to collect the Liabilities or any
power, right, or remedy with respect to any of the Liabilities, the Collateral,
or the Guaranty Obligations, including: (i) any action or inaction of Lender to
perfect, protect, or enforce any security interest in any Collateral; (ii) any
impairment or invalidity of the Collateral or any suspension of Lender's right
to enforce against Borrower any Liabilities, any Guaranty Obligations, or any
security interest in or Lien upon the Collateral; or (iii) any change in the
time, manner, or place of payment of, or in any other term of, any or all of the
Liabilities or the Guaranty Obligations, or any other amendment to or waiver of
the Loan Agreement, any other Loan Document, or any other agreement or
instrument governing or evidencing any of the Liabilities or the Guaranty
Obligations;
(b) insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition, assignment for the benefit of creditors, appointment of a receiver
or trustee for all or any part of Borrower's or Guarantor's assets, liquidation,
winding-up, or dissolution of Borrower or Guarantor;
(c) any limitation, discharge, cessation, or partial satisfaction of
the Liabilities or any Guaranty Obligations, whether by operation of any
statute, regulation, or rule of law, or otherwise, regardless of the
intervention or omission of
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Lender, or any invalidity, voidability, unenforceability, or irregularity, or
future change to or amendment of, in whole or in part, the Loan Agreement, this
Agreement, any other Loan Document, or any other document evidencing any
Liabilities;
(d) any merger, acquisition, consolidation or change in structure of
Borrower or Guarantor; or any sale, lease, transfer, or other disposition of any
or all of the assets of Borrower or Guarantor;
(e) any assignment or other transfer, in whole or in part, of
Lender's interest in and rights under the Loan Agreement or any other Loan
Document, including this Agreement, or of Lender's interest in the Liabilities,
the Guaranty Obligations, or the Collateral;
(f) any claim, defense, counterclaim, or set-off, other than (i) any
defense of prior performance or (ii) any defense based on any applicable
provision of the UCC requiring that the Collateral be disposed of in a
commercially reasonable manner, which Borrower or Guarantor may have or assert,
including any defense of incapacity, disability, or lack of corporate or other
authority to execute any documents relating to the Liabilities, the Guaranty
Obligations, or the Collateral;
(g) any cancellation, renunciation, or surrender of any debt
instrument evidencing the Liabilities or the Guaranty Obligations;
(h) Lender's vote, claim, distribution, election, acceptance,
action, or inaction in any bankruptcy or reorganization case related to the
Collateral, the Liabilities, or the Guaranty Obligations;
(i) any other action or circumstances that might otherwise
constitute a defense available to, or a legal or equitable discharge of, any
surety, guarantor or pledgor; or
(j) the fact that any of the Liabilities or the Guaranty Obligations
may become due or payable in connection with or by reason of any agreement or
transaction that may be illegal, invalid, or unenforceable in whole or in part;
it being agreed by Guarantor that the Guaranty Obligations shall not be
discharged.
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2.3 Demand by Lender. In addition to the terms of the guaranty set forth
in Sections 2.1 and 2.2, and in no manner imposing any limitation on such terms,
it is expressly understood and agreed that, if the Liabilities are declared to
be or otherwise become immediately due and payable, then Guarantor shall, upon
demand in writing therefor by Lender to Guarantor, immediately pay the Guaranty
Obligations to Lender. Payment by Guarantor shall be made to Lender to be
credited and applied upon the Liabilities, in immediately available funds to an
account designated by Lender or at any address that may be specified in writing
from time to time by Lender. This section shall in no way affect Lender's right
to resort to the Collateral without demand, as provided in Section 4.2. Any
payment received by Lender with respect to the Liabilities shall reduce the
Guaranty Obligations by the amount of such payment.
2.4 Guarantor Waivers. In addition to any other waivers contained herein,
Guarantor waives and agrees as follows:
(a) Guarantor expressly waives any right Guarantor may now or in the
future have to require Lender to, and Lender shall not have any liability to,
first pursue or enforce against Borrower, the Collateral, or any other security,
guaranty, or pledge that may now or hereafter be held by Lender for the
Liabilities or for the Guaranty Obligations, or to apply such security,
guaranty, or pledge to the Liabilities or to the Guaranty Obligations, or to
pursue any other remedy in Lender's power that Guarantor may or may not be able
to pursue and that may lighten Guarantor's burden, before proceeding against the
Collateral. Guarantor shall remain liable for the Guaranty Obligations,
notwithstanding any judgment Lender may obtain against Borrower, any other
guarantor of the Liabilities, or any other Person, or any modification,
extension, or renewal with respect thereto.
(b) Guarantor has entered into this Agreement based solely upon
Guarantor's independent knowledge of Borrower's financial condition and
Guarantor assumes full responsibility for obtaining any further information with
respect to Borrower or the conduct of its business. Guarantor represents that
Guarantor is now, and during the terms of this Agreement will be, responsible
for ascertaining the financial condition of Borrower. Guarantor hereby waives
any duty on the part of Lender to disclose to
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Guarantor, and agrees that Guarantor is not relying upon nor expecting Lender to
disclose to Guarantor, any fact known or hereafter known by Lender relating to
the operation or condition of Borrower or its business. Guarantor knowingly
accepts the full range of risk encompassed in a contract of guaranty, which risk
includes the possibility that Borrower may incur Indebtedness after its
financial condition or its ability to pay its debts as they mature has
deteriorated.
(c) Lender shall not be under any liability to marshal any assets in
favor of Guarantor or in payment of any or all of the Liabilities or Guarantor
Obligations.
(d) Guarantor hereby waives: (i) presentment, demand, protest,
notice of acceleration, dishonor, non-payment, protest, or any delay related
thereto, with respect to any instruments or documents relating to the
Liabilities or the Guaranty Obligations, except as specifically provided in
Section 2.3; (ii) notice of any extension, modification, renewal, or amendment
of any of the terms of the Loan Agreement or any other Loan Document relating to
the Liabilities or the Guaranty Obligations; (iii) notice of the occurrence of
any Default or Event of Default with respect to the Liabilities, the Guaranty
Obligations, or the Collateral; and (iv) notice of any exercise or non-exercise
by Lender of any right, power, or remedy with respect to the Liabilities, the
Collateral, or the Guaranty Obligations.
If Lender may, under applicable law, proceed to realize its benefits
under any Loan Document giving Lender a Lien upon any Collateral, either by
judicial foreclosure or by nonjudicial sale or enforcement, Lender may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Agreement. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies under any Loan Document, including obtaining a deficiency
judgment against Borrower or any other Person, whether because of any applicable
laws pertaining to "election of remedies," anti-deficiency rules, or the like,
Guarantor hereby consents to such action by Lender and waives any claim based
upon such action. Any election of remedies that results in the denial or
impairment of the right of Lender to seek a deficiency judgment against Borrower
shall not impair Guarantor's obligations under this Agreement. In the event
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Lender shall bid at any foreclosure or trustee's sale or at any public or
private sale permitted by law or the Loan Documents, Lender may bid all or less
than the amount of the Liabilities or the Guaranty Obligations and the amount of
such bid need not be paid by Lender but shall be credited and applied as set
forth in Section 5. The amount of the successful bid at any such sale, whether
Lender or any other party (including Guarantor) is the successful bidder, shall
be deemed to be prima facie evidence of the fair market value of the Collateral
and the amount remaining after application of such bid amount in the manner set
forth in Section 5 shall be deemed to be prima facie evidence of the amount of
the amount at such time of the remaining Liabilities guaranteed under this
Agreement.
(e) Guarantor agrees and represents that the Liabilities are and
shall be incurred by Borrower, and that the Guaranty Obligations are and shall
be incurred by Guarantor, for business and commercial purposes only. Guarantor
agrees that any claim of Lender against Guarantor arising out of this Agreement
arises out of the conduct by Guarantor of Guarantor's trade, business, or
profession. Guarantor undertakes all the risks encompassed in the Loan Agreement
and the other Loan Documents as they may be now or are hereafter agreed upon by
Lender and Borrower. Lender, in such manner and upon such terms and at such time
as it deems best, and with or without notice to Guarantor, may release, add,
subordinate or substitute security for the Liabilities or the Guaranty
Obligations.
(f) Guarantor waives and agrees that Guarantor shall not at any time
insist upon, plead, or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, or redemption laws, or
exemption, whether now or at any time hereafter in force, which may delay,
prevent, or otherwise affect the performance by Guarantor of the Guaranty
Obligations or the enforcement by Lender of this Agreement.
(g) A separate action or actions may be brought under this Agreement
or any of the Loan Documents and prosecuted by Lender against Guarantor whether
or not an action is brought against Borrower, or whether Borrower is joined in
any such action or actions. Without limiting the generality of the foregoing,
Guarantor expressly waives the benefit of any statute
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of limitation affecting the Liabilities and expressly agrees that the running of
a period of limitation on, or Lender's delay or omission in, any action by
Lender against Borrower or for the foreclosure of any Lien or the enforcement of
any security interest in the Collateral shall not exonerate or affect
Guarantor's liability to pay and perform the Guaranty Obligations.
2.5 Waivers of Defenses. Guarantor waives any defense based upon or
arising by reason of: (a) any disability or other defense of Borrower or any
other Person; (b) the cessation of liability or limitation from any cause
whatsoever of the Liabilities or any portion thereof, other than payment in
full; (c) any lack of authority of any agent or other person acting or
purporting to act on behalf of Borrower, or any defect in the formation of
Borrower; (d) the application by Borrower of the proceeds of the Liabilities or
any other obligation of Borrower to Lender for purposes other than the purposes
represented to, or intended or understood by Lender; (e) any act or omission by
Lender that directly or indirectly results in or aids the discharge of Borrower
or any portion of the Liabilities or any other obligation of Borrower to Lender
by operation of law or otherwise; or (f) any modification of the Liabilities or
any other obligation of Borrower to Lender in any form whatsoever, including the
renewal, extension, acceleration or other change in time for payment of the
Liabilities, or other change in the terms of the Liabilities or any part
thereof, including increase or decrease of the rate of interest thereon.
2.6 Benefits of Agreement. The provisions of this Agreement are for the
benefit of Lender and its respective successors, transferees, endorsees, and
assigns, and nothing herein shall impair, as between Borrower and Lender, the
Liabilities. No such transfer, endorsement, or assignment shall increase or
diminish any of the Guaranty Obligations hereunder. This Agreement binds
Guarantor, and Guarantor may not assign, transfer, or endorse this Agreement. In
the event all or any part of the Liabilities are transferred, endorsed, or
assigned by Lender to any Person, any reference to "Lender" herein shall be
deemed to refer equally to such Person.
2.7 Continuing Agreement. Guarantor agrees that (a) this is a continuing
guaranty, (b) this Agreement shall remain in full
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force and effect until the Liabilities are paid in full and the Guaranty
Obligations shall have been completely satisfied, and (c) the Guaranty
Obligations hereunder shall extend to each and every extension or renewal, if
any, of the Loan Agreement, regardless of whether the Liabilities may, in
successive transactions, be paid, repaid, advanced, or renewed from time to
time.
2.8 Subordination.
(a) Guarantor hereby agrees that all obligations and all
Indebtedness of Borrower to Guarantor, and any and all present and future
Indebtedness regardless of its nature or manner of origination now or hereafter
to become due and owing by Borrower to Guarantor (collectively, the
"Subordinated Indebtedness"), are hereby unconditionally and forever
subordinated and postponed and shall be inferior, in all respects, to the
Liabilities; provided, that so long as no Default or Event of Default under the
Loan Agreement has occurred and is continuing or would result therefrom,
Guarantor may receive Permitted Payments.
(b) In no circumstance shall any Subordinated Indebtedness be
entitled to any collateral security; provided, that in the event any such
collateral security exists, Borrower hereby agrees that any now existing or
hereafter arising Lien upon or security interest in any of the assets of
Borrower in favor of Guarantor, whether created by contract, assignment,
subrogation, reimbursement, indemnity, operation of law, principles of equity or
otherwise, shall be junior and inferior to, and is hereby subordinated in
priority to any now existing or hereafter arising Lien or security interest in
favor of Lender in and against the Collateral, regardless of the time, manner or
order of creation, attachment or perfection of the respective Liens or security
interests. Guarantor represents and warrants to Lender that as of the date
hereof, none of the Subordinated Indebtedness to which Guarantor is a party is
secured by any assets or interests of Borrower or any other entity, and that
Guarantor will not take any security interest or lien to secure any of the
Subordinated Indebtedness without the prior written consent of Lender.
(c) Without limiting the generality of Section 2.8(a),
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if (i) any Default or Event of Default under the Loan Agreement or Security
Agreement shall exist and be continuing, whether or not any notice of any such
Default or Event of Default shall have been given or Lender shall have asserted
any remedy in connection therewith, (ii) the Loan Agreement shall have expired
but the obligations of Borrower to Lender shall not have been paid and satisfied
in full, (iii) any insolvency, bankruptcy, receivership, custodianship,
liquidation, reorganization, assignment for the benefit of creditors, or other
similar proceeding relative to Borrower is commenced by or against Borrower, or
(iv) any proceeding for the voluntary liquidation, dissolution or other winding
up of Borrower is commenced by or against Borrower, and whether or not involving
insolvency or bankruptcy proceedings, then and in any such event Guarantor
agrees as follows:
(1) all Liabilities shall first be paid in full, and finally
and indefeasibly be received by Lender, before any payment or distribution of
any character, whether in cash, securities or other property, shall be made in
respect of the Subordinated Indebtedness; and
(2) any payment or distribution of any character, whether in
cash, securities or other property, which would otherwise, but for the terms
hereof, be payable or deliverable in respect of the Subordinated Indebtedness,
shall be paid or delivered directly to Lender until all Liabilities shall have
been paid in full to and indefeasibly received by Lender, and Guarantor, or any
other holder of the Subordinated Indebtedness, irrevocably authorizes, empowers
and directs all receivers, trustees, liquidators, custodians, conservators, and
others having authority in the premises to effect all such payment and
deliveries.
(d) If, notwithstanding the provisions of this Agreement, any
payment or distribution of any character, whether in cash, securities, or other
property, or any security shall be received by Guarantor in contravention of the
terms of this Agreement, and before all Liabilities shall have been paid in
full, such payment, distribution or security shall not be commingled with any
asset of Guarantor, shall be held in trust for the benefit of, and shall be
immediately paid over or delivered or transferred to Lender, or its
representative, for
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application to the payment of all Liabilities remaining unpaid, until all of the
Liabilities shall have been paid in full.
(e) Guarantor shall not assert, collect, accept payment on or
enforce any of the Subordinated Indebtedness, or take collateral or other
security to secure payment of the Subordinated Indebtedness unless and until the
Liabilities are paid in full; provided, that so long as no Default or Event of
Default under the Loan Agreement has occurred and is continuing or would result
therefrom, Guarantor may receive Permitted Payments. Guarantor shall not demand
payment of, accelerate the maturity of, or declare a default or event of default
under the Subordinated Indebtedness unless and until the Liabilities are paid in
full. Guarantor shall not cause or permit Borrower to make or give, and
Guarantor shall not receive or accept, payment in any form (direct or indirect,
including by transfer to an Affiliate or Subsidiary of Borrower or Guarantor) on
account of the Subordinated Indebtedness, make any transfers in respect of the
Subordinated Indebtedness without the express prior written consent of Lender
(which consent may be withheld for any reason in Lender's sole discretion), or
give or receive any collateral security for the Subordinated Indebtedness;
provided, that so long as no Default or Event of Default under the Loan
Agreement has occurred and is continuing or would result therefrom, Guarantor
may receive Permitted Payments. Any payment, transfer, or collateral security so
made or given by Borrower and received or accepted by Guarantor, without the
express prior written consent of Lender, shall be held in trust by Guarantor for
Lender, for the account of Lender, and Guarantor shall immediately turn over, in
kind, any such payment to Lender for application in reduction of, or (in the
case of property other than cash) as security for, the Guaranty Obligations.
(f) Guarantor, or any other holder of the Subordinated Indebtedness,
shall, after a written request by Lender, execute and deliver to Lender or its
representatives all such further instruments confirming the authorization
referred to in this Agreement, any powers of attorney specifically confirming
the rights of Lender arising hereunder, and all proofs of claim, assignments of
claim, and any other instruments, and shall take all such other actions as may
be reasonably requested by Lender in order to enable Lender to enforce all
claims upon or in respect of such Subordinated Indebtedness, including
authorizing
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Lender or any of its agents, nominees or designees to file and prove and vote
claims in Lender's name or in the name of Guarantor, in connection with any
receivership, bankruptcy or proceedings, under the Bankruptcy Code or otherwise.
2.9 Subrogation.
Guarantor will not exercise any rights which Guarantor may acquire
by way of subrogation under this Agreement, by any payment made hereunder or
otherwise, until all the Liabilities shall have been paid in full. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when all the Liabilities shall not have been paid in full, such amount shall be
held in trust for the benefit of Lender, and shall forthwith be paid to Lender
to be credited and applied upon the Liabilities, whether matured or unmatured,
in accordance with the terms of the Loan Agreement. If (i) Guarantor shall make
payment to Lender of all or any part of the Liabilities and (ii) all the
Liabilities shall be paid in full, Lender shall, at Guarantor's request, execute
and deliver to Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
Guarantor of an interest in the Liabilities resulting from such payment by
Guarantor.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to make Revolving Loans under the Loan Agreement,
Guarantor makes the following representations and warranties, each and all of
which shall survive the execution and delivery of this Agreement. After giving
effect to the consents and waivers provided by the Multi-Party Agreement:
3.1 Authority; Consents. Guarantor is duly authorized and empowered to
execute, deliver and perform this Agreement, and all corporate action on
Guarantor's part requisite for the due execution, delivery and performance of
this Agreement has been taken. No consent, approval, authorization or other
order of any Person, and no Governmental Authorization, which in either case has
not been obtained, is required to be made or obtained by Guarantor for the
execution, delivery, or performance of this Agreement by Guarantor.
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3.2 Guarantor's Addresses. Guarantor's name and address are accurately set
forth in Section 11.5.
3.3 No Violation or Default. The execution, delivery, and performance of
this Agreement and all other Loan Documents and all instruments and documents to
be delivered by Guarantor here under and under the Loan Agreement will not
violate any Governmental Requirement, will not conflict with or result in the
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, lease, agreement, or other instrument to which Guarantor is a party or by
which Guarantor or any of Guarantor's property is bound, will not result in the
creation or imposition of any Lien upon any of the property of Guarantor.
3.4 Enforceable Liabilities. At or prior to the Closing Date, this
Agreement shall have been duly executed and delivered by Guarantor, and shall
then constitute a legal, valid, and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general principles of equity.
3.5 No Offset, Defense, or Counterclaim. Guarantor represents, warrants,
and agrees that, as of the date of this Agreement, the Guaranty Obligations are
not subject to any offset or defense against Lender, or Borrower of any kind,
and Guarantor specifically waives Guarantor's right to assert any such defense
or right of offset. Guarantor further agrees that the Guaranty Obligations shall
not be subject to any counterclaims, offsets, or defenses against Lender or
Borrower that may arise in the future, except for (a) any defense of prior
performance or payment, (b) any defense based on any applicable provision of the
UCC requiring that the Collateral be disposed of in a commercially reasonable
manner, which Borrower or Guarantor may have or assert, or (c) applicable
provisions of the laws of the State of Illinois governing the disposal of the
Collateral upon foreclosure of the Liens created thereon by the Security
Agreement.
3.6 Pending or Threatened Litigation. Except as set forth in Schedule 4.8
to the Loan Agreement, there are no actions, suits, proceedings or other
litigation (including proceedings by
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or before any arbitrator or governmental authority) pending, or to the knowledge
of Guarantor, threatened against Guarantor, that (a) challenge the validity or
propriety of this Agreement or of the secured financing transactions
contemplated under the Loan Agreement, (b) could, if adversely determined, have
a Material Adverse Effect on the real and personal property or financial or
other condition of Guarantor, or (c) could materially affect the ability of
Guarantor to perform Guarantor's obligations under this Agreement.
3.7 Consultation with Legal Counsel. Guarantor acknowledges that the
waivers in Section 2.4 and 2.5 herein are a material inducement to Lender to
make Revolving Loans under the Loan Agreement and that Lender is relying upon
the foregoing waivers in its future dealings with Borrower. Guarantor warrants
and represents that Guarantor has reviewed the foregoing waivers with
Guarantor's legal counsel and that, after such review with such legal counsel,
Guarantor has agreed to the foregoing waivers.
4. DEFAULTS AND REMEDIES
4.1 Events of Default. It shall be an "Event of Default" hereunder upon
the occurrence of any one or more of the following events (regardless of the
reason therefor):
(a) any Event of Default under and as defined in the Loan Agreement
shall occur;
(b) Guarantor shall fail or neglect to perform, keep or observe any
provision of this Agreement or any other Loan Document to which Guarantor is a
party, and the same shall remain unremedied for a period of five (5) Business
Days after the earlier of (i) written notice thereof being given by Lender to
Guarantor, or (ii) such default otherwise becoming known to Guarantor;
(c) any material representation or warranty of Guarantor made under
this Agreement shall prove to be untrue or incorrect as of the date when made or
deemed made;
(d) Guarantor shall renounce or revoke, or attempt to renounce or
revoke, this Agreement;
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(e) Guarantor is no longer Solvent;
(f) any of the assets of Guarantor shall be attached, seized, levied
upon or subject to a writ or distress warrant, or come within the possession of
any receiver, trustee, custodian, or assignee for the benefit of creditors of
Guarantor and shall remain unstayed or undismissed for thirty (30) consecutive
days; or any Person shall apply for the appointment of a receiver, trustee, or
custodian for any of the assets of Guarantor and such application or proceeding
shall remain unstayed or undismissed for thirty (30) consecutive days;
(g) a case or proceeding shall have been commenced against Guarantor
in a court having competent jurisdiction seeking a decree or order in respect of
Guarantor (i) under the Bankruptcy Code, or any other applicable Federal, state,
or foreign bankruptcy or other similar law, or (ii) appointing a custodian,
receiver, liquidator, assignee, trustee, or sequestrator (or similar official)
of any substantial part of Guarantor's properties and such case or proceeding
shall remain undismissed or unstayed for thirty (30) consecutive days or such
court shall enter a decree or order granting the relief sought in such case or
proceeding; or
(h) Guarantor shall: (i) file a petition seeking relief under the
Bankruptcy Code or any other applicable Federal, state, or foreign bankruptcy or
other similar law; or (ii) consent to the institution of proceedings thereunder
or to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of any substantial part of Guarantor's
properties.
