SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1998 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 001-14065
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. Goldstein
Business Loan Center, Inc.
645 Madison Avenue, 18th Floor, New York, NY 10022-1010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (212) 751-5626
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
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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 |_|
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 September 8, 1998, there were outstanding 19,918,452 shares of
the Registrant's Common Stock ("Common Stock"), $.01 par value per share. The
aggregate market value as of September 8, 1998, of the shares of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $33,941,000.
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 of the Company", "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, selling 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").
In addition, the Company recently qualified as a participating
lender in the United
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States Department of Agriculture (the "USDA") Business and Industry Guaranteed
Loan Program (the "B&I Program"), through its wholly owned subsidiary BLC
Commercial Capital Corporation ("BLC Comm Cap Corp"). The B&I Program was
designed to create jobs and stimulate rural economies by providing financial
backing for rural businesses.
The Company originally incorporated in Texas on October 30, 1973
under the name Crawford Energy, Inc., and was reincorporated in Delaware on
August 10, 1990. As of April 30, 1998, the Company became listed on the American
Stock Exchange (AMEX), and prior to that date the Company was listed on the OTC
Bulletin Board.
Organizational Structure
The Company has seven wholly owned subsidiaries: Business Loan
Center, a small business lending company which participates in the SBA 7(a)
Guaranteed Loan Program, BLC Comm Cap Corp., a lending company which
participates in the United States Department of Agriculture Business & Industry
Guaranteed Loan Program, BLC Cap Corp, a lending company which generates loans
that which may exceed the SBA's maximum guaranteed portion, Business Loan Center
Financial Corporation, holder of the Class B Certificates issued in connection
with a securitization consummated by Business Loan Center, BLC Financial Network
("BLC Network"), a loan origination company , BLC Financial Network of
Mid-America ("BLC Network Mid-America"), a loan origination company, and BLC
Financial Network of Florida ("BLC Network Florida"), a loan origination
company.
Loan Production Subsidiaries . BLC Network, BLC Mid-America and BLC
Florida are loan production subsidiaries formed to coordinate and facilitate
loan origination activities for Business Loan Center and BLC Comm Cap Corp., and
BLC Capital Corp. BLC Financial Network is headquartered in Richmond Virginia
and has two satellite offices in Indianapolis, Indiana and Annandale, Virginia
(near Washington D.C.), while BLC Mid-America is headquartered in Wichita,
Kansas and has satellite offices in Plano, Texas, Seattle, Washington and
Albuquerque, New Mexico. BLC Florida is headquartered in Panama City, Florida
and has satellite offices in Baton Rouge, Louisiana as well as Orlando, Florida.
Business Loan Center, Inc.
Background. Business Loan Center, a Small Business Lending Company,
(as defined in and under the Small Business Administration Act (the "SBA Act"),
is authorized to originate, sell, and service loans to small businesses under
the SBA 7(a) Program.
Business Loan Center's principal office is located at 645 Madison
Avenue, New York, New York, with branch offices in Richmond and Annandale,
Virginia (near Washington D.C.), Indianapolis, Indiana, Panama City Beach and
Orlando, Florida, Baton Rouge, Louisiana, Wichita, Kansas, Plano, Texas,
Albuquerque, New Mexico, Seattle, Washington and Burlington, Vermont.
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The SBA (7a) Program - The SBA offers financial assistance to
eligible small businesses in the form of partial government guarantees on loans
made to such businesses by 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
and must demonstrate 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 buildings may have
maturities up 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 the maximum interest rates established by the SBA.
Loans with maturities of seven years or greater may bear a maximum interest rate
not exceeding 2-3/4% over the base rate (discussed below). 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 are adjusted 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 10 years. In consideration for
the issuance of its guarantee, the SBA charges participating lenders a fee
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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,
known as "General Participation", each loan made by a participating lender under
the Guaranteed Loan Program must be reviewed and approved by the SBA.
The second level of lender participation, known as "Certified Lender
Participation," is similar to the General Participation in that the SBA must
review a 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 Certified Lender status in New York, New
York and Melville, New York.
Under the third level of lender participation, known as the
"Preferred Lender Program," 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
the following 39 districts: Birmingham, Alabama, Little Rock, Arkansas, Denver,
Colorado, South and North Florida, Atlanta, Georgia, Chicago and Springfield,
Illinois, Indianapolis, Indiana, Cedar Rapids and Des Moines, Iowa, Kansas City
and Wichita, Kansas, Louisville, Kentucky, New Orleans, Louisiana, Baltimore,
Maryland, Springfield and St. Louis, Missouri, Omaha, Nebraska, Las Vegas,
Nevada, Newark, New Jersey, Albuquerque, New Mexico, Rochester, Elmira and
Syracuse, New York, Oklahoma City, Oklahoma, Pittsburgh, Pennsylvania, Columbia,
South Carolina, Nashville, Tennessee, Richmond Virginia, Washington D.C.,
Clarksburg, West Virginia and seven districts in Texas including Houston, and
Dallas.
Sales in the Secondary Market. The SBA-guaranteed portions of loans
are sold by Business Loan Center, on a non-recourse basis, in the secondary
market. Broker-dealer firms establish a secondary market by purchasing the
SBA-guaranteed portions of the loans from participating lenders (including
Business Loan Center), and then reselling them, individually or in pools, to
banks, pension funds, institutions, or individual investors. Immediately prior
to or upon closing a loan, Business Loan Center generally will solicit bids from
several broker-dealers active in the secondary market. 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. Business
Loan Center's ability to sell in the secondary market is not dependent on any
one or several of such broker-dealers because there are numerous broker-dealers
in the secondary market. During the fiscal year ended June 30, 1998 ("Fiscal
Year 1998"), not more than 25% of Business Loan Center's loans were sold to any
one broker-dealer. The SBA facilitates the existence of this secondary market by
maintaining a Fiscal and Transfer Agent (the "FTA") which maintains
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a central registry of all such loans sold in the secondary market and issues
certificates representing fractional or undivided interests in 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, the rate of return as compared to other investment paper backed by the
United States Government and the service fees to be received by Business Loan
Center from the purchaser. Under the SBA Act, Business Loan Center, is required
to pay to the SBA one-half of any premium in excess of 10% on the sale of the
SBA-guaranteed portion of any 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 1998, Business Loan Center obtained an average premium of
approximately 10% on the sale of the SBA-guaranteed portion of the loans sold in
the secondary market. 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. 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.
After Business Loan Center sells the SBA-guaranteed portion of a
loan in the secondary market, Business Loan Center continues to service the loan
for an annual fee. Although the fee is subject to negotiation, the regulatory
minimum fee which must be received by Business Loan Center for servicing any
loan equals 1% per year of the principal amount of the SBA-guaranteed portion of
such loan. Participating lenders under the Guaranteed Loan Program 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 any
loan closed subsequent to October 12, 1995. Business Loan Center has obtained
net servicing fees (after deducting the fee paid to the SBA) ranging from 1% to
2.62%, with an average service fee for loans originated during Fiscal Year 1998
of 2.24%.
In May 1996, Business Loan Center sold participations in the
unguaranteed portion of certain of its loans totaling $6,384,000. Pursuant to
the loan participation agreement entered into with the purchaser, Business Loan
Center, at its option, in respect to loans which are delinquent for more than 60
days is required to either (i) repurchase said loan or (ii) substitute interest
in another loan of equal value. During Fiscal Year 1998, seven loans with an
aggregate value of approximately $362,000 were repurchased. See Management's
Discussion and Analysis of Financial Conditions and Results of Operations -
Liquidity and Capital Resources.
Revenues. Business Loan Center derives its revenues primarily from
three sources: (i) interest earned on loans retained for its own account; (ii)
gains from the sale of the SBA-guaranteed portion and unguaranteed portion of
loans; and (iii) servicing fees paid and interest
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earned relating to 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. See Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Results of Operations.
Loan Portfolio. At June 30, 1998, Business Loan Center serviced a
loan portfolio consisting of 357 loans, in the approximate aggregate principal
amount of $169,039,000. Of this amount, approximately $124,291,000 (74%)
consisted of the SBA-guaranteed portion of these loans, of which approximately
$14,667,000 (9%) 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 $44,748,000 (26%) consisted of the unguaranteed portion of loans,
while approximately $20,911,000 (12%) in unguaranteed loans were retained by
Business Loan Center for its own account. The original principal amounts of
these loans range from $20,000 to $1,556,000 and the contractual maturities
range from seven years to 25 years. At June 30, 1998, Business Loan Center's
portfolio had a weighted average maturity of approximately 21 years. The
interest rates on these loans are adjustable and substantially all are 2.75%
over the prime rate.
Of the $169,039,000 of loans serviced by Business Loan Center's
portfolio at June 30, 1998, delinquent loans accounted for approximately
$2,630,000 of which, approximately $362,000 represented Business Loan Center's
proportionate share. Of Business Loan Center's share, delinquencies between 60
and 90 days totaled approximately $12,000 and delinquencies greater than 90 days
totaled approximately $350,000. See Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Results of Operations.
Loans in liquidation serviced by Business Loan Center's portfolio at
June 30, 1998, accounted for approximately $9,222,000, of which, approximately
$1,809,000 represented Business Loan Center's proportionate share.
An estimation of the liquidated value of real estate collateral and
other collateral securing loans in liquidation is performed regularly based on
recent evaluations of collateral. All loans in liquidation are reviewed on a
weekly basis to determine changes in status. Of the loans in liquidation,
approximately 19% were in the restaurant industry, 13% were in the entertainment
industry and 10% were in the real estate industry. At June 30, 1998, Business
Loan Center had allowances for credit loss and estimated future losses on loans
in liquidation of approximately $309,000 on its financial statements which
incorporates management's assessment of these 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 1998, Business
Loan Center collected approximately $11,053,000 of loan prepayments of which
approximately $904,000 represented Business Loan Center's proportionate share.
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At June 30, 1998, 43 proposed loans in the approximate aggregate
principal amount of $31,808,000 had received both Business Loan Center and SBA
approval and were awaiting closing. In addition, 41 proposed loans in the
approximate aggregate principal amount of $30,308,000 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. See Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Results of Operations.
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 federal 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 budget for the Federal Fiscal Year 1998 is $9.2 billion under the Guaranteed
Loan Program in which Business Loan Center participates. The actual usage of
funds for Federal Fiscal Year 1997 was $9.5 billion as compared to $7.7 and $7.8
billion for Federal Fiscal Years 1996 and 1995, respectively. Beginning in
Federal Fiscal Year 1999, the Administration has requested a $10 billion program
level for participants in the Guaranteed Loan Program.
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 violation of law or SBA regulations or
violation of any agreement with the SBA. Management of Business Loan Center has
no reason to believe that its license to participate in the program will be
terminated.
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. 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 and Annandale Virginia, (near Washington D.C.), Albuquerque, New
Mexico, Baton Rouge, Louisiana, Plano, Texas, Seattle, Washington, Indianapolis,
Indiana 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"),
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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). Business Loan Center
believes it is in material compliance with all applicable rules and regulations.
Competition. The commercial lending business is highly competitive
and the Company competes with many banks and other non-bank lending
institutions, most of which are substantially larger, and have greater financial
resources and name recognition. There are currently twelve active and licensed
non-bank lenders, which compete within the Guaranteed Loan Program lending
market. Additionally, certain banks and non-bank lending institutions which
participate in the Guaranteed Loan Program have also been designated as
"Preferred" or Certified Lenders". There is no assurance that the Company will
be able to compete successfully in the future or that competition will not have
a material adverse effect on the Company's business, financial condition and
results of operations.
Seasonality. Business Loan Center's business is not seasonal.
Acquisitions
EBLC, Inc. 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., an unaffiliated New York corporation ("BLC-New
York"). On September 16, 1996, Business Loan Center purchased the minority
interest of BLC-GP for $380,000. Prior to that purchase, the Company owned the
existing 88% of the partnership. In February 1997, BLC-GP transferred its assets
and liabilities to Business Loan Center, a wholly owned subsidiary of the
Company.
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, an employee of BLC Network and a former Vice President and
former Director of the Company.
Loan Production Subsidiaries
The Company, recognizing the need to centralize its loan
originations on a regional basis established three regional loan production
subsidiaries to coordinate loan originations and to process applications
received from Business Loan Center's network of independent loan referral
sources. During Fiscal Year 1998, Business Loan Center generated more than 87%
of its loan volume directly and indirectly, through loan referral sources
constituting the representative network.
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Generally, a loan referral source is compensated after the closing
of a loan. During the current fiscal year no loan sources accounted for more
than 15% of Business Loan Center's volume.
BLC Financial Network, Inc., a Delaware corporation ("BLC Network"),
is a wholly-owned loan production subsidiary of the Company. 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 with satellite offices in Annandale,
Virginia (near Washington, D.C.) and Indianapolis, Indiana.
BLC Financial Network of Florida, Inc., a Florida corporation ("BLC
Network - Florida"), is a wholly-owned loan production subsidiary of the
Company. 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 offices in Orlando, Florida and Baton
Rouge, Louisiana.
BLC Financial Network of Mid-America, Inc., a Kansas corporation
("BLC Network - Mid-America"), is a wholly-owned loan production subsidiary of
the Company. 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 and has satellite offices in Plano, Texas, Albuquerque, New Mexico and
Seattle, Washington.
BLC Commercial Capital Corporation
Background. BLC Commercial Capital Corporation, a Florida
corporation ("BLC Comm Cap Corp."), is a wholly owned subsidiary of the Company.
On November, 4, 1997 BLC Comm Cap Corp was granted the authority to participate
in the United States Department of Agriculture ("USDA") Business & Industry
Guaranteed Loan Program (the "B&I Program").
The B&I Program. The B&I Program was designed to create jobs and
stimulate rural economies by providing financial backing for rural businesses.
The assistance is available in rural areas, which include all areas other than
cities of more than 50,000 people and their immediately adjacent urbanized
fringe areas. The program provides for guarantees by the USDA of 80% for loan
amounts up to $5,000,000 and 70% for loans between $5,000,000 and $10,000,000.
Interest rates are negotiated between the borrower, the lender and the USDA, but
typically range between 1% and 2% above the prime 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. Each borrower pays a
guarantee fee equal to 2% of the guaranteed amount of its loan to the USDA. The
participating lenders may, in turn, charge this fee to the borrower upon initial
disbursement of the loan.
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Loans typically have maturities between seven and 30 years depending
upon the use of proceeds. The types of businesses eligible are less restrictive
than the SBA (7a) Program and there is an active secondary market for the
guaranteed portion of the loan with premiums comparable to those received by
Business Loan Center in the SBA (7a) Program. This business is relatively new to
the Company and therefore, the Company cannot accurately project future
business. The Company believes, however, that it can generate significant volume
through its origination offices and independent loan originators, which are
located near rural areas.
Revenues. BLC Comm Cap Corp. derives its revenues primarily from
three sources: (i) interest earned on loans retained for its own account; (ii)
gain on the sale of the USDA-guaranteed portion of the loans; and (iii)
servicing fees paid on the USDA-guaranteed portion of loans sold in the
secondary market. See Management's Discussion and Analysis - Results of
Operations.
B&I Program Loan Portfolio. At June 30, 1998, BLC Comm Cap Corp.
serviced a loan portfolio consisting of two loans, in the approximate aggregate
principal amount of $6,850,000. Of this amount, approximately $5,480,000
consisted of the USDA guaranteed portion of the loans and approximately
$1,370,000 consisted of the unguaranteed portion of the loans. BLC Comm Cap
Corp. retained the entire unguaranteed $1,370,000 for its own account. The
original principal amounts of these loans was $4,800,000 and $2,050,000 and the
maturities were 15 and 30 years, respectively. The interest rates on these loans
are adjustable and were 2% and 2.25% over prime, respectively.
At June 30, 1998, neither of these loans were delinquent or in
liquidation. See Management's Discussion and Analysis - Results of Operations.
At June 30, 1998, one loan for $5,000,000 had received both BLC Comm
Cap Corp. and USDA approval and was awaiting closing. In addition, seven
proposed loans in the approximate aggregate principal amount of $18,710,000 were
approved by BLC Comm Cap Corp. and awaiting submission to the USDA or awaiting
USDA approval. BLC Comm Cap Corp.'s existing capital resources should enable it
to fund each of these loans.
Government Regulation. The level of B&I funding for the B&I Program
is subject to the federal budgeting process for each Federal Fiscal Year.
Accordingly, the availability of funds for USDA guarantees under the B&I Program
could increase or decrease each year. The federal budget for Federal Year 1998
is $1 billion.
Seasonality - BLC Commercial Capital Corp's business is not
seasonal.
BLC Capital Corporation
Background. BLC Capital Corporation, a Delaware corporation ("BLC
Cap Corp."), is a wholly-owned subsidiary of the Company whose primary function
is to complement the
12
<PAGE>
Guaranteed Loan Program by originating, underwriting, closing and servicing
loans which may exceed the SBA's maximum guaranteed portion. In addition, BLC
Cap Corp.'s lending program makes loans the proceeds of which are used for
purposes that are not permitted under the Guaranteed Loan Program, such as
acquisition of rental real estate.
Piggyback Loan Program. BLC Cap Corp. has been originating first
mortgage loans in conjunction with its SBA loans. These loans are being funded
by various financial institutions from which BLC Cap Corp. receives a fee. In
addition, the Company has negotiated an agreement with a major financial
institution to fund qualified piggyback loans originated by the Company from
which BLC Cap Corp receives a fee for both originating and servicing these
loans.
Revenues. BLC Cap Corp. derives its revenue from servicing fees on
those loans in its portfolio that it services, as well as from commissions on
loan referrals to outside financial institutions. The referral fees received on
these loans ranges from 3% to 8% of the loan amount and totaled $867,000 for the
Fiscal Year ended June 30, 1998. See Management's Discussion and Analysis -
Results of Operations.
Loan Portfolio - At June 30, 1998, BLC Cap Corp. through its
Piggyback Loan Program originated 23 loans in the amount of $15,575,000, while
it serviced 21 loans, in the approximate aggregate principal amount of
$14,665,000. See Management's Discussion and Analysis - Liquidity and Capital
Resources.
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 and BLC Comm Cap Corp., 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 and
BLC Comm Cap Corp. In such an event, each of Business Loan Center and BLC Comm
Cap Corp. 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 and BLC Comm
Cap Corp.. To date, neither Business Loan Center nor BLC Comm Cap Corp. has 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 and BLC Comm Cap Corp. will obtain an environmental
evaluation to ascertain the existence of toxic wastes prior to making the loan.
Employees
The Company, through its subsidiaries, currently employs 60
full-time and four
13
<PAGE>
part-time employees. Of these employees, 14 are employed in executive or
managerial capacities, 25 are employed in administrative or clerical capacities,
six are employed in loan servicing capacities and 19 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
for all of its general business purposes in New York, New York, Burlington,
Vermont, Richmond and Annandale, Virginia (near Washington, D.C.), Panama City
Beach and Orlando, Florida, Wichita, Kansas, Indianapolis, Indiana, Albuquerque,
New Mexico, Plano, Texas and Baton Rouge, Louisiana. See "Consolidated Financial
Statements - Note 8".
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
New York, Richmond, Wichita, Kansas Panama City Orlando, Florida Burlington,
New York Virginia Beach, Florida Vermont
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Approximate
Square Footage 5,900 7,100 3,000 2,400 300 200
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Indianapolis, Annandale, Virginia (near Albuquerque, Plano, Texas Baton Rouge,
Indiana Washington, D.C.) New Mexico Louisiana
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Approximate
Square Footage 1,300 1,000 800 600 200
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Item 3. LEGAL PROCEEDINGS.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 8, 1998, the Company held its Annual Meeting of Stockholders.
The total number of shares voted at the meeting were 13,709,766, including 312
proxies. At the meeting, stockholders voted on and approved: (1) the election of
three directors of the Company (Jerome B. Alenick, Robert W. D'Loren and Robert
W. Wien); (2) the adoption of amendments to the Amended 1995 Management
Incentive Plan (the "Plan") (i) to increase the number of shares of Common Stock
that may be subject to Options (as defined in the Plan) granted under the Plan
and (ii) to remove the current restrictions in the Plan limiting the number of
shares of Common Stock subject to Options that may be granted to any individual
employee under the Plan during any three calendar-year period; (3) to approve
adoption of the 1998 BLC Financial Services, Inc. Employee Stock Purchase Plan;
and (4) the ratification of the appointment of Richard A. Eisner & Company, LLP
as auditors of the Company for the fiscal year ending on June 30, 1998.
14
<PAGE>
Votes on the previous issues were cast in the following manner:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Issue For Against Abstain Not Voted
----- --- ------- ------- ---------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1.
Election of Directors
Jerome B. Alenick 13,705,692 4,074
Robert W. D'Loren 13,706,632 3,134
Robert W. Wien 13,706,632 3,134
- --------------------------------------------------------------------------------------------
2. Amendment to Amended 1995
Management Incentive Plan 11,810,912 110,133 27,542 1,761,179
- --------------------------------------------------------------------------------------------
3. Adoption of 1998 BLC Financial
Services Inc. Employee Stock
Purchase Plan 11,852,640 69,244 26,703 1,761,179
- --------------------------------------------------------------------------------------------
4. Ratification of Auditors 13,683,382 2,116 24,268
- --------------------------------------------------------------------------------------------
</TABLE>
The following directors were not up for re-election at the meeting and they
continued in office after the meeting: Robert F. Tannenhauser, Peter Blanck,
Irwin Redlener, M.D., Kenneth S. Schwartz, M.D.
15
<PAGE>
Part II.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
On April 30, 1998, the Company's Common Stock began trading on the
American Stock Exchange. Prior to that date, the Company's Common Stock was
listed for trading on the over-the-counter market through the OTC Electronic
Bulletin Board. The following table lists the high and low bid information, as
reported by the American Stock Exchange from April 30, 1998 through June 30,
1998, and prior to that date, the range of high and low bid information as
reported by the National Quotation Bureau from January 1, 1996 through March 31,
1998.
High Bid Low Bid
-------- -------
1998
Second Quarter (AMEX) 5.25 3.0625
First Quarter 3.0625 1.375
1997
Fourth Quarter 1.625 .71875
Third Quarter .84375 .71875
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
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 September 8, 1998, there were approximately 913 holders of
record of the Common Stock of the Company.
16
<PAGE>
Item 6. SELECTED FINANCIAL DATA.
The following selected financial data should be read in conjunction
with the financial statements included in this Report.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------------------
1998 1997 1996 (1) 1995 (1) 1994
---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Total revenues $15,729,000 $ 7,168,000 $ 4,997,000 $ 2,536,000 $ 1,571,000
Income before
extraordinary items 3,226,000 1,702,000 553,000 142,000 150,000
Extraordinary item -- 245,000 91,000 -- 25,000
Net Income 3,226,000 1,947,000 644,000 142,000 175,000
Income per share (basic)
before extraordinary item .18 .10 .04 .01 .02
Income per share
from extraordinary item -- .01 .01 -- --
Net income per
share (basic) .18 .11 .05 .01 .02
Net income per share .15 .11 .04 .01 .02
(diluted)
As of June 30:
Total assets $53,281,000 $20,086,000 $10,983,000 $10,535,000 $ 6,691,000
Total liabilities 39,012,000 12,896,000 5,657,000 7,274,000 4,277,000
Shareholders' equity 14,269,000 7,190,000 4,601,000 2,608,000 2,414,000
Shareholders' equity
per share .72 .41 .27 .23 .21
</TABLE>
(1) Restated. See footnotes to "Consolidated Financial Statements."
17
<PAGE>
Selected Quarterly Financial Data (Unaudited)
Summarized Quarterly data was as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
<S> <C> <C> <C> <C>
Year ended June 30, 1998
Revenue $ 2,381,000 $ 5,020,000 $ 3,436,000 $ 4,892,000
Expenses 2,005,000 2,755,000 2,476,000 3,156,000
Provision for Income Taxes 151,000 820,000 358,000 782,000
Net Earnings before extraordinary items 225,000 1,445,000 602,000 954,000
Extraordinary items -- -- -- --
Net Earnings 225,000 1,445,000 602,000 954,000
Earnings Per Share
Basic:
Income before extraordinary items .01 .08 .03 .06
Extraordinary items -- -- -- --
Net income .01 .08 .03 .06
Diluted:
Income before extraordinary items .01 .07 .03 .04
Extraordinary items -- -- -- --
Net income .01 .07 .03 .04
Year ended June 30, 1997
Revenue $ 1,170,000 $ 1,196,000 $ 1,708,000 $ 3,094,000
Expenses 1,022,000 1,142,000 1,480,000 1,847,000
Equity of minority interest in Income of Subsidiaries -- -- -- 2,000
Provision for Income Taxes 35,000 (17,000) 40,000 (85,000)
Net Earnings before extraordinary items 113,000 71,000 188,000 1,330,000
Extraordinary items -- 245,000 -- --
Net Earnings 113,000 316,000 188,000 1,330,000
Earnings Per Share
Basic:
Income before extraordinary items .01 -- .01 .08
Extraordinary items -- .01 -- --
Net income .01 .01 .01 .08
Diluted:
Income before extraordinary items .01 -- .01 .08
Extraordinary items -- .01 -- --
Net income .01 .01 .01 .08
</TABLE>
18
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following discussion and analysis should be read in conjunction
with the Company's financial statements included in this report 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
The Company actively engages in commercial lending through Business
Loan Center, BLC Comm Cap Corp. and BLC Cap Corp., and therefore, the Company
has a constant need for debt financing. Cash used by the Company and its
subsidiaries 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 the Company's cash requirements is derived
from existing capital and short and long-term borrowing.