4.2 Remedies. Upon the occurrence of an Event of Default hereunder and the
continuation of such Event of Default after any applicable cure period provided
therefor, Lender may declare all of the Guaranty Obligations, immediately and
without demand, notice or legal process of any kind, to be, and such Guaranty
Obligations shall immediately become, due and payable, and then, or at any
subsequent time, Lender may exercise any or all of its rights and remedies under
this Agreement, the Loan Agreement, and any other Loan Documents, and under
applicable law, and may, in addition:
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(a) make demand upon Guarantor for the payment of the Guaranty
Obligations; and
(b) resort to the Collateral for payment of the Guaranty
Obligations, without notice, declaration, or demand by Lender to the extent not
prohibited by applicable law;
provided, that upon the occurrence of an Event of Default specified in Sections
4.1(f), (g) or (h), the Guaranty Obligations shall become immediately due and
payable without declaration, notice or demand by Lender.
5. APPLICATION OF PAYMENTS
Any payment made by Guarantor under this Agreement shall be applied by
Lender first, to the satisfaction of Guarantor's indemnification liabilities
pursuant to Section 6, and then, in the manner set forth in Section 2.13 of the
Loan Agreement.
6. INDEMNIFICATION
Guarantor agrees to indemnify and hold Lender harmless from and against
any liabilities, claims and damages, including reasonable costs, attorneys'
fees, and disbursements, and other expenses incurred or arising by reason of the
taking or the failure to take action by Lender, in good faith, in respect of any
transaction effected under this Agreement, including any action to enforce
payment of the Guaranty Obligations, or in connection with the Lien upon the
Collateral. The liabilities of Guarantor under this Section 6 shall survive the
termination of this Agreement.
7. FURTHER ASSURANCES
Guarantor agrees that Guarantor will, at Guarantor's expense, upon the
written request of Lender, from time to time, promptly execute and deliver to
Lender any additional instruments or documents reasonably considered necessary
by Lender to cause this Agreement to be, become, or remain valid and effective
in accordance with its terms.
8. REINSTATEMENT
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This Agreement shall remain in full force and effect and continue to be
effective, as the case may be, if at any time payment and performance of the
Liabilities under the Loan Agreement or the Guaranty Obligations, or any part
thereof, is, pursuant to applicable law, avoided, rescinded or reduced in
amount, or must otherwise be restored or returned by Lender, any obligee of the
Liabilities under the Loan Agreement or the Guaranty Obligations, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is avoided, rescinded, reduced, restored, or returned, the
Liabilities under the Loan Agreement or the Guaranty Obligations, as the case
may be, shall be reinstated and deemed reduced only by such amount paid and not
so avoided, rescinded, reduced, restored, or returned.
9. OBLIGATIONS ABSOLUTE.
All rights of Lender hereunder, and all obligations of Guarantor
hereunder, shall be absolute and unconditional and shall remain in full force
and effect without regard to and shall not be impaired or affected by, or deemed
to be satisfied, nor shall Guarantor be exonerated, discharged, or released
except as set forth in Section 10.
10. RELEASE
All obligations created under this Agreement shall terminate and be deemed
canceled upon the full and final payment of the Liabilities and any other
Guaranty Obligations.
11. MISCELLANEOUS
11.1 Entire Agreement; Amendments. This Agreement, together with the other
Loan Documents (a) constitutes the entire agreement between the parties with
respect to the subject matter hereof, and (b) may not be amended or supplemented
except by a writing signed by Guarantor and Lender.
11.2 Section Titles. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
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11.3 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality, and
enforceability of any such provision or provisions in every other respect, and
the remaining provisions of this Agreement, shall not be in any way impaired.
11.4 Conflict of Terms. The Loan Documents, other than this Agreement, are
incorporated in this Agreement by this reference. Except as otherwise provided
in this Agreement and except as otherwise provided in the Loan Documents other
than this Agreement, 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 Loan Documents other than this
Agreement, provisions contained in the Loan Agreement shall govern and control.
11.5 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 Lender, at:
Transamerica Business Credit Corporation
8750 W. Bryn Mawr Avenue, Suite 720
Chicago Illinois 60631
Attention: Account Executive - BLC
Facsimile: (773) 380-6169
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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 Guarantor, at:
BLC Financial Services, 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,
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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.
11.6 Non-Waiver. None of the obligations of Guarantor, and no right or
remedy of Lender under this Agreement, shall be deemed to have been suspended or
waived by Lender, nor shall Lender be estopped from asserting any such right or
remedy, by Lender's conduct or oral statements, but any such suspension or
waiver of any such right or remedy by Lender must be in writing and signed by
Lender. Any suspension or waiver by Lender of any of its rights or remedies
under this Agreement shall not suspend or waive any prior or subsequent right or
remedy, whether of the same or of a different type.
11.7 Lender Liability. No Lender, or any of its officers, directors,
employees, agents, or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own respective gross negligence or willful misconduct.
11.8 Governing Law. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, AND THE
REVOLVING CREDIT NOTE 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. IT IS THE
INTENT OF ALL OF THE PARTIES HERETO THAT THE LAWS OF THE STATE OF ILLINOIS SHALL
GOVERN THIS AGREEMENT, THE REVOLVING CREDIT NOTE, AND THE OTHER LOAN DOCUMENTS,
AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
11.9 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
20
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JUDICIAL SYSTEM AND OF ARBITRATION, GUARANTOR AND LENDER 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, THE REVOLVING CREDIT NOTE OR ANY OF THE LOAN 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. LENDER AND GUARANTOR 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. LENDER AND GUARANTOR FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH 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 LOAN DOCUMENTS,
THE REVOLVING CREDIT NOTE, OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
REVOLVING LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.10 Cumulative Remedies. All rights and remedies provided in and
contemplated by this Agreement and the other Loan Documents are cumulative and
not exclusive of any right or remedy otherwise provided herein, therein, at law
or in equity.
11.11 Taxes, etc. Any taxes (excluding income taxes) payable or ruled
payable by federal or state authority in respect of this Agreement shall be paid
by Guarantor, together with interest and penalties, if any.
11.12 Assignment. Guarantor shall not have the right to assign or delegate
Guarantor's rights or obligations under this Agreement or any interest herein,
without the prior written consent of Lender.
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11.13 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.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Guarantor has executed and delivered this Agreement as
of the date first above written.
"Guarantor":
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation
By: /s/ Robert F. Tannenhauser
--------------------------
Robert F. Tannenhauser
President
"Lender"
ACCEPTED AS OF _____________, 1997
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By: /s/ Sam V. LoBosco
-----------------------
Sam V. LoBosco
Vice President - Credit
23
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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)
24
RESTATED AND AMENDED LOAN AGREEMENT
between
BUSINESS LOAN CENTER, INC.,
a Delaware corporation,
as Borrower,
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation,
as Parent,
and
TRANSAMERICA BUSINESS CREDIT CORPORATION,
a Delaware corporation,
as Lender
$25,000,000.00 Dated as of August 27, 1997
<PAGE>
TABLE OF CONTENTS
RECITALS................................................................... 1
AGREEMENT.................................................................. 2
ARTICLE 1 GENERAL TERMS.................................................. 2
1.1 Defined Terms.................................................. 2
1.2 Accounting Principles.......................................... 15
1.3 Other Terms.................................................... 16
1.4 Certain Matters of Construction................................ 16
ARTICLE 2 AMOUNT AND TERMS OF LOAN....................................... 16
2.1 The Loans and Commitments...................................... 16
2.2 Notice of Borrowing; Disbursement of Advances.................. 18
2.3 Interest Rate.................................................. 18
2.4 Computation.................................................... 19
2.5 Fees........................................................... 19
2.6 Borrower's Termination of Agreement............................ 20
2.7 Mandatory Prepayments.......................................... 21
2.8 Reserves Against Liabilities................................... 21
2.9 All Loans to Constitute One Loan............................... 21
2.10 Loan Purpose................................................... 21
2.11 Term of Agreement.............................................. 22
2.12 Payment Procedure.............................................. 22
2.13 Collection of Borrower's Loans and Payments.................... 22
2.14 Collections; Lender's Right to Notify Account
Debtors........................................................ 25
2.15 Application of Payments and Collections........................ 26
2.16 Refund of Excess Interest; Statement of Account................ 26
2.17 Business Days.................................................. 26
2.18 Sales of and Participations in Non-Guaranteed
Notes Receivable............................................... 26
2.19 Effectiveness of Provisions Regarding SBA
Guaranteed Notes Receivable.................................... 27
ARTICLE 3 SECURITY....................................................... 27
3.1 Borrower's Liabilities......................................... 27
3.2 Further Assurances............................................. 27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES................................. 28
4.1 Corporate Existence............................................ 28
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4.2 Corporate Power and Authorization.............................. 28
4.3 Ownership of Property; Permitted Liens......................... 28
4.4 Capital Structure.............................................. 29
4.5 Binding Obligations............................................ 29
4.6 No Legal Bar; No Lien.......................................... 29
4.7 No Consent..................................................... 29
4.8 Liabilities; Litigation........................................ 30
4.9 Taxes; Governmental Charges.................................... 30
4.10 Defaults....................................................... 30
4.11 Use of Proceeds; Margin Stock.................................. 30
4.12 Compliance with the Law........................................ 31
4.13 ERISA.......................................................... 31
4.14 No Material Misstatements...................................... 31
4.15 Investment Company Act......................................... 31
4.16 No Financing of Corporate Takeovers............................ 31
4.17 Location of Borrower........................................... 31
4.18 Use of Proceeds................................................ 32
4.19 Hazardous Materials............................................ 32
4.20 Insurance Policies............................................. 33
4.21 Schedule of Deposit Accounts................................... 33
4.22 Labor Matters.................................................. 34
4.23 Employment and Labor Agreements................................ 34
4.24 Solvent Financial Condition.................................... 34
4.25 Brokers........................................................ 34
4.26 True Sales of Notes Receivable................................. 34
4.27 No Material Intellectual Property.............................. 34
4.28 Automatic Warranty and Reaffirmation of Warranties
and Representations; Survival of Warranties and
Representations................................................ 35
ARTICLE 5 AFFIRMATIVE COVENANTS.......................................... 35
5.1 Financial Statements and Reports and Other Data................ 35
5.2 Taxes and Other Liens.......................................... 38
5.3 Maintenance.................................................... 38
5.4 Further Assurances............................................. 38
5.5 Performance of Obligations..................................... 39
5.6 Insurance; Payment of Premiums................................. 39
5.7 Accounts and Records........................................... 40
5.8 Right of Inspection............................................ 40
5.9 Notice of Certain Events....................................... 40
5.10 ERISA Information and Compliance............................... 41
5.11 Financial Covenants............................................ 41
5.12 Bad Debt Reserve............................................... 42
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5.13 Charges; Liens................................................. 42
5.14 Communication With Accountants................................. 43
5.15 Notes Receivable Documents..................................... 43
5.16 Subordination Agreement........................................ 44
5.17 Right of First Refusal for Securitization
Transaction Subordinated Certificates.......................... 44
ARTICLE 6 NEGATIVE COVENANTS............................................. 44
6.1 Debt........................................................... 44
6.2 Loans and Compensation......................................... 44
6.3 Liens.......................................................... 45
6.4 Capital Expenses............................................... 45
6.5 Dividends, Distributions and Redemptions....................... 45
6.6 Capital Structure.............................................. 45
6.7 Transactions with Affiliates................................... 45
6.8 Change of Business............................................. 45
6.9 Name of Borrower............................................... 46
6.10 Location of Collateral......................................... 46
6.11 Proceeds of Loans.............................................. 46
6.12 ERISA Compliance............................................... 46
6.13 Sale or Discount of Receivables................................ 46
6.14 Compensation and Bonuses....................................... 47
6.15 Payments on Subordinated Debt.................................. 47
6.16 Affiliates..................................................... 47
6.17 Consulting and Brokerage Services.............................. 47
6.18 Modification of Sterling Documents............................. 48
6.19 Survival of Obligations Upon Termination of
Agreement...................................................... 48
ARTICLE 7 EVENTS OF DEFAULT.............................................. 48
7.1 Events......................................................... 48
7.2 Termination of Agreement and Acceleration of the
Liabilities.................................................... 51
7.3 Remedies....................................................... 51
7.4 Notice of Sale or Other Action................................. 54
7.5 Marshalling; Payments Set Aside................................ 54
7.6 Effect of Multi-Party Agreement and Intercreditor
Agreement...................................................... 54
ARTICLE 8 CONDITIONS OF LENDING.......................................... 54
8.1 Initial Advance................................................ 54
8.2 All Advances................................................... 57
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ARTICLE 9 MISCELLANEOUS.................................................. 58
9.1 Notices........................................................ 58
9.2 Modification of Agreement; Sale of Interest.................... 60
9.3 Lien Release Prior to Sale of SBA Guaranteed Notes
Receivable..................................................... 60
9.4 Fees and Expenses.............................................. 60
9.5 Severability................................................... 61
9.6 Waiver by Lender............................................... 62
9.7 Successors and Assigns......................................... 62
9.8 Conflict of Terms.............................................. 62
9.9 Waivers by Borrower and Parent................................. 62
9.10 Cumulative Rights.............................................. 63
9.11 GOVERNING LAW.................................................. 63
9.12 Taxes, etc..................................................... 63
9.13 Governmental Regulation........................................ 63
9.14 Titles of Articles and Sections................................ 63
9.15 Authorized Signatures.......................................... 64
9.16 Publicity...................................................... 64
9.17 Counterparts................................................... 64
9.18 Entire Agreement............................................... 64
9.19 WAIVER OF JURY TRIAL........................................... 64
5
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LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Borrowing Request
Exhibit C - Form of Borrowing Base Report
Exhibit D - Form of Compliance Certificate
Exhibit E - Schedule of Documents
Exhibit F - Certificate of Validity of Collateral
Exhibit G - Form of Letter to Parent's and Borrower's
Accountant
Exhibit H - Form of Note Sale Report
LIST OF SCHEDULES
Schedule 1.1(a) Net Eligible Non-Guaranteed Notes Receivable
Schedule 1.1(b) Net Eligible SBA Guaranteed Notes Receivable
Schedule 4.3(a) Ownership of Property
Schedule 4.3(b) Permitted Liens
Schedule 4.4 Capital Structure
Schedule 4.8 Borrower's Liabilities and Litigation
Schedule 4.20 Insurance Policies
Schedule 4.21 Deposit Accounts
Schedule 4.23 Employment Agreements
Schedule 4.27 Intellectual Property
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RESTATED AND AMENDED LOAN AGREEMENT
THIS RESTATED AND AMENDED LOAN AGREEMENT is made as of this 27th day
of August, 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 ("Borrower"), 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 ("Lender"), with
reference to the following facts:
RECITALS
A. Borrower, Parent and Business Loan Center, a New York general
partnership (collectively, the "Original Borrowers"), and Sterling National Bank
(formerly known as Sterling National Bank & Trust Company of New York), a
national banking association ("Sterling"), have entered into that certain
Revolving Credit Agreement dated as of December 19, 1994, as amended, restated,
supplemented or otherwise modified from time to time (the "Original Credit
Agreement"), pursuant to which Sterling has made certain advances to Original
Borrowers prior to the date hereof.
B. Sterling and Lender have entered into that certain Partial Assignment
Agreement of even date herewith, pursuant to which Sterling has assigned to
Lender all of Sterling's right, title and interest to and all of its obligations
under the portions of the "Revolving Credit Loans" (as defined in the Original
Credit Agreement) previously advanced by Sterling to Original Borrowers against
the "Unguaranteed Portions" of "Eligible SBA Loans" (each as defined in the
Original Credit Agreement), and certain related rights, obligations, collateral
and other assets (the "Assignment").
C. After the Assignment, Sterling will continue to make Revolving Credit
Loans to Borrower and Parent against the "Guaranteed Portions" (as defined in
the Original Credit Agreement) of Eligible SBA Loans, but will no longer make
Revolving Credit Loans against the Unguaranteed Portions of
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Eligible SBA Loans, and Sterling, Borrower and Parent are entering into that
certain Amended and Restated Revolving Credit Agreement of even date herewith
(as amended, restated, supplemented or otherwise modified from time to time, the
"Restated Sterling Credit Agreement") to amend and restate the Original Credit
Agreement to reflect the foregoing and to make certain other amendments to the
financing arrangements thereunder.
D. After the Assignment, Lender, Borrower and Parent intend for Lender to
continue making Revolving Credit Loans to Borrower against the Unguaranteed
Portions of Eligible SBA Loans, and Lender and Borrower are entering into this
Agreement to also restate and amend the Original Credit Agreement to reflect the
foregoing and to make certain other amendments to the financing arrangements
thereunder.
E. Lender, Borrower and Parent also wish to include in this Agreement the
terms and provisions under which Lender would also make Revolving Credit Loans
to Borrower against the Guaranteed Portions of Eligible SBA Loans if Lender
subsequently receives SBA approval to provide such loans to Borrower either
through an assignment of Sterling's rights under the Restated Sterling Credit
Agreement or otherwise.
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions set
forth herein, and of any extension of credit contemplated hereby, now or
hereafter made by the Lender to Borrower, Borrower, Parent and Lender hereby
restate and amend the Original Credit Agreement 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):
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"Accounts" shall mean all accounts, accounts receivable, other
receivables, contract rights, and notes (other than forms of obligations
evidenced by chattel paper, documents or instruments), whether now owned or
hereafter acquired by Borrower and whether or not earned by performance.
"Accountant" shall have the meaning ascribed to that term in Section
5.1(a).
"Account Debtor" shall mean any Person who is or who may become
obligated to Borrower under, with respect to, or on account of, an Account.
"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 Borrower or Parent, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower of Parent; provided,
that in no case shall Lender be deemed to be an Affiliate of Borrower 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 Restated and Amended Loan 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.
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"Allocated Payment Portion" shall have the meaning ascribed to such
term in Section 2.13(c).
"Assignment" shall have the meaning ascribed to such term in the
Recitals hereto.
"Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq. as the same
may be modified, amended or supplemented from time to time.
"Blocked Account" shall have the meaning ascribed to such term in
Section 2.13(a).
"Borrower" shall mean Business Loan Center, Inc., a Delaware
corporation, and its successors and permitted assigns.
"Borrowing Base Report" shall mean the report by Borrower with
respect to calculation of the Maximum Commitment, to be substantially in the
form attached as Exhibit C hereto.
"Borrowing Request" shall mean the request by Borrower for advances
under the Agreement, to be substantially in the form attached as Exhibit B
hereto.
"Broker-Dealer Confirmation" shall mean, with respect to any sale of
an SBA Guaranteed Note Receivable, the written communication from a securities
broker-dealer to Borrower confirming the date on which all funds to be paid by
the purchaser of such SBA Guaranteed Note Receivable will be disbursed to
Intermediary for the account of Borrower.
"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 Borrower, 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 Borrower and Parent.
4
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"Charges" shall mean all taxes, levies, assessments, charges, Liens,
claims or encumbrances upon or relating to (a) the Collateral, (b) the
Liabilities, (c) the employees, payroll, income or gross receipts of Borrower,
(d) the ownership or use of any of the assets of Borrower, or (e) and any other
aspect of Borrower's business.
"Collateral" shall mean all of the property and interests in
property described in the Security Agreement and the other Security Documents
and all other property and interests in property which shall, from time to time,
secure the Liabilities.
"Compliance Certificate" shall mean the certificate evidencing
Borrower's and Parent's compliance with the terms of this Agreement, to be
substantially in the form attached as Exhibit D hereto.
"Current Portion of Net Eligible Non-Guaranteed Notes Receivable"
shall mean, at any particular time, that portion of the aggregate principal
amount then outstanding of Non-Guaranteed Notes Receivable conforming to each of
the requirements set forth in Schedule 1.1(a).
"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.
"Defaulted Portion of Net Eligible Non-Guaranteed Notes Receivable"
shall mean, at any particular time, that portion of the aggregate principal
amount then outstanding of Non-Guaranteed Notes Receivable conforming to each of
the requirements set forth in Schedule 1.1(a), other than paragraphs J or K
thereof, and with respect to which either (a) payment of interest, principal, or
other amount due thereunder is more than 120 days past due, or (b) the SBA has
designated it as "liquidation accounts."
"Delinquent Portion of Net Eligible Non-Guaranteed Notes Receivable"
shall mean, at any particular time, that portion of the aggregate principal
amount then outstanding of Non-Guaranteed Notes Receivable conforming to each of
the requirements set forth in Schedule 1.1(a), other than paragraph K thereof,
and with respect to which no payment of interest,
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<PAGE>
principal, or other amount due thereunder is more than 120 days past due.
"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.
"Effective Date" shall mean the first date on which all conditions
precedent set forth in Section 8.1 have been satisfied in a manner acceptable to
Lender or waived in writing by Lender as provided therein and Lender makes or is
prepared to make the initial Revolving Loan under this Agreement.
"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.
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"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 Borrower 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. ss.ss. 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss.ss. 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss.ss. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss.ss. 1251 et seq.),
the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. ss.ss. 2601 et seq.), the Occupational Safety and Health Act (29
U.S.C. ss.ss. 651 et seq.) and the Emergency Planning and Community
Right-To-Know-Act (42 U.S.C. ss.ss. 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 Borrower under
IRC Sections 414(b) or (c).