SBA 7(a) Program. During Fiscal 1998, the Company entered into an
agreement with Transamerica Business Credit Corporation ("Transamerica")
providing for a $35,000,000 line of credit and terminated its agreement with its
existing lender, Sterling National Bank & Trust Company of New York.
On December 19, 1997, the Company, through Business Loan Center,
successfully completed the securitization and sale of a portion of its
unguaranteed SBA loan portfolio through the issuance of its SBA Loan-Backed
Adjustable Rate Class A Certificates 1997-1 in the approximate aggregate
principal amount of $18,000,000. The Class A Certificates received an 'AAA'
("Triple A") rating from Duff & Phelps Credit Rating Company. The Class B
Certificates in the approximate amount of $1,800,000 were acquired by Business
Loan Center Financial Corporation., also a wholly-owned subsidiary of the
Company. The Class A and Class B Certificates were initially collateralized by
the unguaranteed portion of SBA loans in the approximate aggregate principal
amount of $16,300,000 and a cash pre-funding account of $3,500,000.
In February 1998, the Company, through Business Loan Center
transferred approximately $3,500,000 of the unguaranteed portion of its SBA
loans in exchange for a like amount of cash from the pre-funding account.
The Class A and B Certificate holders received annual interest at
the rates of 6.6% and 7.0%, respectively, during the initial accrual period.
Thereafter, the Class A Certificates holders are entitled to receive a per annum
interest rate equal to the prime rate less 190 basis points and the Class B
Certificate holder is entitled to receive annual interest at the rate equal to
the prime rate less 150 basis points. The applicable interest rate earned on the
Class A and Class B Certificates will be adjusted on the first business day of
every January, April, July and August
19
<PAGE>
using the lowest prime lending rate published in the Eastern edition of The Wall
Street Journal on the applicable adjustment date. Principal payments on the SBA
loans are passed through to the holder of the Certificates on a pro-rata basis
with the holders of the guaranteed portion of the loans.
The 'AAA' (Triple A) rating on the senior Certificates was based on
an analysis of the legal and financial structure of the transaction. Also
considered are the characteristics of the pools of loans being purchased by the
trust, the delinquency and default history of the portfolios of SBA loans of
Business Loan Center, as well as the Small Business Administration. The loan
origination and servicing policies and procedures of Business Loan Center.
Aggregate credit enhancement of 12% on the date of issuance and 15% thereafter
are included in the rating consideration. The initial credit enhancement is
comprised of the 9% subordinated Class B Certificates and a cash reserve equal
to 3% of the outstanding aggregate principal balance of the unguaranteed
interest of the loans on the date of issuance. Thereafter, the cash reserves
will be funded with the excess spread. The excess spread generally consists of
the excess of the interest received from the borrowers on the loans sold and the
interest paid to the holders of the Certificates, after deducting the 1% service
fee retained by Business Loan Center.
In addition, the Company raised through a private placement,
approximately $3,328,000 in convertible debentures during Fiscal Year 1998. The
debentures are convertible into common stock at approximately $2.00 per share,
pay interest at a rate of 9-1/4% per annum and have a four year term. During the
year, the Company also received approximately $1,288,000 through the exercise of
previously issued warrants to purchase Common Stock of the Company, and issued
another $189,000 of warrants in connection with professional services rendered.
At June 30, 1998, sales of the SBA-guaranteed portions of loans in
the aggregate amount of $7,504,000 were pending settlement in the secondary
market, while $7,160,000 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 a source of revenues. Subsequent to June 30, 1998, Business Loan
Center received net cash proceeds of approximately $750,000 from those loans
pending settlement at June 30, 1998.
Management believes that the credit facility with Transamerica,
along with the anticipated proceeds from sales of guaranteed loans in the
secondary market, the proceeds from periodic securitization of 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, should be sufficient to meet its future financial obligations and
projected capital requirements. Management believes that Business Loan Center
should be able to originate and fund at least $100,000,000 in new loans during
Fiscal Year 1999. However, there can be no assurance Business Loan Center will
be able to achieve this level.
The B&I Program. In May, 1998 BLC Comm Cap Corp., entered into an
20
<PAGE>
agreement with Transamerica providing for a $15,000,000 a line of credit to fund
the guaranteed and unguaranteed portions the loans made pursuant to the B&I
Program.
Management believes that BLC Comm Cap Corp. should be able to
originate and fund at least $20,000,000 in new loans during Fiscal Year 1999.
However, there can be no assurance BLC Comm Cap Corp. will be able to achieve
this level.
Year 2000 Issues
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
year 2000, these date code fields will need to accept four digit entries to
distinguish the twenty-first century dates. The Company uses software and
related technologies that will be affected by the Year 2000 problem. The Company
began the process of identifying the changes required to their computer programs
and hardware during Fiscal Year 1997. The Company believes that all of its major
programs and hardware are Year 2000 compliant. The Company believes that it will
not incur any significant costs between now and January 1, 2000 to resolve Year
2000 issues. However, there can be no assurance that other companies' computer
systems and applications on which the Company's operations rely will be timely
converted, or that any such failure to convert by another company would not have
a material adverse effect on the Company's systems and operations. Furthermore,
there can be no assurances that the software that the Company uses which has
been designated to be Year 2000 compliant contains all necessary date code
changes.
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 Programs have assisted participating lenders
in providing record amounts of guaranteed loans over the past three federal
fiscal years. Business Loan Center and BLC Comm Cap Corp. have contributed to
the success of the Guaranteed Loan Programs by originating loans in the
principal amount of approximately $93,854,000, for Fiscal Year 1998, resulting
in a serviced loan portfolio approximating $175,889,000. By establishing an
effective loan origination network spanning the United States, Management
believes that the Company has positioned itself to achieve ongoing growth, both
with respect to the amount of loans originated and the geographic areas in which
it operates. The origination network is currently comprised of loan referral
sources that service several broad geographic regions and provide customers with
a variety of financial products.
Management of the Company 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, the Company's current lending pattern, both regarding industry and
geographic location, is extremely diverse. At June 30, 1998, businesses in
approximately 95 distinct industries in approximately 26 different states
received loans from Business Loan Center. The largest industry sectors in
Business Loan Center's portfolio include: restaurants, approximating 17% of the
aggregate loan portfolio; and lodging, approximating 31%
21
<PAGE>
of the aggregate loan portfolio.
Fiscal Year 1998 vs. Fiscal Year 1997. The Company recorded net
income of $3,226,000 (or $.18 per basic share) for the year ended June 30, 1998
("Fiscal Year 1998") as compared to net income of $1,947,000 (or $.11 per basic
share) for the year ended June 30, 1997 ("Fiscal Year 1997"). Net income before
provision for income taxes and extraordinary item ("Operating Income") was
$5,337,000 for Fiscal Year 1998, as compared to $1,675,000 for Fiscal Year 1997.
Net income before extraordinary item was $3,226,000 (or $ .18 per basic share)
for Fiscal Year 1998, as compared to $1,702,000 (or $.10 per basic share) for
Fiscal Year 1997. There were no extraordinary items during Fiscal Year 1998, as
compared to an extraordinary gain of $245,000 in Fiscal Year 1997. This
extraordinary gain resulted from a settlement of a lawsuit involving a
promissory note issued in connection with the acquisition of Business Loan
Center from its predecessor in interest.
Revenues for Fiscal Year 1998, which approximated $15,729,000,
increased by 119% from Fiscal Year 1997 primarily due to higher gains on loan
sales, servicing fee income, and interest income. This is directly attributable
to (i) a 79 % increase in the loan portfolio, which approximated $175,889,000 at
June 30, 1998, as compared to approximately $98,017,000 at June 30, 1997 and
(ii) the recognition of gains on the sale of both guaranteed and unguaranteed
loans approximating $10,583,000 in Fiscal Year 1998.
Interest income increased from $1,666,000 for Fiscal Year 1997 to
$2,439,000 for Fiscal Year 1998, or by approximately 46%. This resulted from a
88% increase in the unguaranteed loan portfolio held by the Company, which
approximated $22,281,000 at June 30, 1998, as compared to $11,850,000 at June
30, 1997. At June 30, 1998, the average interest rate on the Company's total
portfolio approximated 11.25%. During Fiscal Year 1998 both Business Loan
Center's and BLC Comm Cap Corp.'s base lending rate, the prime rate, remained
stable at 8.50%.
Service fee income, which increased by 44% from Fiscal Year 1997, to
approximately $1,150,000 in Fiscal Year 1998. This increase directly resulted
from the increased guaranteed loan portfolio which yielded servicing fees of
between 1% 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.
In addition, the Company earned additional residual interest income (net of
amortization) on those unguaranteed loans securitized during Fiscal Year 1998.
With respect to the SBA-guaranteed loans sold in the secondary market, loans
originated during Fiscal Year 1998 yielded an average service fee of 2.24%,
while the loans made pursuant to the B&I Program yielded an average service fee
of 50 basis points.
Operating expenses in Fiscal Year 1998 increased by approximately
100% over Fiscal Year 1997. This increase can be attributed to the increase in
payroll, commissions, travel and consulting expenditures incurred in connection
with the Company's overall growth and expansion.
General and administrative expenses in Fiscal Year 1998 approximated
$1,753,000, an increase of 38% from Fiscal Year 1997, as the Company incurred
greater costs in connection with
22
<PAGE>
the opening of the new loan production offices. The Company also incurred
additional expenditures for corporate and legal services rendered.
Interest expense rose approximately 121% from Fiscal Year 1997 to
$2,158,000 in Fiscal Year 1998. This increase was directly attributable to the
Company'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 $93,854,000
were originated during Fiscal Year 1998, as compared to loans in the approximate
aggregate principal amount of $42,335,000 for Fiscal Year 1997, representing a
121% increase in origination activities during the referenced periods. The
guaranteed principal amount of the loans originated during Fiscal Year 1998
approximated $67,357,000 as compared to the aggregate guaranteed principal of
$31,140,000 for Fiscal Year 1997. Of those loans originated and fully funded
during Fiscal Year 1998, substantially all of the guaranteed portions were sold
in the secondary market subsequent to the full funding of each loan, at premium
rates approximating 10%. During Fiscal Year 1998, the Company securitized and
sold approximately $18,000,000 in unguaranteed loans. In connection with this
transaction, the Company acquired approximately $5,800,000 of previously sold
participations in the unguaranteed loans from a purchaser.
The loans receivable that remain in the Company's portfolio, as well
as the guaranteed portions sold in the secondary market, are actively serviced
through the collection efforts of the Company's staff. The number and aggregate
principal amount of the loans in the Company's portfolio at the end of Fiscal
Year 1998 may be classified and compared to the loans in its portfolio at the
end of Fiscal Year 1997 as follows:
23
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 6/30/98 YEAR ENDED 6/30/97
------------------ ------------------
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 164,037,000 120,298,000 43,739,000 321 86,127,000 65,265,000 20,862,000 216
Delinquent Loans 2,630,000 2,060,000 570,000 3 4,379,000 3,534,000 845,000 13
Loans in Liquidation 9,222,000 7,413,000 1,809,000 35 7,511,000 6,127,000 1,384,000 30
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Loans 175,889,000 129,771,000 46,118,000 359 98,017,000 74,926,000 23,091,000 259
=========== =========== =========== =========== =========== ===========
LESS:
Loans Sold 22,289,000 11,241,000
Allowance for Credit Losses 641,000 901,000
Deferred Income & Other 1,148,000 1,110,000
---------- ----------
Loans Receivable Net 22,040,000 9,839,000
========== ==========
</TABLE>
Loans for which interest and principal payments are due for a period
greater than 60 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 the Company 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.
Fiscal Year 1997 vs. Fiscal Year 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 Fiscal Year 1996. 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 approximately $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 settlement of a lawsuit involving 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 to higher gains on sales of
loans, servicing, and interest income. This is directly attributable to (i) a
46% increase in the loan portfolio, which approximated
24
<PAGE>
$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 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 8.5%.
Service fee income increased from $560,000 for Fiscal Year 1996 to
$800,000 for Fiscal Year 1997. This 43% increase directly resulted from the
increased performing loan portfolio which yielded servicing fees of between
1.00% and 2.62% per annum, as well as , service fees ranging from .75 to 1.75%
on the sale of participations in the unguaranteed portion 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
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 management's assessment of the adequacy of the
allowance for credit losses.
General and administrative expenses in Fiscal Year 1997 were
approximately $1,267,000 an increase of 154% from Fiscal Year 1997 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 for Fiscal Year 1997. This increase was directly attributable to
Business Loan Center's increased borrowings under its line of credit
necessitated by 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
approximately an 129% increase in origination activities during the referenced
periods. The SBA-guaranteed principal amount of the loans originated during
Fiscal Year 1998 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 following
the full funding of each loan, at premium rates
25
<PAGE>
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. # Total Guaranteed Ungteed. #
Amount Amount Amount Loans Amount Amount Amount Loans
------ ------ ------ ----- ------ ------ ------ -----
<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:
Participations Sold 11,241,000 6,372,000
Allowance for Credit Losses 901,000 1,230,000
Deferred Income & Other 1,110,000 523,000
---------- -------
Loans Receivable Net $ 9,839,000 $ 5,861,000
=========== ===========
</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 STATEMENT AND SUPPLEMENTARY DATA.
The financial statements located in Item 14(a)(1) and (2) are
included in this report on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
26
<PAGE>
ACCOUNTING AND FINANCIAL DISCLOSURES.
None
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>
- --------------------------------------------------------------------------------------------------------------
Age (at Year Term
Name September 8, Positions Director Since Officer Since Will Expire
1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert F. Tannenhauser (1) 53 President & September 1986 September 1986 2000
Chairman of the
Board
- --------------------------------------------------------------------------------------------------------------
Peter D. Blanck (1)(3) 41 Director June 1993 N/A 2000
- --------------------------------------------------------------------------------------------------------------
Jerome B. Alenick (2) 69 Director May 1998 N/A 2001
- --------------------------------------------------------------------------------------------------------------
Robert W. D'Loren (3) 40 Director June 1997 N/A 2001
- --------------------------------------------------------------------------------------------------------------
Irwin E. Redlener, M.D. (2) 54 Director June 1997 N/A 1999
- --------------------------------------------------------------------------------------------------------------
Kenneth S. Schwartz, M.D. 53 Director June 1997 N/A 1999
(3)
- --------------------------------------------------------------------------------------------------------------
Robert W. Wien (2) 47 Director June 1997 N/A 2001
- --------------------------------------------------------------------------------------------------------------
Leonard Rudolph 51 Executive Vice N/A May 1998 N/A
President
==============================================================================================================
Jennifer M. Goldstein 26 Treasurer N/A June 1996 N/A
==============================================================================================================
David I. Redlener 30 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 next annual meeting of the Company's shareholders and until his
successor has been elected and qualified. Since the Company's reorganization,
annual meetings of its shareholders were held in September 1990, June 1993, June
1997, and May 1998. Each of the executive officers serves at the pleasure of the
Board of Directors.
Robert F. Tannenhauser has been a full time employee of Business
Loan Center, Inc. or its predecessor Business Loan Center, a New York general
partnership since March 1995. From January 1992 until February 1995, Mr.
Tannenhauser was of counsel to the law firm of Hall Dickler Kent Friedman &
Wood, LLP. Mr. Tannenhauser has been or is a principal or general partner of
various corporations or partnerships engaged in the oil and gas or real estate
businesses. Additionally, Mr. Tannenhauser serves as a Director of the
Children's Health Fund, together with
27
<PAGE>
Dr. Redlener.
Peter Blanck has been as a Professor of Law since 1993, and as a
Professor of Preventive Medicine since 1997 with the University of Iowa. Since
February 1992, Dr. Blanck has been a director and the President of Futuronics
Corporation. Dr. Blanck is the brother-in-law of Robert F. Tannenhauser.
Robert W. D'Loren has been President of CAK Universal Credit
Corporation since February 1, 1998. Prior to that he had been self-employed for
eleven years and conducted business in a company known as D'Loren, Levien &
Company, LLC., which provided 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 Senior Executive 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 & Co., Inc. (formally 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. Mr. Wien is a member of the Bar in the State of New
York and a licensed Real Estate Broker in the State of New York. Additionally,
Mr. Wien served as Senior Vice President of Investment Banking at Dean Witter
Reynolds, Inc. from April 1987 to June 1994.
Jerome B. Alenick has been sole proprietor of Jerome B. Alenick
Investments & Financial Services since 1991. From 1990 to 1991 Mr. Alenick was
Executive Vice President of The Kushner Companies. Mr. Alenick is a member of
the Bars of the State of New Jersey the District of Columbia and is a licensed
Real Estate Broker in the State of New Jersey. He has been an Adjunct Professor
of Real Estate at New York University since 1993 and has been a member of the
faculty at New York University since 1983.
Leonard Rudolph joined the Company as Executive Vice President in
May of 1998 and
28
<PAGE>
currently serves as President of Business Loan Center, Inc. From 1996 until
joining Company, Mr. Rudolph served as Executive Vice President, Senior Credit
Officer of Sterling National Bank Additionally, between 1991 and 1996, Mr.
Rudolph held the position of Senior Vice President of Sterling National Bank.
Jennifer Goldstein 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. Goldstein has been employed by Business
Loan Center. Ms. Goldstein graduated with a degree in Accounting from San Diego
State University and is currently pursuing a Masters degree in Finance.
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 Business Loan Center, Inc.. 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. He is currently
pursuing a Masters degree in Finance. 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
During fiscal year ended June 30, 1998, there were no late filings
made by any officers or directors or beneficial owner of more than 10% of the
Common stock of the Company with respect to Section 16(a) of the Exchange Act of
1934.
Item 11. EXECUTIVE COMPENSATION.
Board of Directors Report on Executive Compensation
At June 30, 1998, Peter Blanck, Robert D'Loren and Kenneth Schwartz
were members of the Compensation Committee of the Board of Directors of the
Company. The Compensation Committee's functions include the review and approval
of compensation and terms of employment for all executive officers and
administering the grant of employee stock options pursuant to the 1995 Amended
Management Incentive Plan.
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. 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
29
<PAGE>
executive officers, primary consideration is given to each executive's level of
responsibility and individual performance.
Compensation Committee Interlocks and Insider Participation.
Certain members of the Company's Board of Directors also served as
officers of the Company in Fiscal Year 1998. Specifically, Robert F.
Tannenhauser served as President. Robert McGee served as Vice President and
Director for a portion of the year. The members of the Compensation Committee
consisted of Peter Blanck, who is a substantial shareholder of the Company and
brother-in-law to Robert F. Tannenhauser, as well as Robert D'Loren and Kenneth
Schwartz who are also warrant holders and/or shareholders of the Company.
Performance Graph.
The following graph provides a comparison of the cumulative total
return of the Company's Common Stock with the Russell 2000 Market Index, a broad
marked index covering small capitalization stocks listed on the Russell 2000
Index and two custom indexes (i) Peer Group Indexes ("Peer Index") and (ii)
Miscellaneous Business Credit Institutions ("Misc Bus Credit Inst"). In
addition, the cumulative total returns for each index were prepared by Media
General Financial Services, Inc. Each case assumes an initial investment of $100
afer the close of the market on June 30, 1995 as well as the reinvestment of any
dividends.
[performance graph]
Plot Points 6/30/95 6/30/96 6/30/97 6/30/98
- ----------- ------- ------- ------- -------
BLC Financial Services, Inc. ...... $ 70.59 $117.66 $164.72 $611.82
Peer Group Index .................. 119.47 173.91 238.89 335.82
Russell 2000 Index ................ 120.08 148.90 173.21 201.77
Misc Bus Credit Inst .............. 132.30 206.83 346.19 514.43
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, 1998.
The following salaries and/or benefits are presently payable pursuant to
employment agreements.
30
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Name and Principal Position Fiscal Year Annual Compensation Securities Underlying Options
- ----------------------------------------------------------------------------------------------------------------
Salary Bonus Other
------ ----- -----
<S> <C> <C> <C> <C> <C>
1998 $208,085 (1) 0 0 500,000
Robert F. Tannenhauser
President and Director 1997 207,411 (1) 0
1996 150,997 (1) 0
- ----------------------------------------------------------------------------------------------------------------
Leonard Rudolph 1998 $36,154 (2) 0 0 70,000
Executive Vice President
1997 N/A N/A
1996 N/A N/A
================================================================================================================
Jennifer Goldstein 1998 $106,923 100,000
Treasurer
1997 $64,769 N/A
1996 $45,553 75,000
================================================================================================================
Robert McGee (3) 1998 $196,417 (3) 0
Vice President
1997 200,000 0
1996 209,022 187,475
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes premiums for excess health insurance.
(2) Based upon approximately two months of salary at an annual rate of
$170,000.
(3) Robert McGee was an officer of the Company through the 1st half of the
year in which he earned $100,000. In the 2nd half of the year he was an
employee of one of the Company's subsidiaries.
Compensation of Directors. During the fiscal year ended June 30,
1998, and pursuant to Non-Qualified Stock Option Agreements, certain Directors
were each granted 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. The Directors covered under the above referenced option package
include: Robert W. D'Loren, Irwin E. Redlener, M.D., Kenneth S. Schwartz, M.D.
and Robert W. Wien. As additional compensation, each Director is to receive
$1,000 per meeting of the Board of Directors.
Employment Agreements. The Company entered into Employment
Agreements with Robert F. Tannenhauser, President, and Robert C. McGee, former
Vice President, on February 5, 1996. Mr. McGee's Employment Agreement was
amended in January 1998. Additionally, during the current fiscal year, the
Company entered into Employment Agreements with Leonard Rudolph, Executive Vice
President, and Jennifer M. Goldstein, Treasurer of the Company.
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
31
<PAGE>
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 original Employment Agreement
provided that he was to 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's Amended and Restated Employment Agreement provides that
he shall be employed as BLC Financial Network, Inc.'s ("BLC-Network") Senior
Credit Advisor through January 15, 2001 at a gross annual salary of $175,000.
The agreement further provides that should BLC-Network terminate Mary McGee's,
his spouse, employment for other than cause or death or disability, then Mr.
McGee's compensation shall be increased to $256,000 per year. In the event
BLC-Network terminates Mary McGee's employment for cause or as a result of death
or disability, then Mr. McGee's compensation shall be increased to $200,000 per
annum. Furthermore, in the event BLC-Network reduces Mary McGee's salary below
$81,000 per year, then Mr. McGee's salary will be increased by a like amount.
Mr. McGee is also entitled to participate in all benefit plans established from
time to time by the Company, BLC-Network, and Business Loan Center, Inc. on the
same basis as all other executive employees.
The agreement shall automatically renew for 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.
Leonard Rudolph. Leonard Rudolph's Employment Agreement provides
that he shall be employed as Executive Vice President and President of Business
Loan Center, Inc. through April 30, 2003 at an annual gross salary of $170,000.
Mr. Rudolph was also granted a $10,000 signing bonus as well as options to
purchase 70,000 shares of Common Stock at an exercise price of $4.81, which
shall vest equally over the next four years. Mr. Rudolph is also entitled to
participate in all benefit plans established from time to time by the Company
and Business Loan Center, Inc. on the same basis as all other executive
employees. He may terminate this Agreement in the event that Robert. F.
Tannenhauser is no longer affiliated with the Company. Mr. Tannenhauser shall be
deemed to be affiliated with the Company as long as he serves as an Officer or
Director of the Company. A termination under this provision shall not be deemed
a termination for cause under her
32
<PAGE>
employment agreement.
The agreement shall automatically renew for 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. Rudolph the greater
of $170,000 or his annual gross salary if (i) Mr. Rudolph's employment is
terminated for any reason other than his death or disability, (ii) the agreement
is not renewed by the Company or Business Loan Center or (iii) Mr. Rudolph
terminates the agreement due to a reduction in Mr. Rudolph's salary or benefits
or the diminution of his responsibility, authority or status as an executive.
Jennifer Goldstein. Jennifer Goldstein's employment agreement
provides that she shall be employed as Treasurer and Chief Financial Officer of
the Company, BLC Comm Cap Corp., BLC Cap Corp. and Business Loan Center through
September 30, 2002 at an initial annual gross salary of $100,000. Ms. Goldstein
was granted options to purchase 100,000 shares of Common Stock at an exercise
price of $.82, which shall vest equally over the next five years. Ms. Goldstein
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. She may terminate this Agreement in the event that Robert.
F. Tannenhauser is no longer affiliated with the Company. Mr. Tannenhauser shall
be deemed to be affiliated with the Company as long as he serves as an Officer
or Director of the Company. A termination under this provision shall not be
deemed a termination for cause under her employment agreement.
The agreement shall automatically renew for 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 Ms. Goldstein the
greater of $100,000 or her annual gross salary if (i) Ms. Goldstein's employment
is terminated for any reason other than her death or disability, (ii) the
agreement is not renewed by the Company or Business Loan Center on (iii) Ms.