"Event of Default" shall mean the occurrence of any of the events
specified in Section 7.1 hereof, provided that any requirement for notice or
lapse of time or any other condition precedent has been satisfied.
"Execution Date" shall mean August 27, 1997.
"GAAP" shall mean the generally accepted accounting principles in
the United States of America as in effect from time to time.
7
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"GECC Participated Notes Receivable" shall mean the Notes Receivable
in which Borrower has sold a pro rata participation in the non-guaranteed
portion thereof to General Electric Capital Corporation pursuant to the
Participation Agreements dated May 30, 1996 and March 20, 1997.
"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 Borrower.
"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,
8
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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.
"Highest Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Revolving Credit Note or on other
Liabilities, as the case may be, under the law of the State of Illinois (or the
law of any other jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Agreement), or law of the United States
of America applicable to Lender and the Transactions which would permit Lender
to contract for, charge, take, reserve or receive a greater amount of interest,
than under Illinois (or such other jurisdiction's) 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 Borrower 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.
"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.
"Intercreditor Agreement" shall mean the Intercreditor Agreement of
even date herewith, by and between Sterling and
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Lender, as amended, restated, supplemented or otherwise modified from time to
time.
"Intermediary" shall mean Colson Services Corp., as fiscal and
transfer agent for the SBA, or any other Person designated by the SBA to perform
the same or similar functions.
"Items of Payment" shall have the meaning ascribed to such term in
Section 2.13(a).
"Lender" shall mean Transamerica Business Credit Corporation, a
Delaware corporation, together with its successors and permitted assigns.
"Lender's Agent" shall mean North Fork Bank, a New York state
chartered commercial bank formerly known as Bank of Great Neck, in its capacity
as agent for Sterling and Lender to hold the original SBA 7(a) Loan Notes in
which a security interest can be perfected only by possession pursuant to the
Multi-Party Agreement, or any of its successors or assigns.
"Liabilities" shall mean all of Borrower's liabilities, obligations
and indebtedness to Lender of any and every kind and nature (including interest,
charges, expenses, attorneys' fees and other sums chargeable to Borrower by
Lender and future advances made to or for the benefit of Borrower), whether
arising under this Agreement, under any of the other Loan Documents or acquired
by Lender from any other source, whether heretofore, now or hereafter owing,
arising, due, or payable from Borrower to Lender 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,
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leases and other title exceptions and encumbrances affecting Property.
"Loan Documents" shall mean this Agreement, the Revolving Credit
Note, the Security Agreement, the Security Documents, the Parent Guaranty, the
Multi-Party Agreement and all agreements, instruments and documents, including
notes, guaranties, mortgages, deeds of trust, chattel mortgages, pledges, powers
of attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements, subordination agreements, trust account
agreements, and all other written matter whether heretofore, now, or hereafter
executed by or on behalf of Borrower or Parent or delivered to Lender, with
respect to this Agreement.
"Loan Guaranty Agreement" shall mean any Loan Guaranty Agreement
(Deferred Participation) (SBA Form 750) or similar agreement in force and effect
between Borrower and the SBA from time to time (including, with respect to any
SBA Guaranteed Note Receivable originated by a predecessor in interest of
Borrower, the Loan Guaranty Agreement (Deferred Participation) (SBA Form 750) or
similar agreement under which such SBA Guaranteed Note Receivable was guaranteed
by SBA).
"Loan Participation Agreement" shall mean the Loan Participation
Agreement between Borrower and Lender 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 Participation
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 Borrower or Parent, or (ii) the ability of Borrower
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 the Revolving Credit Note, this Agreement, or the other Loan Documents on
a timely basis.
"Maximum Commitment" shall have the meaning ascribed to such term in
Section 2.1.
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"Maximum Credit Line" shall mean $25,000,000.
"Multi-Party Agreement" shall mean the Multi-Party Agreement
(Relating to SBA Loan Documentation and Administration) by and among Borrower,
Sterling, the SBA, and Lender's Agent, dated as of December 19, 1994, as the
same may be supplemented, modified, or amended from time to time, and to which
Lender has, pursuant to the Assignment, succeeded to Sterling's rights and
obligations thereunder with respect to the "Retained Portions" of any "BLC Loan"
(as such terms are defined in the Multi-Party Agreement).
"Net Eligible Non-Guaranteed Notes Receivable" shall mean, at any
particular time, the sum of (a) the Current Portion of Net Eligible
Non-Guaranteed Notes Receivable, (b) the Delinquent Portion of Net Eligible
Non-Guaranteed Notes Receivable, and (c) the Defaulted Portion of Net Eligible
Non-Guaranteed Notes Receivable.
"Net Eligible SBA Guaranteed Notes Receivable" shall mean, at any
particular time, the aggregate principal amount then outstanding of SBA
Guaranteed Notes Receivable conforming to the requirements set forth in Schedule
1.1(b).
"Net Sale Proceeds" shall mean the proceeds payable to or for the
account of Borrower from the sale of any SBA Guaranteed Notes Receivable, net of
any fees or commissions payable to Intermediary with respect thereto.
"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 and in which Lender has been
granted a first priority security interest pursuant to the Security Agreement.
"Non-Guaranteed Pro Rata Participation" shall mean a loan
participation with respect to a Note Receivable, sold by
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Borrower after the Effective Date pursuant to documentation acceptable to
Lender, which participation represents an undivided pro rata interest in the
Non-Guaranteed Note Receivable portion thereof and is entitled to be paid pro
rata with payment of both any SBA Guaranteed Note Receivable portion thereof and
the Non-Guaranteed Note Receivable portion thereof retained by Borrower.
"Note Participation Amount" shall mean the proceeds payable to or
for the account of Borrower from the sale of any Non-Guaranteed Pro Rata
Participation, which shall be a cash amount equal to not less than 100% of the
buyer's or participant's pro rata share of the outstanding principal amount of
the Participated Note Receivable.
"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 Borrower 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 Borrower by the applicable Term Loan Debtor and evidencing such
Note Receivable.
"Note Sale Reserve" shall mean, for purposes of calculating the
Maximum Commitment, a reserve equal to one hundred percent (100%) of the
outstanding principal amount of any SBA Guaranteed Note Receivable proposed to
be sold by Borrower, which, at Lender's option, Lender may establish as of the
close of Lender's business on the Business Day immediately preceding the
proposed Settlement Date for such sale, to be maintained until the Business Day
on which the Net Sale Proceeds payable on account of such SBA Guaranteed Note
Receivable are credited against the Liabilities pursuant to Section 2.13(a).
"Original Credit Agreement" shall mean the Revolving Credit
Agreement dated as of December 19, 1994, as amended, restated, supplemented or
otherwise modified from time to time prior to the date hereof, by and between
Sterling and Borrower, Parent and Business Loan Center, a New York general
partnership.
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"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 up to $3,000,000 that may be issued by Parent after the Effective
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 Lender, 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 Lender.
"Parent Guaranty" shall mean the Guaranty Agreement dated as of the
date hereof executed by Parent in favor of Lender pursuant to which Parent
guarantees to Lender the payment and performance of the Liabilities.
"Participated Notes Receivable" shall mean the Non-Guaranteed Notes
Receivable in which Borrower has sold a Non-Guaranteed Pro Rata Participation.
"Permitted Liens" shall have the meaning ascribed to such term in
Section 4.3(b).
"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 Borrower or any ERISA Affiliate,
at any time, an employee benefit plan, as defined in Section 3(3) of ERISA,
which Borrower maintains, contributes to, or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Prepayment Fee" shall have the meaning ascribed to that term in
Section 2.6.
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"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"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.
"Restated Sterling Credit Agreement" shall mean the Amended and
Restated Revolving Credit Agreement of even date herewith, by and between
Sterling and Borrower and Parent, as amended, restated, supplemented or
otherwise modified from time to time.
"Revolving Credit Note" shall mean the promissory note of Borrower
described in Section 2.1, substantially in the form of the note attached as
Exhibit A, together with any and all renewals, extensions for any period,
increases or rearrangements thereof.
"Revolving Loans" shall have the meaning ascribed to such term in
Section 2.1.
"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 and in which Lender
has been granted a first priority security interest as set forth in the Security
Agreement.
"SBA Owned Notes Receivable" shall mean any SBA Guaranteed Notes
Receivable that are from time to time held by SBA.
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"SBA 7(a) Loans" shall mean any loans made by Borrower to small
businesses and guaranteed by SBA pursuant to the authorization contained in
Section 7(a) of the Small Business Act of 1953 and the rules and regulations
promulgated thereunder, as in effect from time to time.
"SBA 7(a) Loan Notes" shall mean any promissory notes that at any
time evidence SBA 7(a) Loans.
"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 Loan Documents and the transactions contemplated hereunder and thereunder,
substantially in the form attached hereto as Exhibit E.
"Schedule of Eligible Notes Receivable" shall have the meaning
ascribed to such term in Section 5.1(c).
"Secondary Participation Agreement" shall mean any Secondary
Participation Guaranty Agreement (SBA Form 1086) or similar agreement among
Borrower, the SBA, and any purchaser or potential purchaser of any SBA
Guaranteed Note Receivable from
time to time.
"Securitization Transaction" shall mean any transaction effected in
a manner acceptable to Lender and through documentation in form and substance
acceptable to Lender, pursuant to which Borrower 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.
"Security Agreement" shall mean the Security Agreement dated as of
the date hereof executed by Borrower for the benefit of Lender.
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"Security Documents" shall mean the Security Agreement, the Parent
Guaranty, deeds of trust, financing statements, and any and all other agreements
or instruments now or hereafter executed and delivered by Borrower or any other
Person in connection with, or as security for the payment or performance of the
Revolving Credit Note or this Agreement, as such agreements may be amended or
supplemented from time to time.
"Servicer Account" shall have the meaning ascribed to such term in
Section 2.13(b).
"Settlement Date" shall mean the date specified for the settlement
of the sale of any SBA Guaranteed Note Receivable pursuant to a Broker-Dealer
Confirmation.
"Sold Notes Receivable" shall mean the SBA Guaranteed Notes
Receivable sold by Borrower to purchasers in the secondary market.
"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, formerly known as
Sterling National Bank & Trust Company of New York, a national banking
association.
"Sterling Documents" shall mean the Original Credit Agreement, the
Restated Sterling Credit Agreement, the Multi-Party Agreement 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.
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"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 Lender
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 Borrower 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 Borrower for a term loan or other financial
accommodation provided to or for the benefit of such Person.
"Termination Date" shall mean the earliest of: (a) August 26, 1999;
(b) the date that Borrower elects to terminate this Agreement and repays the
Liabilities in full in accordance with the terms of Section 2.6; and (c) the
date Lender elects to terminate Borrower's right to receive Revolving Loans in
accordance with Section 7.2.
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"Transactions" shall mean the transactions provided for in and
contemplated by this Agreement and the other Loan 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 or all of the attachment, perfection or
priority of, or the remedies with respect to, Lender's security interest in any
Collateral 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 Loan Document relating to such attachment, perfection,
priority 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
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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 LOAN
2.1 The Loans and Commitments.
(a) General. Subject to the terms and conditions set forth herein
and relying on the representations and warranties contained in this Agreement,
Lender hereby agrees that it will make available to Borrower, from time to time
prior to the Termination Date and so long as no Default or Event of Default has
occurred and is continuing, advances pursuant to Section 2.2 (collectively, the
"Revolving Loans"), and Borrower may make borrowings, payments, and reborrowings
in respect thereof. On the Effective Date, all outstanding obligations of
Original Borrowers under the Original Credit Agreement that have been assigned
to Lender pursuant to the Partial Assignment Agreement shall be deemed to be
Revolving Loans under this Agreement. If Lender makes advances to Borrower from
such line of credit, all advances shall be repayable as provided in Sections
2.12 and 2.13, and shall be used by Borrower only for legal and proper portfolio
development and working capital requirements consistent with all applicable laws
and statutes.
(b) Maximum Commitment. The aggregate outstanding principal amount
of the Revolving Loans made to Borrower at any one time (the "Maximum
Commitment") shall not exceed the least of:
(i) the Maximum Credit Line; or
(ii) the amount by which the sum of (w) up to one hundred
percent (100%) of the Net Eligible SBA Guaranteed Notes
Receivable, plus (x) subject to Section 2.18(b), up to
seventy-five percent (75%) of the Current Portion of Net
Eligible Non-Guaranteed Notes
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Receivable, plus (y) subject to Section 2.18(b), up to
fifty percent (50%) of the Delinquent Portion of Net
Eligible Non-Guaranteed Notes Receivable, plus (z)
subject to Section 2.18(b), up to fifty percent (50%) of
the Defaulted Portion of Net Eligible Non-Guaranteed
Notes Receivable (not exceeding sixty-five percent (65%)
of the estimated remaining value of such Defaulted
Portion of Net Eligible Non-Guaranteed Notes Receivable
as determined by Borrower and accepted by Lender),
exceeds the sum of (A) the aggregate amount of Note Sale
Reserves then outstanding, and (B) twenty-five percent
(25%) of the aggregate amount of all undisbursed binding
lending commitments of Borrower for which all lending
conditions have been met; or
(iii) the maximum amount that Borrower could borrow hereunder
without creating a breach of the Liabilities to Tangible
Net Worth ratio covenant in Section 5.11(c).
(c) Revolving Credit Note. To evidence the loans made by Lender
pursuant to this Section 2.1, Borrower has issued, executed, and delivered to
Lender the Revolving Credit Note in the principal amount of Twenty-Five Million
Dollars ($25,000,000). Interest on the Revolving Credit Note shall be payable to
Lender on the first Business Day of each calendar month, as it accrues on the
principal amount from time to time outstanding, at the rates provided in Section
2.3 herein, commencing on the first day of the month next succeeding the month
in which the Effective Date falls.
2.2 Notice of Borrowing; Disbursement of Advances.
(a) Notice. The amount and date of each advance hereunder shall be
designated by Borrower's execution of and delivery to Lender of a Borrowing
Request by no later than 12:00 noon (Central Time) on the proposed funding date.
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(b) Disbursement. Upon receipt of a Borrowing Request pursuant to
Section 2.2(a) and satisfaction of all of the other conditions precedent set
forth in Article 8, subject to the provisions of, and satisfaction of the
conditions set forth in, Section 2.1, Lender shall, on or after the Effective
Date, make advances to Borrower on a revolving basis up to a maximum aggregate
outstanding principal amount equal to the Maximum Commitment.
2.3 Interest Rate.
(a) Borrower shall pay interest to Lender (i) monthly in arrears
commencing on the first Business Day of the month next succeeding the month in
which the Effective Date falls, and on the first Business Day of each subsequent
calendar month, (ii) on the Termination Date, and (iii) if any interest accrues
or remains payable after the Termination Date, or during the continuance of an
Event of Default, upon demand by Lender.
(b) Interest shall accrue on the Revolving Loans at a floating rate
equal to the Index Rate plus two percent (2%) per annum, adjusted by Lender on
the same day as each change in the Index Rate (the "Stated Index Rate").
(c) All computations of interest shall be made by Lender on the
basis of a three hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is payable. The
Index Rate shall be determined as of the last Business Day of each month for use
in calculating the interest that is payable for the following calendar month.
Each determination by Lender of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error or bad faith.
(d) After and during the continuation of an Event of Default beyond
the applicable cure period, and at the sole discretion of Lender, the interest
rate of the Revolving Credit Note shall be increased to six percent (6%) per
annum above the Index Rate. To the extent that any change in the Highest Lawful
Rate would affect the interest rate in effect hereunder, then the interest rate
hereunder shall be adjusted on the effective date of such change in order to
reflect such change in the Highest Lawful Rate.
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2.4 Computation.
(a) In no event shall the interest rate on the Revolving Credit Note
exceed the Highest Lawful Rate. In the event that the interest rate on the
Revolving Credit Note would, without giving effect to the previous sentence,
exceed the Highest Lawful Rate under the terms of this Agreement, then, should
any interest payable hereunder thereafter fall below the Highest Lawful Rate,
interest shall continue to accrue at the Highest Lawful Rate until such time as
Lender has received an amount of interest equal to what Lender would have
received but for the operation of this Section 2.4(a), at which time the
interest payable shall again accrue at the rate otherwise provided for under
Section 2.3 until such rate under Section 2.3 again exceeds the Highest Lawful
Rate, in which event the terms of this Section 2.4(a) shall again apply.
(b) In the event that at maturity or final payment of the Revolving
Credit Note, the total amount of interest paid or accrued thereon is less than
the total amount of interest which would have accrued if a varying rate per
annum equal to the applicable interest rate had at all times been in effect,
then Borrower agrees, to the fullest extent permitted by law, to pay to Lender
an amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on the Revolving Credit Note if the Highest
Lawful Rate had at all times been in effect or (ii) the amount of interest which
would have accrued on the Revolving Credit Note if a varying rate per annum
equal to the applicable interest rate had at all times been in effect as of such
maturity or final payment date, and (b) the amount of interest otherwise accrued
on the Revolving Credit Note in accordance with the provisions of Section 2.3
hereof and this Section 2.4.
2.5 Fees.
(a) Commitment Fees. Borrower agrees to pay Lender on the Effective
Date, solely as consideration for Lender agreeing to enter into this Agreement,
a fully earned and non-refundable closing fee equal to Two Hundred Fifty
Thousand Dollars ($250,000). The One Hundred Twenty-Five Thousand Dollars
($125,000) paid by Borrower to Lender on May 1, 1997 as a closing
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fee under the Loan Participation Agreement shall be credited against such
commitment fee. The remaining One Hundred Twenty-Five Thousand Dollars
($125,000) of such commitment fee shall be paid by Borrower to Lender by either
wire transfer or cash on the Effective Date.
(b) Unused Credit Line Fee. As additional compensation for Lender's
costs and risks in making the advances hereunder available to Borrower, Borrower
agrees to pay to Lender, commencing on the Effective Date, in arrears on the
last date of each month and at maturity, a facility fee for Borrower's non-use
of the available Maximum Credit Line in an amount equal to one-quarter of one
percent (0.25%) per annum of the average daily difference between (i) the
Maximum Credit Line and (ii) the aggregate outstanding principal amount of the
Revolving Loans; provided, that the fee described in this Section 2.5(b) shall
not be payable with respect to any month in which the average daily amount of
the aggregate outstanding principal amount of the Revolving Loans is equal to or
greater than Five Million Dollars ($5,000,000); and further provided, that if a
Securitization Transaction has been completed and Lender has purchased the
subordinated certificates issued thereunder, then the fee described in this
Section 2.5(b) shall not be payable with respect to any month including or after
the date of such purchase.
2.6 Borrower's Termination of Agreement. Upon at least sixty (60) days
prior written notice to Lender, Borrower may, at its option, terminate only the
entirety of this Agreement and not any single section thereof. In order for such
termination by Borrower to become effective, Borrower shall, on or before such
termination date, pay to Lender all of the then outstanding Liabilities;
provided, that if Borrower terminates this Agreement within any of the time
periods listed below using the proceeds of financing from any source other than
a Securitization Transaction, or if this Agreement is terminated pursuant to
Section 7.2, then Borrower shall also pay to Lender, as
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liquidated damages for the loss of the bargain and not as a penalty, a
prepayment premium equal to the following amounts (the "Prepayment Fee"):
If Prepayment is Made
Between the Following
Dates, Inclusive: The Premium Shall Be:
----------------- ---------------------
Effective Date to Two Percent (2%)
August 26, 1998 of the Maximum Credit
Line
August 27, 1998 to One Percent (1%)
August 26, 1999 of the Maximum Credit
Line
and further provided, that if (a) new reserves established by Lender after the
Effective Date pursuant to Section 2.8 result in a reduction of the Maximum
Commitment that is greater than the greater of (i) Five Hundred Thousand Dollars
($500,000), and (ii) ten percent (10%) of the Maximum Commitment immediately
prior to the implementation of such new reserves, (b) Borrower notifies Lender
in writing, within thirty (30) days of Borrower's receipt of notice from Lender
of the implementation of such new reserves, of Borrower's intention to terminate
this Agreement by reason thereof, and (c) no Default or Event of Default has
occurred and is continuing at the actual time of termination, then the
Prepayment Fee shall be reduced to Fifty Thousand Dollars ($50,000).
2.7 Mandatory Prepayments. If at any time the sum of the Revolving Loans
exceeds the Maximum Commitment, then Borrower shall immediately prepay to Lender
the amount of such excess for application towards the reduction of the
outstanding principal balance of the Revolving Credit Note. Such prepayments
shall be without premium or penalty.
2.8 Reserves Against Liabilities. Lender shall have the right to refuse to
make Revolving Loans when the refusal is necessary to enable Lender, in its sole
discretion, exercised in a commercially reasonable manner, to establish reserves
applied on account of the Liabilities hereunder in determining collateral
eligibility. Any and all such reserves shall become effective
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immediately upon their establishment for purposes of calculating the Maximum
Commitment.
2.9 All Loans to Constitute One Loan. Notwithstanding the limitations on
the Maximum Credit Line set forth in Section 2.1, all advances made by Lender to
Borrower under this Agreement and the other Loan Documents shall constitute one
loan to Borrower and all Liabilities of Borrower under this Agreement and the
other Loan Documents shall constitute one general obligation of Borrower secured
by Lender's security interest in all the Collateral and by all other security
interests, Liens, claims and encumbrances heretofore, now, or at any time
hereafter granted to or obtained by Lender with respect to any property or
assets of Borrower. All of the rights of Lender set forth in this Agreement
shall apply to any modification of or supplement to this Agreement and the other
Loan Documents.