Goldstein terminates the agreement due to a reduction in salary or benefits or
the diminution of her responsibility, authority or status as an executive.
33
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise
of stock options during the fiscal year ended June 30, 1998 by the named
individual, along with the year-end value of unexercised options/warrants at
June 30, 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Number of Value of Unexercised In-The-
Name Share Acquired on Unexercised Money Options/Warrants at
Exercise Value Realized Options at 6/30/98 6/30/98 (5)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert F. Tannenhauser
President and Director 0 0 927,500 (1) $2,347,875 (6)
- ---------------------------------------------------------------------------------------------------------------------------
Leonard Rudolph
Executive Vice President 0 0 70,000 (2) $ 0 (7)
- ---------------------------------------------------------------------------------------------------------------------------
Jennifer Goldstein
Treasurer 0 0 175,000 (3) $ 449,250 (8)
- ---------------------------------------------------------------------------------------------------------------------------
Robert McGee (3)
Vice President 0 0 187,475 (4) $ 496,809 (9)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 500,000 options at an exercise price of $.82 and 427,500 at an
exercise price of $.60 of which 427,500 are currently exercisable.
(2) No options currently exercisable.
(3) Includes 100,000 options at an exercise price of $.82 and 75,000 at an
exercise price of $.50 per share of which 37,500 is currently exercisable.
(4) All options are currently exercisable.
(5) The value realized equals the market value of the common stock at June
30,1998 (Closing Bid) minus the exercise price multiplied by the number of
shares. The price of a share of common stock at the close of business on June
30, 1998 was $3.25.
(6) 500,000 shares ($3.25 - $.82) = $1,215,000 and 427,500 ($3.25 - $.82) =
$1,132,875.
(7) These options are out of the money.
(8) 100,000 shares ($3.25 - $.82) = $243,000 and 75,000 ($3.25 - $.50) =
$206,250
(9) 187,475 shares ($3.25 - .60) = $496,809.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Potential realizable Potential realizable
Number of % Total value at assumed value at assumed
securities ptions/SARs annual rates of stock annual rates of stock
underlying Granted to price appreciation for price appreciation
options/SARs mployees in Exercise Expiration option term for option term
Name Granted Fiscal Year Price Date 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert F.
Tannenhauser 500,000 40% .82 4/5/03 $68,500 $194,000
President and Director
- --------------------------------------------------------------------------------------------------------------------------------
Leonard Rudolph
Executive Vice 70,000 6% 4.81 8/7/02 $31,500 $106,400
President
- --------------------------------------------------------------------------------------------------------------------------------
Jennifer Goldstein
Treasurer 100,000 8% .82 4/5/03 $13,700 $38,800
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
Reference is made to the section of this Report entitled "Certain
Relationships and Related Transactions" for a description of 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).
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.
35
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of June 30,
1998 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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Amount and Nature of Beneficial
Name and Address of Beneficial Owner Ownership Percent Of Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Futuronics Corporation 2,609,964 (1) 13.20%
3652 Forest Gate Drive, N.E.
Iowa City, Iowa 52240
- -----------------------------------------------------------------------------------------------
Peter D. Blanck 3,376,130 (2)(3) 16.82%
University of Iowa, College of Law
Iowa City, Iowa 52241
- -----------------------------------------------------------------------------------------------
Richard Blanck 3,226,131 (2)(4) 16.20%
9 Hickory Road
Manhasset Hills, New York 11040
- -----------------------------------------------------------------------------------------------
Robert W. D'Loren 220,000(5) 1.10%
72 Woodland Drive
Oyster Bay Cove, NY 11771
- -----------------------------------------------------------------------------------------------
Robert C. McGee 1,996,296 (6) 9.99%
204 Oxford Circle East
Richmond, Virginia 23221
- -----------------------------------------------------------------------------------------------
Jennifer M. Goldstein 147,500(7) *
50 West 72nd Street
New York, New York 10023
- -----------------------------------------------------------------------------------------------
David I. Redlener 15,000 *
155 Henry Street
Brooklyn, New York 11201
- -----------------------------------------------------------------------------------------------
Irwin E. Redlener 20,000(8) *
11 Alfred Lane
New Rochelle, New York 10804
- -----------------------------------------------------------------------------------------------
Diane Rosenfeld 1,119,984 (9) 5.59%
RR #1 Box 427 D
County Road #86
Amenia, New York 12501
- -----------------------------------------------------------------------------------------------
Kenneth S. Schwartz 31,525(10) *
284 Guard Hill Road
Bedford, New York 10506
- -----------------------------------------------------------------------------------------------
Carol Tannenhauser 5,356,767 (2)(11) 26.67%
210 East 68th Street
New York, New York 10021
- -----------------------------------------------------------------------------------------------
Robert F. Tannenhauser 5,356,767 (11) 26.67%
210 East 68th Street
New York, New York 10021
- -----------------------------------------------------------------------------------------------
Jerome B. Alenick 425,375 (12) 2.66%
26 Columbia Turnpike
Florham Park, New Jersey 07932
- -----------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Amount and Nature of Beneficial
Name and Address of Beneficial Owner Ownership Percent Of Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Robert W. Wien 74,500 (13) *
24 James Road
Mount Kisco, New York 10549
- -----------------------------------------------------------------------------------------------
Leonard Rudolph 8,600 *
3 Pelham Place
East Brunswick, New Jersey 08816
- -----------------------------------------------------------------------------------------------
All Directors and officers
as a group (nine persons) 6,988,603(14) 33.26%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Owns less than 1% of the outstanding shares of Common Stock
(1) Includes 2,609,964 shares owned directly 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) 211,933
shares deemed owned by Peter D. Blanck as custodian for his four 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, (f) 83,334
shares that may be acquired upon the exercise of Warrants by Peter D. Blanck as
custodian for his four children, (g) 100,000 shares that may be acquired upon
the conversion of Debentures held directly by Peter D. Blanck and (h) 33,332
shares that may be acquired upon the conversion of debentures held by Peter D.
Blanck as custodian for his four children.
(4) Includes (a) 190,501 shares owned directly by Richard Blanck, (b) 107,169
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) 83,333 shares that may be acquired upon the exercise of Warrants by Richard
Blanck, (f) 25,000 shares that may be acquired upon the conversion of Debentures
held by Richard Blanck and (g) 33,334 shares that may be acquired upon the
conversion of Debentures held by Richard Blanck as custodian for his two
children.
(5) Includes (a) 200,000 shares that may be acquired upon the exercise of
Warrants held by D'Loren Levien & Company L.L.C. of which Robert D'Loren is a
member and (b) 20,000 shares that may be acquired upon the exercise of options
held by Robert D'Loren.
(6) 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.
(7) Includes (a) 110,000 shares owned by Jennifer M. Goldstein, and (b) 37,500
shares that may be acquired upon the exercise of options held by Jennifer M.
Goldstein.
(8) Includes 20,000 shares that may be acquired upon the exercise of options
held by Irwin Redlener.
(9) Includes (a) 666,710 shares directly owned by Diane Rosenfeld, (b) 205,774
shares directly owned by Eric Rosenfeld , (b) 202,500 shares underlying options
owned by Diane Rosenfeld and (d) 45,000 shares that may be acquired upon the
exercise of Warrants owned by Diane Rosenfeld.
(10) Includes (a) 11,525 shares directly owned by Kenneth Schwartz or jointly
with Jane Schwartz, and (b) 20,000 shares that may be acquired upon the exercise
of options held by Kenneth Schwartz.
(11) Includes 172,468 shares owned directly by Robert F. Tannenhauser, (b)
1,325,409 shares directly owned by Carol Tannenhauser, the spouse of Robert F.
Tannenhauser, (c) 2,609,964 owned by Futuronics Corporation of which the spouse
of Robert F. Tannenhauser is an officer and director, (d) 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, (e) 427,500 shares underlying
options owned by Carol Tannenhauser,(f) 54,500 shares that may be acquired upon
the conversion of Debentures held by Carol Tannenhauser, (g) 83,333 shares that
may be acquired upon the exercise of Warrants held by the two children of Robert
Tannenhauser, (h) 207,833 shares
37
<PAGE>
owned by David Tannenhauser, the son of Robert F. Tannenhauser and Carol
Tannenhauser, (i) 164,600 shares held in a custodial account for the benefit of
Emily Tannenhauser, the daughter of Robert F. Tannenhauser each of Carol
Tannenhauser and Robert F. Tannenhauser share voting and dispositive power of
such shares, (j) 43,233 shares owned by Emily Tannenhauser, the daughter of
Robert F. Tannenhauser and Carol Tannenhauser, (k) 4,500 shares that may be
acquired upon the conversion of Debentures held by Robert F. Tannenhauser, (l)
21,167 shares that may be acquired upon the conversion of Debentures held by
David Tannenhauser, the son of Robert F. Tannenhauser and Carol Tannenhauser,
(m) 21,166 shares that may be acquired upon the conversion of Debentures held by
Emily Tannenhauser, the daughter of Robert F. Tannenhauser and Carol
Tannenhauser, (n) 22,132 shares held in trust for David Tannenhauser, the son of
Robert F. Tannenhauser and Carol Tannenhauser and (o) 22,132 shares held in
trust for Emily Tannenhauser, the daughter of Robert F. Tannenhauser and Carol
Tannenhauser.
(12) Includes (a) 317,875 shares owned by the Defined Benefit Plan for the
Benefit of Jerome Alenick, and (b) 107,500 shares owned by Jerome B. Alenick and
Nicole A. Alenick as joint tenants and tenants in common.
(13) Includes (a) 20,000 shares owned directly by Robert W. Wien, (b) 20,000
shares that may be acquired upon the exercise of options held by Robert W. Wien,
and (c) 34,500 shares that may be acquired upon the exercise of certain Warrants
held by Robert W. Wien.
(14) Represents shares beneficially owned pursuant to Rule 13d-3 by Mr.
Tannenhauser, a Director and President of the Company, Ms. Goldstein, Treasurer
and Chief Financial Officer of the Company, Leonard Rudolph, Executive Vice
President of the Company, David Redlener, Secretary of the Company, Messrs.
D'Loren, Peter Blanck , Wien, Alenick 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.
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 1998, 1997 and 1996. For those periods, Business Loan
Center incurred interest expense relating to such individuals in the aggregate
amounts of $17,000, $157,000, and $130,000, respectively. The maximum amounts
outstanding for these loans during the periods in question were $2,594,000,
$2,594,000, and $2,108,000, respectively. Additionally, certain members and
affiliates of Mr. Tannenhauser's family participated in the debenture offering
placed by the Company during the fiscal year ended June 30, 1998. Interest
expense and interest accrual relating to such individuals totaled approximately
$48,000 and $25,000, respectively, based upon outstanding debentures to said
parties in the aggregate amount of $950,000.
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. Mr McGee is the son of Robert McGee, a
Vice President and Director of the Company for a portion of Fiscal Year 1998.
On November 11, 1997, the Company entered into an investment banking
agreement with Josephthal & Co., Inc. ("Josephthal") pursuant to which the
Company paid a $25,000 retainer to Josephthal and agreed to pay an additional
$12,500 per month for three months commencing in January 1998. Thereafter the
fee would be reduced to $5,000 per month. For the Fiscal Year 1998, the Company
paid Josephthal a total of $85,000 in fees. In addition, the Company issued to
38
<PAGE>
Josephthal, pursuant to such Investment Banking Agreement, warrants to purchase
90,000 shares of the Common Stock of the Company. The initial exercise price for
the warrants is $1.10 per share. Robert W. Wien, a director of the Company, is a
Managing Director of Josephthal.
The Company, during Fiscal Year 1998 obtained a line of credit for
Business Loan Center and entered into a loan origination and servicing agreement
with a certain financial institution introduced to the Company by Robert W.
D'Loren, a Director of the Company. In connection with such arrangements and
pursuant to a written agreement, D'Loren Levien & Company, LLC ("DLC"), a
limited liability company of which Mr. D'Loren is a member, received total fees
of $125,000. In July 1997, BLC Capital Corp., a subsidiary of the Company,
entered into a loan origination and servicing agreement with the financial
institution introduced by Mr. D'Loren pursuant to which BLC Capital Corp. was to
receive fees for originating and servicing non-SBA first mortgage commercial
real estate backed loans for the financial institution. DLC is entitled to
receive fees based upon each transaction closed. In December 1997, DLC received
a fee advance of $72,500 in connection with arranging a line of credit for BLC
Comm Cap Corp, to be utilized to fund loans under the Department of Agriculture
Program. In December 1997, the Company and DLC agreed, and the Board of Director
approved, an amendment to the agreement with respect to fees due and to be
received in the future by DLC whereby DLC agreed to reduce the cash amount of
its fees in exchange for 200,000 warrants to purchase the Common Stock of the
Company at a purchase price of $1.83 per share and the right to earn an
additional 600,000 shares.
During Fiscal Year 1998 the Company entered into Employment Agreements with four
executive officers. See, "Item 11-Executive Compensation".
39
<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:
Independent Auditors' Report................................... F-2
Consolidated Balance Sheets at June 30, 1998 and 1997.......... F-3
Consolidated Statements of Income --
Years Ended June 30, 1998, 1997 and
1996......................................................... F-4
Consolidated Statements of Changes in
Shareholders' Equity --Years ended
June 30, 1998, 1997 and 1996................................. F-5
Consolidated Statements of Cash Flows --
Years ended June 30, 1998, 1997 and
1996 ....................................................... 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 44 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, 1998. On December 19, 1997, Business Loan
Center, a wholly-owned subsidiary of the Company, successfully
completed the securitization and sale of a portion of its
unguaranteed SBA loan portfolio.
(c) Exhibits
See Item 14(a)(3) above.
(d) Financial Statement Schedules
The financial statement schedules required to be filed pursuant to
this Item 14(d) are listed above under Items 14(a)(1) and (2).
40
<PAGE>
BLC FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 and 1997
<PAGE>
BLC FINANCIAL SERVICES, INC.
Contents
Page
----
Consolidated Financial Statements
Independent auditors' report F-2
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 OF RICHARD A. EISNER & COMPANY, LLP]
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997 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, 1998, in conformity
with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
August 27, 1998
Florham Park, New Jersey
F-2
<PAGE>
BLC FINANCIAL SERVICES, INC
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Loans receivable - net $22,040,000 $ 9,839,000
Loans held for sale 7,160,000 1,109,000
Cash 1,730,000 803,000
Restricted cash 1,768,000
Accounts receivable - loans sold 8,252,000 3,247,000
Accounts and other receivables 1,006,000 282,000
Prepaid expenses 302,000 218,000
Leasehold improvements, furniture and equipment, net of accumulated
depreciation of $342,000 in 1998; $211,000 in 1997 742,000 344,000
Servicing assets 3,270,000 1,972,000
Residual interests 5,057,000 952,000
Deferred income taxes 991,000 1,037,000
Security deposits 131,000 3,000
Deferred financing costs, net of accumulated amortization of $415,000
in 1998; $47,000 in 1997 832,000 280,000
----------- ------------
$53,281,000 $ 20,086,000
=========== ============
LIABILITIES
Notes payable $32,541,000 $ 8,770,000
Accrued expenses 1,163,000 422,000
Due to participants 264,000 524,000
Allowance for estimated future losses on loans sold 466,000 99,000
Due to affiliates 2,594,000
Debentures 3,328,000
Debt 46,000 156,000
Customer deposits 1,204,000 331,000
----------- ------------
Total liabilities 39,012,000 12,896,000
----------- ------------
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 19,778,449
in 1998 and 17,341,243 in 1997 197,000 173,000
Additional paid-in capital 10,840,000 7,391,000
Retained earnings (accumulated deficit) 2,762,000 (464,000)
Unrealized gain on residual interests (net of income taxes of $341,000 in 1998;
$10,000 in 1997) 470,000 90,000
----------- ------------
Total shareholders' equity 14,269,000 7,190,000
----------- ------------
$53,281,000 $ 20,086,000
=========== ============
</TABLE>
F-3
<PAGE>
BLC FINANCIAL SERVICES, INC
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Interest income $ 2,439,000 $ 1,666,000 $ 1,335,000
Gain on sale of loans 10,583,000 4,333,000 2,945,000
Service fee income 1,150,000 800,000 560,000
Miscellaneous 1,557,000 369,000 157,000
------------ ------------ -----------
15,729,000 7,168,000 4,997,000
------------ ------------ -----------
Expenses:
Operating costs 6,481,000 3,249,000 2,918,000
General and administrative 1,753,000 1,267,000 498,000
Interest 2,158,000 975,000 889,000
------------ ------------ -----------
10,392,000 5,491,000 4,305,000
------------ ------------ -----------
Equity of minority interest in income of subsidiary 2,000 72,000
------------ -----------
Income before provision (benefit) for income taxes
and extraordinary item 5,337,000 1,675,000 620,000
Provision (benefit) for income taxes 2,111,000 (27,000) 67,000
------------ ------------- -----------
Income before extraordinary item 3,226,000 1,702,000 553,000
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 $ 3,226,000 $ 1,947,000 $ 644,000
============ ============ ===========
Basic:
Income before extraordinary item $.18 $.10 $.04
Extraordinary item $.01 $.01
Net income $.18 $.11 $.05
Diluted:
Income before extraordinary item $.15 $.10 $.04
Extraordinary item .01
Net income $.15 .11 .04
</TABLE>
F-4
<PAGE>
BLC FINANCIAL SERVICES, INC
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock Retained Unrealized
------------------------ Additional Earnings Gain on
Number Paid-in (Accumulated Residual
of Shares Amount Capital Deficit) Interests Total
------------ -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
Exercise of warrants and options 2,437,206 24,000 1,264,000 1,288,000
Net income 3,226,000 3,226,000
Pre-confirmation net operating loss utilization 1,996,000 1,996,000
Issuance of warrants in connection with
professional services rendered 189,000 189,000
Change in unrealized gain on residual
interests,
net of income tax effect 380,000 380,000
------------ -------- ----------- ----------- ----------- -----------
Balance, June 30, 1998 19,778,449 $197,000 $10,840,000 $ 2,762,000 $ 470,000 $14,269,000
============ ======== =========== =========== =========== ===========
</TABLE>
F-5
<PAGE>
BLC FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------
1998 1997 1996
------------ ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary item $ 3,226,000 $ 1,702,000 $ 553,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 131,000 69,000 39,000
Minority interest in income of subsidiary 2,000 72,000
Amortization 782,000 217,000 14,000
Provisions for credit losses 190,000 74,000 917,000
Deferred income tax expense (benefit) 1,711,000 (333,000) 9,000
Issuance of warrants in connection with professional
services rendered 189,000
Changes in:
Loans held for sale (6,051,000) 1,215,000 (1,806,000)
Restricted cash (1,768,000)
Accounts receivable - loans sold (5,005,000) (3,247,000) 309,000
Accounts and other receivables (724,000) (23,000) (102,000)
Prepaid expenses (84,000) (218,000)
Deferred financing costs (920,000) (250,000) 13,000
Accrued expenses 741,000 34,000 (55,000)
Due to participants (260,000) 524,000
Security deposits (128,000) 19,000 (3,000)
Customer deposits 873,000 65,000 165,000
------------ ------------ ----------
Net cash provided by (used in) operating activities (7,097,000) (150,000) 125,000
------------ ------------ ----------
Cash flows from investing activities:
Loans originated (26,496,000) (10,996,000) (4,433,000)
Principal collections and sales of loans receivable 8,937,000 5,037,000 5,484,000
Principal payments on residual interests 429,000 15,000
Acquisition of equipment (529,000) (254,000) (137,000)
Purchase of minority interest in subsidiary (380,000)
------------ ------------ ----------
Net cash provided by (used in) investing activities (17,659,000) (6,578,000) 914,000
------------ ------------ ----------
Cash flows from financing activities:
Net borrowings under lines of credit 23,921,000 5,066,000 (260,000)
Proceeds from issuance of debentures 2,978,000
Proceeds from exercise of warrants and options 1,288,000 178,000
Proceeds from issuance of common stock 1,000,000
Principal payments on debentures (1,006,000)
Due to affiliates (2,394,000) 1,966,000 (492,000)
Principal payments on notes payable (110,000) (172,000)
------------ ------------ ----------
Net cash provided by (used in) financing activities 25,683,000 7,038,000 (758,000)
------------ ------------ ----------
Net increase in cash 927,000 310,000 281,000
Cash at beginning of period 803,000 493,000 212,000
------------ ------------ ----------
Cash at end of period $ 1,730,000 $ 803,000 $ 493,000
============ ============ ==========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 1,950,000 $ 961,000 $ 899,000
Income taxes 175,000 $ 438,000 $ 30,000
</TABLE>
F-6
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
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.
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").
Additionally, the Company originates, sells and services loans to businesses
under the United States Department of Agriculture Rural Business - Cooperative
Business and Industry Guaranteed Loan Program ("B&I"). The Company sells the SBA
and B&I guaranteed portion of the loan in the secondary market, without
recourse, at a premium. During the years ended June 30, 1998, 1997 and 1996, two
loan production companies accounted for 24% and 29%, and one loan production
company accounted for 43% of the Company's loan originations, respectively.
During the years ended June 30, 1998, 1997 and 1996, 83% of the guaranteed loans
were sold to four securities dealers, 78% were sold to one securities dealer,
and 90% were sold to four securities dealers, respectively. During the year
ended June 30, 1998, the Company securitized and sold approximately $18,000,000
of unguaranteed loans. In connection with this transaction, the Company acquired
approximately $5,800,000 of unguaranteed loans from a lender. Additionally,
during 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 or B&I 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 Liabilities ("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.
During the year ended June 30, 1998, the Company acquired Southeastern 1st
Financial Network, Inc. ("Network") in a business combination accounted for as a
pooling of interests. Network was primarily an originator of SBA loans.
F-7
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
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 appropriate 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 to the collectibility of
principal.
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. However, the ultimate amount
realized from collateral securing the impaired loans cannot reasonably be
determined until their disposition. The Company's charge-off policy is based on
an account-by-account review for all loans receivable.
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 fair value of the residual interest is determined based on various economic
factors including loan size, dates of origination, terms and geographic
locations. The Company also used other available information such as reports on
historical average loan maturity as compared to the contractual loan maturity.
The Company reviews these factors and, if necessary, adjusts the remaining asset
to the fair value of the residual interest. As of June 30, 1998, the average
loan maturities and cash flow discount rate assumptions are 8 years and 11.25%,
respectively.
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, 1998 and 1997
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 either SBA or B&I loans which,
in management opinion, have similar risk characteristics.
Leasehold improvements, 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. Leasehold improvements are amortized over the lesser
of the lease term or its economic life.
Per share information:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which
is effective for periods ended after December 15, 1997 and requires that, upon
adoption, all prior periods be restated.
Basic EPS is determined using net income dividend by the weighted average shares
outstanding during the period. Diluted EPS is computed by dividing net income,
plus the after tax effect of the interest expense on the convertible debentures,
by the weighted average shares outstanding, assuming all dilutive potential
common shares were issued using the treasury stock method calculated based upon
average market price for the period.
F-9
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table presents the basic and diluted EPS for the years ended June
30, 1998, 1997 and 1996, computed under the provisions of FAS 128.
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7 1 9 9 6
------------------------------------ ------------------------------------ ---------------------------------
Income Income Income
before Before Before
Extra- Weighted Extra- Weighted Extra- Weighted
ordinary Average Per Share ordinary Average Per Share ordinary Average Per Share
Item Shares Amount Item Shares Amount Item Shares Amount
------------ ---------- ---------- ------------ ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before
extraordinary
item $3,226,000 $1,702,000 $553,000
========== ========== ========
Basic EPS
Income before
extraordinary
item available
to common
stockholders $3,226,000 18,287,002 $.18 $1,702,000 17,317,428 $.10 $553,000 14,240,886 $.04
==== ==== ====
Effect of
dilutive stock
options and
warrants 2,306,048 915,429 120,576
Effect of
convertible
debentures 91,000 831,025
---------- ---------- ---------- ---------- -------- ----------
Diluted EPS
Income before
extraordinary
item available
to common
stockholders $3,317,000 21,424,075 $.15 $1,702,000 18,232,857 $.10 $553,000 14,361,462 $.04
========== ========== ==== ========== ========== ==== ======== ========== ====
</TABLE>
Income taxes:
The Company and its subsidiaries file a consolidated Federal income tax return.
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 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 employee stock option incentive plans.
F-10
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
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, 1998 and 1997, loans receivable - net consisted of:
1998 1997
----------- ------------
Loans receivable $23,829,000 $11,560,000
Less:
Deferred income (1,148,000) (820,000)
Allowance for credit
losses (641,000) (901,000)
----------- ------------
Net loans receivable $22,040,000 $ 9,839,000
=========== ===========
As of June 30, 1998, contractual maturities of loans receivable for each of the
next five years were as follows:
Year Ending
June 30,
-----------
1999 $359,000
2000 402,000
2001 450,000
2002 503,000
2003 562,000
As of June 30, 1998 and 1997, the impaired loan portfolio totaled $1,809,000 and
$1,368,000, respectively, for which specific allocations to the allowance for
credit losses aggregated $309,000 and $509,000 respectively. The average balance
of the impaired loan portfolio for the year ended June 30, 1998 and 1997
approximated $1,589,000 and $1,425,000, respectively. The Company did not
recognize any interest income on its impaired loan portfolio during the years
ended June 30, 1998, 1997 and 1996.