2.10 Loan Purpose. Borrower shall use the advances provided for hereunder
solely to (a) refinance Borrower's existing indebtedness to Sterling under the
Sterling Loan Documents with respect to SBA 7(a) Loans, (b) repurchase from
Lender the loan participation previously sold to Lender by Borrower in certain
SBA 7(a) Loans pursuant to the Loan Participation Agreement, and (c) fund
Borrower's SBA 7(a) Loan portfolio development (including expenses related
thereto) after the Effective Date. Borrower's use of such advances shall be only
for legal purposes (duly authorized by Borrower's Board of Directors),
consistent with all applicable laws, statutes and regulations.
2.11 Term of Agreement. Subject to Lender's right to cease making advances
to Borrower, as set forth in Section 7.2 or otherwise, the provisions of this
Agreement shall be in effect until the Termination Date; provided, that in the
event of a prepayment of the entire principal amount then outstanding under the
Revolving Credit Note prior to the Termination Date other than with the proceeds
of a Securitization Transaction, Borrower shall simultaneously therewith pay to
Lender, in immediately available funds, all outstanding Liabilities in full, in
accordance with the terms of the agreements creating and instruments evidencing
such Liabilities, together with the Prepayment Fee, if any; and, provided
further, that from and after any Termination Date until full and final payment
of the
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Liabilities, Lender shall retain all rights and remedies provided under this
Agreement and each of the other Loan Documents.
2.12 Payment Procedure. Except as otherwise provided in Section 2.13, all
payments to Lender shall be payable at Lender's address set forth above or at
such other place or places as Lender may designate from time to time in writing
to Borrower. That portion of the Liabilities consisting of:
(a) interest payable pursuant to this Agreement shall be due on the
first Business Day of each month (for the preceding month), and shall be charged
through the last calendar day of each month;
(b) costs, fees and expenses payable pursuant to this Agreement
shall be payable as and when provided in this Agreement and, if not specified,
on demand;
(c) principal payable pursuant to this Agreement shall be due and
payable to the extent and on the date of any collections of the Collateral or
from any other source, to the extent consisting of cleared funds, except to the
extent such collections are applied to other Liabilities;
(d) the balance of the Liabilities, if any, shall be payable as and
when provided in this Agreement or the other Loan Documents and, if not
specified, on the Termination Date;
(e) With respect to the payment of any Liability, including
interest, costs, fees or expenses which become due hereunder, Borrower
authorizes and directs Lender, at Lender's option, to cause such Liability to be
paid on such due date by charging such Liability as an advance hereunder. Lender
shall use commercially reasonable efforts to notify Borrower prior to or
concurrently with such payments pursuant to Section 2.15.
2.13 Collection of Borrower's Loans and Payments.
(a) Blocked Account; Deposits by Intermediary. Borrower shall
establish a bank account, by lock-box arrangement or otherwise, from which
Lender alone has power of access and withdrawal except to such limited extent as
may otherwise be provided in the agreement or as otherwise agreed to in writing
by
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Lender, in form and substance satisfactory to Lender and Borrower, governing
such bank account (the "Blocked Account"). Borrower shall deposit or cause to be
deposited to the Blocked Account all checks, drafts, cash and other remittances
in payment, or on account of payment, with respect to any of the Notes
Receivable (collectively referred to as "Items of Payment"), except for such
portion, if any, of any Item of Payment that is an Allocated Payment Portion.
Borrower shall deposit or cause to be deposited to the Servicer Account that
portion of each Item of Payment that constitutes an Allocated Payment Portion.
Borrower shall deposit all Items of Payment received by Borrower, or the
appropriate portions thereof, in the Blocked Account or the Servicer Account, as
the case may be, on the same day of receipt thereof. If the entire amount of an
Item of Payment is being deposited in either the Blocked Account or the Servicer
Account, then it shall be deposited in precisely the form received, except for
the endorsements of Borrower where necessary to permit the collection of any
such Items of Payment, which endorsements Borrower hereby agrees to make.
Without limiting the generality of the foregoing, Borrower shall cause
Intermediary to deposit by wire transfer to the Blocked Account, immediately
upon the receipt thereof by Intermediary, all Net Sale Proceeds, and Borrower
shall cause payment of all Note Participation Amounts to be made directly to the
Blocked Account. The depository holding the Blocked Account and the Servicer
Account shall be instructed to advise Borrower of any deposits made to the
Blocked Account or the Servicer Account. Subject to the provisions of Sections
2.13(c) and (d) and Section 2.15, amounts deposited in the Blocked Account
(including deposits through transfers from the Servicer Account) shall be
credited against the Liabilities as follows:
(i) if and to the extent such deposits are made and accepted
into the Blocked Account not later than 2:00 p.m. Central Time on such
Business Day, and Borrower notifies Lender of the making of such deposits
pursuant to the provisions of Section 9.1(a) not later than 2:00 p.m.
Central Time on such Business Day, as of the same Business Day on which
such deposits are made; and
(ii) otherwise, as of the next Business Day following the date
of such deposit;
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provided, that solely for the purpose of calculating interest due to Lender
under this Agreement, such deposits shall be credited two (2) days after the
applicable date specified by (i) or (ii) above.
(b) Servicer Account. Commencing immediately upon the Effective Date
and continuing until all Liabilities have been paid in full, Borrower shall
establish and maintain a depository account, with the same bank or institution
at which the Blocked Account is located, in Borrower's capacity as servicer for
the benefit of the purchasers of the Sold Notes Receivable, the GECC
Participated Notes Receivable, the Participated Notes Receivable and the SBA
Owned Notes Receivables, and, to the extent of Borrower's retained interest in
any such Notes Receivable, Lender (the "Servicer Account"). The agreement(s)
governing the Servicer Account must be in form and substance satisfactory to
Lender and Borrower.
(c) Allocation of Payments on Sold and Participated Notes
Receivable. Contemporaneously with the deposit of any Items of Payment into the
Blocked Account or the Servicer Account, Borrower shall deliver to Lender
information detailing, with respect to each Item of Payment, the specific Note
Receivable to which such Item of Payment relates and (i) the amount, if any, of
such Item of Payment that relates to a Sold Note Receivable and that Borrower
has determined is payable to Intermediary for the benefit of the purchaser of
such Sold Note Receivable, (ii) the amount, if any, of such Item of Payment that
relates to a GECC Participated Note Receivable or a Participated Note Receivable
and that Borrower has determined is payable to GECC or the purchaser of such
Participated Note Receivable, (iii) the amount, if any, of such Item of Payment
that relates to a SBA Owned Note Receivable and that Borrower has determined is
payable to SBA, (iv) the amount, if any, of such Item of Payment that relates to
a Guaranteed Portion of Eligible SBA Loans under and as defined in the Restated
Sterling Credit Agreement and that Borrower has determined is payable to
Sterling (any such amount described in clauses (i), (ii), (iii) or (iv) above
being the "Allocated Payment Portion"), and (v) the amount of such Item of
Payment that relates to Borrower's retained interest in a Note Receivable and
that Borrower has determined is payable to Borrower. The Allocated Payment
Portion, if any, of each Item of Payment originally deposited in the Blocked
Account shall be held
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by Lender for the benefit of Borrower (in Borrower's capacity as servicer of the
Sold Notes Receivable, the GECC Participated Notes Receivable, the Participated
Notes Receivable, the SBA Owned Notes Receivable, or the Guaranteed Portion of
Eligible SBA Loans, as the case may be) and shall, subject to final collection,
(x) in the case of all Allocated Payment Portions with respect to Sold Notes
Receivables, be transferred by Lender to the Servicer Account within one (1)
Business Day after receipt of cleared funds, and (y) in the case of all
Allocated Payment Portions with respect to GECC Participated Notes Receivables,
Participated Notes Receivables, SBA Owned Notes Receivable, or the Guaranteed
Portion of Eligible SBA Loans, be transferred by Lender to GECC, the purchaser
of such Participated Note Receivable, SBA or Sterling, as the case may be, in
accordance with the written instructions of Borrower within one (1) Business Day
after receipt of cleared funds or, if requested by Borrower, to the Servicer
Account. The portion payable to Borrower of each Item of Payment originally
deposited in the Servicer Account shall be held by Borrower for the benefit of
Lender, and Borrower shall cause any such portion to be transferred by Borrower
to the Blocked Account within one (1) Business Day after receipt of cleared
funds.
(d) Application of Items of Payment. Except as otherwise provided in
Section 2.13(c), all Items of Payment shall be applied to the outstanding
Liabilities in the order in which they are deposited in the Blocked Account.
Prior to deposit into the Blocked Account or the Servicer Account in the manner
required by this Agreement, Borrower shall not commingle any such Items of
Payment with any of its other funds or property, but shall hold them separate
and apart therefrom in trust and for the account of, and as the property of,
Lender. Lender may, subject to the Multi-Party Agreement, revoke the collection
privilege given to Borrower by either giving notice of its assignment of, and
lien on, the collateral to the Term Loan Debtors or giving notice of such
revocation to Borrower.
(e) Borrower as Servicer. Borrower shall at its own expense service
all of the Notes Receivable, including (i) the billing, posting and maintaining
of complete records applicable thereto, and (ii) subject to applicable SBA rules
and regulations, the taking of such action with respect thereto as Lender may
request or in the absence of such request, as Borrower
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may deem advisable. Borrower agrees to pay to Lender any and all reasonable
fees, costs and expenses incurred in connection with opening and maintaining the
Blocked Account, the Servicer Account, and any other collection arrangement
described above.
2.14 Collections; Lender's Right to Notify Account Debtors. Subject to the
Multi-Party Agreement and applicable SBA rules and regulations, Borrower hereby
authorizes Lender, now and at any time or times hereafter, whether or not a
Default or an Event of Default has occurred, to open Borrower's mail and collect
any and all amounts due to Borrower from Account Debtors; provided, that Lender
shall use commercially reasonable efforts not to open Borrower's private,
personal or confidential mail that does not, on its face, relate to the
Collateral or the Account Debtors. Borrower hereby further authorizes Lender, at
any time after the occurrence of a Default or an Event of Default, (a) to notify
any or all Account Debtors that the Accounts have been assigned to Lender and
that Lender has a security interest therein, and (b) to direct such Account
Debtors to make all payments due from them to Borrower upon the Accounts
directly to Lender or to the Blocked Account or the Servicer Account. Borrower
irrevocably makes, constitutes and appoints Lender (and all Person designated by
Lender for that purpose) as Borrower's true and lawful attorney (and
agent-in-fact) to endorse Borrower's name on any checks, notes, drafts, or any
other form of payment relating to the Collateral or proceeds of the Collateral
that come into Lender's possession or under Lender's control. Borrower hereby
agrees that any such notice, in Lender's sole discretion, may be sent on
Borrower's stationery and, upon request of Lender, Borrower shall co-sign such
notice with Lender.
2.15 Application of Payments and Collections. Except to the extent
otherwise provided in Section 2.13(c), Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or
times hereafter received by Lender from or on behalf of Borrower. Borrower
irrevocably agrees that Lender shall have the continuing exclusive right to
apply and reapply any and all such payments and collections received at any time
or times hereafter by Lender or its agents against the Liabilities in such
manner as Lender may in its reasonable discretion deem advisable,
notwithstanding any entry by Lender on its books and records.
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2.16 Refund of Excess Interest; Statement of Account. Lender shall provide
Borrower with a statement of account relating to the Liabilities on a monthly
basis. Each such statement of account shall be presumed correct and accurate and
shall, except for Lender's right to reapply payments, constitute an account
stated between Borrower and Lender, unless thereafter waived in writing by
Lender or unless, within thirty (30) days after Borrower's receipt thereof,
Borrower delivers to Lender, by registered or certified mail, written objection
thereto specifying the error or errors contained therein.
2.17 Business Days. If any payment on the Revolving Loans or any other
payment due hereunder becomes due and payable on a day other than a Business
Day, then for all purposes of the Loan 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.
2.18 Sales of and Participations in Non-Guaranteed Notes Receivable.
(a) Proposed Sales or Participations. So long as a Securitization
Transaction has not been consummated, after the Effective Date Borrower may
propose to sell a Non-Guaranteed Pro Rata Participation in any Non-Guaranteed
Notes Receivable.
(b) Notice to Lender; Lender's Option to Purchase. Borrower shall
notify Lender in writing at least ten (10) Business Days prior to the proposed
sale of any Non-Guaranteed Pro Rata Participation, which notice shall identify
the specific Non-Guaranteed Note Receivable affected and the proposed buyer or
participant, and describe the material terms of the proposed sale or
participation, including the amount thereof, proposed purchase price therefor,
any premium payable therefor and interest rate payable thereunder and any other
matters reasonably requested by Lender. Lender shall have the option (but not
the obligation) to purchase the proposed Non-Guaranteed Pro Rata Participation
on the terms set forth in such notice. If Lender fails to notify Borrower of
Lender's election to exercise such option within five (5) Business Days after
Lender's receipt of such notice from Borrower, Borrower may complete the
proposed sale of the Non-Guaranteed Pro Rata Participation to the buyer or
participant
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identified in such notice on the terms set forth in such notice, provided that
(i) Lender receives the Note Participation Amount with respect thereto, (ii)
Borrower shall at all times retain for its own account not less than ten percent
(10%) of the outstanding principal amount of the total Note Receivable affected
(provided, that such ten percent (10%) requirement may be reduced with the
written consent of Lender so long as Borrower would not violate any applicable
SBA rules or regulations), and (iii) such sale is made in full conformity with
all applicable provisions of the SBI Act and other governing law.
2.19 Effectiveness of Provisions Regarding SBA Guaranteed Notes
Receivable. None of the provisions of this Agreement relating to Revolving Loans
with respect to SBA Guaranteed Notes Receivable shall be effective unless and
until both (a) Lender receives SBA approval to provide Revolving Loans to
Borrower with respect to SBA Guaranteed Notes Receivable, either through an
assignment of Sterling's rights under the Restated Sterling Credit Agreement or
otherwise, and (b) Lender has received an assignment of Sterling's rights under
the Restated Sterling Credit Agreement or the Restated Sterling Credit Agreement
has been terminated and all obligations of Borrower and Parent thereunder fully
satisfied. So long as the Restated Sterling Credit Agreement is in effect, all
rights of Lender with respect to SBA Guaranteed Notes Receivable and the
collections and proceeds thereof shall be subject to the terms of the
Intercreditor Agreement.
ARTICLE 3
SECURITY
3.1 Borrower's Liabilities. The Liabilities of Borrower to pay all sums
due to Lender and to perform all other covenants and agreements under this
Agreement, the Revolving Credit Note, and the other Loan Documents to which
Borrower is a party, shall be secured to the extent provided by the Security
Documents.
3.2 Further Assurances. Provided that such action would not violate
applicable SBA rules or regulations, Borrower shall, at its sole cost and
expense, execute and deliver to Lender all such further documents, instruments
and agreements and agree to perform all such other acts which may be required in
the opinion
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of Lender to enable Lender to exercise and enforce its rights as the secured
party or beneficiary under the Security Documents. To the extent permitted by
applicable law, Borrower hereby authorizes Lender to file financing statements
and continuation statements with respect to the security interests granted under
the Security Documents in favor of Lender and to execute such financing
statements and continuation statements on behalf of Borrower.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to provide the financial accommodations to
Borrower provided for herein and in the other Loan Documents, Borrower and
Parent make the following warranties and representations to Lender, each of
which will be correct and true as of the Effective Date and on the date that
each advance is requested by Borrower:
4.1 Corporate Existence. Each of Borrower 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.
4.2 Corporate Power and Authorization. Borrower is duly authorized and
empowered to create and issue the Revolving Credit Note; and each of Borrower
and Parent is duly authorized and empowered to execute, deliver and perform the
Loan Documents, including this Agreement, to which it is a party; and all
corporate action on Borrower's or Parent's part requisite for the due creation
and issuance of the Revolving Credit Note and for the due execution, delivery
and performance of the Loan Documents, including this Agreement, to which it is
a party has been duly and effectively taken.
4.3 Ownership of Property; Permitted Liens.
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(a) Except as set forth in Schedule 4.3(a), and except for fixtures
and improvements in which Borrower has good and marketable title, Borrower does
not own any real property and is not a lessor or lessee under any lease other
than those leases that have been previously disclosed to Lender.
(b) Except for the permitted Liens, if any, set forth on Schedule
4.3(b) (the "Permitted Liens"), no Property of Borrower is subject to any Lien.
4.4 Capital Structure. The number and nature of all outstanding securities
of each of Borrower and Parent, and the holder of all outstanding securities of
Borrower, 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 4.4. 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 Borrower, except as set forth on Schedule
4.4. Except as set forth on Schedule 4.4, there are no outstanding agreements or
instruments binding upon any of Borrower's shareholders relating to the
ownership of its shares of capital Stock.
4.5 Binding Obligations. This Agreement does, and the Revolving Credit
Note and other Loan Documents to which Borrower 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.
4.6 No Legal Bar; No Lien. Based upon and subject to the provisions of the
Multi-Party Agreement and the Loan Guaranty Agreement, (a) the Revolving Credit
Note and each of the Loan Documents, including this Agreement, to which Borrower
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
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which Borrower is subject; and (b) neither the execution, delivery, or
performance of the Revolving Credit Note or the other Loan Documents, including
this Agreement, shall create, or constitute cause for the creation of, any Lien
on any asset of Borrower or Parent, other than the Liens granted in favor of
Lender.
4.7 No Consent. Except for the consent of the SBA provided under the
Multi-Party Agreement and the consent of Sterling provided under the
Intercreditor Agreement, Borrower's and Parent's execution, delivery and
performance of the Revolving Credit Note and each of the Loan Documents,
including this Agreement, to which it is a party do not require the consent or
approval of any other Person (unless such consent has otherwise 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.
4.8 Liabilities; Litigation. Neither Borrower nor Parent has, as of the
Effective Date, any material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed in Schedule 4.8. Except as disclosed
in Schedule 4.8, as of the Effective Date, there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of Borrower or Parent, threatened against or
affecting Borrower or Parent that would have a Material Adverse Effect on
Borrower or Parent or challenge any Transaction contemplated hereunder.
4.9 Taxes; Governmental Charges. As of the Effective Date or the date each
advance is requested by Borrower, as applicable, each of Borrower 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.
4.10 Defaults. Neither Borrower 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,
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indenture, mortgage, deed of trust, security agreement or other agreement or
instrument evidencing or pertaining to any debt of Borrower or Parent, or under
any material agreement or instrument to which Borrower or Parent is a party or
by which it is bound or which would have a Material Adverse Effect on Borrower
or Parent or its business. No Default or Event of Default hereunder has occurred
and is continuing.
4.11 Use of Proceeds; Margin Stock. The proceeds of the Revolving Credit
Note will be used by Borrower to fund Borrower's commercial lending activities
and for other purposes permitted by Section 2.10. 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. Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stocks. Neither Borrower,
Parent nor any Person acting on behalf of Borrower or Parent has taken or will
take any action which might cause the Revolving Credit Note or any of the Loan
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.
4.12 Compliance with the Law. Based upon and subject to the
provisions of the Multi-Party Agreement, neither Borrower 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, Borrower has obtained the Loan
Guaranty Agreement and has complied and will continue to comply with all
statutory, and other regulatory
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requirements necessary to obtain and maintain the Loan Guaranty Agreement.
4.13 ERISA. Each of Borrower 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 Borrower of Parent.
4.14 No Material Misstatements. No information, exhibit or report
furnished to Lender by Borrower 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.
4.15 Investment Company Act. Neither Borrower 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.
4.16 No Financing of Corporate Takeovers. No proceeds of any advances
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.
4.17 Location of Borrower. Borrower'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 Effective Date such
principal place of business and chief executive offices may be relocated if
Lender and Parent comply with the requirements of Section 6.10.
4.18 Use of Proceeds. Borrower's use of the proceeds of any advances and
re-advances made by Lender to Borrower 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.
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4.19 Hazardous Materials.
(a) the operations of Borrower and Parent comply in all material
respects with all Environmental Laws;
(b) each of Borrower 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 Borrower and Parent is in compliance with all
material terms and conditions of such Governmental Authorizations;
(c) (i) Neither Borrower 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. ss.ss. 9604 et seq.) or comparable state laws, and (ii)
to Borrower'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 Borrower 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 Borrower 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 Borrower or Parent, nor, to the knowledge of Borrower or
Parent, any predecessor of Borrower or Parent has filed any notice under any
Environmental Law indicating past or present treatment, storage, or disposal of
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Hazardous Materials at any Property, and none of the operations of Borrower 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 Borrower or Parent, nor, to the knowledge of
Borrower or Parent, any predecessor in title to Borrower 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 Borrower or Parent;
(g) Neither Borrower 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 Borrower 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 Borrower or Parent, nor, to the knowledge of Borrower 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 Borrower or Parent, no underground storage
tanks or surface impoundments are on or at any Property owned or used by
Borrower 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 Borrower or Parent.
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4.20 Insurance Policies. Schedule 4.20 lists all insurance of any nature
maintained for current occurrences by Borrower 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 Borrower and Parent.
4.21 Schedule of Deposit Accounts. Schedule 4.21 lists all banks and other
financial institutions at which Borrower 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.
4.22 Labor Matters. There are no labor disputes against Borrower or Parent
pending or, to Borrower's or Parent's knowledge, overtly threatened, that would
have a Material Adverse Effect. Hours worked by and payment made to the
employees of Borrower 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 Borrower 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 Borrower or Parent.
4.23 Employment and Labor Agreements. Except as listed in Schedule 4.23,
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 Borrower or Parent, and there are no collective bargaining
agreements or other labor agreements covering any employees of Borrower or
Parent. A true and complete copy of each such agreement has been furnished to
Lender.
4.24 Solvent Financial Condition. Each of Borrower and Parent is now and,
after giving effect to the advances to be made hereunder, at all times will be,
Solvent.
4.25 Brokers. There are no claims for brokerage commissions, finder's fees
or investment banking fees in connection with the transactions contemplated by
this Agreement,
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except for the fees payable solely by Parent and Borrower to Rothschild, Inc. in
the amount of $150,000 and to D'Loren, Levin & Company in the amount of $75,000
(which is in addition to the $50,000 fee paid to D'Loren, Levin & Company at the
closing of the Loan Participation Agreement), each of which will be paid by
Borrower on the Effective Date.
4.26 True Sales of Notes Receivable. Borrower now intends and at all times
will intend that its transfers of Sold Notes Receivable and Participated Notes
Receivable to the purchasers thereof constitute true sales and not financing
devices.
4.27 No Material Intellectual Property. Neither Borrower 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 4.27. Neither Borrower nor Parent is a party to
or the subject of any agreement or dispute respecting Intellectual Property
which, if resolved unfavorably to Borrower or Parent, would have a Material
Adverse Effect.
4.28 Automatic Warranty and Reaffirmation of Warranties and
Representations; Survival of Warranties and Representations. Each request for an
advance made by Borrower pursuant to this Agreement or the other Loan Documents
shall constitute (a) a warranty and representation by Borrower and Parent to
Lender that there does not then exist a Default or an Event of Default, except
as otherwise disclosed in writing by Borrower to Lender, and (b) a reaffirmation
as of the date of said request of the representations and warranties of Borrower
and Parent contained in Sections 4.1 through and including 4.27. All
representations and warranties of Borrower and Parent contained in this
Agreement and the other Loan 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 Effective Date, and at such other
times as Lender in its sole discretion may request, Borrower shall deliver to
Lender Certificates of Validity of Collateral in the form of Exhibit F, executed
by Borrower's President and Chief Financial Officer, respectively, or such other
officers of Borrower as Lender may require.
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ARTICLE 5
AFFIRMATIVE COVENANTS
Borrower and Parent will at all times comply with the covenants contained
in this Article 5, from the date hereof and for so long as any part of the
Liabilities are outstanding.
5.1 Financial Statements and Reports and Other Data. Borrower and Parent
will promptly furnish to Lender from time to time upon request such information
regarding the business affairs and financial condition of Borrower or Parent as
Lender may reasonably request, which information shall be certified by the
President and Chief Financial Officer of Borrower or Parent to be true and
correct as of the date provided. The information that may be requested by Lender
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
Borrower shall provide to Lender audited fiscal year end financial statements of
Parent, Borrower, 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 Borrower and
acceptable to Lender (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 Lender that, based upon Accountant's examination of
the affairs of Parent, Borrower, 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
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of Default under Section 7.1(c) 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 Borrower's annual business
and financial plans in form and substance satisfactory to Lender, as approved by
Parent's and Borrower's Board of Directors, which plans shall include the budget
and cash flow projections for Parent and Borrower 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,
Borrower, and Parent's other consolidated Subsidiaries, prepared on a
consolidated and consolidating basis, that are satisfactory to Lender 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 Borrower 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 5.1(b)(i), a Compliance Certificate duly and
properly executed and completed by either the President or the Chief Financial
Officer of Borrower 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
Borrower, such other information as Lender shall reasonably request with respect
to the Notes Receivable; and
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(iv) Promptly after becoming available and in any event within
twenty (20) days after the end of each month in each fiscal year of Borrower,
all audit reports prepared by Borrower with respect to any Term Loan Debtor.
(c) Daily Reports. Accompanying each request for a Revolving Loan
hereunder, and in any event no less frequently than each Business Day, Borrower
shall provide Lender with a report listing, by name of obligor and other
identifying information ordinarily employed by Borrower, each of the Notes
Receivable then constituting the Net Eligible SBA Guaranteed Notes Receivable,
the Net Eligible Non-Guaranteed Notes Receivable (including the breakdown among
the Current Portion of Net Eligible Non-Guaranteed Notes Receivable, the
Delinquent Portion of Net Eligible Non-Guaranteed Notes Receivable and the
Defaulted Portion of Net Eligible Non-Guaranteed 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 Lender (each a "Schedule of Eligible Notes Receivable").
(d) Other Reports.
(i) Audit Reports. Promptly upon receipt thereof, one copy of
each management letter or other report submitted to Borrower or Parent by its
accountants in connection with any annual, interim or special audit made by them
of the books of Borrower or Parent.
(ii) Borrowing Base Report. Together with any Borrowing
Request and in any event no less frequently than on a weekly basis, Borrower
shall deliver to Lender a Borrowing Base Report.
(iii) Reports Respecting Sale of SBA Guaranteed Notes
Receivable. No later than 2:00 p.m. (Central Time) of the Business Day
immediately prior to any Settlement Date, Borrower shall deliver to Lender a
Note Sale Report in substantially the form of Exhibit H, accompanied by the
Broker-Dealer Confirmation and the Secondary Participation Agreement reflecting
the anticipated sale of the subject SBA Guaranteed Note Receivable and all
instructions of Borrower to Intermediary with respect
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thereto. On the request of Lender, Borrower shall deliver to Lender copies of
any other documents related to such sale.
(iv) SEC Filings. Promptly after the filing by Parent or
Borrower with the SEC of any report on Form 10Q or 10K, or any other material
disclosure, Borrower shall deliver a copy of such filing to Lender.
(v) Collateral Appraisals on Defaulted Loans. Promptly after a
request by Lender with respect to any Non-Guaranteed Note Receivable that is
part of the Defaulted Portion of Net Eligible Non-Guaranteed Notes Receivable,
Borrower shall obtain and deliver to Lender a copy of a current appraisal,
prepared by an appraiser acceptable to Lender, of the underlying collateral for
such Non-Guaranteed Note Receivable.
(vi) Other Data. Promptly upon receipt thereof, copies of such
other financial or other data as Lender may, in its sole discretion, reasonably
request.
5.2 Taxes and Other Liens. Each of Borrower 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
Borrower 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 Borrower or Parent.
5.3 Maintenance.
(a) Each of Borrower and Parent shall (i) maintain its corporate
existence, rights and franchises; and (ii) observe and comply with all
Governmental Requirements.
(b) Each of Borrower 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
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generality of the foregoing, Borrower 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.
5.4 Further Assurances. Each of Borrower and Parent will promptly cure any
defects in the creation and issuance of the Revolving Credit Note and the
execution and delivery of the Loan Documents, including this Agreement. Provided
that such action would not violate applicable SBA rules or regulations, each of
Borrower and Parent at its expense will promptly execute and deliver to Lender
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 Borrower in the Loan Documents, including this
Agreement, or to further evidence and more fully describe the collateral
intended as security for the Revolving Credit Note, or to correct any omissions
in the Loan Documents, or more fully to state the security obligations set out
herein or in any of the Loan Documents, or to perfect, protect or preserve any
Liens created pursuant to any of the Loan 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 Lender in its sole and absolute
discretion.
5.5 Performance of Obligations. Borrower will pay the Revolving Credit
Note according to the reading, tenor, and effect thereof. To the fullest extent
permitted by applicable law, each of Borrower and Parent will do and perform
every act and discharge all of the obligations provided to be performed and
discharged by it under the Loan Documents, including this Agreement, at the time
or times and in the manner specified.
5.6 Insurance; Payment of Premiums. To the extent available on terms and
conditions reasonably acceptable to Borrower, Borrower shall, at its sole cost
and expense, keep and maintain the Collateral (other than accounts, cash and
other items not generally insured) insured for its full insurable value against
loss or damage by fire, theft, explosion, sprinklers and all other hazards and
risks ordinarily insured against by other owners or users of such properties in
similar businesses and
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notify Lender promptly of any occurrence causing a material loss or decline in
value of the Collateral and the estimated (or actual, if available) amount of
such loss or decline. All policies of insurance on the Collateral shall be in
form and with insurers reasonably acceptable to Lender and all such policies
shall be in such amounts as may be satisfactory to Lender. Borrower shall
deliver to Lender the original (or certified copy) of each policy of insurance
and such evidence of payment of all premiums therefor as may reasonably be
requested by Lender. Such policies of insurance shall contain an endorsement, in
form and substance acceptable to Lender, showing loss payable to Lender, as its
interests may appear (including, naming Lender as an additional insured under
Borrower's fidelity insurance policies). Such endorsement, or an independent
instrument furnished to Lender, shall provide that the insurance companies will
give Lender at least thirty (30) days prior written notice before any such
policy or policies of insurance shall be altered or canceled and that no act or
default of Borrower or any other person shall affect the right of Lender to
recover under such policy or policies of insurance in case of loss or damage,
and Lender shall be included as an additional insured on all liability policies.
Borrower hereby directs all insurers under such policies of insurance to pay all
proceeds payable thereunder directly to Lender, as its interests may appear. If
no Default or Event of Default has occurred, Lender shall disburse to Borrower
the insurance proceeds received by Lender to the extent Borrower requests such
proceeds to repair or replace the damaged or destroyed Collateral that
originally gave rise to such insurance claim or claims. Borrower irrevocably
makes, constitutes and appoints Lender (and all officers, employees or agents
designated by Lender) as Borrower's true and lawful attorney (and agent-in-fact)
for the purpose of, upon the occurrence and during the continuation of an Event
of Default, making, settling and adjusting claims under such policies of
insurance, endorsing the name of Borrower on any check, draft, instrument or
other items of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. In the event Borrower, at any time hereafter, shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then Lender, without waiving or releasing
any obligations or default by Borrower hereunder, may at any time thereafter
(but shall be under no obligation to) obtain and
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maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Lender deems advisable. All sums so disbursed
by Lender, including reasonable attorneys' fees, court costs, expenses and other
reasonable charges relating thereto, shall be payable on demand by Lender and
shall be additional Liabilities hereunder secured by the Collateral.
5.7 Accounts and Records. Each of Borrower 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 Borrower's and Parent's Accountant concurs.
5.8 Right of Inspection. Each of Borrower and Parent will permit any
officer, employee or agent of Lender to examine Borrower's and Parent's books of
record and accounts, take copies and extracts therefrom, and discuss the
affairs, finances and accounts of Borrower and Parent with Borrower's and
Parent's officers, accountants and auditors, all at such reasonable times and as
often as Lender may desire. Borrower and Parent acknowledges that Lender
presently anticipates performing a minimum of four (4) audits in each fiscal
year of Borrower and Parent.
5.9 Notice of Certain Events. Each of Borrower and Parent shall promptly
notify Lender 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 Borrower 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 Borrower or Parent or of any
security (as defined in the Securities Act of 1933, as amended) of Borrower or
Parent with respect to a claimed default, together with a detailed statement by
a responsible officer of Borrower or Parent specifying the notice given or other
action taken by such holder and the nature of the claimed default and what
action Borrower or Parent is taking or proposes to take with respect thereto; or
(iii) any legal, judicial or regulatory proceedings affecting Borrower or
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Parent or any of the Collateral 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 Borrower 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.
5.10 ERISA Information and Compliance. Each of Borrower and Parent will
promptly furnish to Lender (i) after the filing thereof with the United States
Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of each
annual and other report with respect to each Plan or any trust created
thereunder, and (ii) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, or of any
"prohibited transaction," as such term is defined in Section 4975 of the
Internal Revenue Code of 1954, as amended, in connection with any Plan or any
trust created thereunder, a written notice signed by the President or the Chief
Financial Officer of Borrower or Parent specifying the nature thereof, what
action Borrower or Parent is taking or, proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service with respect
thereto. Each of Borrower and Parent will fund all current service pension
liabilities as they are incurred under the provisions of all Plans from time to
time in effect for the benefit of its employees, and comply with all applicable
provisions of ERISA.
5.11 Financial Covenants. From and after the Effective Date
and until the Liabilities are fully satisfied, Borrower 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
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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) Liabilities to Tangible Net Worth Ratio. Maintain, on a
consolidated basis, a maximum ratio of (i) the Liabilities to (ii) Tangible Net
Worth, each as measured as of the end of each fiscal quarter, of not more than
5.0 to 1.0.
(d) Delinquency Percentage. As measured as of the end of each month,
not cause or allow the Delinquent Portion of Net Eligible Non-Guaranteed Notes
Receivable to be more than five percent (5%) of Borrower's Non-Guaranteed Notes
Receivable (measured by the respective aggregate outstanding principal amounts)
.
(e) Default Percentage. As measured as of the end of each month, not
cause or allow the Defaulted Portion of Net Eligible Non-Guaranteed Notes
Receivable to be more than ten percent (10%) of Borrower's Non-Guaranteed Notes
Receivable (measured by the respective aggregate outstanding principal amounts).
5.12 Bad Debt Reserve. Borrower 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.
5.13 Charges; Liens.
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(a) Borrower 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 Collateral. Except for Liens in favor
of Lender and any other Permitted Liens, if Borrower, 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 Collateral, subject to the provisions of Section 5.13(b) below, Lender may,
without waiving or releasing any obligation or liability of Borrower 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 Lender deems advisable. All
sums so paid by Lender and any expenses, including attorneys' fees, court costs,
expenses and other reasonable charges relating thereto, shall be payable, upon
demand, by Borrower to Lender and shall be additional Liabilities hereunder
secured by the Collateral.
(b) Borrower may in good faith contest, by proper legal actions or
proceedings, the validity or amount of any Charges or claims, and provided that
Borrower gives Lender advance notice of its intention to contest the validity or
amount of any such Charge or claim, Lender 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 Borrower in an
amount reasonably acceptable to Lender, (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 Collateral will be subject to
forfeiture or loss of any Lien in favor of Lender by reason of the institution
or prosecution of such contest, (v) no Lien that may reasonably be expected to
prime the Liens of Lender shall exist for such Charges or claims during such
action or proceeding, (vi) Borrower shall promptly pay or discharge such
contested Charges and all additional charges, interests, penalties and expenses,
if any, and shall deliver to Lender evidence reasonably acceptable to Lender of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower, and (vii) Lender has not advised Borrower in
writing that Lender
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reasonably believes that non-payment or non-discharge thereof would have a
Material Adverse Effect.
5.14 Communication With Accountants. Each of Borrower and Parent shall
cooperate with Lender to permit reasonable access to Accountant and authorizes
Accountant to disclose to Lender 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 Borrower's or
Parent's business, pending litigation, financial condition and other affairs. On
or before the Effective Date, Parent and Borrower shall deliver to Lender a
letter addressed to such accountants in the form of Exhibit G.
5.15 Notes Receivable Documents. Pursuant to the Multi-Party Agreement,
Borrower shall deliver to Lender's Agent all original SBA 7(a) Loan Notes, with
all necessary endorsements, within three (3) Business Days of the execution or
delivery to Borrower thereof. Borrower shall simultaneously deliver to Lender
copies of all Notes Receivable Documents, whether or not required to be
delivered to Lender's Agent. Borrower shall at all times comply with the terms
and conditions of the Multi-Party Agreement and the Loan Guaranty Agreement.
5.16 Subordination Agreement. Prior to incurring any Subordinated Debt
other than with respect to the Parent Debentures, Borrower shall cause to be
delivered to Lender a subordination agreement executed by such Person in form
and substance satisfactory to Lender.
5.17 Right of First Refusal for Securitization Transaction Subordinated
Certificates. Parent and Borrower shall cause Lender to be given a right of
first refusal to purchase any subordinated certificates issued in connection
with a Securitization Transaction.
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ARTICLE 6
NEGATIVE COVENANTS
Without Lender's prior written consent, which Lender may or may not in its
sole discretion give, each of Borrower and Parent covenants that it shall not:
6.1 Debt. Create, incur, assume or have outstanding any Indebtedness,
except for: (i) Indebtedness owing to Lender; (ii) Indebtedness incurred by
Borrower or Parent in the ordinary course of business, other than Indebtedness
for borrowed money; (iii) Subordinated Debt, including Subordinated Debt with
respect to the Parent Debentures; or (iv) Indebtedness to Sterling under the
Restated Sterling Credit Agreement.
6.2 Loans and Compensation. Make any loans, distributions, payments, asset
transfers, or advances of money and/or extensions of credit to any Persons,
including officers, directors, employees, stockholders, or Affiliates and
Subsidiaries of Borrower or Parent, other than (a) reasonable advances made in
the ordinary course of business on account of salary, commissions, and routine
travel and business expenses, (b) loans made in the ordinary course of business
to Term Loan Debtors, and (c) so long as no Default or Event of Default has
occurred and is continuing or would result therefrom, (i) reasonable amounts
with respect to payment to Borrower, Parent or their respective Subsidiaries of
servicing fees, reimbursement of origination expenses, and funding of operating
expenses in the ordinary course of business, and (ii) payment to Parent of the
amount actually used by Parent to make interest payments on the Parent
Debentures, to the extent Parent is permitted pursuant to Section 6.15 to make
such interest payments to the holders of the Parent Debentures.
6.3 Liens. Except as otherwise expressly permitted herein or in the other
Loan 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 6.13 and the sale
of other property in the ordinary course of business), lease or otherwise
dispose of or transfer, whether by sale, merger,
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consolidation, liquidation, dissolution, or otherwise, any of Borrower's or
Parent's assets.
6.4 Capital Expenses. Make capital expenditures (including capitalized
leases) during any fiscal year of Parent and Borrower which, in the aggregate,
exceed $150,000 in the fiscal year ending June 30, 1998 (provided, that if
Borrower and Parent relocate their principal place of business in compliance
with Section 6.10 during such fiscal year, such limit will be increased to
$250,000), or $100,000 in any subsequent fiscal year.
6.5 Dividends, Distributions and Redemptions. Except as otherwise
permitted under Section 6.2, declare or pay any dividend, purchase, redeem or
otherwise acquire for value any of its Stock now or hereafter outstanding,
return any capital to its stockholders, or make any distribution of its assets
to its stockholders or Affiliates or Subsidiaries.
6.6 Capital Structure. Make any material change in Borrower'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.
6.7 Transactions with Affiliates. Enter into, or be a party to, any
transaction with any Affiliate or stockholder of Borrower or Parent, except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
or Parent's business and upon fair and reasonable terms which are no less
favorable to Borrower or Parent than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate or stockholder of Borrower or
Parent; provided, that such transactions involving, (i) in any individual
instance, transfers of Property the value of which exceeds $100,000, or (ii) in
the aggregate, transfers of Property the value of which exceeds $500,000 in any
Fiscal Year, must be fully disclosed to and approved by Lender.
6.8 Change of Business. Enter into any new business or make any material
change in any of Borrower's or Parent's business objectives, purposes or
operations.
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6.9 Name of Borrower. Use any corporate name (other than its own) or any
fictitious name, tradestyle or "d/b/a" other than "Business Loan Center."
6.10 Location of Collateral. Remove its books and records or the
Collateral from the location listed in the preamble to this Agreement, or keep
any of such books and records and/or the Collateral at any other office(s) or
location(s) unless (i) Borrower gives Lender 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.
6.11 Proceeds of Loans. Permit the proceeds of any of the Revolving Loans
to be used for any purpose other than those permitted by Section 2.10 hereof.
6.12 ERISA Compliance. At any time permit any Plan maintained by it to:
(a) engage in any "prohibited transaction" as such term is defined
in Section 4975 of the Internal Revenue Code of 1954, as amended;
(b) incur any "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA; or
(c) terminate any such Plan in a manner which could result in the
imposition of a Lien on the Property of Borrower pursuant to Section 4068 of
ERISA.
6.13 Sale or Discount of Receivables. Discount or sell any portion of its
Notes Receivable or its Accounts; provided, that so long as no Event of Default
shall have occurred and be continuing, Borrower may:
(a) sell SBA Guaranteed Notes Receivable to the extent that such
sales are made (i) at par or at a premium, (ii) on ordinary business terms,
(iii) by or through the Intermediary, (iv) in full conformity with all
applicable provisions of the SBI Act and other governing law, and (v) in
accordance with the Settlement Date reporting requirements of Section
5.1(d)(iii);
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(b) sell Non-Guaranteed Notes Receivable pursuant to a
Securitization Transaction, to the extent that such sales are made (i) in full
conformity with all applicable provisions of the SBI Act and other governing
law, and (ii) on terms (including with respect to the amount and timing of
payment of the purchase price therefor) and in a manner acceptable to Lender;
(c) sell Non-Guaranteed Pro Rata Participations to the extent
permitted by Section 2.18; and
(d) sell to SBA the SBA Owned Notes Receivable, or otherwise dispose
of Notes Receivable or the collateral therefor, to the extent required by SBA as
part of the servicing or liquidation thereof.
6.14 Compensation and Bonuses. (i) Pay annual salaries or bonuses or any
other direct or indirect compensation (including through the payment of
directors' fees) to any of Parent's or Borrower's executive officers in an
aggregate amount exceeding (A) the respective amounts currently scheduled to be
paid to such Persons in their fiscal year ending June 30, 1997, (B) $2,500,000
for all of such Persons in their fiscal year ending June 30, 1998, or (C)
$3,000,000 for all of such Persons in any subsequent fiscal year, or (ii) pay
directors' fees in an aggregate amount exceeding $50,000 for all directors in
any fiscal year of Borrower.
6.15 Payments on Subordinated Debt. Prepay any Subordinated Debt or make
any payment of principal or interest thereof or interest thereon or any other
payment or distribution in respect thereof, except that Parent may make payments
of interest on the Parent Debentures regularly scheduled thereunder provided
that no Default or Event of Default has occurred or is continuing under this
Agreement or would result from such interest payment. All Subordinated Debt
shall have a maturity date after the Termination Date and shall be unsecured and
subordinated to Lender in liquidation and repayment on terms that are acceptable
to Lender.
6.16 Affiliates. Hereafter create any Affiliate or Subsidiary or divest
itself of any material assets by transferring them to any Affiliate or
Subsidiary. Lender shall not unreasonably withhold its consent to a written
request by
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Borrower or Parent for Lender's consent to a transaction by Borrower or Parent
that would otherwise violate this Section 6.16.
6.17 Consulting and Brokerage Services. Provide, or enter into any
contract or agreement to provide, or allow any Affiliate or Subsidiary of
Borrower 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, Borrower 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 Borrower or Parent to another funding source that is
not an Affiliate or Subsidiary of Borrower or Parent, and (ii) the receipt by
Borrower or Parent of a reasonable referral fee in an arm's-length relationship
with such other funding source.