Changes in the allowance for credit losses for the three years ended June 30,
1998 were as follows:
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
Benefit for credit losses (177,000)
Loans charged off (83,000)
----------
Balance as of June 30, 1998 $ 641,000
==========
F-11
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 3. RESTRICTED CASH AND ESTIMATED FUTURE LOSSES ON LOANS SOLD:
In connection with the December 1997 securitization, the Company was required to
deposit funds into a cash account with the trustee for possible losses ("Spread
Account"). Additionally, the Company is required to deposit into the Spread
Account cash flows from the residual interest in order to maintain a specified
percentage of the outstanding principal balance of the certificates. This
percentage may increase in the event of defaults and/or losses exceeding certain
specified levels. Furthermore, losses are charged against the Spread Account. If
the Spread Account is in excess of the specified percentage, the trustee will
release the excess funds to the Company.
NOTE 4. SERVICING ASSETS AND RESIDUAL INTERESTS
Changes in servicing assets and residual interests for the three years ended
June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Servicing Residual
Assets Interests
----------- ----------
<S> <C> <C>
Assets, originated 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
Assets originating from loan sales 1,712,000 3,823,000
Amortization (414,000)
Principal payments (429,000)
Change in market value 711,000
----------- ----------
Balance, June 30, 1998 $ 3,270,000 $5,057,000
=========== ==========
</TABLE>
As of June 30, 1998, the gross unrealized gains were $811,000.
NOTE 5. FINANCING
Notes payable as of June 30, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
=========== ==========
<S> <C> <C>
Advances under revolving credit facilities $32,541,000 $4,513,000
Subordinated advances collateralized by loans receivable 4,257,000
----------- ----------
$32,541,000 $8,770,000
=========== ==========
</TABLE>
As of June 30, 1998, the Company had $50,000,000 in revolving credit facilities.
The facilities are collateralized by loans receivable, loans held for sale and
accounts receivable - loans sold and the interest rates range from the prime
rate plus 1% to the prime rate plus 1.50%. The facilities expire in August 1999
and include covenants requiring the company to, among other matters, maintain
minimum tangible net worth.
F-12
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 5. FINANCING (CONTINUED)
Debt as of June 30, 1998 and 1997 consists of the following:
1998 1997
------- --------
Note payable in monthly payments of $9,000 including
interest at 7% per annum, due January 1999 $46,000 $156,000
------- --------
$46,000 $156,000
======= ========
The debentures, which bear interest at 9-1/4% pre annum and mature in November
2001, are subordinated to the revolving lines of credit and are convertible into
1,662,049 shares of common stock. Additionally, $150,000 of the subordinated
advances and $200,000 of the due from affiliates outstanding as of June 30, 1997
were converted into $350,000 debentures.
As of June 30, 1998, principal payments on the debt of $46,000 and the debenture
of $3,328,000 are due during the years ended June 30, 1999 and 2002,
respectively.
During the year ended June 30, 1996, debenture holders agreed to forgive accrued
interest aggregating $105,000 in exchange for the Company prepaying 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 6. INCOME TAXES
The significant components of the Company's deferred income tax and liabilities
as of June 30, 1998 and 1997 are as follows: 1998 1997
1998 1997
----------- -----------
Deferred income tax assets:
Net operating losses $ 2,056,000 $ 3,859,000
Allowance for credit losses 428,000 440,000
Loan discount 398,000 230,000
Alternative minimum tax credit
carryforward 140,000 33,000
Other 14,000
----------- -----------
3,022,000 4,576,000
Deferred income tax liability; unrealized
gain on residual interest (341,000) (10,000)
Valuation allowance (1,690,000) (3,529,000)
----------- -----------
Net deferred income tax asset $ 991,000 $ 1,037,000
=========== ===========
These valuation allowances represent the unutilized tax benefit of the pre
confirmation net operating losses.
F-13
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 6. INCOME TAXES (CONTINUED)
The significant components of the provision (benefit) for income taxes for the
years ended June 30, 1998, 1997 and 1996 are as follows:
1998 1997 1996
----------- --------- ---------
Current:
Federal $ 123,000 $ 20,000 $ 10,000
State 277,000 286,000 48,000
----------- --------- ---------
Total current taxes 400,000 306,000 58,000
----------- --------- ---------
Deferred:
Federal 3,572,000 336,000 176,000
State (22,000) (101,000)
Change in valuation allowance (1,839,000) (568,000) (167,000)
----------- --------- ---------
Total deferred taxes 1,711,000 (333,000) 9,000
----------- --------- ---------
Provision (benefit) for income taxes $ 2,111,000 $ (27,000) $ 67,000
=========== ========= =========
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 as
of June 1998, 1997 and 1996 is summarized as follows:
1998 1997 1996
---- ---- -----
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income tax, net of federal benefit 4.8% 5.2 5.1
Reduction in valuation allowance (33.9) (26.9)
Miscellaneous 0.8 (6.9) (1.4)
---- ---- -----
Effective income tax rate 39.6% (1.6)% (10.8)%
==== ==== =====
As of June 30, 1998, the Company has net operating loss carryforwards for income
tax purposes expiring as follows:
Year Ending
June 30,
-----------
1999 $3,649,000
2000 225,000
2001 1,127,000
2002 124,000
2003 124,000
2004 546,000
2005 125,000
2007 52,000
----------
$5,972,000
==========
F-14
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
Note 7. 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 exercise 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.
The Company applies APB 25 in accounting for its employee stock option incentive
plan and, accordingly, recognizes compensation expense for the difference
between the fair value of the underlying common stock and the exercise 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 123,
the Company's income before extraordinary items would have been as follows:
Year Ended June 30,
-------------------------------------
1998 1997 1996
---------- ---------- --------
Pro forma income before
extraordinary item $3,164,000 $1,661,000 $477,000
Pro forma earnings per share:
Basic 0.17 0.10 0.03
Diluted 0.15 0.09 0.03
The fair value of each option granted in 1998, 1997 and 1996 has been estimated
on the date of grant using the Black-Scholes options pricing model with the
following assumption: no dividends yield, expected volatility of 40%, risk free
interest rates ranging from 5.36% and 6.37% and expected lives ranging from 4.75
years to 10 years. The fair value of options granted during 1998, 1997 and 1996
were $1.00, $0.27 and $0.11.
The following table summarizes stock option transactions under the Plans:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------
1998 1997 1996
---------------------- --------------------- ---------------------
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 1,922,475 $0.57 1,947,475 $0.56 1,785,000 $0.55
Options granted 1,332,000 1.54 150,000 0.62 874,432 0.56
Options exercised (422,500) 0.50 (140,000) 0.50
Options expired or
canceled (35,000) 0.50 (711,957) 0.55
---------- ---------- ----------
Outstanding options at the
end of year 2,831,975 $1.04 1,922,475 $0.57 1,947,475 0.56
========== ===== ========== ==========
</TABLE>
F-15
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 7. STOCK OPTIONS AND WARRANTS (CONTINUED)
The following table summarizes information about the Plans' outstanding options
as of June 30, 1998:
<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 - $0.90 2,561,975 3.2 $0.69 1,433,100 $0.61
$4.18 - $4.81 270,000 4.9 4.34 0
</TABLE>
As of June 30, 1998, 1997 and 1996, 1,075,500, 625,000 and 490,000 shares were
available for grant under the Plans.
As of June 30, 1998, the Company had outstanding warrants to purchase 907,500
shares of common stock at prices ranging from $0.65 to $1.85. These warrants
expire between March 1999 and December 2002.
As of June 30, 1998, 5,401,524 shares have been reserved for the exercise of
warrants, stock options and conversion of debentures.
During the year ended June 30, 1998, the Company issued warrants to purchase
415,000 shares of common stock in connection with professional services
rendered. The fair value of each warrant granted in 1998 has been estimated on
the date of grant using the Black-Scholes pricing model with the following
assumptions: no dividends yield, expected volatility of 40% and risk free
interest rates of 5.5% and expected lives ranging from 3 to 5 years.
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,
-----------
1999 $ 360,000
2000 265,000
2001 244,000
2002 215,000
2003 218,000
Thereafter 1,142,000
----------
$2,444,000
==========
Rent expense for the years ended June 30, 1998, 1997 and 1996 aggregated
$294,000, $109,000 and $104,000, respectively.
F-16
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
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 balance sheet financial instruments
without attempting to estimate the value of anticipated future business and the
value of assets and liabilities 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, 1998 June 30, 1997
----------------------------- ----------------------------
Carrying Value Fair Value Carrying Value Fair Value
-------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Cash $ 1,730,000 $ 1,730,000 $ 803,000 $ 803,000
Loans held for sale 7,160,000 7,876,000 1,109,000 1,220,000
Servicing assets and residual 8,327,000 8,952,000 2,924,000 3,364,000
Loans receivable 23,829,000 24,491,000 9,724,000 10,544,000
Accounts receivable 8,252,000 8,252,000 3,247,000 3,247,000
Debt, notes payable
or due to affiliates 32,587,000 32,587,000 11,520,000 11,520,000
Debentures 3,328,000 5,402,000
</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-17
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
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.
Debentures:
The fair value of the debentures is based upon the market value of the
underlying common stock.
Loan commitments:
Typically, the Company does not charge fees for commitments to originate loans,
additionally, since the loans are variable rate, changes in interest rates do
not affect their fair value. Accordingly, the off-balance sheet instruments have
no estimated fair value.
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, 1998, the Company
had bank deposits exceeding Federally insured limits by approximately
$3,390,000. 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, 1998,
the Company's commitments to extend credit aggregated $94,876,000. However,
$70,919,000 of the commitments are SBA and B&I guaranteed loans which the
Company intends to sell in the secondary market.
As of June 30, 1998, loans sold with limited or unlimited recourse aggregated
$21,239,000. The Company's maximum exposure under the recourse provisions is
$10,722,000. The Company lends to diverse industries primarily in the eastern
United States. As of June 30, 1998, the lodging and restaurant industries
represented approximately 31% and 17% of the Company's loan portfolio,
respectively.
Note 10. Related Parties Transactions
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, 1998, 1997 and 1996, the maximum amount of
short-term loans outstanding from family members of an officer aggregated
$2,594,000, $2,594,000 and $2,108,000, respectively. Interest expense on these
loans aggregating $17,000, $157,000 and $130,000 on such loans was paid in 1998,
1997 and 1996, respectively.
F-18
<PAGE>
BLC FINANCIAL SERVICES, INC.
Notes to Financial Statements
June 30, 1998 and 1997
NOTE 10. RELATED PARTIES TRANSACTIONS (CONTINUED)
Family members of an officer purchased $950,000 of the newly issued debentures.
Interest expense and accrued interest payable on these debentures aggregated
$48,000 and $25,000, respectively.
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-19
<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: September 25, 1998 BLC FINANCIAL SERVICES, INC.
(Registrant)
By: /s/ Robert F. Tannenhauser
Robert F. Tannenhauser,
President
By:
Jennifer M. Goldstein,
Treasurer and Chief Financial Officer
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 September 25, 1998
Robert F. Tannenhauser
/s/ Peter D. Blanck Director September 25, 1998
Peter D. Blanck
Director September___, 1998
Robert W. D'Loren
Director September___, 1998
Irwin E. Redlener
/s/ Kenneth S. Schwartz Director September 25, 1998
Kenneth S. Schwartz
/s/ Robert W. Wien Director September 25, 1998
Robert W. Wien
/s/ Jerome Alenick Director September 25, 1998
Jerome Alenick
41
<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
Exhibit 1.3[15] 1.3 Amended and Restated Certificate of Incorporation of
Registrant
Exhibit 1.4[15] 1.4 Amended and Restated By-Laws of Registrant
* 1.5 By-Laws of BLC Financial Corp.
* 1.6 By-Laws of BLC Commercial Capital Corporation
Exhibit 2.1[6] 2.1 Form of Common Stock Certificate of 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 2.8[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
42
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
Exhibit 2.12[15] 2.12 1995 Employee Stock Purchase Plan
* 2.13 Form of Warrant
* 2.14 Form of Debenture
* 2.15 Form of Incentive Stock Option Agreement
* 3.1 Employment Agreement between Business Loan Center and
Leonard Rudolph dated May 4, 1998
* 3.2 Employment Agreement between Business Loan Center and
Jennifer Goldstein dated October 8, 1997
Exhibit 4.1[15] 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 8.1b[15] 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.
* 9.1 Guarantee Agreement dated May 7, 1998 between BLC
Financial Services, Inc. and Transamerica Business
Credit Corporation.
* 9.2 Guarantee Agreement dated March 25, 1998 between BLC
Financial Services, Inc. and Transamerica Business
Credit Corporation.
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
Exhibit 10.3[15] 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)
43
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
Exhibit 10.4[15] 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)
Exhibit 10.5[15] 10.5 Confirmation Agreement by and among Robert F.
Tannenhauser in favor of Sterling National Bank dated
August 27, 1997
Exhibit 10.6[15] 10.6 Partial Assignment Agreement between Sterling National
Bank and Transamerica Business Credit Corporation dated
August 27, 1997
* 10.7 Loan Agreement between BLC Commercial Capital
Corporation as Borrower, BLC Financial Services as
parent and Transamerica Business Credit Corporation as
lender dated May 7, 1998
* 10.8 Loan Agreement between Business Loan Center as
Borrower, BLC Financial Services as parent and
Transamerica Business Credit Corporation as lender
dated March 25, 1998
* 10.9 First Amendment to Loan Agreement between Business
Loan Center as Borrower, BLC Financial Services as
parent and Transamerica Business Credit Corporation as
lender dated June 24, 1998
* 10.10 Pooling and Servicing Agreement between Marine
Midland Bank (Trustee) and Business Loan Center (Seller
and Servicer) dated as of December 1,1997
* 10.11 Security Agreement between Business Loan Center and
Transamerica Business Credit Corporation as lender
dated March 25, 1998
* 10.12 Security Agreement between BLC Commercial Capital
Corporation and Transamerica Business Credit
Corporation as lender dated May 7, 1998
44
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
* 10.13 Revolving Credit Note between BLC Commercial Capital
Corporation and Transamerica Business Credit
Corporation dated May 7, 1998
* 10.14 Revolving Credit Note between Business Loan Center and
Transamerica Business Credit Corporation dated March
25, 1998
* 10.15 Amendment and Restated Revolving Credit Note between
Business Loan Center and Transamerica Business Credit
Corporation (June 1998)
* 10.16 Multi-Party Agreement between Business Loan Center,
Inc., BLC Financial Services, Inc., Transamerica
Business Credit Corporation, Colson Services Corp., and
the United States Small Business Administration dated
March 25, 1998
* 10.17 Multi-Party Agreement Among Business Loan Center,
Inc., Marine Midland Bank, Colson Services Corp., and
the SBA dated December 1, 1997
* 10.18 Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates (Class A)
* 10.19 Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates (Class B)
* 10.20 Business Loan Center SBA Loan Trust 1997-1 between
Business Loan Center, Inc. (Seller) and Marine Midland
Bank (Borrower) dated December 1, 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
45
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
Exhibit 11.2[15] 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.
Exhibit 11.3[15] 11.3 Release among Sydney Yaskowitz 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)
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 14.3[15] 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 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
46
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
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
Exhibit 17.1[10] 17.1 Participation Agreement between Business Loan Center
and GE Capital Small Business Finance Corporation
Exhibit 17.2[15] 17.2 Participation Agreement between Business Loan Center
and GE Capital Small Business Finance Corporation -
March 20, 1997
Exhibit 18.1[15] 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)
Exhibit 18.2[15] 18.2 Assignment and Assumption Agreement between Business
Loan Center, Inc. and Business Loan Center, a New York
general partnership.
Exhibit 18.3[15] 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.
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.
Exhibit 20.2[13] 20.2 Security agreement between Business Loan Center, Inc.
and Transamerica Business Credit Corporation dated
August 27, 1997
47
<PAGE>
Incorporated by Exhibit
Reference to Number Description
- ------------ ------ -------------
Exhibit 20.3[15] 20.3 Guaranty Agreement between Business Loan Center, Inc.
and Transamerica Business Credit Corporation dated
August 27, 1997
Exhibit 20.4[15] 20.4 Restated and Amended Loan Agreement between Business
Loan Center, Inc., BLC Financial Services, Inc. and
Transamerica Business Credit Corporation dated August
27, 1997
Exhibit 20.5[15] 20.5 Trademark Security Agreement between between
Business Loan Center, Inc. and Transamerica Business
Credit Corporation dated August 27, 1997
Exhibit 20.6[15] 20.6 Revolving Credit Note between between Business Loan
Center, Inc. and Transamerica Business Credit
Corporation dated August 27, 1997
Exhibit 20.7[15] 20.7 Intercreditor Agreement between Transamerica Business
Credit Corporation and Sterling National Bank dated
August 27, 1997
Exhibit 21[15] 21 Amended List of Subsidiaries
Exhibit 22[15] 22 EDGAR filing: Article 5 Financial Data Schedule
Exhibit 23.1[6] 23.1 Service Mark Registration for "BUSINESS LOAN
CENTER"
* 27 Financial Data Schedule
- ----------
* Filed Herewith
48
<PAGE>
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 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
[15] Registrant's Annual Report on Form 10-K for the year ended June 30,
1997.
[16] Registrant's Current Report on Form 8-K dated December 30, 1997
EXHIBIT 21
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 Commercial Capital Corporation Florida
BLC Capital Corporation Delaware
BLC Financial Network, Inc. Delaware
BLC Financial Network of Florida, Inc. Delaware
BLC Financial Network of Mid-America Kansas
Business Loan Center Financial Corporation Delaware
- ----------
49
BY LAWS
OF
Business Loan Center Financial Corp.
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 - SHAREHOLDERS
1. Place of Meetings.
Meetings of shareholders 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 shareholders of the Corporation shall be held at 2:00
PM 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 shareholders 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 shareholders may be called at any time by the Board or
by the President, and shall be called by the President or the Secretary at the
written request of the holders of ten (10%) per cent of the outstanding shares
entitled to vote thereat, or as otherwise required by law.
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<PAGE>
4. Notice of Meetings.
Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
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 shareholder of record
entitled to vote at such meeting, and to any other shareholder 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
shareholders 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 shareholder at his address, as it appears
on the records of the shareholders 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 shareholder who submits a signed
waiver of notice either before or after a meeting. The attendance of any
shareholder at a meeting, in person or by proxy, shall constitute a waiver of
notice by such shareholder.
6. Fixing Record Date.
For the purpose of determining the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or to express consent
to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders 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
shareholders. 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 shareholders of the Corporation, the presence at the commencement of
such meeting, in person or by proxy, of shareholders holding a majority of the
total number of shares of the Corporation then issued and
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<PAGE>
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 shareholder 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
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting.
8. Voting.
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation,
(1) directors shall be elected by a plurality of the votes cast; and
(2) all other corporate action to be taken by vote of the shareholders,
shall be authorized by a majority of votes cast;
at a meeting of shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of shares
of the Corporation entitled to vote, shall be entitled to one vote for each
share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact duly authorized in writing. No proxy shall
be voted or acted upon after three (3) years, unless the proxy shall specify the
length of time it is to continue in force. The proxy shall be delivered to the
Secretary at the meeting and shall be filed with the records of the Corporation.
Every proxy shall be revocable at the pleasure of the shareholder executing it,
unless the proxy states that it is irrevocable, except as otherwise provided by
law.
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<PAGE>
(d) Any action that may be taken by vote may be taken without a meeting on
written consent. Such action shall constitute action by such shareholders with
the same force and effect as if the same had been approved at a duly called
meeting of shareholders and evidence of such approval signed by all of the
shareholders shall be inserted in the Minute Book of the corporation.
ARTICLE III - BOARD OF DIRECTORS
1. Number.
The number of the directors of the Corporation shall be one (1) until otherwise
determined by a vote of the Board.
2. Election.
Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board need not be shareholders and shall be
elected by a majority of the votes cast at a meeting of shareholders, by the
holders of shares entitled to vote in the election.
3. Term of Office.
Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
4. 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
shareholders.
5. Annual Meetings.
Regular annual meetings of the Board shall be held immediately following the
annual meeting of shareholders.
6. 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.
-4-
<PAGE>
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.
7. 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 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.
8. 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.
9. 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.
-5-
<PAGE>
10. Manner of Acting.
(a) At all meetings of the Board, each director present shall have one vote.
(b) Except as otherwise provided by law, by the Certificate of Incorporation, or
these Bylaws, 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.
11. Vacancies.
Any vacancy 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.
12. 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.
13. 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 shareholders called for that purpose, and may be
removed for cause by action of the Board.
14. 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.
-6-
<PAGE>
15. 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 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.
16. 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
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<PAGE>
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 shareholders.
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.
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<PAGE>
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 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 shareholder 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
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<PAGE>
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 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 shareholders entitled to receive notice
of, and to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of determining shareholders 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
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<PAGE>
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders 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 shareholders 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 shareholders
entitled to express consent to corporate action in writing without 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 shareholders of
record entitled to notice of or to vote at any meeting of shareholders 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, from 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 conducive 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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<PAGE>
ARTICLE IX - AMENDMENTS
1. By Shareholders.
All by-laws of the Corporation shall be subject to revision, amendment or
repeal, and new by-laws may be adopted from time to time by a majority of the
shareholders who are at such time entitled to vote in the election of directors.
2. By Directors.
The Board of Directors shall adopt a resolution setting forth the amendment
proposed declaring its advisability, and either calling a special meeting of the
stockholders entitled to vote in respect thereto for the consideration of such
amendment or directing that the amendment proposed be considered at the next
annual meeting of stockholders. Such special or annual meeting shall be called
and held upon notice. This notice shall set forth such amendment in full or a
brief summary of the changes to be effected thereby, as the directors shall deem
advisable. At the meeting a vote of the stockholders entitled to vote thereon
shall be taken for and against the proposed amendment. If a majority of the
outstanding stock entitled to vote thereon, and a majority of the outstanding
stock of each class entitled to vote thereon as a class has been voted in favor
of the amendment, a certificate setting forth the amendment and certifying that
such amendment has been duly adopted in accordance with this Section shall be
executed, acknowledged, filed and recorded and shall become effective.
The undersigned Incorporator certifies that he has adopted the foregoing
by-laws as the first by-laws of the Corporation, in accordance with the
requirements of the Business Corporation Law.
Dated:
--------------------------
--------------------------------
Incorporator
-12-
BYLAWS
OF
BLC COMMERCIAL CAPITAL CORP.
ARTICLE I - OFFICES
SECTION 1. PRINCIPAL PLACE OF BUSINESS
The initial location of the principal place of business of the corporation
shall be as specified in the articles of incorporation and may be changed from
time to time by resolution of the board of directors. It may be located at any
place within or outside the State of Florida. [BCA Sec. 607.0202(b)]
The principal place of business of the corporation shall also be known as
the principal office of the corporation.
SECTION 2. OTHER OFFICES
The corporation may also have offices at such other places as the board of
directors may from time to time designate, or as the business of the corporation
may require.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS
All meetings of the shareholders shall be held at the principal place of
business of the corporation or at such other place, within or outside the State
of Florida, as may be determined by the board of directors. [BCA Secs.
607.0701(2) & 607.0702(2)]
SECTION 2. ANNUAL MEETINGS
The annual meeting of the shareholders shall be held on the of the
month of in each year, at o'clock M., at which time the
shareholders shall elect a board of directors and transact any other proper
business. If this date falls on a legal holiday, then the meeting shall be held
on the following business day at the same hour. [BCA Sec. 607.0701(1)]
SECTION 3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the board of
directors or by the shareholders. In order for a special meeting to be called by
the shareholders, 10 percent or more of all the votes entitled to be cast on any
issue proposed to be
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considered at the proposed special meeting shall sign, date and deliver to the
secretary one or more written demands for the meeting describing the purpose or
purposes for which it is to be held. [BCA Sec. 607.0702]
The secretary shall issue the call for special meetings unless the
president, the board of directors, or the shareholders designate another person
to make the call.
SECTION 4. NOTICE OF MEETINGS
Notice of all shareholders' meetings, whether annual or special, shall be
given to each shareholder of record entitled to vote at such meeting no fewer
than 10 or more than 60 days before the meeting date. The notice shall include
the date, time and place of the meeting and in the case of a special meeting the
purpose or purposes for which the meeting is called. Only the business within
the purpose or purposes included in the notice of special meeting may be
conducted at a special shareholders' meeting.
Notice of shareholders' meetings may be given orally or in writing, by or
at the direction of the president, the secretary or the officer or persons
calling the meeting. Notice of meetings may be communicated in person; by
telephone, telegraph, teletype, facsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at the
shareholder's address as it appears on the stock transfer books of the
corporation, with postage prepaid.