6.18 Modification of Sterling Documents. Amend or modify any of the
Sterling Documents.
6.19 Survival of Obligations Upon Termination of Agreement. Except as
otherwise expressly provided for in this Agreement and in the other Loan
Documents, no termination or cancellation (regardless of cause or procedure) of
this Agreement or the other Loan Documents shall in any way affect or impair the
powers, obligations, duties, rights, and Liabilities of Borrower, Parent or
Lender relating to (a) any transaction or event occurring prior to such
termination or cancellation, (b) the Collateral, or (c) any of the undertakings,
agreements, covenants, warranties and representations of Borrower, Parent or
Lender contained in this Agreement or the other Loan Documents. All such
undertakings, agreements, covenants, warranties and representations shall
survive such termination or cancellation and be effective until the full and
final payment of the Liabilities, at which time Lender shall take all reasonable
steps deemed necessary by Borrower to effect the release of Lender's
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Liens; provided, that all indemnity claims of Lender under the Loan Documents
shall survive such full and final payment.
ARTICLE 7
EVENTS OF DEFAULT
7.1 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 on the Revolving Credit Note or any
other Liabilities; or
(b) Loan Balance. Lender notifies Borrower that the outstanding
balance of the Loans hereunder exceeds the Maximum Commitment, and such
condition is not corrected within three (3) Business Days after such notice; or
(c) Financial Covenants. Borrower or Parent fails to satisfy any
financial covenant set forth in Section 5.11 hereof; or
(d) Representations and Warranties. Borrower or Parent fails to
perform, keep or observe any material representation or warranty made by it
herein or in any other Loan Document or in any certificate, request or other
document furnished pursuant to or under this Agreement or any other Loan
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
(e) Covenants. Borrower or Parent fails to perform, keep or observe
any of the covenants or agreements contained in Article 5 and Article 6 (other
than any failure to make any payment when due, or any failure to perform any of
the covenants in Section 5.11), 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 Lender to Borrower, or (ii) such
default otherwise becoming known to Borrower; or
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(f) Other Obligations. A default shall occur under any agreement,
document or instrument, other than this Agreement or the other Loan Documents,
to which Borrower 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 Borrower becomes aware of such default; or
(g) Breach of Agreement with SBA. Borrower shall breach in any
material respect its servicing or any other obligations under the Multi-Party
Agreement or under any Loan Guaranty Agreement; or
(h) Default Under Sterling Documents. Any "Event of Default" under
and as defined in the Sterling Documents shall have occurred.
(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 Borrower or Parent, or any of its officers,
employees or agents, to Lender 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 Borrower shall receive written notice of such fact from
Lender or five (5) Business Days after Borrower becomes aware of such default;
or
(k) Involuntary Bankruptcy or Other Proceedings. The filing of a
petition with a court having jurisdiction over Borrower or Parent to commence an
involuntary case for Borrower 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 Borrower'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
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(l) Voluntary Petitions, etc. The commencement by Borrower 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 Borrower or Parent to the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator, agent or other similar
official for Borrower or Parent or for any material part of Borrower's or
Parent's property; the making by Borrower or Parent of an assignment for the
benefit of creditors; any case of proceeding is commenced by Borrower or Parent
for Borrower's or Parent's dissolution, liquidation or termination; or the
taking of any action by or on behalf of Borrower or Parent in furtherance of any
of the foregoing; or
(m) Uninsured Loss. There shall occur any uninsured damage to, or
loss, theft, or destruction of, any of the Collateral, if the amount of such
damages or loss, or the value of the stolen or destroyed Collateral is in excess
of $50,000; provided, that for purposes of this Section 7.1(m), Collateral shall
be deemed not to include tangible personal property, and the loan losses not
covered by credit insurance shall not constitute damage, loss, or destruction of
Collateral; or
(n) Discontinuance of Business. Borrower 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
(o) ERISA Notices. Borrower or Parent fails to (i) furnish Lender,
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 Borrower 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 Lender
promptly upon receipt by Borrower or Parent of any notice of the institution of
any proceeding or other action which may result in the termination of such plan;
or
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(p) Loan Documents. The Loan 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 perfected Lien of the priority
required thereby on any of the Collateral purported to be covered thereby, or
Borrower or Parent (or any other Person who may have granted or purported to
grant such Lien) shall so state in writing; or
(q) Material Adverse Event. A Default or any other event shall have
occurred which would have a Material Adverse Effect on Borrower, which event
continues for five (5) days after written notice to Borrower; or
(r) Change of Control. A Change of Control shall have occurred; or
(s) Merger. Borrower or Parent shall merge or consolidate with or
acquire the Stock or assets of any Person; or
(t) Solvency. Borrower or Parent is no longer Solvent.
7.2 Termination of Agreement and Acceleration of the Liabilities. During
any period of grace afforded Borrower or Parent under this Article 7 after which
an act or omission of Borrower or Parent will become an Event of Default, Lender
shall have no obligation to make any Revolving Loan hereunder. Upon the
occurrence and continuation of an Event of Default, all of the Liabilities may,
at the option of Lender and without demand, notice, or legal process of any
kind, be declared, and immediately shall become, due and payable, and Lender,
at its option, may terminate this Agreement; provided, that all of the
Liabilities shall immediately become due and payable, and this Agreement shall
be terminated upon the occurrence and continuation of an Event of Default set
forth in Section 7.1(k) or Section 7.1(l); and further provided, that Lender's
rights and remedies under this Agreement shall survive any such termination.
7.3 Remedies. Upon the occurrence and at any time during the continuance
of any Event of Default specified in Section 7.1, and subject at all times to
Lender's compliance with all applicable terms of the Multi-Party Agreement,
including those
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relating to the transfer of authority for collection, servicing, and liquidation
of Notes Receivable, Lender shall have the following rights and remedies:
(a) Rights of Setoff. Upon the occurrence and during the continuance
of any Event of Default, Lender and each subsequent holder of the Revolving
Credit Note is hereby authorized by Borrower at any time and from time to time,
without notice to Borrower (any such notice being expressly waived by Borrower),
to setoff and to appropriate and, to the extent permitted by applicable law, to
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by Lender or
any subsequent holder of the Revolving Credit Note to or for the credit or the
account of Borrower against any and all of the Liabilities of Borrower,
irrespective of whether or not the Lender or any subsequent holder of the
Revolving Credit Note shall have made any demand under this Agreement, the
Revolving Credit Note or under any other Loan Documents and although such
obligations may be unmatured; provided, that Lender shall have no right of
setoff with respect to funds deposited or held in the Servicer Account. Lender
and any subsequent holder of the Revolving Credit Note agrees promptly to notify
Borrower in writing after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of Lender or any subsequent holder of the Revolving
Credit Note under this Section 7.3(a) are in addition to other rights and
remedies (including other rights of setoff) now or hereafter granted under
applicable law which Lender or any subsequent holder of the Revolving Credit
Note may have.
(b) Notes Receivable and Accounts. The right to: (i) monitor,
manage, and, subject to the terms of the Multi-Party Agreement, transfer the
collection, servicing, and liquidation of any or all of Notes Receivable and
Borrower's lending relationship with Term Note Debtors; (ii) unless and until
the SBA takes over or transfers to another SBA-participating lender, designated
by the SBA and acceptable to Lender, the collection, servicing and liquidation
functions of the Notes Receivable in accordance with the Multi-Party Agreement,
enforce and demand payment of the Accounts and the Notes Receivable, in
accordance with their terms, by legal proceedings or otherwise;
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(iii) exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts and Notes Receivable; (iv) settle, adjust,
compromise, extend, or renew the Accounts and Notes Receivable; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts and
Notes Receivable; (vi) if permitted by applicable law, sell or assign the
Accounts and Notes Receivable upon such terms, for such amounts and at such time
or times as Lender deems advisable; (vii) discharge and release the Accounts or
Notes Receivable; (viii) take control, in any manner, of any Item of Payment;
(ix) prepare, file and sign Borrower's name on any Proof of Claim in Bankruptcy
or similar document against any Account Debtor or Term Loan Debtor; (x) prepare,
file and sign Borrower's name on any notice of lien, assignment or satisfaction
of lien or similar document in connection with the Accounts or Notes Receivable;
(xi) do all acts and things necessary, in Lender's sole discretion, to fulfill
Borrower's obligations under this Agreement; (xii) endorse the name of Borrower
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to the Accounts or Notes Receivable; (xiii) open Borrower's
mail and collect any and all amounts due Borrower from Account Debtors and Term
Loan Debtors; and (xiv) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the Accounts
and Notes Receivable, to which Borrower has access;
(c) Sell Collateral. The right to: (i) require Borrower to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender, in its sole discretion; (ii) sell or to otherwise dispose of all or any
Collateral at public or private sale or sales, with such notice as may be
required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable; (iii) adjourn such sales from time to
time with or without notice; and (iv) conduct such sales on Borrower's premises
or elsewhere and use Borrower's premises without charge for such sales for such
time or times as Lender may see fit. Lender is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrower's rights under all
licenses and all
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franchise agreements shall inure to Lender's benefit. Lender shall have the
right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, and Lender may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may setoff the
amount of such price against the Liabilities. The proceeds realized from the
sale of any Collateral shall be applied first to the reasonable costs, expenses
and attorneys' fees and expenses incurred by Lender for collection and for
acquisition, completion, protection, removal, storage, sale and delivery of the
Collateral; second to interest due upon any of the Liabilities; and third to the
principal of the Liabilities. If any deficiency shall arise, Borrower shall
remain liable to Lender therefor;
(d) Servicing of SBA Loans. The right, directly or through its
designee, to monitor, manage, and service any or all of the Notes Receivable,
including the Sold Notes Receivable, the GECC Participated Notes Receivable, the
Participated Notes Receivable, and the SBA Owned Notes Receivable, and
Borrower's relationship with its Term Loan Debtors and other customers;
provided, that Lender, or its designee, shall have been approved by the SBA (as
a participating lender under the Small Business Act of 1953, as described in 13
CFR ss. 120.302.1, or otherwise) to perform such functions; and further
provided, that with respect to the GECC Participated Notes Receivable such
rights of Lender shall be subject to any servicing rights of GECC therein. Upon
the transfer of the servicing obligations of Borrower's Notes Receivable from
Borrower to Lender or its designee, Borrower shall immediately deliver to Lender
or its designee all loan documents then held by Borrower or any other Person
relating to all of the outstanding Notes Receivable. Borrower consents to any
action taken by Lender or its designee pursuant to this Section 7.3(d), and
agrees that such action shall not release or relieve Borrower of its obligations
to Lender whether arising under this Agreement, or any of the other Loan
Documents. In carrying out the provisions of this Section 7.3(d), Lender or its
designee may rely and act upon any notice or instruction given to Lender or its
designee by the SBA, and in so doing, neither Lender nor its designee shall
incur any liability or obligation to Borrower by reason thereof; and
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(e) UCC Remedies. In addition to any other rights and remedies
contained in this Agreement and in all of the other Loan Documents, all of the
rights and remedies of a secured party under the UCC or other applicable law,
all of which rights and remedies shall be cumulative and non-exclusive, to the
extent permitted by law.
7.4 Notice of Sale or Other Action. Any notice required to be given by
Lender of a sale, lease, other disposition of the Collateral or any other
intended action by Lender, if given five (5) Business Days prior to such
proposed action, shall constitute commercially reasonable and fair notice
thereof to Borrower.
7.5 Marshalling; Payments Set Aside. Lender shall be under no obligation
to marshall any assets in favor of Borrower or any other party or against or in
payment of any or all of the Liabilities. To the extent that Borrower makes a
payment or payments to Lender or Lender enforces its security interests or
exercises its rights of set-off, and such payment or payments or the proceeds of
such enforcement or 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 enforcement or set-off had not occurred.
7.6 Effect of Multi-Party Agreement and Intercreditor Agreement.
Notwithstanding any other provision of this Article 7, all rights and remedies
of Lender under this Article 7 shall be subject to the provisions of the
Multi-Party Agreement and the Intercreditor Agreement.
ARTICLE 8
CONDITIONS OF LENDING
The obligations of Lender to make Revolving Loans pursuant to this
Agreement are subject to the conditions precedent stated in this Article 8.
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8.1 Initial Advance. The obligation of Lender to make the initial
Revolving Loan under this Agreement is, in addition to the conditions precedent
specified in Section 8.2 hereof, subject to the following conditions precedent
wherein each document to be delivered to Lender shall be in form and substance
satisfactory to Lender:
(a) Closing. Borrower and Parent shall have executed and delivered
to Lender this Agreement. Lender shall have received such documents, instruments
and agreements as Lender 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 Lender.
(b) Notes. Borrower shall have duly and validly issued, executed and
delivered the Revolving Credit Note to Lender as of the Effective Date.
(c) Opinion of Borrower's and Parent's Counsel. Lender shall have
received from counsel for Borrower and Parent a written opinion in form and
substance acceptable to Lender as to such matters as Lender may require,
including opinions regarding (i) the validity, creation, and attachment of the
Liens under the Security Documents, (ii) Borrower's and Parent's corporate
authorization to enter into the Transactions contemplated by this Agreement,
(iii) Borrower's and Parent's compliance with all Federal, state and local laws,
(iv) the existence of litigation against Borrower or Parent that may result in a
Material Adverse Effect, and (v) 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 Effective Date, there shall have been (a) no material adverse change in the
business, financial or other conditions of Borrower or Parent, or any Affiliate
or Subsidiary of Borrower or Parent, or in the Collateral, or in the prospects
or projections of Borrower, Parent or their Affiliates and Subsidiaries, (b) no
material increase in the liabilities (absolute or contingent) of Borrower,
Parent or their Affiliates and Subsidiaries, whether or not disclosed or
required to be reserved against on any pro forma balance sheet, other than
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i liabilities incurred by Borrower or Parent in the ordinary course of its
business in connection with the execution, delivery, and performance of loan
documents by Borrower, as lender to its customers, and (ii) the Parent
Debentures, (c) no material decrease in the assets of Borrower, Parent or their
Affiliates and Subsidiaries, and (d) no distribution by Borrower or Parent of
capital Stock either by dividends or otherwise.
(e) Recordings. The Security Documents, or other notices related
thereto if necessary or appropriate, shall have been duly delivered to the
appropriate offices for filing or recording, and Lender shall have received
confirmations of receipt thereof from the appropriate filing or recording
offices.
(f) [Intentionally Omitted.]
(g) Fees. Lender shall have received the fees described in Section
2.5 hereof.
(h) Certificate of Validity of Collateral. Lender shall have
received a "Certificate of Validity of Collateral" executed by the President and
Chief Financial Officer of Borrower in substantially the form attached as
Exhibit F hereto.
(i) Schedule of Documents. Lender shall have received all other
documents, agreements and items set forth on the Schedule of Documents.
(j) Borrower's Guidelines and Operations Manual. Borrower shall have
delivered to Lender Borrower's written operating guidelines and written
operations manuals, detailing Borrower'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 Lender.
(k) Borrower's Credit Request and Field Examination Forms. Borrower
shall have delivered to Lender Borrower's credit request, loan report and
analysis, and field examination/site visit forms, and such materials shall be in
a form satisfactory to Lender.
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(l) Borrower's Form Loan Documents. Borrower shall have submitted to
Lender the standard form loan agreement, security agreement, note, deed of
trust, guaranty, subordination agreement, and other form loan documents employed
by Borrower (including, where applicable, standard forms prescribed or supplied
by the SBA), and all such loan documents shall be satisfactory to Lender and its
counsel.
(m) 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 Borrower, or replacements acceptable to
Participant shall be serving in such positions.
(n) SBA Approval; Loan Guaranty Agreement. Borrower shall have
provided Lender with evidence satisfactory to Lender that the SBA shall have (i)
entered into the Loan Guaranty Agreement with Borrower and (ii) through its
execution of the Multi-Party Agreement, consented to Borrower's entering into
this Agreement and the other Loan Documents.
(o) Effectiveness of Assignment and Restated Sterling Credit
Agreement. Sterling and Lender shall have entered into the Partial Assignment
Agreement, and Sterling, Borrower and Parent shall have entered into the
Restated Sterling Credit Agreement, all conditions precedent to the
effectiveness of each of such agreements shall have been satisfied or waived,
and each of such agreements shall have become effective.
(p) Repurchase Under Loan Participation Agreement. Borrower shall
have agreed, by its execution of this Agreement (i) to repurchase from Lender
the loan participation previously sold to Lender by Borrower with respect to
certain Notes Receivable pursuant to the Loan Participation Agreement and
satisfy all of Borrower's other obligations to Lender thereunder, on or before
October 1, 1997, and (ii) to reimburse Lender for any loss incurred by Lender
with respect to such Notes Receivable prior to such repurchase.
(q) Other. Lender shall have received such other documents as it may
reasonably have requested at any time at or prior to the Effective Date.
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8.2 All Advances. The obligation of Lender to make Revolving Loans under
this Agreement is subject to the following further conditions precedent:
(a) Borrowing Requests and Reports. Before each advance, Lender
shall have received a Borrowing Request, a Borrowing Base Report, and a Schedule
of Eligible 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 Borrower.
(b) Possession of Notes Receivables Documents. All original SBA 7(a)
Loan Notes shall have been physically delivered to the possession of Lender's
Agent and copies of the Notes Receivables Documents shall have been delivered to
Lender.
(c) Loan Documents. Borrower shall provide Lender's Agent with the
original duly and properly executed SBA 7(a) Loan Notes, and shall provide
Lender with copies of the duly and properly executed Note Receivable Documents,
as set forth in Section 5.15.
(d) No Default. No Default or Event of Default shall have occurred
and be continuing or would result from the funding of the advance.
(e) Representations and Warranties. All of the representations and
warranties of Borrower 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
Borrower or Parent contained in any of the other Loan 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.
(f) No Material Adverse Change. There shall have occurred no change
in the condition, financial or otherwise, of Borrower which Lender reasonably
deems to be a Material Adverse Effect.
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(g) Key Officers. Each of Borrower and Parent shall continue to
employ as its President and its Chief Financial Officer the Persons holding such
positions as of the Effective Date, or shall have hired replacements for such
officers acceptable to Lender.
(h) Escrow Arrangements Regarding Concurrent Fundings. To the extent
that, pursuant to the proviso contained in either paragraph A of Schedule 1.1(a)
or paragraph A of Schedule 1.1(b), the requested advance is being made based
upon new loans by Borrower that have not yet actually been disbursed to the Term
Loan Debtor, the conditions of and escrow arrangements for the disbursement of
such new loans shall be satisfactory in form and substance to Lender.
The acceptance by Borrower of the proceeds of any advance hereunder
shall be deemed to constitute, as of the date of such acceptance, (i) a
representation and warranty by Borrower that the conditions in this Section 8.2
have been satisfied, and (ii) a confirmation by Borrower of the granting and
continuance of Lender's Lien pursuant hereto.
ARTICLE 9
MISCELLANEOUS
9.1 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:
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(a) If to Lender, 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
provided, that notice to Lender for purposes of Section 2.13(a)(i) shall be
given to Sam V. LoBosco by telephone at (773) 864-3993 or by facsimile at (773)
380-6169, and no copy of such transmission is required to be sent to any other
Person.
(b) If to Borrower 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
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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.
9.2 Modification of Agreement; Sale of Interest. This Agreement and the
other Loan Documents may not be modified, altered or amended, except by an
agreement in writing signed by Borrower and Lender. Borrower may not sell,
assign or transfer this Agreement, or the other Loan Documents or any portion
thereof, including Borrower's rights, title, interests, remedies, powers, or
duties hereunder or thereunder. Each of Borrower and Parent hereby consents to
Lender's participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement, or the other Loan Documents, or of
any portion hereof or thereof, including Lender's rights, title, interests,
remedies, powers, or duties hereunder or thereunder, subject to the provisions
of the Multi-Party Agreement and provided that Lender shall not sell its entire
interest in all of the Revolving Loans without the prior written consent of SBA,
which consent shall not be unreasonably withheld. Lender agrees that prior to
any such disposition it will make a good faith effort to provide Borrower with
notice of such disposition; provided, that the failure of Lender to provide such
notice shall not prevent Lender from making such disposition.
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9.3 Lien Release Prior to Sale of SBA Guaranteed Notes Receivable.
Lender's security interest in any SBA Guaranteed Note Receivable shall be deemed
to be automatically released on any Settlement Date established with respect to
such SBA Guaranteed Note Receivable (or other date of settlement established
pursuant to any applicable Broker-Dealer Confirmation) concurrently with the
receipt by Intermediary of the purchase price therefor. Notwithstanding any
release of a security interest by Lender under this Section 9.3, Lender shall
not release, but rather shall retain without interruption, its security interest
in and to the Net Sale Proceeds of such sale.
9.4 Fees and Expenses. Borrower shall reimburse Lender for all reasonable
out-of-pocket expenses of Lender in connection with the negotiation,
preparation, execution, interpretation and administration of this Agreement and
the other Loan Documents (including the reasonable fees and expenses of all of
Lender'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, Lender 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 Loan Documents;
(b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower, Parent or any other Person) in any way
relating to the Collateral, this Agreement or the other Loan 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 Borrower, Parent or any other Person that may be obligated to Lender by
virtue of this Agreement or the other Loan 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 Lender against Borrower,
Parent or any other Person that may be
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obligated to Lender by virtue of this Agreement or the other Loan Documents; or
(d) any attempt to appraise, inspect, verify, protect, collect,
sell, liquidate or otherwise dispose of the Collateral, then, and in any such
event, a $500 per day per auditor charge in connection with any audit of the
Collateral by Lender 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 9.4, shall be payable, on demand, by Borrower
to Lender and shall be additional Liabilities secured by the Collateral. 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.
9.5 Severability. In the event that any one or more of the provisions
contained in the Revolving Credit Note, this Agreement or in any other Loan
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 Revolving Credit Note, this Agreement or any other
Loan Document.