When a meeting is adjourned to a different date, time or place, it shall
not be necessary to give any notice of the adjourned meeting if the new date,
time or place is announced at the meeting at which the adjournment is taken, and
any business may be transacted at the adjourned meeting that might have been
transacted on the original date of the meeting. If, however, after the
adjournment, the board fixes a new record date for the adjourned meeting, notice
of the adjourned meeting in accordance with the preceding paragraphs of this
bylaw shall be given to each person who is a shareholder as of the new record
date and is entitled to vote at such meeting. [BCA Secs. 607.0141 & 607.0705]
SECTION 5. WAIVER OF NOTICE
A shareholder may waive any notice required by the Business Corporation
Act, the articles of incorporation or these bylaws before or after the date and
time stated in the notice. The waiver must be in writing, be signed by the
shareholder entitled to the notice, and be delivered to the corporation for
inclusion in the minutes or filing with the corporate records. Neither the
business to be transacted at nor the purpose of any annual or special
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meeting of the shareholders need be specified in any written waiver of notice.
[BCA Sec. 607.0706(1)]
SECTION 6. ACTION WITHOUT MEETING
Any action which is required by law to be taken at an annual or special
meeting of shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote if one or more written consents, setting forth the
action so taken, shall be dated and signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Written consents shall not be effective to take
corporate action unless, within 60 days of the date of the earliest written
consent relating to the action, the signed written consents of the number of
holders required to take the action are delivered to the corporation.
Within 10 days after obtaining any such authorization by written consent,
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action. [BCA Sec. 607.0704]
SECTION 7. QUORUM AND SHAREHOLDER ACTION
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. Unless otherwise
provided under law, the articles of incorporation or these bylaws, if a quorum
is present, action on a matter, other than the election of directors, shall be
approved if the votes cast by the holders of the shares represented at the
meeting and entitled to vote favoring the action exceed the votes cast opposing
the action. Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof. [BCA Secs. 607.0727 & 607.0728]
SECTION 8. VOTING OF SHARES
Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, except as may be provided
under law or the articles of incorporation. A shareholder may vote either in
person or by proxy executed in
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writing by the shareholder or the shareholder's duly authorized
attorney-in-fact.
At each election of directors, each shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder, for as many persons as there are directors to
be elected at that time and for whose election the shareholder has a right to
vote. [BCA Secs. 607.0721 & 607.0728]
SECTION 9. PROXIES
A shareholder, or the shareholder's attorney-in-fact, may appoint a proxy
to vote or otherwise act for the shareholder. An executed telegram or cablegram
appearing to have been transmitted by such person, or a photographic,
photostatic, or equivalent reproduction of an appointment form, shall be a
sufficient appointment form.
An appointment of a proxy is effective when received by the secretary or
other officer or agent authorized to tabulate votes. An appointment is valid for
up to 11 months unless a longer period is specified in the appointment form.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is revocable and the appointment
is coupled with an interest as provided in Section 607.0722(5) of the Business
Corporation Act. [BCA Sec. 607.0722]
SECTION 10. RECORD DATE FOR DETERMINING SHAREHOLDERS
The board of directors may fix in advance a date as the record date for
the purpose of determining shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote, or to take any other action. In
no event may a record date fixed by the board of directors be a date preceding
the date upon which the resolution fixing the record date is adopted. A record
date may not be specified to be more than 70 days before the meeting or action.
Unless otherwise specified by resolution of the board of directors, the
following record dates shall be operative:
1. The record date for determining shareholders entitled to demand a
special meeting is the date the first shareholder delivers the shareholder's
demand to the corporation.
2. If no prior action is required by the board of directors pursuant to
the Business Corporation Act, the record date for determining shareholders
entitled to take action without a meeting
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is the date the first signed written consent relating to the proposed action is
delivered to the corporation.
3. If prior action is required by the board of directors pursuant to the
Business Corporation Act, the record date for determining shareholders entitled
to take action without a meeting is at the close of business on the day on which
the board of directors adopts the resolution taking such prior action.
4. The record date for determining shareholders entitled to notice of and
to vote at a meeting of shareholders is at the close of business on the day
before the first notice is delivered to the shareholders. [BCA Sec. 607.0707]
SECTION 11. SHAREHOLDERS' LIST
After a record date is fixed or determined in accordance with these
bylaws, the secretary shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
shall show the addresses of, and the number and class and series, if any, of
shares held by, each person.
The shareholders' list shall be available for inspection by any
shareholder for a period of 10 days prior to the meeting, or such shorter time
as exists between the record date and the meeting, and continuing through the
meeting, at the corporation's principal place of business. [BCA Sec. 607.0720]
ARTICLE III - DIRECTORS
SECTION 1. POWERS
Except as may be otherwise provided by law or the articles of
incorporation, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors. [BCA Sec. 607.0801(2)]
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless:
1. The director votes against or abstains from the action taken; or
2. The director objects at the beginning of the meeting, or promptly upon
the director's arrival, to holding the meeting or
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transacting specified business at the meeting. [BCA Sec. 607.0824 (4)]
The board of directors shall have the authority to fix the compensation
of directors. [BCA Sec. 607.08101]
SECTION 2. QUALIFICATION AND NUMBER
Directors shall be individuals who are 18 years of age or older but need
not be residents of Florida or shareholders of this corporation. [BCA Sec.
607.0802]
The authorized number of directors shall be . This number may be
increased or decreased from time to time by amendment to these bylaws, but no
decrease shall have the effect of shortening the term of any incumbent director.
[BCA Secs. 607.0803 & 607.0805(3)]
SECTION 3. ELECTION AND TENURE OF OFFICE
The directors shall be elected at each annual meeting of the shareholders
and each director shall hold office until the next annual meeting of
shareholders and until the director's successor has been elected and qualified,
or until the director's earlier resignation or removal from office. [BCA Secs.
607.0803(3) & BCA Sec. 607.0805]
SECTION 4. VACANCIES
Unless otherwise provided in the articles of incorporation, any vacancy
occurring in the board of directors, including any vacancy created by reason of
an increase in the number of directors, may be filled by the affirmative vote of
a majority of the remaining directors, though less than a quorum of the board of
directors, or by the shareholders. [BCA Sec. 607.0809(1)]
A director elected to fill a vacancy shall hold office only until the next
shareholders' meeting at which directors are elected. [BCA Secs. 607.0805(4)]
SECTION 5. REMOVAL
Unless the articles of incorporation provide that a director may only be
removed for cause, at a meeting of shareholders called expressly for that
purpose, one or more directors may be removed, with or without cause, if the
number of votes cast to remove the director exceeds the number of votes cast not
to remove the director. [BCA Sec. 607.0808]
SECTION 6. PLACE OF MEETINGS
Meetings of the board of directors shall be held at any place,
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within or without the State of Florida, which has been designated in the notice
of the meeting or, if not stated in the notice or if there is no notice, at the
principal place of business of the corporation or as may be designated from time
to time by resolution of the board of directors.
The board of directors may permit any or all directors to participate in
meetings by, or conduct the meeting through the use of, any means of
communication by which all directors participating can simultaneously hear each
other during the meeting. [BCA Sec. 607.0820]
SECTION 7. ANNUAL AND REGULAR MEETINGS
An annual meeting of the board of directors shall be held without call or
notice immediately after and at the same place as the annual meeting of the
shareholders.
Other regular meetings of the board of directors shall be held at such
times and places as may be fixed from time to time by the board of directors.
Call and notice of these regular meetings shall not be required. [BCA Secs.
607.0820(1) & 607.0822(1)]
SECTION 8. SPECIAL MEETINGS AND NOTICE REQUIREMENTS
Special meetings of the board of directors may be called by the chairman
of the board or by the president and shall be preceded by at least 2 days'
notice of the date, time, and place of the meeting. Unless otherwise required by
law, the articles of incorporation or these bylaws, the notice need not specify
the purpose of the special meeting. [BCA Sec. 607.0822(2)]
Notice of directors' meetings may be given orally or in writing, by or at
the direction of the president, the secretary or the officer or persons calling
the meeting. Notice of meetings may be communicated in person; by telephone,
telegraph, teletype, facsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the director at the
director's current address on file with the corporation, with postage prepaid.
[BCA Sec. 607.0141]
If any meeting of directors is adjourned to another time or place, notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors. [BCA Secs. 607.0820(2)]
SECTION 9. QUORUM
A majority of the authorized number of directors shall
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constitute a quorum for all meetings of the board of directors. [BCA Sec.
607.0824]
SECTION 10. VOTING
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present at the meeting shall be the act of the board of
directors.
A director of the corporation who is present at a meeting of the board of
directors when corporate action is taken shall be deemed to have assented to the
action taken unless:
1. The director objects at the beginning of the meeting, or promptly upon
arriving, to holding the meeting or transacting specified business at the
meeting; or
2. The director votes against or abstains from the action taken. [BCA Sec.
607.0824]
SECTION 11. WAIVER OF NOTICE
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
or the manner in which it has been called or convened, except when a director
states, at the beginning of the meeting or promptly upon arrival at the meeting,
any objection to the transaction of business because the meeting is not lawfully
called or convened. [BCA Sec. 607.0823]
SECTION 12. ACTION WITHOUT MEETING
Any action required or permitted to be taken at a board of directors'
meeting or committee meeting may be taken without a meeting if the action is
taken by all members of the board of directors or of the committee. The action
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member. [BCA Sec. 607.0821]
ARTICLE IV - OFFICERS
SECTION 1. OFFICERS
The officers of the corporation shall consist of a president, a secretary,
a treasurer, and such other officers as the board of directors may appoint. A
duly appointed officer may appoint one or more officers or assistant officers if
authorized by the board of directors.
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The same individual may simultaneously hold more than one office in the
corporation.
Each officer shall have the authority and shall perform the duties set
forth in these bylaws and, to the extent consistent with these bylaws, shall
have such other duties and powers as may be determined by the board of directors
or by direction of any officer authorized by the board of directors to prescribe
the duties of other officers. [BCA Secs. 607.08401 & 607.0841]
SECTION 2. ELECTION
All officers of the corporation shall be elected or appointed by, and
serve at the pleasure of, the board of directors.
The election or appointment of an officer shall not itself create contract
rights. [BCA Secs. 607.08401 & 607.0843]
SECTION 3. REMOVAL, RESIGNATION AND VACANCIES
An officer may resign at any time by delivering notice to the corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If a resignation is made effective at a later
date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date if the board
provides that the successor does not take office until the effective date.
The board of directors may remove any officer at any time with or without
cause. Any officer or assistant officer, if appointed by another officer, may
likewise be removed by such officer.
An officer's removal shall not affect the officer's contract rights, if
any, with the corporation. An officer's resignation shall not affect the
corporation's contract rights, if any, with the officer. [BCA Secs. 607.0842 &
607.0843]
Any vacancy occurring in any office may be filled by the board of
directors.
SECTION 4. PRESIDENT
The president shall be the chief executive officer and general manager of
the corporation and shall, subject to the direction and control of the board of
directors, have general supervision, direction, and control of the business and
affairs of the corporation. He shall preside at all meetings of the shareholders
if present thereat and be an ex-officio member of all the standing committees,
including the executive committee, if any, and shall have the general powers and
duties of management usually vested in the office of president of a corporation.
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In the absence or disability of the president, the vice president, if any,
shall perform all the duties of the president and, when so acting, shall have
all the powers of, and be subject to all the restrictions imposed upon, the
president.
SECTION 5. SECRETARY
(a) The secretary shall be responsible for preparing, or causing to be
prepared, minutes of all meetings of directors and shareholders and for
authenticating records of the corporation. [BCA Sec. 607.08401(3)]
(b) The secretary shall keep, or cause to be kept, at the principal place
of business of the corporation, minutes of all meetings of the shareholders or
the board of directors; a record of all actions taken by the shareholders or the
board of directors without a meeting for the past three years; and a record of
all actions taken by a committee of the board of directors in place of the board
of directors on behalf of the corporation. [BCA Sec. 607.1601(1)]
(c) Minutes of meetings shall state the date, time and place of the
meeting; whether regular or special; how called or authorized; the notice
thereof given or the waivers of notice received; the names of those present at
directors' meetings; the number of shares present or represented at
shareholders' meetings; and an account of the proceedings thereof.
(d) The secretary shall maintain, at the principal place of business of
the corporation, a record of its shareholders, showing the names of the
shareholders and their addresses, the number, class, and series, if any, held by
each, the number and date of certificates issued for shares, and the number and
date of cancellation of every certificate surrendered for cancellation. [BCA
Sec. 607.1601(3)]
(e) The secretary shall make sure that the following papers and reports
are included in the secretary's records kept at the principal place of business
of the corporation:
1. The articles or restated articles of incorporation and all
amendments to them currently in effect;
2. The bylaws or restated bylaws and all amendments to them
currently in effect;
3. Resolutions adopted by the board of directors creating one or
more classes or series of shares and fixing their relative rights, preferences,
and limitations, if shares issued pursuant to those resolutions are outstanding;
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4. Minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past 3 years;
5. written communications to all shareholders generally or all
shareholders of a class or series within the past 3 years, including the
financial statements furnished for the past 3 years under Article VI, Section 2
of these bylaws and any reports furnished during the last 3 years under Article
VI, Section 3 of these bylaws;
6. A list of the names and business street addresses of current
directors and officers; and
7. The corporation's most recent annual report delivered to the
Department of State under Article VI, Section 4 of these bylaws. [BCA Sec.
607.1601(5)]
The secretary shall give, or cause to be given, notice of all meetings of
shareholders and directors required to be given by law or by the provisions of
these bylaws.
The secretary shall have charge of the seal of the corporation.
In the absence or disability of the secretary, the assistant secretary,
or, if there is none or more than one, the assistant secretary designated by the
board of directors, shall have all the powers of, and be subject to all the
restrictions imposed upon, the secretary.
SECTION 6. TREASURER
The treasurer shall have custody of the funds and securities of the
corporation and shall keep and maintain ' or cause to be kept and maintained, at
the principal business office of the corporation, adequate and correct books and
records of accounts of the income, expenses, assets, liabilities, properties and
business transactions of the corporation. [BCA Sec. 607.1601(2)]
The treasurer shall prepare, or cause to be prepared, and shall furnish to
shareholders, the annual financial statements and other reports required
pursuant to Article VI, Sections 2 and 3 of these bylaws.
The treasurer shall deposit monies and other valuables in the name and to
the credit of the corporation with such depositories as may be designated by the
board of directors. The treasurer shall disburse the funds of the corporation in
payment of the just demands against the corporation as authorized by the board
of directors and shall render to the president and directors, whenever
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requested, an account of all his or her transactions as treasurer and of the
financial condition of the corporation.
In the absence or disability of the treasurer, the assistant treasurer, if
any, shall perform all the duties of the treasurer and, when so acting, shall
have all the powers of and be subject to all the restrictions imposed upon the
treasurer.
SECTION 7. COMPENSATION
The officers of this corporation shall receive such compensation for their
services as may be fixed by resolution of the board of directors.
ARTICLE V - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate from its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution, the articles of incorporation or these bylaws, shall have
and may exercise the authority of the board of directors, except that no such
committee shall have the authority to:
1. Approve or recommend to shareholders actions or proposals required by
law to be approved by shareholders.
2. Fill vacancies on the board of directors or any committee thereof.
3. Adopt, amend, or repeal the bylaws.
4. Authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the board of directors.
5. Authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the board of directors may authorize a
committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the board of directors.
Each such committee shall have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
directors as alternate members of any such committee who may act in the place
and stead of any absent member or members at any meeting of such committee.
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The provisions of law, the articles of incorporation and these bylaws
which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the board of directors shall apply to such committees of the
board and their members as well.
Neither the designation of any such committee, the delegation thereto of
authority, nor action by such committee pursuant to such authority shall alone
constitute compliance by any member of the board of directors not a member of
the committee in question with the director's responsibility to act in good
faith, in a manner the director reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in like
position would use under similar circumstances. [BCA Sec. 607.0825]
ARTICLE VI - CORPORATE BOOKS, RECORDS AND REPORTS
SECTION 1. BOOKS, RECORDS AND REPORTS
The corporation shall keep correct and complete books and records of
account; minutes of the proceedings of its shareholders, board of directors, and
committees of directors; a record of its shareholders; and such other records
and reports as are further described in Article IV, Sections 5 and 6 of these
bylaws, at the principal place of business of the corporation.
Any books, records, and minutes may be in written form or in another form
capable of being converted into written form within a reasonable time. [BCA Sec.
607.1601(4)]
SECTION 2. ANNUAL FINANCIAL STATEMENTS FOR SHAREHOLDERS
Unless modified by resolution of the shareholders within 120 days of the
close of each fiscal year, the corporation shall furnish its shareholders annual
financial statements which may be consolidated or combined statements of the
corporation and one or more of its subsidiaries, as appropriate, that include a
balance sheet as of the end of the fiscal year, an income statement for that
year, and a statement of cash flow for that year. If financial statements are
prepared on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, the accountant's report must accompany them. If not, the statements
must be accompanied by a statement of the president or the person responsible
for the corporation's accounting records:
1. Stating the person's reasonable belief whether the statements were
prepared on the basis of generally accepted
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accounting principles and, if not, describing the basis of preparation, and
2. Describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements prepared for the preceding
year.
The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the corporation
to prepare its financial statements if, for reasons beyond the corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the corporation shall mail the shareholder the latest financial
statements. [BCA Sec. 607.1620]
Copies of the annual financial statements shall be kept at the principal
place of business of the corporation for at least 5 years, and shall be subject
to inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
SECTION 3. OTHER REPORTS TO SHAREHOLDERS
If the corporation indemnifies or advances expenses to any director,
officer, employee, or agent, other than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
corporation, the corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time that such meeting is held. The
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation. [BCA Sec. 607.1621(1)]
If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting. [BCA Sec. 607.1621(2)]
SECTION 4. ANNUAL REPORT TO DEPARTMENT OF STATE
The corporation shall prepare and deliver an annual report form to the
Department of State each year within the time limits imposed, and containing the
information required, by Section 607.1622 of the Business corporation Act.
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SECTION 5. INSPECTION BY SHAREHOLDERS
(a) A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, the records
of the corporation described in Article IV, Section 5(e) of these bylaws if the
shareholder gives the secretary written notice of the shareholder's demand at
least 5 business days before the date on which the shareholder wishes to inspect
and copy.
(b) A shareholder of this corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation if the shareholder
meets the requirements of subsection (c) below and gives the corporation written
notice of the shareholder's demand at least 5 business days before the date on
which the shareholder wishes to inspect and copy:
1. Excerpts from minutes of any meeting of the board of directors,
records of any action of a committee of the board of directors while acting in
place of the board of directors on behalf of the corporation, minutes of any
meeting of the shareholders, and records of action taken by the shareholders or
board of directors without a meeting, to the extent not subject to inspection
under subsection (a) above;
2. Accounting records of the corporation;
3. The record of shareholders; and
4. Any other books and records of the corporation.
(c) A shareholder may inspect and copy the records described in subsection
(b) above only if:
1. The shareholder's demand is made in good faith and for a purpose
reasonably related to the shareholder's interest as a shareholder;
2. The demand describes with reasonable particularity the
shareholder's purpose and the records the shareholder desires to inspect; and
3. The records requested are directly connected with the
shareholder's purpose.
(d) This section of the bylaws does not affect:
1. The right of a shareholder to inspect and copy records under
Article II, Section 11 of these bylaws;
15
<PAGE>
2. The power of a court, independently of the Business Corporation
Act, to compel the production of corporate records for examination. [BCA Sec.
607.1602]
SECTION 6. INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind of the
corporation and to inspect the physical properties of the corporation. Such
inspection by a director may be made in person or by agent or attorney. The
right of inspection includes the right to copy and make extracts.
ARTICLE VII - INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION UNDER BCA SECTION 607.0850
The corporation shall have the power to indemnify any director, officer,
employee, or agent of the corporation as provided in section 607.0850 of the
Business Corporation Act.
SECTION 2. ADDITIONAL INDEMNIFICATION
The corporation may make any other or further indemnification or
advancement of expenses of any of its directors, officers, employees, or agents,
under any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in the person's official capacity and as to action
in another capacity while holding such office. However, such further
indemnification or advancement of expenses shall not be made in those instances
specified in Section 607.0850 (7) (a-d) of the Business corporation Act.
SECTION 3. COURT ORDERED INDEMNIFICATION
Unless otherwise provided by the articles of incorporation,
notwithstanding the failure of the corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction in accordance with Section
607.0850(9) of the Business Corporation Act.
SECTION 4. INSURANCE
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director,
16
<PAGE>
officer, employee, or agent of the corporation against any liability asserted
against the person and incurred by the person in any such capacity or arising
out of the person's status as such, whether or not the corporation would have
the power to indemnify the person against such liability under provisions of
law. [BCA Sec. 607.0850(12)]
ARTICLE VIII - SHARES
SECTION 1. ISSUANCE OF SHARES
The board of directors may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed, promises to perform
services evidenced by a written contract or other securities of the corporation.
Before the corporation issues shares, the board of directors shall
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and nonassessable.
When the corporation receives the consideration for which the board of
directors authorized the issuance of shares, the shares issued therefor are
fully paid and nonassessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
The corporation may place in escrow shares issued for a contract for
future services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may credit distributions in respect of
the shares against their purchase price, until the services are performed, the
note is paid, or the benefits received. If the services are not performed, the
shares escrowed or restricted and the distributions credited may be canceled in
whole or part. [BCA Sec. 607.0621]
SECTION 2. CERTIFICATES
After shares in the corporation have been fully paid, the holder of the
shares shall be given a certificate representing the shares. At a minimum, each
share certificate shall state on its face the following information:
1. the name of the corporation and that the corporation is organized under
the laws of Florida;
17
<PAGE>
2. the name of the person to whom issued;
3. the number and class of shares and the designation of the series, if
any, the certificate represents.
Each certificate shall be signed, either manually or in facsimile, by the
president or a vice president and by the secretary or an assistant secretary of
the corporation and may bear the seal of the corporation. [BCA Sec. 607.0625)
ARTICLE IX - DIVIDENDS
SECTION 1. PAYMENT OF DIVIDENDS
The board of directors may authorize, and the corporation may make,
dividends on its shares in cash, property, or its own shares and other
distributions to its shareholders, subject to any restrictions contained in the
articles of incorporation, to the requirements of Sections 607.0623 and
607.06401 of the Business Corporation Act, and to all applicable provisions of
law. [BCA Secs. 607.01401(15), 607.0623(2) & 607.06401(3)]
ARTICLE X - AMENDMENT OF ARTICLES AND BYLAWS
SECTION 1. AMENDMENT OF ARTICLES OF INCORPORATION
The board of directors may propose one or more amendments to the articles
of incorporation for submission to the shareholders. For the amendment to be
effective:
1. The board of directors must recommend the amendment to the
shareholders, unless the board of directors determines that because of conflict
of interest or other special circumstances it should make no recommendation and
communicates the basis for its determination to the shareholders with the
amendment; and
2. The shareholders entitled to vote on the amendment must approve the
amendment as provided below.
The board of directors may condition its submission of the proposed
amendment to the shareholders on any basis. The shareholders shall approve
amendments to the articles of incorporation by the vote of a majority of the
votes entitled to be cast on the amendment, except as may otherwise be provided
by the articles of incorporation, Sections 607.1003 and 607.1004 of the
Business Corporation Act and other applicable provisions of law, and these
bylaws.
The corporation shall notify each shareholder, whether or not entitled to
vote, of the proposed shareholders' meeting to amend
18
<PAGE>
the articles of incorporation in accordance with Article II, Section 4 of these
bylaws. The notice of meeting must state that the purpose, or one of the
purposes, of the meeting is to consider the proposed amendment and contain or be
accompanied by a copy or summary of the amendment.
Notwithstanding the above provisions of this section and unless otherwise
provided in the articles of incorporation, if this corporation has 35 or fewer
shareholders then, pursuant to Section 607.1002(6) of the Business Corporation
Act, the shareholders may amend the articles of incorporation without an act of
the directors at a meeting of the shareholders for which the notice of the
changes to be made is given. [BCA Secs. 607.1002 - 607.1005]
SECTION 2. AMENDMENT OF BYLAWS
The board of directors may amend or repeal these bylaws unless:
1. The articles of incorporation or the Business Corporation Act reserves
the power to amend the bylaws generally or a particular bylaw provision
exclusively to the shareholders; or
2. The shareholders, in amending or repealing the bylaws generally or a
particular bylaw provision, provide expressly that the board of directors may
not amend or repeal the bylaws or that bylaw provision.
The shareholders may amend or repeal these bylaws even though the bylaws
may also be amended or repealed by the board of directors. [BCA Sec. 607.1020]
CERTIFICATE
This is to certify that the foregoing is a true and correct copy of the
Bylaws of the corporation named in the title thereto and that such Bylaws were
duly adopted by the board of directors of the corporation on the date set forth
below.
Dated:
Secretary
------------------------------
19
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTOR TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M. NEW YORK TIME, NOVEMBER 10, 2000
No. W-1997-1 ________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________ or
registered assigns, is the registered holder of _________ Warrants to purchase
initially at any time from November 10, 1998 until November 10, 2000 (the
"Expiration Date"), up to _________ fully-paid and non-assessable shares of
common stock, $.___ par value ("Common Stock") of BLC Financial Services, Inc.,
a Delaware corporation (the "Company"), at the initial exercise prices, subject
to adjustment in certain events (the "Exercise Price"), of $______ per share of
Common Stock, upon surrender of this Warrant Certificate and payment of the
applicable Exercise Price at an office or agency of the Company, or due exercise
of Section 3.2 of the Warrant Agreement (as hereafter defined), but subject to
the conditions set forth herein and in the Warrant Agreement dated as of
________________ between the Company and _________________ (the "Warrant
Agreement"). Payment of the applicable Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m. New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference herein and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events, the
then applicable Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the then applicable Exercise
Price and the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificate shall
<PAGE>
not in any way change, alter, or otherwise impair, the rights of the holder as
set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.