9.6 Waiver by Lender. Lender's failure, at any time or times hereafter, to
require strict performance by Borrower or Parent of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance. Any suspension or waiver by Lender of
an Event of Default by Borrower or Parent under this Agreement or the other Loan
Documents shall not suspend, waive or affect
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any other Event of Default by Borrower or Parent under this Agreement or the
other Loan 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 Borrower or Parent
contained in this Agreement or the other Loan Documents and no Event of Default
by Borrower or Parent under this Agreement or the other Loan Documents shall be
deemed to have been suspended or waived by Lender, unless such suspension or
waiver is by an instrument in writing signed by an officer of Lender and
directed to Borrower or Parent specifying such suspension or waiver.
9.7 Successors and Assigns. All covenants and agreements by or on behalf
of Borrower or Parent contained in the Revolving Credit Note, this Agreement and
any other Loan Documents shall bind its successors and assigns and shall inure
to the benefit of Lender. Neither Borrower nor Parent shall, however, have the
right to assign its rights under this Agreement or any interest herein, without
the prior written consent of Lender.
9.8 Conflict of Terms. The other Loan 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 Loan 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 Loan Documents, the
provision contained in this Agreement shall govern and control. Notwithstanding
the foregoing, in the event any provision of this Agreement conflicts or is
inconsistent with the Multi-Party Agreement, the relevant provisions of the
Multi-Party Agreement shall be controlling.
9.9 Waivers by Borrower and Parent. Except as otherwise provided herein,
each of Borrower 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 Lender on which Borrower or Parent may in any way be liable
and hereby ratifies and confirms whatever Lender may do in this regard; (b) all
rights to notice of a hearing prior to Lender's taking possession or control of,
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or to Lender's replevy, attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to allowing Lender to
exercise any of Lender's remedies; and (c) the benefit of all valuation,
appraisement and exemption laws. Each of Borrower and Parent acknowledges that
it has been advised by counsel with respect to this Agreement and the
transactions evidenced by this Agreement.
9.10 Cumulative Rights. The rights and remedies of Lender under the
Revolving Credit Note, 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.
9.11 GOVERNING LAW. THIS AGREEMENT, THE OTHER SECURITY INSTRUMENTS AND THE
REVOLVING CREDIT NOTE 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 LENDER 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; PROVIDED, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS. IT IS
THE INTENT OF ALL OF THE PARTIES HERETO THAT THE LAWS OF THE STATE OF ILLINOIS
SHALL GOVERN THIS AGREEMENT, THE REVOLVING CREDIT NOTE, AND THE OTHER LOAN
DOCUMENTS, AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
9.12 Taxes, etc. Any taxes (excluding income taxes) payable or ruled
payable by federal or state authority in respect of the Revolving Credit Note,
this Agreement or the other Loan Documents shall be paid by Borrower, together
with interest and penalties, if any.
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9.13 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, Lender shall not be obligated to extend credit to
Borrower in an amount in violation of any limitation or prohibition provided by
any applicable statute or regulation.
9.14 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.
9.15 Authorized Signatures. Until Lender is notified by Borrower to the
contrary in writing as provided by Section 9.1, the signature upon this
Agreement or any of the other Loan Documents of an individual designated in
Borrower's incumbency resolutions of even date herewith shall bind Borrower and
be deemed to be the act of Borrower affixed pursuant to and in accordance with
resolutions duly adopted by Borrower's Board of Directors.
9.16 Publicity. Each of Borrower and Parent hereby agrees that, except as
required by law (including by reason of Borrower or Parent being required to
file any report with the SEC), (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 Lender; provided, that so long as Borrower
or Parent does not (i) employ or cause to be employed the name or logo of Lender
or its affiliates, or (ii) purport to represent Lender or its affiliates in any
capacity, Borrower 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 Borrower or Parent. Each of
Borrower and Parent hereby consents to Lender issuing a press release or
publishing a
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tombstone or similar advertising material relating to the financing transactions
contemplated by this Agreement.
9.17 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.
9.18 Entire Agreement. The Revolving Credit Note, the Security Documents,
and this Agreement 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.
9.19 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, BORROWER, PARENT AND LENDER 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, THE
REVOLVING CREDIT NOTE, OR ANY OF THE LOAN 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. LENDER, BORROWER 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. LENDER,
BORROWER AND PARENT FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS
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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 LOAN DOCUMENTS, THE REVOLVING CREDIT
NOTE, 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Restated and
Amended Loan Agreement to be duly executed as of the date first above written.
BORROWER:
BUSINESS LOAN CENTER, INC.,
a Delaware corporation
By: /s/Jennifer Napier
---------------------------------
Jennifer Napier
Chief Financial Officer
PARENT:
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation
By: /s/Robert F. Tannenhauser
---------------------------------
Robert F. Tannenhauser
President
LENDER:
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By: /s/Sam V. LoBosco
---------------------------------
Sam V. LoBosco
Vice President - Credit
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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)
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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)
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Schedule 1.1(a)
Net Eligible Non-Guaranteed Notes Receivable
Upon delivery to Lender of a Schedule of Eligible Notes Receivable,
Lender 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 amounts to be advanced pursuant to
Section 2.1. In making this determination, Lender 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 Borrower 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 Borrower to or for the account of the Term Loan Debtor
shall be eligible under this paragraph A; provided, that at the discretion of
Lender, 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 Lender;
.B. Borrower 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 Borrower 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. Not later than three (3) Business Days after the issuance of the Loan,
the original SBA 7(a) Loan Notes are in the physical possession of Lender's
Agent and are endorsed by Borrower to Lender in a manner acceptable to Lender;
Schedule 1.1(a)
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.E. The Loan conforms to Borrower's written credit and underwriting
guidelines, copies of which have been previously delivered to Lender; 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;
.F. 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;
.G. The Loan does not cause 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, to exceed thirty percent (30%) of the aggregate amount of all
Non-Guaranteed Notes Receivable; provided, that if the industry is the
hotel/motel industry (SIC #7011), such percentage shall be increased to
forty-five percent (45%) during the first six months after the Effective Date,
forty percent (40%) during the seventh month after the Effective Date, and
thirty-five percent (35%) during the eighth month after the Effective Date; and
provided further, that in either case such Loan will be ineligible only to the
extent of such excess;
.H. The Term Loan Debtor is neither the United States of America nor any
subdivision, department, or agency thereof, except to the extent that Borrower
has delivered to Lender all documents necessary to comply with the Federal
Assignment of Claims Act of 1940, as amended from time to time;
.I. The Term Loan Debtor is not a state or subdivision, department, or
agency thereof, unless Borrower gives prompt notice to Lender of any Notes
Receivable with respect to these entities;
.J. The Term Loan Debtor is not insolvent or the subject of an insolvency
proceeding or a case commenced under the Bankruptcy Code; provided, that the
failure of a Non-Guaranteed Note Receivable to meet this requirement shall not
preclude its being included in the Defaulted Portion of Net Eligible
Non-Guaranteed Notes Receivable;
Schedule 1.1(a)
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.K. No payment of interest and principal, or other amount due under the
Loan is more than sixty (60) days past due; provided, that the failure of a
Non-Guaranteed Note Receivable to meet this requirement (i) shall not preclude
its being included in the Delinquent Portion of Net Eligible Non-Guaranteed
Notes Receivable if no payment of interest, principal, or other amount due
thereunder is more than 120 days past due, and (ii) shall, in any case, not
preclude its being included in the Defaulted Portion of Net Eligible
Non-Guaranteed Notes Receivable;
.L. 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;
.M. The subject Note Receivable is subject to no lien or security
interest, except for the security interest of Lender;
.N. The Loan is evidenced by legal documentation in form and substance
satisfactory to Lender; provided, that (i) legal documentation that conforms in
all material respects to forms provided by the SBA shall be presumed to be
satisfactory to Lender, and (ii) any Loan evidenced by legal documentation that
does not satisfy clause (i) above must have been reviewed by Borrower's legal
counsel for legal sufficiency and the perfection of Borrower's liens in any
collateral thereunder, with the written results of such review being
satisfactory to Lender;
.O. The Loan does not arise out of transactions with an employee, officer,
agent, director, stockholder, or Affiliate of Borrower or any Affiliate of any
thereof;
.P. With respect to the Non-Guaranteed Note Receivable, Borrower has made
or reaffirmed the warranties and representations set forth in the Loan
Agreement, at the time the most recent Schedule of Eligible Notes Receivable was
provided to Lender;
.Q. The Loan has not been turned over to the SBA or any other Person for
servicing or collection;
.R. The Loan and the respective rights of the SBA, Lender, Borrower, and
Lender's Agent with respect thereto are subject to
Schedule 1.1(a)
3
<PAGE>
the terms of the Multi-Party Agreement or such other agreement with SBA and
Borrower which Lender, in its sole discretion, deems acceptable; and
.S. The Loan is determined by Lender, in its business judgment, to
constitute adequate collateral to support the advance requested by Borrower.
Notwithstanding any other provision of this Schedule or the Loan
Agreement, Lender shall retain the right, in its sole discretion, to revise or
further restrict the criteria for advances, if any, to be made against 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.
Schedule 1.1(a)
4
<PAGE>
Schedule 1.1(b)
Net Eligible SBA Guaranteed Notes Receivable
Upon delivery to Lender of a Schedule of Eligible Notes Receivable,
Lender shall determine, in its sole discretion, which SBA Guaranteed Notes
Receivable, if any, shall be deemed to be "Net Eligible SBA Guaranteed Notes
Receivable" for purposes of determining the amounts to be advanced pursuant to
Section 2.1. In making this determination, Lender shall be generally guided by
the following requirements with respect to each SBA 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 Borrower 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 Borrower to or for the account of the Term Loan Debtor
shall be eligible under this paragraph A; provided, that at the discretion of
Lender, 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 Lender;
.B. Borrower 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, but the SBA guaranteed portion
thereof has not yet been sold by Borrower;
.C. The Loan conforms to all requirements of the SBA applicable to the
initial approval and guaranty of the SBA;
.D. No event or condition subsequent that would release the SBA from its
obligations to Borrower 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;
Schedule 1.1(b)
1
<PAGE>
.E. Not later than three (3) Business Days after the issuance of the Loan,
the original SBA 7(a) Loan Notes are in the physical possession of Lender's
Agent and are endorsed by Borrower to Lender in a manner acceptable to Lender;
.F. The Loan conforms to Borrower's written credit and underwriting
guidelines, copies of which have been previously delivered to Lender; provided,
that to the extent the original principal amount of any Note Receivable exceeds
$1,500,000, such excess shall not constitute any part of the Net Eligible SBA
Guaranteed Notes Receivable;
.G. The Term Loan Debtor is neither the United States of America nor any
subdivision, department, or agency thereof, except to the extent that Borrower
has delivered to Lender 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 Borrower gives prompt notice to Lender 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. 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;
.K. The subject Note Receivable is subject to no lien or security
interest, except for the security interest of Lender;
.L. The Loan is evidenced by legal documentation in form and substance
satisfactory to Lender; provided, that (i) legal documentation that conforms in
all material respects to forms provided by the SBA shall be presumed to be
satisfactory to Lender, and (ii) any Loan evidenced by legal documentation that
does not satisfy clause (i) above must have been reviewed by Borrower's legal
counsel for legal sufficiency and the perfection
Schedule 1.1(b)
2
<PAGE>
of Borrower's liens in any collateral thereunder, with the written results of
such review being satisfactory to Lender;
.M. The Loan does not arise out of transactions with an employee, officer,
agent, director, stockholder, or Affiliate of Borrower or any Affiliate of any
thereof;
.N. With respect to the SBA Guaranteed Note Receivable, Borrower has made
or reaffirmed the warranties and representations set forth in the Loan
Agreement, at the time the most recent Schedule of Eligible Notes Receivable was
provided to Lender;
.O. The Loan has not been turned over to the SBA or any other Person for
servicing or collection;
.P. The Loan and the respective rights of the SBA, Lender, Borrower, and
Lender's Agent with respect thereto are subject to the terms of the Multi-Party
Agreement or such other agreement with SBA and Borrower which Lender, in its
sole discretion, deems acceptable; and
.Q. The Loan is determined by Lender, in its business judgment, to
constitute adequate collateral to support the advance requested by Borrower.
Notwithstanding any other provision of this Schedule or the Loan
Agreement, Lender shall retain the right, in its sole discretion, to revise or
further restrict the criteria for advances, if any, to be made against Net
Eligible SBA 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.
Schedule 1.1(b)
3
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is made as of August
27, 1997, by BUSINESS LOAN CENTER, INC., a Delaware corporation ("Assignor"), in
favor of TRANSAMERICA BUSINESS CREDIT CORPORATION ("Lender"), a Delaware
corporation, with reference to the following facts:
RECITALS
A. Pursuant to that certain Restated and Amended Loan Agreement of
even date herewith between Assignor and Lender (as the same from time to time
may be amended, supplemented or otherwise modified, the "Loan Agreement"),
Lender has agreed, among other things, to make loans and extend other financial
accommodations to and for the direct and indirect benefit of Assignor. Unless
otherwise defined herein, capitalized terms and matters of construction defined
or established in the Loan Agreement shall be applied herein as defined or
established therein.
B. Under the terms of the Security Agreement, Assignor has granted
to Lender a lien upon certain of Assignor's assets, including the Intellectual
Property Collateral, in order to secure the prompt and complete payment and
performance of the Liabilities.
C. Assignor owns the trademarks and rights under the trademark
licenses as set forth in Schedule 1, and Assignor may hereafter own various
additional trademarks, file various additional trademark applications, or be a
party to, or an assignee of a party to, various additional trademark licenses.
Any reference to "Schedule 1" in this Agreement shall refer to Schedule 1
attached hereto, as the same may be amended from time to time, which schedule is
incorporated by reference into this Agreement.
D. The parties are entering into this Agreement, in addition to the
Security Agreement, in order to more fully describe the rights and remedies of
Lender with respect to the Intellectual Property Collateral (as defined below),
and to
<PAGE>
ensure that Lender will realize the full benefits of the rights and remedies
that the parties intend to confer upon Lender in connection with the
Intellectual Property Collateral. Nothing contained herein shall be construed to
limit the rights or remedies of Lender under the Security Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth herein,
and to induce Lender to enter into the Loan Agreement and the Security Agreement
and to make the loans and other financial accommodations provided for therein,
Assignor agrees as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings assigned to them:
(a) "Goodwill" shall mean all goodwill, trade secrets, proprietary
or confidential information, technical information, procedures, formulae,
quality control standards, designs, operating and training manuals, customer
lists, distribution agreements and general intangibles now or hereafter owned or
acquired by Assignor.
(b) "Intellectual Property Collateral" shall have the meaning given
to it in Section 2 of this Agreement.
(c) "Trademarks" shall mean all of the following:
(i) all trademarks, trade names, corporate names, business
names, trade styles, service marks, logos, other source or business
identifiers, proprietary product names or descriptions, prints and labels
on which any of the foregoing have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office
or agency of the United States, any state or territory thereof, or any
other country or any political
2
<PAGE>
subdivision thereof, including the trademarks listed in Schedule 1; and
(ii) all proceeds of the foregoing, including license
royalties and proceeds of infringement suits, the right to sue for past,
present and future infringements, all rights corresponding thereto
throughout the world and all reissues, extensions or renewals thereof.
(d) "Trademark Licenses" shall mean all rights now owned or
hereafter acquired by Assignor under any written agreement granting any right to
use any Trademark or Trademark registration, including the trademark licenses
listed in Schedule 1.
2. Grant of Security Interest. As security for payment and performance of
the Liabilities, Assignor hereby mortgages, pledges, and grants to Lender a lien
upon and security interest in, all of Assignor's right, title and interest,
whether presently existing or hereafter arising or acquired, in, to and under
the following (collectively, the "Intellectual Property Collateral"):
(a) each Trademark owned and Trademark application filed by
Assignor, including those listed in Schedule 1;
(b) each Trademark License to which Assignor is a party (or the
assignee of a party), including each Trademark License listed in Schedule 1;
(c) the Goodwill associated with: (i) each Trademark and Trademark
application, including those listed in Schedule 1; and (ii) each Trademark
licensed under any Trademark License, including those listed in Schedule 1; and
(d) all products and proceeds of the foregoing, including any claim
of Assignor against third parties for any (i) past, present or future
infringement or dilution of any Trademark or of any Trademark License, and (ii)
injury to the Goodwill associated with the foregoing.
3. Representations and Warranties. Assignor represents and warrants to
Lender that as of the date of this Agreement:
3
<PAGE>
(a) Assignor does not own any trademark that is filed or registered
with, or issued by, the United States Patent and Trademark Office or any similar
offices or agencies of the United States, any state or territory thereof, or any
other country or political subdivision other than each of the Trademarks listed
in Schedule 1.
(b) Assignor is not a party to, or an assignee of a party to, any
trademark license other than the Trademark Licenses listed in Schedule 1.
(c) Assignor does not own any trademark material to the conduct of
its business other than the Trademark registrations listed in Schedule 1.
(d) Assignor has not granted any license, right or privilege in or
to the Intellectual Property Collateral to any party, except as otherwise set
forth herein.
(e) The Trademark registrations listed in Schedule 1 have been duly
and properly issued, and are valid and enforceable.
(f) None of the Intellectual Property Collateral listed in Schedule
1 has been adjudged invalid or unenforceable, in whole or in part.
(g) Assignor (i) conducts business without infringement or claim of
infringement of any license, service mark, Trademark, trade name, or other
intellectual property right of others, and (ii) has not commenced and is not
about to commence any suit or action against others in connection with the
violation or enforcement of its rights in any of the Intellectual Property
Collateral.
(h) Assignor is and shall at all times remain the sole and exclusive
owner of the entire and unencumbered right, title and interest in and to the
Intellectual Property Collateral as listed in Schedule 1, free and clear of any
liens, charges and encumbrances, including pledges, assignments, licenses, and
covenants by Assignor not to sue third persons, except for (i) the interest of
Lender under the Loan Documents and (ii) Permitted Liens.
4
<PAGE>
(i) Assignor has the unqualified right and power to enter into this
Agreement and perform its terms and has entered and will enter into written
agreements as necessary with each of its present and future employees, agents
and consultants that will enable it to comply with the covenants herein
contained.
4. Covenants. Assignor covenants and agrees as follows:
(a) (i) Assignor shall not, either by itself or through any agent,
employee, licensee or designee, file an application for the registration of any
Intellectual Property Collateral with the United States Patent and Trademark
Office or any similar office or agency in the United States or any other country
or any political subdivision thereof without giving Lender written notice
thereof within 45 days after any such application is filed, (ii) upon issuance
of any Trademarks, Assignor shall notify Lender promptly in writing and, in any
event, within five Business Days thereafter, and (iii) upon the request of
Lender, Assignor shall execute and deliver, for filing with any such office or
agency as Lender may deem appropriate, (A) an amendment to this assignment
adding a description of such Intellectual Property Collateral to Schedule 1 and
(B) any other agreements, instruments, documents, and papers as Lender may
request to evidence Lender's lien upon and security interest in such
Intellectual Property Collateral.
(b) Subject to Section 4(a) hereof, Assignor shall take all
necessary actions to maintain and pursue each application, to obtain the
relevant registration, and to maintain the registration of all of the
Intellectual Property Collateral with the United States Patent and Trademark
Office or other appropriate filing office or agency in which registration is
necessary to protect its rights therein, including the filing of applications
for renewal, affidavits of use, affidavits of noncontestability and opposition
and interference and cancellation proceedings.
(c) In the event that any of Assignor's rights under any
Intellectual Property Collateral are infringed, misappropriated or diluted by a
third party, Assignor (i) shall notify Lender promptly after it learns thereof,
unless Assignor shall reasonably determine that such Intellectual Property
Collateral is not material to the conduct of its business, in which case
Assignor shall provide Lender with quarterly reports
5
<PAGE>
thereof within the period required for delivery of Assignor's monthly financial
statements as set forth in Section 5.1(b) of the Loan Agreement, (ii) shall
promptly sue such party for infringement, misappropriation or dilution and
recover any and all damages for such infringement, misappropriation or dilution,
unless Assignor shall reasonably determine that such Intellectual Property
Collateral is not material to the conduct of its business, and (iii) shall take
such other actions as Assignor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property Collateral.
(d) Assignor shall promptly notify Lender, in writing, of any suit,
action or proceeding brought against Assignor relating to, concerned with or
affecting the Intellectual Property Collateral or infringement of or
interference with another trademark which, if determined adversely, is likely to
have a Material Adverse Effect and shall, upon request by Lender, deliver to
Lender a copy of all pleadings, papers, orders, or decrees theretofore or
thereafter filed in any such suit, action or proceeding, and shall keep Lender
fully advised and informed, in writing, of the progress of any such suit, action
or proceeding.
(e) Assignor shall notify Lender immediately if it knows or has
reason to know (i) that any application or registration relating to any
Intellectual Property Collateral that is material to the conduct of its business
may become abandoned or dedicated, or (ii) that there has been or, in Assignor's
reasonable business judgment, likely may be an adverse determination or
development (including the institution of, or any adverse determination or
development in, any proceeding in the United States Patent and Trademark Office
or any court) regarding (A) Assignor's ownership of any Intellectual Property
Collateral that is material to the conduct of its business, (B) Assignor's right
to register such Intellectual Property Collateral, or (C) Assignor's right to
keep and maintain such Intellectual Property Collateral.
(f) Upon the written request of Lender, Assignor shall promptly and
duly execute and deliver any and all additional documents, including UCC-1
financing statements, and take such further action as Lender may reasonably
require to obtain the full benefit of this Agreement, all at the sole expense of
Assignor.