Dated as of
-------------------
BLC FINANCIAL SERVICES, INC.
[SEAL]
By:
----------------------------------
Name: Robert F. Tannenhauser
ATTEST: Title: President
- -------------------------------
David Redlener, Secretary
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
/___/ ____________________ shares of Common Stock;
CHECK THE APPROPRIATE BOX
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of BLC FINANCIAL
SERVICES, INC., in the amount of $_________________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such securities be
registered in the name of ______________________________, whose address is
_________________________________________________ and that such Certificate be
delivered to_________________________________________________, whose address is
___________________________________________________________.
Dated:
Signature: ________________________________
(Signature must conform in all respects to name of holder
as specified on the face of the Warrant Certificate.)
____________________________________________
Insert Social Security or Other Identifying
Number of Holder
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED, ____________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and hereby irrevocably constitutes and appoints ___________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:_____________________________________________
SIGNATURE:_________________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate)
_________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT A
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK INTO WHICH THIS NOTE MAY
BE CONVERTED HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES LAWS. THIS NOTE AND THE SHARES OF COMMON STOCK INTO WHICH
THESE NOTES MAY BE CONVERTED ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED
BY SECTION 4(2) OF THE SECURITIES ACT, REGULATION D THEREUNDER, CERTAIN
STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED
PURSUANT THERETO. NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK INTO
WHICH THIS NOTE MAY BE CONVERTED MAY BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION, THE NOTES AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE NOTES ARE SUBJECT TO THE PROVISIONS OF THE HOLDERS
AGREEMENT DATED AS OF ___________, 1997 AMONG THE CORPORATION AND EACH
PURCHASER OF THE NOTES, AS AMENDED AND MODIFIED FROM TIME TO TIME, A COPY
OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION AND WILL BE
FURNISHED TO THE HOLDER ON REQUEST. BY ACCEPTANCE OF THIS NOTE, THE HOLDER
AGREES TO BE BOUND BY THE PROVISIONS OF THE HOLDERS AGREEMENT.
BLC FINANCIAL SERVICES, INC.
9-1/4% CONVERTIBLE SUBORDINATED NOTE DUE 2001
CONVERSION PRICE $______ PER SHARE
SERIES _____
$ ______ __________, 1997
FOR VALUE RECEIVED, the undersigned, BLC FINANCIAL SERVICES, INC., a
Delaware corporation (the "Corporation"), hereby promises to pay to the order of
________________________________________ (the "Holder") in lawful money of the
United States of America and in immediately available funds, the principal
amount of ____________________________ ($______), together with interest (as
provided below) on the unpaid principal amount of this Note outstanding from
time to time, from the date hereof
<PAGE>
until any applicable Conversion Date, Redemption Date or the Maturity Date (as
such terms are defined below), as the case may be.
This Note is issued to the Holder pursuant to that certain
Subscription Agreement dated as of __________, 1997 (the "Subscription
Agreement") between the Corporation and the Holder and, accordingly, is subject
to all of the terms and conditions set forth therein. All capitalized terms,
unless otherwise defined herein, shall have the meanings ascribed to them in the
Subscription Agreement. This Note is one of a series of identical notes (the
"Notes") issued to certain holders (the "Holders") in a private placement exempt
from the registration requirements of the Securities Act.
Principal of, premium, if any, and interest on this Note will be
payable (i) at the Corporation's principal executive office located at 919 Third
Avenue, New York, New York 10022, or at such other location as designated by the
Corporation, (ii) at the option of either the Corporation or the Holder, by
check mailed to the Holder at its address set forth in the register of holders
of Notes (or at such other address designated by the Holder in writing) or (iii)
at the Holder's option, by wire transfer to an account designated by Holder in
writing.
1. Interest. This Note shall bear interest (computed on the basis of
a 360-day year (comprised of twelve 30-day months) for the actual number of
days elapsed) at the rate of 9-1/4% per annum, commencing on the date hereof
(the "Issue Date"), accrued annually, and payable quarterly in arrears on the
January 15, April 15, July 15 and October 15 of each year, commencing on January
15, 1998 (each an "Interest Payment Date"). Interest will be paid to the person
in whose name this Note is registered at the close of business on the January 1,
April 1, July 1 and October 1 immediately preceding each relevant interest
payment date.
2. Principal. The unpaid principal balance of this Note, together
with accrued but unpaid interest thereon, shall be due and payable on November
11, 2001 (the "Maturity Date").
3. Subordination. This Note is subordinated in all respects to the
Senior Indebtedness (as defined below) of the Corporation. "Senior Indebtedness"
means (i) the principal of, and premium, if any, and interest on any
Indebtedness of the Corporation to any bank or other institutional lender, plus
interest and expenses with respect thereto, and (ii) any refinancings,
deferrals, refundings, replacements, extensions and renewals of or amendments,
modifications or supplements thereto. "Indebtedness" means, with respect to any
person, (i) any obligation of, or any obligation guaranteed by, such person for
the repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, (ii) all obligations of the person with
respect to interest rate hedging arrangements to hedge interest rates relating
to Indebtedness of such person, (iii) any deferred payment obligation of, or any
such obligation guaranteed by, such person for the
2
<PAGE>
payment of the purchase price of property or assets evidenced by a note or
similar instrument and (iv) any obligation of, or any such obligation guaranteed
by, such person for the payment of rent or other amounts under a lease of
property or assets which obligation is required to be classified and accounted
for as a capitalized lease on the balance sheet of such person under generally
accepted accounting principles.
4. Conversion. (a) The Notes will be convertible at the option of
the Holder, unless previously converted, redeemed or repurchased, in whole or in
part, at any time and from time to time, on 30 days' prior written notice, into
shares of Common Stock, $.01 par value, of the Corporation (the "Common Stock"),
following the last issuance of the Notes until the close of business on the
Business Day immediately preceding the Maturity Date, unless previously
converted, redeemed or repurchased, at a conversion price per share of
$____________ (the "Conversion Ratio"). Accrued and unpaid interest on the Notes
converted to the date of conversion will be paid at conversion.
(b) In order to exercise the right of conversion attaching to the
Notes, the Holder must (i) deliver to the Corporation a written notification of
the Holder's intent to convert (the "Notice of Conversion") all or a specified
portion of the Notes held by such Holder, at least 30 days prior to the
conversion date specified in the Notice of Conversion (the "Conversion Date")
and (ii) deliver the Note at the specified office of the Corporation,
accompanied by a duly signed and completed Notice of Conversion on such
Conversion Date.
(c) (i) The Conversion Ratio is subject to adjustment as set forth
below in the event the Corporation should at any time, or from time to
time after the date of issuance of the Notes, fix a record date for the
effectuation of a split or subdivision of the outstanding shares of the
Common Stock or the determination of holders of the Common Stock entitled
to receive a dividend or other distribution payable in additional shares
of the Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly additional
shares of the Common Stock (hereinafter referred to as the "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of the Common Stock (or the Common Stock Equivalents
issuable upon conversion or exercise thereof). In such case, as of such
record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Ratio shall be
appropriately adjusted so that the number of shares of the Common Stock
issuable upon conversion of this Note shall be increased in proportion to
such increase of outstanding shares.
(ii) If the number of shares of the Common Stock outstanding
at any time after the date hereof is decreased by a combination of the
outstanding shares of the Common Stock, then, following the record date of
such combination, the Conversion Ratio shall be appropriately adjusted so
that the number of shares
3
<PAGE>
of the Common Stock issuable on conversion hereof shall be decreased in
proportion to such decrease in outstanding shares.
(iii) In the case of (x) any reclassification or change of the
Common Stock or (y) a consolidation, merger or combination involving the
Corporation or a sale or conveyance to another corporation of the property
and assets of the Corporation as an entirety or substantially as an
entirety, in each case as a result of which Holders of Common Stock shall
be entitled to receive stock, other securities, other property or assets
(including cash) with respect to or in exchange for such Common Stock, the
holders of the Notes then outstanding will be entitled thereafter to
convert such Notes into the kind and amount of shares of stock, other
securities or other property or assets of such reorganized, consolidated
or merged Corporation which they would have owned or been entitled to
receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Notes been converted into Common
Stock immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance (assuming, in a case in which the
Corporation's stockholders may exercise rights of election that a holder
of Notes would not have exercised any rights of election as to the stock,
other securities or other property or assets receivable in connection
therewith and received per share the kind and amount received per share by
a plurality of non-electing shares).
(iv) No adjustment in the Conversion Ratio will be required
unless such adjustment would require a change of at least 1% of the
Conversion Ratio then in effect; provided that any adjustment that would
otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment. Except as stated above, the
Conversion Ratio will not be adjusted for the issuance of Common Stock or
any securities convertible into or exchangeable for Common Stock or having
the right to purchase any of the foregoing.
(v) Any sales, transfer, use or other similar taxes imposed as
a result of the transfer of the Common Stock upon conversion of this Note
in accordance with its terms shall be borne by the Holder.
5. Redemption. (a) The Notes will be redeemable at the option of the
Corporation unless previously converted, redeemed or repurchased, on written
notice as described below, in whole or in part, at any time and from time to
time, if for five or more days in any 20-Trading Day period (whether or not
consecutive) the Market Price per share of Common Stock is greater than
$_________, at a redemption price equal to 110% of the principal amount of the
Notes to be redeemed plus all accrued and unpaid interest thereon to the date of
redemption, provided that such notice of redemption shall be delivered no later
than 10 days after the expiration of such 20-day Trading Period. In addition,
the Notes will be redeemable at the option of the Corporation unless previously
converted, redeemed or repurchased, on written notice as described below, in
whole or in part, at any time and from
4
<PAGE>
time to time, from the proceeds of one or more underwritten primary public
offerings of the Common Stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended, at a redemption price equal to
110% of the principal amount of the Notes being redeemed plus all accrued and
unpaid interest thereon to the date of redemption. Upon delivery of any notice
of redemption by the Corporation, a Holder may elect, in the manner specified
below, to convert the Notes to be redeemed at the Conversion Ratio.
(b) If less than all of the Notes are to be redeemed, the Notes will
be chosen for redemption by the Corporation on a pro rata basis or by lot or by
a method that complies with applicable legal requirements.
(c) In order to exercise the right of redemption attaching to the
Notes, the Corporation must deliver to each Holder a written notification of the
Corporation's intent to redeem (the "Notice of Redemption") all or a specified
portion of the Notes held by such Holder, at least 60 days prior to the
redemption date (the "Redemption Date") specified in the Notice of Redemption.
Such Notice of Redemption shall specify (i) the Redemption Date on which the
Holder must deliver the Notes to be redeemed at the specified office of the
Corporation, (ii) the principal amount of Notes of such Holder to be redeemed
and (iii) the redemption price to be paid by the Corporation in respect of such
Notes.
(d) For a period of 30 days after delivery by the Corporation of a
Notice of Redemption, the Holder shall retain its right of conversion (at the
Conversion Ratio) attaching to the Notes specified in the Notice of Redemption
to be redeemed. In order to exercise such right of conversion, the Holder must
(i) deliver a Notice of Conversion with respect to all or a portion of the Notes
to be redeemed at least 30 days prior to the Redemption Date specifying a
Conversion Date no later than the Redemption Date and (ii) deliver the Note at
the specified office of the Corporation, accompanied by a duly signed and
completed Notice of Conversion on such Conversion Date.
(e) If less than all the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Corporation on a pro rata
basis or by lot or by such method as the Corporation shall deem fair and
appropriate, provided that no Notes of $1,000 or less will be redeemed in part.
On and after the Redemption Date, interest will cease to accrue on Notes or
portions thereof called for redemption.
6. Covenants. (a) Without the prior written consent of holders of a
majority of the aggregate principal amount of Notes outstanding, the Corporation
shall not:
(i) except for transactions listed on Schedule I hereto,
conduct any transaction with any affiliate of the Corporation, any
shareholder of the Corporation or any affiliate of such shareholder, other
than on an arms-length basis; and
5
<PAGE>
(ii) cancel or compromise any claim or debt in excess of
$10,000, except for adequate consideration, as determined in the sole
discretion of the Board of Directors of the Corporation, or in the
ordinary course of its business; or
(iii) consolidate with or merge with or into any other person,
or sell, assign, convey, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties and assets to any persons or
group of affiliated persons unless at the time and after giving effect
thereto (A) either (x) the Corporation shall be the continuing corporation
or (y) the corporation or other entity formed by such consolidation or
into which the Corporation is merged or to which such sale, assignment,
transfer, lease, conveyance or disposition shall have been made (the
"Surviving Entity"), is a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall, in either case, expressly assume all
obligations of the Corporation under the Notes; (B) immediately prior to
such transaction and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and
(C) the consolidated net worth of the Corporation (or the Surviving
Entity) shall at least equal the consolidated net worth of the Corporation
immediately prior to such transaction.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Corporation, the Surviving Entity shall
succeed to, and be substituted for, and may exercise every right and power of,
the Corporation under the Notes with the same effect as if the Surviving Entity
had been named as the Corporation therein, and the Corporation shall be
discharged from any obligations under the Notes.
(b) As soon as available and in any event not later than 90 days
after the end of each of the first three quarters of the fiscal year, the
Corporation shall furnish to the Holder a brief summary of the results of its
operations and unaudited financial statements which fairly present, in all
material respects, its financial position and results of operations for the
preceding fiscal quarter, and such financial statements (including the related
notes, where applicable) shall be prepared in accordance with generally accepted
accounting principles consistently applied during the periods involved.
(c) As soon as available and in any event not later than 120 days
after the end of each fiscal year, the Corporation shall furnish to the Holder a
brief summary of the results of its operations and audited financial statements
which fairly present, in all material respects, its financial position and
results of operations for the preceding fiscal year, and such financial
statements (including the related notes, where applicable) shall be prepared in
accordance with generally accepted accounting principles consistently applied
during the periods involved.
6
<PAGE>
7. Events of Default. The following shall constitute Events of
Default under this Note:
(a) failure by the Corporation to make any payment of interest
required under this Note and such failure remains unremedied for 10 days;
(b) failure by the Corporation to make any payment of the principal
or premium, if any, of any Note when the same becomes due and payable at
maturity, by acceleration or otherwise;
(c) any representation or warranty made by the Corporation under or
in connection with any document executed and delivered in connection with the
Notes shall prove to have been incorrect in any materially adverse respect when
made;
(d) the Corporation shall fail to perform or observe any other term,
covenant or agreement contained in any Transaction Document on its part to be
performed or observed and any such failure shall remain unremedied for 60 days
after written notice thereof shall have been given to the Corporation by any
Holder;
(e) a default occurs under any mortgage, indenture, instrument or
agreement under which there may be issued or by which there may be secured or
evidenced any indebtedness of the Corporation in excess of $1,000,000, whether
such indebtedness now exists or shall hereafter be created, and such
indebtedness shall be declared due and payable prior to its stated maturity;
(f) any final judgment for the payment of money in excess of
$1,000,000 (not covered by insurance) is entered by a court of competent
jurisdiction against the Corporation and such judgment remains undischarged for
a period (during which execution shall not be effectively stayed) of 60 days;
(g) the Corporation pursuant to or within the meaning of any
bankruptcy law: (1) commences a voluntary case; (2) consents to the entry of an
order for relief against it in an involuntary case; (3) consents to the
appointment of a custodian of it or for all or substantially all of its
property; (4) makes a general assignment for the benefit of its creditors; or
(5) admits in writing its inability generally to pay its debts as the same
become due;
(h) a court of competent jurisdiction enters an order or decree
under any bankruptcy law that: (1) is for relief against the Corporation in an
involuntary case; (2) appoints a custodian of the Corporation or for all or
substantially all of the property of the Corporation; or (3) orders the
liquidation of any of the Corporation and the order or decree remains unstayed
and in effect for 60 days; or
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<PAGE>
(i) a court of competent jurisdiction enters a final judgment
holding any of the documents delivered in connection with the Notes to be
invalid or unenforceable and such judgment remains unstayed and is in effect for
a period of 60 consecutive days; or if the Corporation shall assert, in any
pleading filed in such a court, that any of the documents delivered in
connection with the Notes are invalid or unenforceable.
If an Event of Default (other than an Event of Default specified in
clause (g) or (h) above with respect to the Corporation) occurs and is
continuing, then and in every such case, the holders of at least a majority in
principal amount of the then outstanding Notes, by notice to the Corporation,
may declare the unpaid principal of, premium, if any, and any accrued interest
on all the Notes to be due and payable. Upon such declaration, the principal,
premium, if any, and interest on the Notes shall be due and payable immediately.
If an Event of Default specified in clause (g) or (h) above occurs with respect
to the Corporation, such an amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of any Note
holder.
The holders of a majority in aggregate principal amount of the Notes
then outstanding may, on behalf of the holders of all the Notes, waive any past
Default or Event of Default and its consequences, except a Default in the
payment of principal, of premium, if any, or interest on the Notes (other than
the nonpayment of principal, of premium, if any, and interest on the Notes that
has become due solely by virtue of an acceleration that has been duly rescinded
as provided above) or in respect of a covenant or provision of the Notes that
cannot be modified or amended without the consent of all holders of Notes.
8. Miscellaneous.
8.1 Section Headings. The section headings contained in this Note
are for reference purposes only and shall not affect the meaning or
interpretation of this Note.
8.2 Amendment and Waiver. No provision of this Note may be amended
or waived unless the Corporation shall have obtained the written agreement of
holders of a majority in aggregate principal amount of the Notes then
outstanding. No failure or delay in exercising any right, power or privilege
hereunder, shall imply or otherwise operate as a waiver of any rights of the
Holder, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege.
8.3 Assignment and Transfer.
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK INTO WHICH THIS NOTE MAY
BE CONVERTED HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES LAWS. THIS NOTE AND SUCH SHARES OF COMMON STOCK ARE
OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY SECTION 4(2) OF THE SECURITIES
ACT,
8
<PAGE>
REGULATION D THEREUNDER, CERTAIN STATE SECURITIES LAWS AND CERTAIN RULES
AND REGULATIONS PROMULGATED PURSUANT THERETO. NEITHER THIS NOTE NOR THE
SHARES OF COMMON STOCK INTO WHICH THIS NOTE MAY BE CONVERTED MAY BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED. IN ADDITION, THE SHARES OF COMMON STOCK,
ISSUABLE UPON CONVERSION OF THE NOTES ARE SUBJECT TO THE PROVISIONS OF THE
HOLDERS AGREEMENT DATED AS OF __________, 1997 AMONG THE CORPORATION AND
INVESTORS, AS AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH IS
ON FILE AT THE OFFICES OF THE CORPORATION AND WILL BE FURNISHED TO THE
HOLDER ON REQUEST. BY ACCEPTANCE OF THIS NOTE, THE HOLDER AGREES TO BE
BOUND BY THE PROVISIONS OF THE HOLDERS AGREEMENT.
8.4 Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to any
conflicts of laws principles thereof that would otherwise require the
application of the law of any other jurisdiction.
8.5 Lost, Stolen, Destroyed or Mutilated Note. Upon receipt of
evidence reasonably satisfactory to the Corporation of the loss, theft,
destruction or mutilation of this Note and of a letter of indemnity reasonably
satisfactory to the Corporation from the holder of this Note, and upon surrender
or cancellation of this Note if mutilated, the Corporation shall make and
deliver a new note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note.
8.6 Waiver of Presentment, Etc. Except as otherwise provided herein,
presentment, demand, protest, notice of dishonor and all other notices are
hereby expressly waived by the Corporation.
8.7 Usury. Nothing contained in this Note shall be deemed to
establish or require the payment of a rate of interest in excess of the maximum
rate legally enforceable. If the rate of interest called for under this Note at
any time exceeds the maximum rate legally enforceable, the rate of interest
required to be paid hereunder shall be automatically reduced to the maximum rate
legally enforceable. If such interest rate is so reduced and thereafter the
maximum rate legally enforceable is increased, the rate of interest required to
be paid hereunder shall be automatically increased to the maximum rate legally
enforceable, which in no event shall exceed the rate otherwise provided for in
this Note.
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<PAGE>
8.8 Notices. Any notice, request, instruction or other document to
be given hereunder by either party to the other shall be in writing and either
shall be delivered in person with receipt acknowledged, by registered or
certified mail, return receipt requested, postage prepaid or by Federal Express
or other overnight service, addressed (a) if to the Corporation, to 919 Third
Avenue, New York, New York 10022, Attention: Robert F. Tannenhauser, and (b) if
to the Holder, to [__________] or to 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,
request, instruction or other document to be given hereunder shall be deemed to
have been duly given or served on the date on which personally delivered, with
receipt acknowledged; one business day after the same shall have been sent by
overnight courier or other overnight service; and three business days after the
same shall have been deposited with the United States mail.
IN WITNESS WHEREOF, the Corporation has executed and delivered this
Note as of the date hereinabove first written.
BLC FINANCIAL SERVICES, INC.
By:
-----------------------------------
Name: Robert F. Tannenhauser
Title: President and Chief Executive
Officer
10
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of............ by and
between BLC FINANCIAL SERVICES, INC., a Delaware corporation with offices at 645
Madison Avenue, New York, New York 10022 (hereinafter called the "Company") and
.....................(hereinafter called the "Employee").
WITNESSETH
WHEREAS, the Board of Directors of the Company has determined that
the interests of the Company will be advanced by encouraging and enabling
certain employees 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 employees 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 employee is one of those individuals, referred to above, to whom an option
should be granted under the Plan.
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. The Company hereby grants to the Employee, as a matter of
separate inducement and agreement in connection with his employment by 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 .........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 $......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 4 years from such
date, unless it is sooner terminated as provided in this Agreement.
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<PAGE>
3. (a) At the end of each year of the term of the Option, the
Employee shall have the right to purchase up to the number of Shares set forth
below in this Section (less the number of Shares purchased by the Employee by
previous exercise of the Option):
At the end of the Year Number of Shares
---------------------- ----------------
1 .......
2 .......
3 .......
4 .......
(b) Notwithstanding the provisions of paragraph (a) of this
section, 90 days prior to the end of the fourth year of the term of the Option
(provided it has not theretofore been terminated), the Employee shall become
entitled to purchase the entire number of Shares subject of the Option (less the
number of Shares purchased by the Employee by previous exercise of this Option).
4. The Employee may exercise the Option, from time to time in
Employee's 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 Employee exercise the Option to purchase a
fraction of a Share.
5. The Employee 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 Employee'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.
6. Except as set forth in Section 9 of this Agreement, the Employee
may not exercise the Option unless, at the time of exercise, Employee has been
in the employ of the Company continuously since the date of this Agreement.
7. 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 Employee
only by Employee.
8. 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.
9. (a) The Option may be exercised within 12 months after the date
of
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<PAGE>
the Employee's termination of employment on account of Employee's death or
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 termination of
employment.
(b) The Option may be exercised within three (3) months after
the date of the Employee's termination of employment for any reason other than
Cause (as defined in the Employment Agreement dated ...........) or on account
of death or disability, but only to the extent it was otherwise exercisable at
the date of 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.
10. Notwithstanding any other provision of this Agreement, if
(a) the Employee is convicted of a felony in a court of law,
or
(b) the Employee commits any act of dishonesty or moral
turpitude which adversely affects the business of the
Company, or
(c) the Employee discloses to any person any confidential
information or trade secrets of the Company,
(d) The Employment Agreement is terminated for Cause
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.
11. (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 forgoing, it is
specifically understood and agreed that neither the Company nor any of its
officers, directors or employees 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 Employee agrees for himself, Employee's 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.
12. 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
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<PAGE>
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 Employee and Employee's legal representatives.
13. Neither the Employee nor Employee's 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.
14. 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.
15. 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.
16. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
17. This Agreement shall be interpreted in accordance with the laws
of the State 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:
------------------------------
Jennifer Napier, Treasurer
Attest:
- ---------------------------
------------------------------
Employee
4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective the 4th day of May,
1998, by and among Business Loan Center, Inc., a Delaware corporation with
offices at 645 Madison Avenue, New York, N.Y. ("Company" or "BLC") and Leonard
Rudolph residing at 3 Pelham Place, East Brunswick, New Jersey 08816
("Executive").
WHEREAS, the Company is a wholly owned subsidiary of BLC Financial
Services, Inc., a Delaware Corporation ("Financial") with an office at 645
Madison Avenue, New York, New York; and
WHEREAS, Company is in the business of originating, underwriting and
processing commercial loans, including but not limited to loans that fall within
the parameters of the 7(a) Program of the U.S. Small Business Administration
("7(a) Loans") and loans that fall within the parameters of the Department of
Agricultures Rural Development guaranteed loan program ("B & I Loans"), which
loans are funded by or through Financial or its subsidiaries, including Business
Loan Center, Inc. a Delaware Corporation ("BLC"), BLC Commercial Capital
Corporation, a Florida Corporation and BLC Capital Corporation, a Delaware
corporation; and
WHEREAS, Company originates, underwrites and processes the aforementioned
commercial loans exclusively for Financial and its subsidiaries, Business Loan
Center, Inc. ("BLC"), BLC Commercial Capital Corp. ("Commercial"), BLC Capital
Corp. ("Capital") and any other subsidiaries or affiliates that may hereafter be
formed; and
WHEREAS, Executive has valuable experience in commercial lending; and
WHEREAS, Executive's experience as set forth above is of great value to
the Company, Financial and its other subsidiaries; and
WHEREAS, Company desires to employ Executive for the Term set forth herein
and Executive desires to accept such employment on an exclusive basis; and
WHEREAS, in view of Executive's experience and anticipated services for
Company, Executive acknowledges the necessity and reasonableness of his covenant
against disclosure of trade
<PAGE>
secrets of, and unfair competition with, Company and restrictions on his future
business activities;
NOW, THEREFORE, in consideration of the premises and mutual promises set
forth herein, Company, Financial and Executive agree as follows:
(a) Employment and Term.
Company shall employ Executive for a period of five (5) years,
commencing on the date hereof and ending April 30, 2003 ("Initial Period"),
subject to the termination provisions hereinafter set forth. This Agreement
shall be automatically deemed extended for additional successive one-year
periods, unless Financial or Executive notifies the other at least 90 days prior
to the end of the Initial Period or any extension thereof, that it or he does
not wish to extend the Agreement.
(b) Compensation.
(i) As compensation for Executive's performance of all required
services hereunder, and conditioned upon his full, faithful and diligent
performance of all promises and undertakings herein, Company shall pay to
Executive the sum of One Hundred Seventy Thousand Dollars ($170,000) per year.
Said compensation shall be payable in bi-weekly installments, or in accordance
with Company's regular payroll practices for other senior executives of
Financial and BLC.
(ii) All payments to be made by Company to Executive hereunder shall
be subject to such tax, FICA or other deductions or withholdings as Company
shall be required to make by law or which Company uniformly makes as a matter of
policy from compensation paid to other employees.
(iii) As further compensation for Executive's performance of all
required services hereunder, and conditioned upon his full, faithful and
diligent performance of all promises and undertakings herein, Executive shall be
granted options to purchase 70,000 shares of the $.01 par value common stock of
Financial, pursuant to the Option Agreement annexed as Exhibit I.
(iv) From time to time, Financial's Board of Directors may elect to
increase Executive's compensation hereunder, and to grant bonuses and stock
options for Financial stock to Executive based on the Company's, Financial's and
Executive's performance.
(v) During the term of the Executive's employment hereunder,
employee benefits, including medical insurance, will be provided to Executive in
accordance with programs at BLC then available to the BLC's executive employees.
The Executive also shall be entitled to participate in all the Company's and the
BLC's profit sharing, pension, retirement, deferred compensation and savings
plans, as the same may be amended and in effect from time to time, at levels and
having interests commensurate with all of Company's and the BLC's executive
employees.
(viii) Executive shall be entitled to reasonable periods of
vacation, not to exceed
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<PAGE>
four (4) weeks each year, to be taken at time or times which do not unreasonably
interfere with the performance of his duties hereunder.
(ix) Executive shall also be given a one Ten Thousand Dollar
($10,000) bonus upon signing of this Agreement.
(c) Office, Title and Duties.
Executive shall be Company's President, the Executive Vice President
of Financial and shall serve on the Loan Committee of the BLC, Capital &
Commercial. Executive will also, at the direction of the Board of Directors of
Financial, BLC or the Company, assist in the expansion of the loan origination
network, throughout the United States, of BLC, Financial or their subsidiaries.
Executive will devote all of his skill, knowledge and working time (except for
(i) reasonable vacation time and absence for sickness or similar disability and
(ii) to the extent that it does not interfere with the performance of the
Executive's duties hereunder, such reasonable time as may be devoted to service
on boards of directors of civic organizations, civic board of fulfillment of
other civic responsibilities) to the conscientious performance of the duties of
such positions. He may not otherwise engage in other business activities for his
own account of for others, except Executive may, without the prior written
consent of the Company, but subject to restrictions set forth below, own up to
five percent (5%) of the outstanding capital stock of any publicly traded
company and own interests in privately held companies, other entities and
investments that do not compete with the Company. Although Executive may retain
whatever capital stock of any publicly traded company he owns as of the date
hereof, Executive shall not acquire after the date hereof the outstanding
capital stock of any publicly traded company that competes with the Company nor
have any financial interest in any privately held business, company, or
investment, that competes with Company without the prior written consent of
Financial. Executive shall exercise all powers and duties consistent with his
position, as well as such powers and duties as may be delegated or assigned to
him from time to time by the Board of Directors of Company and/or Financial.
Executive, without additional compensation, will, if requested, serve as an
officer and/or director, of Company, Financial, Commercial, BLC, Capital and/or
any hereinafter formed subsidiaries, if he is so elected or designated.
Executive agrees to discharge the above-described powers and duties in a
diligent and professional manner and shall render such other services as may be
requested from time to time by the Board of Directors of Company and/or
Financial upon reasonable advance notice. Without limiting the generality of any
of the foregoing, Executive shall actively seek out and refer to the Company,
Capital, Financial, BLC and Commercial all 7(a) Loans, B & I Loans and other
commercial loans of all types and kinds, Executive shall actively seek to
promote, coordinate and expand the Company's network of loan brokers, loan
representatives and other loan sources and Executive shall use his best efforts
to operate the Company in a profitable manner and maximize the profits generated
by the Company, Financial, Commercial, BLC and Capital. Executive agrees to
travel as reasonably required in performing his functions hereunder. The duties
and obligations of Executive as set forth hereinabove and elsewhere in this
Agreement are collectively referred to as Duties. BLC, Financial, Commercial,
Capital and any later formed subsidiaries of Financial are sometimes hereinafter
referred to as Affiliates.
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<PAGE>
(d) Covenants Against Disclosure of Trade Secrets and Unfair
Competition; Non-Competition
To preserve for Company and its Affiliates the benefit of the
goodwill and ongoing value of Company's and Affiliates' businesses, Executive
covenants and agrees to deliver promptly to Company upon termination of his
employment by Company, or at any other time Company may so request, all
memoranda, notes, records, reports, mailing lists, customer lists, databases and
other documents (and all copies thereof) relating to Company's business, which
Executive obtained from the Company or Affiliates while serving or acting on
behalf of Company or Affiliates.
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 Company and Affiliates, and in view
of Executive's experience and access to unique and proprietary information of
the current and proposed business activities of Company and Affiliates,
Executive will not directly or indirectly:
(i) Disclose to any third party any of Company's or Affiliates'
trade secrets as they exist from time to time, or any of
Company's or Affiliates' confidential information, including,
but not limited to, loan sources, mail lists, customer lists,
databases, loan underwriting criteria and procedures, loan
administration procedures, sources of finance, loan sales and
securitization procedures, confidential technical information,
confidential information concerning loan procurement or sales
activities or procedures, promotion or pricing techniques, or
credit or financial data, including confidential data
concerning customers or business relationships of Company or
Affiliates (collectively, "Confidential Information"), nor
under any circumstances will Executive use any of such
Confidential Information for his own purposes or for the
benefit of any firm, corporation or other person, except
Company or Affiliates. The foregoing restriction shall be
inapplicable to any Confidential Information which becomes
generally available to the public other than as a result of a
disclosure by Executive. Additionally, the foregoing
restriction shall not apply if the Executive is compelled to
disclose the Confidential Information by a regulatory body or
court order. Furthermore, the foregoing restriction shall be
inapplicable to any Confidential Information which becomes
generally available to the public other than as a result of a
disclosure by Executive, and to any information, knowledge,
expertise or experience Executive possessed before becoming
employed by the Company.
(ii) Attempt to divert, solicit, interfere with, or take away any
business of any person, firm, or corporation which has been an
employee, loan broker, loan representative, loan source, or
customer of Company or Affiliates prior to the date hereof or
at any time during Executive's employment.
(iii) Interfere with the employment, contractual or business
relationships of
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<PAGE>
Company or Affiliates which currently exist, or which shall
have been developed at any time during Executive's employment,
by and between Company or Affiliates and any other person,
firm or corporation, including, but not limited to, loan
brokers, loan representatives and other loan sources.
(iv) In any city, village, town or the like in which the Company or
Affiliates conducts business on the date of termination
hereof, 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, member or any business entity, consultant,
adviser or investor in or for any business entity or
enterprise which, at the date hereof, is engaged in, becomes
engaged in during the term hereof, or which, during the Non-
Competition Term, commences to engage in, the making,
origination, underwriting and/or placement of commercial
loans, including, but not limited to, 7(a) loans and B & I
Loans. Notwithstanding anything to the contrary contained
herein, this subparagraph (4) shall apply during the term of
this Agreement and for eighteen months after termination of
this Agreement. This subparagraph shall not apply if
Executive's employment is terminated without Cause.
(v) Executive has carefully reviewed the above restrictions on his
future business activities and represents to 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 Executive
hereby consents and agrees that such scope may be judicially
modified accordingly in any proceedings brought to enforce
such restrictions.
(e) Executive's Work Product.
All of the results and proceeds of Executive'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 Company's
and its affiliates' business, which Executive, 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 are filed or granted for or upon any such
invention, improvement, trade name, trademark, service mark, materials or
technical information, shall at any time be and remain the sole and exclusive
property of Company. To the extent necessary to comply with the above, Executive
further agrees that he will promptly transfer, grant and assign to Company, or
to a corporation designated by Company, for its sole use and benefit, all
ownership rights with respect to the foregoing.
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(f) Termination of Employment.
(i) Default. The Executive may be terminated for "Cause" by
the Company. "Cause" shall mean (a) the failure or refusal by the Executive
substantially to perform his duties hereunder (other than any such failure due
to physical or mental illness) after a demand for substantial performance is
delivered to the Executive by Financial's Board of Directors or the Company's
Board of Directors, which notice identifies the manner in which the Board
believes that the Executive has not substantially performed his duties, (b) the
Executive's conviction, or entering a plea of nolo contendere to, a crime that
constitutes a felony, (c) the Executive's intentional breach of his covenant not
to disclose Confidential Information, or (d) Executive commits an act of Fraud,
misrepresentation, dishonesty or misappropriation of Company assets or any act
that would jeopardize the Company's or Affiliates' ability to continue to
participate in the SBA 7a, B& I or other government sponsored lending programs.
(ii) Disability. The Executive may be terminated for
"disability" by the Company. "Disability" shall mean a physical or mental
disability that prevents the substantial performance by the Executive of his
duties hereunder lasting for a continuous period of four (4) months or longer.
The reasoned and good faith judgment of the company's Board of Directors as to
the Executive's disability shall be final and shall be based upon such competent
medical evidence as shall be presented to the Company's Board of Directors by
the Executive or by any physician or group of physicians or other competent
medical experts on behalf of the executive and on behalf of the Company.
Prior to termination, Company shall be entitled to deduct from
all payments to be made to Executive during any disability period an amount
equal to all disability payments received by Executive (but only with respect to
that portion of the disability period occurring during the Term and then only to
the extent of the salary due to Executive during the period of his disability)
from Worker's Compensation, Social Security and disability insurance policies
maintained by Company by or on behalf of Executive.
(iii) Death. In the event of Executive's death at any time during
the term hereof, this Agreement shall terminate, in which event Company shall
thereupon be released and discharged of and form all further obligations
hereunder.
(iv) Executive's Right to Terminate. Executive may terminate this
Agreement in the event that Robert F. Tannenhauser no longer affiliated with the
Company. Mr. Tannenhauser shall be deemed to be affiliated with the Company as
long as he serves as an Officer or Director of the Company or Financial. A
termination under this provision shall not be deemed a termination for Cause.
(v) Notice of Termination. Any termination by the Company and/or
Financial pursuant to this paragraph or by the Executive pursuant to this
paragraph 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 Executive's employment hereunder has been or will be
terminated, indicating the specific termination provisions in this Agreement
relied upon and
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setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination of employment. Subject to the cure rights
provided for herein, the termination of the Executive's employment shall be
effective as of the date specified in the Notice of Termination; provided,
however, no such termination shall be effective prior to the date the Notice of
Termination was received.
(g) Consequences of Termination.
In the event that the Executive's active employment with the Company
is terminated for any reason, other than Cause ( i.e. disability), the Company
shall pay to the Executive as termination compensation an amount equal to six
months compensation determined as of the Termination Date. Such payment shall be
in addition to any compensation due and payable to the Executive as an active
employee of the Company pursuant to paragraph (b) of this Agreement, through and
including the Termination Date. The payment shall be made in cash in six (6)
monthly installments.
(h) Injunctive Relief.
It is mutually understood and agreed that Executive'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 Executive, Company and/or Affiliates 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 of the rights
which Company may have for damages under this Agreement or otherwise.
(i) Life Insurance.
Executive will permit the Company to purchase "key man" or similar
insurance coverage on this life for the exclusive benefit of the Company, in
amounts that it determines, and Executive will cooperate with the Company and
the insurance carrier in obtaining such insurance.
(j) Miscellaneous.
(i) Assignment. This Agreement shall not be assignable by either
party, except Company shall be entitled to assign this Agreement to, and it
shall thereafter be binding upon any entity with which company may merge or
consolidate, or into which company may liquidate, or to which substantially all
of the assets of Company are transferred, provided that such successor assumes
all of the Company's obligations hereunder. The Company may also assign this
Agreement to any of its Affiliates.
(ii) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto, and supersedes all prior
agreements, arrangements and understandings.
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(iii) Partial Invalidity. Nothing herein contained 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.
(iv) 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. Executive warrants that he is free to enter
into this Agreement and to render his services pursuant thereto.
(v) Benefit. The provisions of this Agreement shall inure to the
benefit of the parties hereto, their heirs, legal representatives, successors
and assigns.
(vi) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly with New York.
(vii) Modification. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms or covenants hereof may
be waived, only by a written instrument executed by the parties hereto, or in
the case of a waiver, by the party waiving compliance. 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 the same. No waiver by
either party of the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
(viii) Section Headings. The section headings contained herein are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
(ix) Notices. All notices, requests, demands and 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 Executive to Leonard Rudolph 3 Pelham Place, East
Brunswick, New Jersey 08816; and to Company or BLCF c/o Business Loan Center,
Inc., 645 Madison Avenue, New York, New York, Attention: Robert F.
Tannenhauser; or to such other address as Executive or Financial may designate
in writing.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first hereinabove written.
COMPANY
Business Loan Center, Inc.
By: /s/ Jennifer Napier
--------------------------------
Jennifer Napier, Treasurer
BLC Financial Services, Inc.
By: /s/ Robert Tannenhauser
--------------------------------
Robert Tannenhauser, President
EXECUTIVE:
/s/ Leonard Rudolph
-----------------------------------
Leonard Rudolph
9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 8th day of October,
1997, by and among Business Loan Center, Inc., a Delaware corporation with
offices at 645 Madison Avenue, New York, N.Y., ("Company" or "BLC") and Jennifer
Napier residing at 50 West 72nd Street, New York, N.Y. ("Executive").
WHEREAS, the Company is a wholly owned subsidiary of BLC Financial
Services, Inc., a Delaware Corporation ("Financial") with an office at 645
Madison Avenue, New York, New York; and
WHEREAS, Company is in the business of originating, underwriting and
processing commercial loans, including but not limited to loans that fall within
the parameters of the 7(a) Program of the U.S. Small Business Administration
("7(a) Loans") and loans that fall within the parameters of the Department of
Agriculture's Rural Development guaranteed loan program ("B & I Loans"), which
loans are funded by or through Financial or its subsidiaries, including Business
Loan Center, Inc. a Delaware Corporation ("BLC"), BLC Commercial Capital
Corporation, a Florida Corporation and BLC Capital Corporation, a Delaware
corporation; and
WHEREAS, Company originates, underwrites and processes the aforementioned
commercial loans exclusively for Financial and its subsidiaries, Business Loan
Center, Inc. ("BLC"), BLC Commercial Capital Corp. ("Commercial"), BLC Capital
Corp. ("Capital") and any other subsidiaries or affiliates that may hereafter be
formed; and
WHEREAS, Executive has been employed by the Company and Financial since
1994; and
WHEREAS, Executive's experience as set forth above is of great value to
the Company, Financial and its other subsidiaries; and
WHEREAS, Company desired to employ Executive for the Term set forth herein
and Executive desires to accept such employment on an exclusive basis; and
<PAGE>
WHEREAS, in view of Executive's experience and anticipated services for
Company, Executive acknowledges the necessity and reasonableness of her covenant
against disclosure of trade secrets of, and unfair competition with, Company and
restrictions on his future business activities;
NOW, THEREFORE, in consideration of the premises and mutual promises set
forth herein, Company, Financial and Executive agree as follows:
(a) Employment and Term.
Company shall employ Executive for a period of five (5) years,
commencing on the effective date hereof and ending September 30, 2002: ("Initial
Period"), subject to the termination provisions hereinafter set forth. This
Agreement shall be automatically deemed extended for additional successive
one-year periods, unless Financial or Executive notifies the other at least 90
days prior to the end of the Initial Period or any extension thereof, that it or
she does not wish to extend the Agreement.
(b) Compensation.
(i) As compensation for Executive's performance of all required
services hereunder, and conditioned upon her full, faithful and diligent
performance of all promises and undertakings herein, Company shall pay to
Executive the sum of:
(a) For the first year of the term - One Hundred Thousand
Dollars ($100,000) per year. Said compensation shall be
payable in bi-weekly installments, or in accordance with
Company's regular payroll practices for other senior
executives of Financial and BLC.
(b) For the second year of the term - One Hundred Twenty Five
Thousand Dollars ($125,000) per year. Said compensation shall
be payable in biweekly installments, or in accordance with
Company's regular payroll practices for other senior
executives of Financial and BLC.
(c) For the third year of the term - One Hundred Fifty
Thousand Dollars ($150,000) per year. Said compensation shall
be payable in bi-weekly installments, or in accordance with
Company's regular payroll practices for other senior
executives of Financial and BLC.
(d) For the fourth and fifth years of the term - One Hundred
Seventy Five Thousand Dollars ($175,000) per year. Said
compensation shall be payable in bi-weekly installments, or in
accordance with Company's regular payroll practices for other
senior executives of Financial and BLC.
(ii) All payments to be made by Company to Executive hereunder shall
be subject to such tax, FICA or other deductions or withholdings as Company
shall be required to make by law
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<PAGE>
or which Company uniformly makes as a matter of policy from compensation paid to
other employees.
(iii) As further compensation for Executive's performance of all
required services hereunder, and conditioned upon his full, faithful and
diligent performance of all promises and undertakings herein, Executive shall be
granted options to purchase 100,000 shares of the $.01 par value common stock
of Financial, pursuant to the Option Agreement annexed as Exhibit I.
(iv) From time to time, Financial's Board of Directors may elect to
increase Executive's compensation hereunder, and to grant bonuses and stock
options for Financial stock to Executive based on the Company's, Financial's and
Executive's performance.
(v) During the term of the Executive's employment hereunder,
employee benefits, including medical insurance, will be provided to Executive in
accordance with programs at BLC then available to the BLC's executive employees.
The Executive also shall be entitled to participate in all the Company's and the
Financial's profit sharing, pension, retirement, deferred compensation and
savings plans, as the same may be amended and in effect from time to time, at
levels and having interests commensurate with all of Company's and the
Financial's executive employees.
(viii) Executive shall be entitled to reasonable periods of
vacation, not to exceed four (4) weeks each year, to be taken at time or times
which do not unreasonably interfere with the performance of her duties
hereunder.
(c) Office, Title and Duties.
Executive shall be Company's Treasurer and Chief Financial Officer,
the Treasurer and Chief Financial Officer of Financial and Capital & Commercial.
Executive will devote all of her skill, knowledge and working time (except for
(i) reasonable vacation time and absence for sickness or similar disability and
(ii) to the extent that it does not interfere with the performance of the
Executive's duties hereunder, such reasonable time as may be devoted to service
on boards of directors of civic organizations, civic board of fulfillment of
other civic responsibilities) to the conscientious performance of the duties of
such positions. Executive may retain whatever capital stock of any publicly
traded company she owns as of the date hereof, Executive shall not acquire after
the date hereof the outstanding capital stock of any publicly traded company
that competes with the Company nor have any financial interest in any privately
held business, company, or investment, that competes with Company without the
prior written consent of Financial. Executive shall exercise all powers and
duties consistent with her position, as well as such powers and duties as may be
delegated or assigned to him from time to time by the Board of Directors of
Company and/or Financial. Executive, without additional compensation, will, if
requested, serve as an officer and/or director, of Company, Financial,
Commercial, BLC, Capital and/or any hereinafter formed subsidiaries, if she is
so elected or designated. Executive agrees to discharge the above-described
powers and duties in a diligent and professional manner and shall render such
other services as may be requested from time to time by the Board of Directors
of Company and/or Financial upon
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<PAGE>
reasonable advance notice. Executive shall use her best efforts to operate the
Company in a profitable manner and maximize the profits generated by the
Company, Financial, Commercial, BLC and Capital. Executive agrees to travel as
reasonably required in performing her functions hereunder. The duties and
obligations of Executive as set forth hereinabove and elsewhere in the Agreement
are collectively referred to as Duties. BLC, Financial, Commercial, Capital and
any later formed subsidiaries of Financial are sometimes hereinafter referred to
as Affiliates.
(d) Covenants Against Disclosure of Trade Secrets and
Unfair Competition; Non-Competition
To preserve for Company and its Affiliates the benefit of the goodwill and
ongoing value of Company's and Affiliates' businesses, Executive covenants and
agrees to deliver promptly to Company upon termination of her employment by
Company, or at any other time Company may so request, all memoranda, notes,
records, reports, mailing lists, customer lists, databases and other documents
(and all copies thereof) relating to Company's business, which Executive
obtained from the Company or Affiliates while serving or acting on behalf of
Company or Affiliates.
During the term of the Agreement and for two years after a
termination of the Agreement pursuant to paragraph (f) (i) herein below (the
"Non-Competition Term"), in order to preserve the goodwill and ongoing business
value of Company and Affiliates, and in view of Executive's experience and
access to unique and proprietary information of the current and proposed
business activities of Company and Affiliates, Executive will not directly or
indirectly:
(i) Disclose to any third party any of Company's or Affiliates'
trade secrets as they exist from time to time, or any of
Company's or Affiliates' confidential information, including,
but not limited to, loan sources, mail lists, customer lists,
databases, loan underwriting criteria and procedures, loan
administration procedures, sources of finance, loan sales and
securitization procedures, confidential technical information,
confidential information concerning loan procurement or sales
activities or procedures, promotion or pricing techniques, or
credit or financial data, including confidential data
concerning customers or business relationships of Company or
Affiliates (collectively, "Confidential Information"), nor
under any circumstances will Executive use any of such
Confidential Information for her own purposes or for the
benefit of any firm, corporation or other person, except
Company or Affiliates. The foregoing restriction shall be
inapplicable to any Confidential Information which becomes
generally available to the public other than as a result of a
disclosure by Executive. Additionally, the foregoing
restriction shall not apply if the Executive is compelled to
disclose the Confidential Information by a regulatory body or
court order. Furthermore, the foregoing restriction shall be
inapplicable to any Confidential Information which becomes
generally available to the public other than as a result of a
disclosure by Executive, and to any information, knowledge,
expertise or experience Executive possessed before becoming
employed by the Company.
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<PAGE>
(ii) Attempt to divert, solicit, interfere with, or take away any
business of any person, firm, or corporation which has been an
employee, loan broker, loan representative, loan source, or
customer of Company or Affiliates prior to the date hereof or
at any time during Executive's employment.
(iii) Interfere with the employment, contractual or business
relationships of Company or Affiliates which currently exist,
or which shall have been developed at any time during
Executive's employment, by and between Company or Affiliates
and any other person, firm or corporation, including, but not
limited to, loan brokers, loan representatives and other loan
sources.
(iv) In any city, village, town or the like in which the Company or
Affiliates conducts business on the date of termination
hereof, 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, member or any business entity, consultant,
adviser or investor in or for any business entity or
enterprise which, at the date hereof, is engaged in, becomes
engaged in during the term hereof, or which, during the
Non-Competition Term, commences to engage in, the making,
origination, underwriting and/or placement of commercial
loans, including, but not limited to, 7(a) loans and B & I
Loans. Notwithstanding anything to the contrary contained
herein, this subparagraph (4) shall apply during the term of
this Agreement and for eighteen months after termination of
this Agreement. This subparagraph shall not apply if
Executive's employment is terminated without Cause.
(v) Executive has carefully reviewed the above restrictions on her
future business activities and represents to Company that they
will not unreasonably interfere with her 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 Executive
hereby consents and agrees that such scope may be judicially
modified accordingly in any proceedings brought to enforce
such restrictions.
(e) Executive's Work Product.
All of the results and proceeds of Executive'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 Company's
and its affiliates' business, which Executive, 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 are filed or granted for or upon
5
<PAGE>
any such invention, improvement, trade name, trademark, service mark, materials
or technical information, shall at any time be and remain the sole and exclusive
property of Company. To the extent necessary to comply with the above, Executive
further agrees that she will promptly transfer, grant and assign to Company, or
to a corporation designated by Company, for its sole use and benefit, all
ownership rights with respect to the foregoing.