6
<PAGE>
5. Power of Attorney. Upon the occurrence and during the continuation of
an Event of Default, Assignor hereby authorizes and empowers Lender to make,
constitute and appoint any officer or agent of Lender, as Lender may select in
its exclusive discretion, as Assignor's true and lawful attorney-in-fact, with
the power to endorse Assignor's name on all applications, documents, papers and
instruments necessary for Lender (a) to use the Intellectual Property
Collateral, or (b) to grant or issue to any third party a license or, to the
extent permitted by an applicable License, a sublicense, whether general,
specific or otherwise and whether on an exclusive or nonexclusive basis, of any
Intellectual Property Collateral throughout the world on such terms and
conditions and in such manner as Lender shall, in its sole discretion,
determine, or (c) to assign, pledge, convey or otherwise transfer title in or
dispose of the Intellectual Property Collateral to any third person. Assignor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be irrevocable for the term of this
Agreement.
6. Grant of License to Use Intellectual Property Collateral. Effective
from and after an Event of Default and for the purpose of enabling Lender to
exercise rights and remedies hereunder or under the Security Agreement at such
time as Lender shall be lawfully entitled to do so, Assignor hereby grants to
Lender an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to Assignor), (a) to use, transfer, license or
sublicense any of the Intellectual Property Collateral now owned or hereafter
acquired by Assignor, and wherever the same may be located, and (b) to have
access to all media in which any of the licensed items may be recorded or stored
and to all computer and automatic machinery software and programs used for the
compilation or printout thereof.
7. Use and Protection of Intellectual Property Collateral. Notwithstanding
anything to the contrary contained herein, unless an Event of Default has
occurred and is continuing, Assignor may continue to use, enjoy and protect the
Intellectual Property Collateral in the ordinary course of its business, and
Lender shall from time to time execute and deliver, upon reasonable written
request of Assignor, any and all instruments, certificates or other documents,
in the form so requested, that in the reasonable judgment of Assignor are
necessary or appropriate to permit Assignor to continue to do so.
7
<PAGE>
8. Termination and Release. On the date on which (a) Assignor's right to
request Revolving Loans under the Loan Agreement terminates and (b) all the
Liabilities shall have been paid and satisfied in full, the rights of Lender
hereunder shall terminate and Lender shall execute and deliver to Assignor all
releases, powers of attorney and other instruments as may be necessary or proper
to terminate the Lien granted by Assignor hereunder and to revest in Assignor
its title to the Intellectual Property Collateral, subject to any disposition
thereof that may have been made by Lender pursuant hereto.
9. Incorporation of Security Agreement. Assignor hereby acknowledges and
affirms that the rights and remedies of Lender with respect to the Lien upon the
Intellectual Property Collateral made and granted hereby are further described
in the Security Agreement, the terms and provisions of which are incorporated
herein by this reference as if fully set forth herein. In the event of any
conflict between the terms hereof and the Security Agreement, the terms set
forth in the Security Agreement shall control.
IN WITNESS WHEREOF, Assignor has executed this Trademark Security
Agreement as of the date first set forth above.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
------------------------
Robert F. Tannenhauser
President
8
<PAGE>
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)
9
<PAGE>
SCHEDULE 1
U.S. TRADEMARKS
Registration No. Registration Date Service Mark
- - ---------------- ----------------- ------------
1,787,035 August 10, 1993 "Business Loan Center"
plus design
FOREIGN TRADEMARKS
NONE.
TRADEMARK LICENSES
Licensor Licensee Subject of License
- - -------- -------- ------------------
NONE.
10
REVOLVING CREDIT NOTE
$8,000,000 New York, New York
August 27, 1997
FOR VALUE RECEIVED, BUSINESS LOAN CENTER, INC., a Delaware
corporation and BLC FINANCIAL SERVICES, INC. a Delaware corporation (jointly and
severally the "Borrowers"), hereby jointly and severally promise to pay to the
order of STERLING NATIONAL BANK (the "Bank"), at its office located at 430 Park
Avenue, 4th Floor, New York, New York 10022, on the Maturity Date the lesser of
(i) the principal sum of Eight Million Dollars ($8,000,000) and (ii) the
aggregate unpaid principal amount of all Advances (as defined in the Agreement)
to the Borrowers from the Bank pursuant to Section 2.01 of the Amended and
Restated Revolving Credit Agreement dated as of August 27, 1997 as amended,
between the Borrowers and the Bank (the "Agreement"), in lawful money of the
United States of America in immediately available funds on June 30, 1998,
subject to acceleration as set forth in the Agreement and subject to extension
as set forth in the Agreement.
This Revolving Credit Note is one of the Revolving Credit Notes
referred to in the Agreement. All capitalized terms used herein and not defined
herein which are defined in the Agreement, shall have the same meaning in this
Note as in the Agreement.
The Borrowers shall pay interest on the outstanding principal
balance of this Note on a monthly basis, on the first day of each month (on the
basis of a year of 360 days consisting of twelve (12) thirty (30) day months) at
an annual rate equal to the sum of the Base Rate, as in effect from time to
time, plus 1.25%.
"Base Rate" shall mean the rate of interest publicly announced by
the Bank at its principal office from time to time as its prime rate, which rate
need not be the best rate available; any change in the Base Rate shall be
effective as of the opening of business on the date each such change is
announced. The Borrowers promise to pay interest, payable on demand, on any
overdue principal and, to the extent permitted by applicable law, overdue
interest, from the respective due dates of such amounts at a rate or rates
determined as set forth in the Agreement.
The Bank may charge any amount due under this Note to the Borrowers'
account with the Bank. Such amount shall be deemed paid out of the first
collections (other than the amounts then payable by the Bank to the SBA's
collection agent for ultimate payment to a party other than the Bank pursuant to
the Loan Documentation) in the account subsequent to the date of the charge. If
the Bank's Base Rate shall be increased, the compensation to be paid by the
Borrowers to the Bank shall be increased by 1/4 of 1% per annum for each 1/4 of
1% per annum of increase in said Base Rate. If the Bank's Base Rate shall be
decreased, the compensation to be paid to the Bank shall be reduced by 1/4 of 1%
per annum for each 1/4 of 1% per annum reduction in the said Base Rate.
The Borrowers hereby waive diligence, presentment, demand, protest
and notice of any kind whatsoever. The nonexercise by the holder hereof of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
<PAGE>
All borrowings evidenced by this Revolving Credit Note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be recorded by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof; provided, however, that the failure
by the holder to make such insertion shall not affect the joint and several
obligations of the Borrowers hereunder.
Reference is made to the Agreement, which, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events and for optional and mandatory prepayment of the
principal hereof prior to the maturity hereof, all upon the terms and conditions
therein specified. This Revolving Credit Note is secured by the Collateral
referred to in the Agreement and in the Security Agreement. This Revolving
Credit Note shall be construed in accordance with and governed by the laws of
the State of New York and applicable federal law.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
------------------------------
Robert Tannenhauser, President
BLC FINANCIAL SERVICES, INC.
By: /s/ Robert Tannenhauser
------------------------------
Robert Tannenhauser, President
-2-
<PAGE>
Schedule of Advances/Repayments
Initials of Guaranteed Amount of
Entering Portion of Principal Outstanding
Date Officer Advance* Repayment Balance
---- ----------- ---------- --------- -----------
* including accrued but unpaid outstanding interest under the Revolving Credit
Loan
-3-
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (the "Agreement") is made and entered into as
of this 27th day of August 1997, by and between Transamerica Business Credit
Corporation, having a place of business at 8750 West Bryn Mawr, Suite 720,
Chicago, Illinois 60018 ("Transamerica"), and Sterling National Bank (formerly
known as Sterling National Bank & Trust Company of New York), having a place of
business at 430 Park Avenue, 4th Floor, New York, New York 10022 ("Sterling"),
with reference to the following facts:
A. Sterling is a secured lender to Business Loan Center, Inc., a Delaware
corporation ("BLC"), BLC Financial Services, Inc., a Delaware corporation
("Parent"), and Business Loan Center, a New York general partnership
("Partnership," and collectively with BLC and Parent, the "Borrowers") pursuant
to that certain Revolving Credit Agreement dated as of December 19, 1994 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") and that certain Security Agreement dated as of December 19,
1994 (as amended, restated, supplemented or otherwise modified from time to
time, the "Security Agreement").
B. Concurrently with the execution of this Agreement, Sterling and
Transamerica have entered into that certain Partial Assignment Agreement (the
"Partial Assignment Agreement"), pursuant to which Sterling is transferring and
assigning to Transamerica a portion of Sterling's interest in the "Revolving
Credit Loan," the "Obligations," the "Multi-Party Agreement, "the "Loan
Documents" and the "Collateral" (each as defined in the Credit Agreement), and
is delegating to Transamerica a portion of its "Commitment" (as defined in the
Credit Agreement) and all of its other duties with respect to the Revolving
Credit Loan, the Obligations, the Multi-Party Agreement, the Loan Documents and
the Collateral, in each instance with respect to the "Unguaranteed Portion" of
"Eligible SBA Loans" (each as defined in the Credit Agreement.
C. Also concurrently with the execution of this Agreement, Sterling is
amending and restating the Credit Agreement, and amending the Security Agreement
and certain of the other Loan Documents as to the portion of the Revolving
Credit Loan, the Obligations, the Multi-Party Agreement, the Loan Documents and
<PAGE>
the Collateral not assigned to Transamerica under the Partial Assignment
Agreement (the "Sterling Retained Portion"), to provide for the continued
financing by Sterling of the "Guaranteed Portion" (as defined in the Credit
Agreement) of Eligible SBA Loans. (Such amended and restated agreements are
hereinafter referred to as the "Sterling Credit Agreement," the "Sterling
Security Agreement," and the "Sterling Loan Documents").
D. Also concurrently with the execution of this Agreement, Transamerica is
amending and restating the Credit Agreement, the Security Agreement, and the
other Loan Documents as to the portion of the Revolving Credit Loan, the
Obligations, the Multi-Party Agreement, the Loan Documents and the Collateral
assigned to Transamerica under the Partial Assignment Agreement (the
"Transamerica Assigned Portion"), to provide for the continued financing by
Transamerica of the Unguaranteed Portion of Eligible SBA Loans. (Such amended
and restated agreements are hereinafter referred to as the "Transamerica Loan
Agreement," the "Transamerica Security Agreement," and the "Transamerica Loan
Documents".)
E. Sterling and Transamerica desire to avoid any possible conflict in the
priority of their respective security interests arising from the execution of
the Partial Assignment Agreement, the Sterling Loan Documents and the execution
of the Transamerica Loan Documents, and the continued borrowing by Borrowers
under both.
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Sterling and Transamerica do hereby agree as follows:
1. Definitions. All capitalized terms used herein and not defined herein
which are defined in the Sterling Credit Agreement shall have the same meaning
herein as in the Sterling Credit Agreement. As used herein, the following terms
shall have the following meanings:
1.1 "Proportionately" shall mean, with respect to the application or
allocation of collections on an Eligible SBA Loan,
2
<PAGE>
other than the proceeds of sales thereof, to Sterling and Transamerica in
proportion to the Guaranteed Portion and Unguaranteed Portion, respectively, of
such Eligible SBA Loan.
1.2 "Ratably" means, at any time, with respect to the application or
allocation of any payment or proceeds of any Collateral, to Sterling and
Transamerica in proportion to the Sterling Loans and the Transamerica Loans,
respectively, then outstanding.
1.3 "Sterling Loans" shall mean all liabilities and obligations,
including principal, interest, fees, and costs, now owed or hereafter owing by
Borrowers to Sterling under the terms of the Sterling Loan Documents.
1.4 "Transamerica Loans" shall mean all liabilities and obligations,
including principal, interest, fees, and costs, now owed or hereafter owing by
Borrowers to Transamerica under the terms of the Transamerica Loan Documents.
2. Priority of Liens and Security Interests; Application of Payments.
Notwithstanding any applicable law to the contrary, whether under the Uniform
Commercial Code or otherwise, from and after the date of this Agreement, the
following priorities and allocations shall apply to the Collateral and all
proceeds thereof:
2.1 All proceeds of sale of the Guaranteed Portion of Eligible SBA
Loans shall be paid and applied first to repayment of the Sterling Loans, and
second to repayment of the Transamerica Loans.
2.2 All proceeds of sale of any Unguaranteed Portion of Eligible SBA
Loans which were part of the Guaranteed Amount at the time that Sterling made an
advance but have subsequently become a part of the Unguaranteed Amount because
of the withdrawal of the guarantee of the SBA, shall be paid and applied first
to the repayment of the Sterling Loans, and second to the repayment of the
Transamerica Loan.
2.3 All proceeds of sale of the Unguaranteed Portion of Eligible SBA
Loans shall be paid and applied first to
3
<PAGE>
repayment of the Transamerica Loans, and second to repayment of the Sterling
Loans.
2.4 All other collections on account of Eligible SBA Loans, whether
from the obligors thereunder or otherwise, shall be paid and applied
Proportionately.
2.5 All proceeds and collections from any other Collateral shall be
paid and applied Ratably.
3. Mutual Consent to Liens and Security Interests. Sterling and
Transamerica each consents to the other's liens and security interests on the
Collateral under the Transamerica Loan Documents and the Sterling Loan
Documents, and agrees that the taking or granting of such liens and security
interests does not and will not constitute an event of default under the
Sterling Loan Documents and the Transamerica Loan Documents, respectively.
Sterling will take all steps reasonably requested by Transamerica, at the cost
of Borrowers or Transamerica, to maintain the perfection of their joint security
interests in the Collateral, including the filing of UCC amendments indicating
that Transamerica is also a secured party with respect thereto.
4. Termination. This Agreement shall remain in effect so long as the
Sterling Credit Agreement and the Transamerica Loan Agreement remain in effect;
provided, that no termination shall impair any rights or priorities that are
created or acquired hereunder by Sterling or Transamerica prior to such
termination. If the financing under the Sterling Credit Agreement is terminated
for any reason, if requested by Transamerica, Sterling will assign its rights
under the Sterling Loan Documents to Transamerica on substantially the same
terms and conditions as the assignment pursuant to the Partial Assignment
Agreement, unless the financing replacing that provided under the Sterling
Credit Agreement is provided by a person or entity other than Transamerica.
5. Successors and Assigns. This Agreement shall be binding on and inure to
the benefit of the successors and assigns of Sterling and Transamerica. The
benefits of this Agreement are
4
<PAGE>
solely for Sterling and Transamerica and are not for Borrowers or their related
parties and, in particular, Sterling and Transamerica may amend, terminate, or
modify this Agreement at any time or in any respect in writing and signed by
both parties without notice to or the consent of any of the Borrowers or their
related parties. This Agreement may not be enforced by or for the benefit of any
of Borrowers and in no way shall limit the liability or obligations of the
Borrowers to Sterling or Transamerica.
6. Copies of Agreements. If so requested by the other, Sterling and
Transamerica shall each furnish to the other complete and correct copies of the
Sterling Loan Documents and the Transamerica Loan Documents, respectively, as in
effect on the date of such request.
7. Amendment of Credit Agreements. Sterling and Transamerica shall not
amend or modify the Sterling Loan Documents or the Transamerica Loan Documents
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed.
8. Notices to Borrowers. Sterling and Transamerica shall deliver to the
other copies of (i) any and all notices delivered to any of the Borrowers in
connection with any default or event of default by any Borrower that may cause
an acceleration of the Sterling Loans or the Transamerica Loans, or the
enforcement of any lien or security interest by Sterling or Transamerica in the
assets of any Borrower, and (ii) any and all notices delivered to any Borrower
in connection with the enforcement by Sterling or Transamerica of any lien or
security interest in the assets of any Borrower. Such notices shall be delivered
to Transamerica or Sterling, as the case may be, within five days of the date
such notices are delivered to any Borrower, but in no event less than three days
prior to the exercise of any remedies by such party against any Borrower as a
result of any such default or event of default.
9. Receipt of Funds or Collateral. The parties agree that
5
<PAGE>
should any of them receive any money from the sale, liquidation or the
disposition of, or as a result of its security interest in, any Collateral as to
which it does not hold pursuant to this Agreement a priority position at any
time prior to the payment in full of all the obligations owed by the Borrowers
to the party holding the first priority position, it will hold the same in trust
for the party holding the first priority position and promptly pay over the same
to the party holding a first priority position for application to the
obligations of the Borrowers owed to the party holding a first priority
position.
10. Bankruptcy Financing Issues. This Agreement shall be applicable before
and after filing of any petition by or against Borrowers under the United States
Bankruptcy Code or any other federal, state or other bankruptcy, moratorium or
other creditors' rights law and all converted or succeeding cases in respect
thereof, and all references herein to Borrowers shall be deemed to apply to a
trustee for Borrowers and Borrowers as debtor in possession and all proceeds of
Collateral between Sterling and Transamerica shall, subject to any court order
approving the financing of or use of cash collateral by Borrowers as debtor in
possession, continue to be applied after the filing thereof on the same basis
that such proceeds were to be applied prior to the date of the petition.
11. Subordination Limitation. The subordinations, agreements and
priorities set forth in this Agreement shall remain in full force and effect
regardless of whether any party hereto or in the future seeks to rescind, amend,
extend, terminate or reform, by liquidation or otherwise, its respective
agreements with the Borrowers. The parties agree that neither party shall
subordinate any security interest or any right to payment to any person without
the express prior written consent of the other party to this Agreement. The
foregoing is not intended to prohibit or restrict either party's ability to
enter into participation agreements for the respective loans to the Borrowers or
assign part or all of the respective loans and collateral as long as the rights
of such participants and holders are subject to the terms and the provisions of
this Agreement.
6
<PAGE>
12. Notices. All notices relating to this Agreement shall be sent by first
class certified mail, postage prepaid, and notice shall be deemed to have been
given upon receipt. Notices to Sterling shall be addressed as follows:
Sterling National Bank
430 Park Avenue, 4th Floor
New York, New York 10022
Attn.: Leonard Rudolph
and to counsel at:
Baer Marks & Upham, LLP
805 Third Avenue
New York, New York 10022
Attn.: Steven S. Pretsfelder, Esq.
and notices to Transamerica shall be addressed as follows:
Transamerica Business Credit Corporation
8750 West Bryn Mawr, Suite 720
Chicago, Illinois 60631
Attn.: Account Executive - BLC
and to counsel at:
Murphy, Weir & Butler
101 California Street, 39th floor
San Francisco, California 94111
Attn.: Hill Blackett, III, Esq.
or to such other person or at such other address as either party may from time
to time specify in writing.
13. Entire Agreement. This Agreement and the Partial Assignment Agreement
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
7
<PAGE>
agreements between the parties.
14. APPLICABLE LAW; CONSENT TO JURISDICTION AND VENUE. THIS AGREEMENT WILL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. The parties hereto
irrevocably agree that any suit, action or other proceeding arising out of this
Agreement shall be brought only in the courts of the State of New York or the
courts of the United States located within the State of New York, in each case
in the county of New York, consent and submit to the exclusive jurisdiction of
each such court in any such suit, action or proceeding and waive any objection
which they, or any of them, may have to personal jurisdiction or the laying of
venue of any such suit, action or proceeding in any such courts and agree not to
seek to change venue.
15. 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, STERLING AND TRANSAMERICA 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
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS
CONTEMPLATED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. STERLING
AND TRANSAMERICA 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. STERLING AND TRANSAMERICA FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
8
<PAGE>
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 OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
16. Counterparts. This Agreement and any amendments, waivers, consents, or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, will be deemed an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
STERLING NATIONAL BANK
By: /s/ Leonard Rudolph
------------------------
Leonard Rudolph
Executive Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Sam V. LoBosco
------------------------
Sam V. LoBosco
Vice President - Credit
9
<PAGE>
ACKNOWLEDGEMENT
Each of the undersigned Borrowers hereby acknowledges and consents
to the terms of the foregoing Intercreditor Agreement and confirms that it will
make no payments and take no other actions contrary to the terms of such
Intercreditor Agreement.
Dated:August 27, 1997 BUSINESS LOAN CENTER, INC.
By: /s/ Jennifer Napier
--------------------------
Jennifer Napier
Chief Financial Officer
BLC FINANCIAL SERVICES, INC.
By: /s/ Robert F. Tannenhauser
--------------------------
Robert F. Tannenhauser
President
BUSINESS LOAN CENTER
By: Business Loan Center, Inc.,
a general partner
By: /s/ Jennifer Napier
-----------------------
Jennifer Napier
Chief Financial Officer
10
<PAGE>
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
11
<PAGE>
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)
12
To date, the following were the registrant's subsidiaries, other than
subsidiaries that, if considered in the aggregate as a single subsidiary would
not constitute a significant subsidiary at such date:
Jurisdiction
of
Name of Subsidiary Incorporation
------------------ -------------
Business Loan Center, Inc. Delaware
BLC Capital Corporation Delaware
BLC Financial Network, Inc. Delaware
BLC Financial Network of Florida, Inc.(1) Delaware
BLC Financial Network of Mid-America(2) Kansas
- - ----------
(1) Incorporated on July 10, 1996 as a wholly owned subsidiary of BLC
Financial Network, Inc.
(2) Incorporated on October 11, 1996 as a wholly owned subsidiary of BLC
Financial Network, Inc.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 803,000
<SECURITIES> 0
<RECEIVABLES> 10,740,000
<ALLOWANCES> 901,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 555,000
<DEPRECIATION> 211,000
<TOTAL-ASSETS> 20,086,000
<CURRENT-LIABILITIES> 12,896,000
<BONDS> 0
0
0
<COMMON> 173,000
<OTHER-SE> 7,017,000
<TOTAL-LIABILITY-AND-EQUITY> 20,086,000
<SALES> 0
<TOTAL-REVENUES> 7,168,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,442,000
<LOSS-PROVISION> 74,000
<INTEREST-EXPENSE> 975,000
<INCOME-PRETAX> 1,675,000
<INCOME-TAX> (27,000)
<INCOME-CONTINUING> 1,702,000
<DISCONTINUED> 0
<EXTRAORDINARY> 245,000
<CHANGES> 0
<NET-INCOME> 1,947,000
<EPS-PRIMARY> 0.11
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