(f) Termination of Employment.
(i) Default. The Executive may be terminated for "Cause" by the
Company. "Cause" shall mean (a) the failure or refusal by the Executive
substantially to perform her duties hereunder (other than any such failure due
to physical or mental illness) after a demand for substantial performance is
delivered to the Executive by Financial's Board of Directors or the Company's
Board of Directors, which notice identifies the manner in which the Board
believes that the Executive has not substantially performed her duties, (b) the
Executive's conviction, or entering a plea of nolo contendere to, a crime that
constitutes a felony, (c) the Executive's intentional breach of her covenant not
to disclose Confidential Information, or (d) Executive commits an act of Fraud,
misrepresentation, dishonesty or misappropriation of Company assets or any act
that would jeopardize the Company's or Affiliates' ability to continue to
participate in the SBA 7a, B& I or other government sponsored lending programs.
(ii) Disability. The Executive may be terminated for "disability" by
the Company. "Disability" shall mean a physical or mental disability that
prevents the substantial performance by the Executive of her duties hereunder
lasting for a continuous period of four (4) months or longer. The reasoned and
good faith judgment of the company's Board of Directors as to the Executive's
disability shall be final and shall be based upon such competent medical
evidence as shall be presented to the Company's Board of Directors by the
Executive or by any physician or group of physicians or other competent medical
experts on behalf of the executive and on behalf of the Company.
Prior to termination, Company shall be entitled to deduct from
all payments to be made to Executive during any disability period an amount
equal to all disability payments received by Executive (but only with respect to
that portion of the disability period occurring during the Term and then only to
the extent of the salary due to Executive during the period of her disability)
from Worker's Compensation, Social Security and disability insurance policies
maintained by Company by or on behalf of Executive.
(iii) Death. In the event of Executive's death at any time during
the term hereof, this Agreement shall terminate, in which event Company shall
thereupon be released and discharged of and form all further obligations
hereunder.
(iv) Executive's Right to Terminate. Executive may terminate this
Agreement in the event that Robert F. Tannenhauser is no longer affiliated with
the Company. Mr. Tannenhauser shall be deemed to be affiliated with the Company
as long as he serves as an Officer or Director of the Company or Financial. A
termination under this provision shall not be deemed a termination for Cause.
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(v) Notice of Termination. Any termination by the Company and/or
Financial pursuant to this paragraph or by the Executive pursuant to this
paragraph 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 Executive's employment hereunder has been or will be
terminated, indicating the specific termination provisions in this Agreement
relied upon and setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination of employment. Subject to the
cure rights provided for herein, the termination of the Executive's employment
shall be effective as of the date specified in the Notice of Termination;
provided, however, no such termination shall be effective prior to the date the
Notice of Termination was received.
(g) Consequences of Termination.
In the event that the Executive's active employment with the Company
is terminated for any reason, other than Cause (i.e. disability), the Company
shall pay to the Executive as termination compensation an amount equal to six
months compensation determined as of the Termination Date. Such payment shall be
in addition to any compensation due and payable to the Executive as an active
employee of the Company pursuant to paragraph (b) of this Agreement, through and
including the Termination Date. The payment shall be made in cash in six (6)
monthly installments.
(h) Injunctive Relief.
It is mutually understood and agreed that Executive'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 Executive, Company and/or Affiliates 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 of the rights
which Company may have for damages under this Agreement or otherwise.
(i) Life Insurance
Executive will permit the Company to purchase "key man" or similar
insurance coverage on this life for the exclusive benefit of the Company, in
amounts that it determines, and Executive will cooperate with the Company and
the insurance carrier in obtaining such insurance.
(j) Miscellaneous.
(i) Assignment. This Agreement shall not be assignable by either
party, except Company shall be entitled to assign this Agreement to, and it
shall thereafter be binding upon any entity with which company may merge or
consolidate, or into which company may liquidate, or to which substantially all
of the assets of Company are transferred, provided that such successor assumes
all of the Company's obligations hereunder. The Company may also assign this
Agreement to any of its Affiliates.
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(ii) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto, and supersedes all prior
agreements, arrangements and understandings.
(iii) Partial Invalidity. Nothing herein contained 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.
(iv) 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. Executive warrants that she is free to enter
into this Agreement and to render her services pursuant hereto.
(v) Benefit. The provisions of this Agreement shall inure to the
benefit of the parties hereto, their heirs, legal representatives, successors
and assigns.
(vi) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly with New York.
(vii) Modification. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms or covenants hereof may
be waived, only by a written instrument executed by the parties hereto, or in
the case of a waiver, by the party waiving compliance. 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 the same. No waiver by
either party of the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
(viii) Section headings. The section headings contained herein are
for reference purposes only and shall not affect the meaning or interpretation
of the Agreement.
(ix) Notices. All notices, requests, demands and other
communications required, or as may be given, under the 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 Executive to Jennifer Napier 50 West 72nd Street, New
York, N.Y.; and to Company BLC c/o Business Loan Center, Inc., 645 Madison
Avenue, New York, New York, Attention: Robert F. Tannenhauser; or to such other
address as Executive or Financial may designate in writing.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement
as of the
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date first herein above written.
COMPANY
Business Loan Center, Inc.
By: /s/ Robert Tannenhauser
-------------------------------------
Robert Tannenhauser, President
BLC Financial Services, Inc.
By: /s/ Robert Tannenhauser
-------------------------------------
Robert Tannenhauser, President
EXECUTIVE:
/s/ Jennifer Napier
----------------------------------------
Jennifer Napier
9
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Agreement") dated as of May 7, 1998, 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. BLC Commercial Capital Corp., a Florida corporation ("Borrower"),
Guarantor and Lender have entered into that certain Loan Agreement dated as of
May 7, 1998 (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 and any exhibits and schedules to
any of the foregoing, as the same may be in effect at the time such reference
becomes operative.
<PAGE>
"Event of Default" shall have the meaning set forth in Section 4.1.
"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 or other financing specifically approved in writing by
Lender, 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 or such other financing.
"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 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
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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 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
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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.
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
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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 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.
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(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
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
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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 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
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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 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.
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(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), 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
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(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 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,
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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 shall, and shall use its best efforts to cause any
other holder of the Subordinated Indebtedness to, 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 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.
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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 USDA Consent:
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.
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 hereunder 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, and 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 Effective 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 Effective Date, the Guaranty Obligations are not
subject to any offset or defense against Lender or Borrower of any kind, and
Guarantor
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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 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
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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;
(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.
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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:
(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
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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
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 or any other 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.
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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.
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
Two Ravinia Drive, Suite 700
Atlanta, Georgia 30346
Attention: Account Executive - BLC Commercial
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 Sheneman Julian & Rogers
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
(b) If to Guarantor, at:
BLC Financial Services, Inc.
645 Madison Avenue, 18th Floor
New York, New York 10022
Attention: Mr. Robert Tannenhauser
President
Facsimile: (212) 751-9345
With copies to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attention: Simeon Gold, Esq.
Facsimile: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered or
sent by facsimile, with receipt acknowledged or confirmed, or three (3) Business
Days after the same shall have been deposited in the United States mail. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request,
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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 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
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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.
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.
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[SIGNATURE PAGE FOLLOWS]
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:
----------------------------
Robert F. Tannenhauser
President
"Lender"
ACCEPTED AS OF MAY 7, 1998
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By:
----------------------------
Terrell W. Harris
Senior Vice President
21
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Agreement") dated as of March 25, 1998,
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 Loan Agreement dated as of
March 25, 1998 (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 and any exhibits and schedules to
any of the foregoing, as the same may be in effect at the time such reference
becomes operative.
<PAGE>
"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 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.
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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 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;
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<PAGE>
(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.
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
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<PAGE>
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 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,
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<PAGE>
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
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
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<PAGE>
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 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
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<PAGE>
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 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,
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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), 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
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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 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
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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 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:
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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.
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 hereunder 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
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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 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
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incorrect as of the date when made or deemed made;
(d) Guarantor shall renounce or revoke, or attempt to renounce or
revoke, this Agreement;
(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
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any other Loan Documents, and under applicable law, and may, in addition:
(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) 380-6179
and
Transamerica Business Credit Corporation
9399 West Higgins Road, Suite 600
Rosemont, Illinois 60018
Attention: Mary F. Krakowski, Esq.
Facsimile: (847) 685-1142
17
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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.
645 Madison Avenue, 18th Floor
New York, New York 10022
Attention: Mr. Robert Tannenhauser
President
Facsimile: (212) 751-9345
With copies to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attention: Simeon Gold, Esq.
Facsimile: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered or
sent by facsimile, with receipt acknowledged or confirmed, or three (3) Business
Days after the same shall have been deposited in the United States mail. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
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
18
<PAGE>
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 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
19
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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.
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.
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REST OF PAGE INTENTIONALLY LEFT BLANK
21
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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:
----------------------------
Robert F. Tannenhauser
President
"Lender"
ACCEPTED AS OF MARCH 25, 1998
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By:
---------------------------------
Ari D. Kaplan
Senior Account Executive
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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)
--------------------------------
23
LOAN AGREEMENT
between
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation,
as Borrower,
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation,
as Parent,
and
TRANSAMERICA BUSINESS CREDIT CORPORATION,
a Delaware corporation,
as Lender
$15,000,000.00 May 7, 1998
<PAGE>
TABLE OF CONTENTS
RECITALS.................................................................... 1
AGREEMENT................................................................... 1
ARTICLE 1
GENERAL TERMS............................. 1
1.1 Defined Terms................................................... 1
1.2 Accounting Principles........................................... 15
1.3 Other Terms..................................................... 15
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............................................................ 20
2.6 Borrower's Termination of Agreement............................. 21
2.7 Mandatory Prepayments........................................... 22
2.8 Reserves Against Liabilities.................................... 22
2.9 All Loans to Constitute One Loan................................ 22
2.10 Loan Purpose.................................................... 22
2.11 Term of Agreement............................................... 22
2.12 Payment Procedure............................................... 23
2.13 Collection of Borrower's Loans and Payments..................... 23
2.14 Collections; Lender's Right to Notify Account
Debtors......................................................... 26
2.15 Application of Payments and Collections......................... 26
2.16 Refund of Excess Interest; Statement of Account................. 26
2.17 Business Days................................................... 27
ARTICLE 3
SECURITY................................ 27
3.1 Borrower's Liabilities.......................................... 27
3.2 Further Assurances.............................................. 27
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.................... 27
4.1 Corporate Existence............................................. 27
4.2 Corporate Power and Authorization............................... 28
4.3 Ownership of Property; Permitted Liens.......................... 28
4.4 Capital Structure............................................... 28
4.5 Binding Obligations............................................. 28
4.6 No Legal Bar; No Lien........................................... 29
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4.7 No Consent...................................................... 29
4.8 Liabilities; Litigation......................................... 29
4.9 Taxes; Governmental Charges..................................... 29
4.10 Defaults........................................................ 30
4.11 Use of Proceeds; Margin Stock................................... 30
4.12 Compliance with the Law......................................... 30
4.13 ERISA........................................................... 30
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................................................. 31
4.19 Hazardous Materials............................................. 31
4.20 Insurance Policies.............................................. 33
4.21 Schedule of Deposit Accounts.................................... 33
4.22 Labor Matters................................................... 33
4.23 Employment and Labor Agreements................................. 33
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................................................. 34
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........................................ 41
5.10 ERISA Information and Compliance................................ 41
5.11 Financial Covenants............................................. 42
5.12 Bad Debt Reserve................................................ 43
5.13 Charges; Liens.................................................. 43
5.14 Communication With Accountants.................................. 44
5.15 Notes Receivable Documents...................................... 44
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............................................................ 45
6.2 Loans and Compensation.......................................... 45
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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.................................... 46
6.8 Change of Business.............................................. 46
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............................... 48
6.18 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 USDA Rules and Regulations and
Subsequent USDA Consent......................................... 54
7.7 Rights of Purchasers of Notes Receivable........................ 54
ARTICLE 8
CONDITIONS OF LENDING......................... 55
8.1 Initial Advance................................................. 55
8.2 All Advances.................................................... 57
ARTICLE 9
MISCELLANEOUS............................. 59
9.1 Notices......................................................... 59
9.2 Modification of Agreement; Sale of Interest..................... 60
9.3 Lien Release Upon Sale of USDA Guaranteed Notes
Receivable or Non-Guaranteed Pro Rata
Participations.................................................. 61
9.4 Fees and Expenses............................................... 61
9.5 Severability.................................................... 62
9.6 Waiver by Lender................................................ 62
9.7 Successors and Assigns.......................................... 63
9.8 Conflict of Terms............................................... 63
9.9 Waivers by Borrower and Parent.................................. 63
9.10 Cumulative Rights............................................... 64
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9.11 GOVERNING LAW................................................... 64
9.12 Taxes, etc...................................................... 64
9.13 Governmental Regulation......................................... 64
9.14 Titles of Articles and Sections................................. 64
9.15 Authorized Signatures........................................... 64
9.16 Publicity....................................................... 65
9.17 Counterparts.................................................... 65
9.18 Entire Agreement................................................ 65
9.19 WAIVER OF JURY TRIAL............................................ 65
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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
Exhibit I - Request for Special Determination of Eligibility
Exhibit J - Certificate of Eligibility
LIST OF SCHEDULES
Schedule 1.1(a) Net Eligible Non-Guaranteed Notes Receivable
Schedule 1.1(b) Net Eligible USDA Guaranteed Notes Receivable
Schedule 4.3(a) Ownership of Real 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
Schedule 6.1 Other Indebtedness
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of this 7th day of May, 1998, by and
between BLC COMMERCIAL CAPITAL CORP., a Florida corporation with its principal
offices located at 645 Madison Avenue, 18th Floor, New York, New York 10022
("Borrower"), BLC FINANCIAL SERVICES, INC., a Delaware corporation with its
principal offices located at 645 Madison Avenue, 18th 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 has requested that Lender provide to it a working capital
facility in the maximum aggregate principal amount of up to $15,000,000, the
proceeds of which Borrower will use to fund and develop its portfolio of B&I
Loans (as hereinafter defined).
B. Lender is willing to extend such financial accommodations to Borrower
in accordance with and on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions set
forth herein, and of any extension of credit contemplated hereby, now or
hereafter made by the Lender to Borrower, Borrower, Parent and Lender hereby
agree as follows:
ARTICLE 1
GENERAL TERMS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings, unless the context otherwise requires (terms
defined in the singular to have the same meaning when used in the plural and
visa versa):
"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).
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"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 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.
"Allocated Payment Portion" shall have the meaning ascribed to such
term in Section 2.13(c).
"Assignment Guaranty Agreement" shall mean any Assignment Guaranty
Agreement (USDA RBS Form 4279-6) or similar agreement among Borrower, USDA, and
any purchaser or potential purchaser of any USDA Guaranteed Note Receivable from
time to time.
"B&I Act" shall mean 7 CFR P. 4279 and P. 4287 or any similar or
successor federal statute and the rules and regulations promulgated thereunder,
as in effect from time to time.
"B&I Lender's Agreement" shall mean any Lender's Agreement (USDA RBS
Form 4279-4) or similar agreement in force and effect between Borrower and USDA
from time to time, setting forth Borrower's responsibilities with respect to B&I
Loans made by Borrower.
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"B&I Loans" shall mean any loans made by Borrower to businesses in
rural communities and guaranteed by USDA pursuant to the authorization contained
in the B&I Act and the rules and regulations promulgated thereunder, as in
effect from time to time.
"B&I Loan Notes" shall mean any promissory notes that at any time
evidence B&I Loans.
"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 BLC Commercial Capital Corp., a Florida
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.
"Borrowing Request" shall mean the request by Borrower for advances
under the Agreement, to be substantially in the form attached as Exhibit B.
"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.
"Certificate of Eligibility" shall mean the certificate of
eligibility pursuant to which Borrower (i) describes any USDA Guaranteed Notes
Receivable and Non-Guaranteed Notes Receivable not previously advanced against
by Lender, (ii) designates which of such USDA Guaranteed Notes Receivable and
Non-Guaranteed Notes Receivable satisfies each and every one of the eligibility
requirements in Schedule 1.1(a) or 1.1(b), as the case may be, and which does
not satisfy such requirements, and (iii) certifies to Lender that such
description and designation is true and correct, and having attached to it a
schedule describing in detail how each Note Receivable designated as a
Net-Eligible Guaranteed Note Receivable or a Net Eligible Non-Guaranteed Note
Receivable satisfies the specified criteria, to be substantially in the form
attached as Exhibit J.
"Change of Control" shall mean any transaction or event as a result
of which (a) Parent ceases to own one hundred percent (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 1, 1998, or (c) Robert F.
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Tannenhauser ceases to be an executive officer of both Borrower and Parent.
"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, accompanied by a detailed
schedule, in form and substance reasonably acceptable to Lender, of the
calculations used to prepare such certificate.
"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 either (i) conforming
to each of the requirements set forth in Schedule 1.1(a), or (ii) otherwise
determined by Lender, in its sole discretion, to constitute Net Eligible
Non-Guaranteed Notes Receivable, with respect to which in either case no
required payment amount of principal and interest, or any other amount due
thereunder, is more than 60 days past due aged based on "interest paid-to date."
"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 Defaulted Portion of
Non-Guaranteed Notes Receivable either (i) conforming to each of the
requirements set forth in Schedule 1.1(a), other than paragraph R thereof, or
(ii) otherwise determined by Lender, in its sole discretion, to constitute Net
Eligible Non-Guaranteed Notes Receivable; provided, that (a) if the aggregate
outstanding principal amount of all Non-Guaranteed Notes Receivable is less than
$10,000,000 and the Defaulted Portion of Net Eligible Non-Guaranteed Notes
Receivable would include amounts from more than one Non-Guaranteed Note
Receivable based on the foregoing criteria, then all amounts with respect to
such Non-Guaranteed Note Receivables other than the one having the lowest
outstanding principal balance shall be excluded, or
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(b) if the aggregate outstanding principal amount of all Non-Guaranteed Notes
Receivable is equal to or greater than $10,000,000, then the Defaulted Portion
of Net Eligible Non-Guaranteed Notes Receivable cannot include any amount with
respect to a Non-Guaranteed Note Receivable that would cause the total amount of
the Defaulted Portion of Net Eligible Non-Guaranteed Notes Receivable to exceed
ten percent (10%) of such aggregate outstanding principal amount.
"Defaulted Portion of Non-Guaranteed Notes Receivable" shall mean,
at any particular time, that portion of the aggregate principal amount then
outstanding of Non-Guaranteed Notes Receivable with respect to which either (a)
any required payment amount of principal and interest, or any other amount due
thereunder, is more than 120 days past due aged based on "interest paid-to
date," or (b) the Term Loan Debtor is insolvent or is the subject of an
insolvency proceeding or a case commenced under the Bankruptcy Code.
"Delinquent Portion of Net Eligible Non-Guaranteed Notes Receivable"
shall mean, at any particular time, that portion of the Delinquent Portion of
Non-Guaranteed Notes Receivable either (i) conforming to each of the
requirements set forth in Schedule 1.1(a), other than paragraph R thereof, or
(ii) otherwise determined by Lender, in its sole discretion, to constitute Net
Eligible Non-Guaranteed Notes Receivable.
"Delinquent Portion of Non-Guaranteed Notes Receivable" shall mean,
at any particular time, that portion of the aggregate principal amount then
outstanding of Non-Guaranteed Notes Receivable with respect to which any
required payment amount of principal and interest, or any other amount due
thereunder, is more than 60, but less than 120, days past due aged based on
"interest paid-to date."
"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.
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"Environmental Claim" shall mean any written accusation, allegation,
notice of violations, claim, demand, abatement or other judicial or
administrative order or direction (conditional or otherwise) by any governmental
authority or any Person for any damage, including personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or based
upon (a) the existence, or the continuation of the existence, of a Release
(whether sudden or non-sudden or accidental or non-accidental), of, or exposure
to, any Hazardous Material, in, into or onto the environment at, in or by, from
or related to any Real Property, (b) the use, handling, transportation, storage,
treatment or disposal of Hazardous Materials in connection with the operation of
any Property, or (c) the violation, or alleged violation, of any Environmental
Laws or Governmental Authorization relating to environmental matters with
respect to any Property.
"Environmental Laws" shall mean all statutes, ordinances, judicial
or administrative orders, rules, regulations or decrees relating to (a) fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials, (b) the generation, use, storage, transportation or disposal of
Hazardous Materials, (c) occupational safety and health, industrial hygiene,
land use in connection with environmental matters for the protection of health
or welfare, in any manner applicable to 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).
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"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 May 7, 1998.
"GAAP" shall mean the generally accepted accounting principles in
the United States of America as in effect from time to time.
"Governmental Authorization" shall mean any permit, license,
authorization, consent order or consent decree of or from any Federal, state or
local governmental authority, agency or court.
"Governmental Requirement" shall mean, to the extent any violation
thereof or failure to comply therewith would have a Material Adverse Effect, any
law, statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
direction or requirement (including any of the foregoing which relate to lender
licensing, environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any federal, state,
county, municipal or other domestic or foreign government, department,
commission, board, court, agency or any other instrumentality of any of them,
which exercises jurisdiction over 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, 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
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<PAGE>
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, servicing assets and residual interests, deferred interest and
deferred financing costs, 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.
"Items of Payment" shall mean the proceeds of any and all checks,
drafts, cash and other remittances received by Borrower in payment or on account
of payment, with respect to any of the Notes Receivable, after deducting such
portion that constitutes an Allocated Payment Portion or USDA fee.
"Lender" shall mean Transamerica Business Credit Corporation, a
Delaware corporation, together with its successors and permitted assigns.
"Liabilities" shall mean all of Borrower's liabilities, obligations
and indebtedness to Lender of any and every kind and nature (including
principal, interest, fees, charges, expenses, attorneys' fees and other sums
chargeable to Borrower by Lender
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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, including the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property.
"Loan Documents" shall mean this Agreement, the Revolving Credit
Note, the Security Documents, the Parent Guaranty, 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 Note Guarantee" shall mean any Loan Note Guarantee (USDA RBS
Form 4279-5) or similar commitment issued by USDA from time to time, setting
forth the terms and conditions of USDA's guarantee of the USDA Guaranteed Note
Receivable portion of a Note Receivable.
"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 to 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.
"Maximum Credit Line" shall mean $15,000,000.
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"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 USDA Guaranteed Notes Receivable" shall mean, at any
particular time, the sum of (a) the aggregate principal amount then outstanding
of USDA Guaranteed Notes Receivable conforming to the requirements set forth in
Schedule 1.1(b), and (b) the aggregate principal amount then outstanding of USDA
Guaranteed Notes Receivable that do not conform to the requirements set forth in
Schedule 1.1(b) but that Lender has determined, in its sole discretion, to
constitute Net Eligible USDA Guaranteed Notes Receivable.
"Net Sale Proceeds" shall mean the proceeds payable to or for the
account of Borrower from the sale of any USDA Guaranteed Notes Receivable.
"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 USDA and in which Lender has been granted a
first priority security interest pursuant to the Security Agreement.
"Non-Guaranteed Participation Reserves" shall mean, for purposes of
calculating the Maximum Commitment, a reserve with respect to each
Non-Guaranteed Note Receivable subject to a Non-Guaranteed Pro Rata
Participation, equal to the lesser of (a) one hundred percent (100%) of the
outstanding principal amount of the portion of such Non-Guaranteed Note
Receivable sold pursuant to such Non-Guaranteed Pro Rata Participation, and (b)
the amount determined under Section 2.1(b)(ii)(A) with respect to such
Non-Guaranteed Note Receivable in calculating the Maximum Commitment.
"Non-Guaranteed Pro Rata Participation" shall mean a loan
participation with respect to a Note Receivable, sold by Borrower after the
Effective Date pursuant to documentation acceptable to Lender, which
participation represents an undivided pro rata interest in not more than eighty
percent (80%) of the Non-Guaranteed Note Receivable portion thereof and is
entitled to be paid pro rata with payment of both any USDA Guaranteed Note
Receivable portion thereof and the Non-Guaranteed Note Receivable portion
thereof retained by Borrower.
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"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 one hundred
percent (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; provided, that upon Lender's release of its Lien on a
specific Note Receivable in connection with the transfer by Borrower of such
Note Receivable to the trustee pursuant to a Securitization Transaction, such
obligation shall cease to be considered a Note Receivable and the provisions of
this Agreement shall no longer be applicable thereto.
"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 Report" shall mean a report by Borrower in substantially
the form attached as Exhibit H, providing the details of any proposed sale by
Borrower of an USDA Guaranteed 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 USDA 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 USDA Guaranteed Note
Receivable are credited against the Liabilities pursuant to Section 2.13(a).
"Parent" shall mean BLC Financial Services, Inc., a Delaware
corporation, and its successors and assigns.
"Parent Debentures" shall mean debentures in the original principal
amount of up to $5,000,000 in the aggregate that have been or may be issued by
Parent, 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
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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,
limited liability company, 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.
"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.
"Request for Special Determination of Eligibility" shall mean
Borrower's written request to Lender for Lender to consider making advances
against those Non-Guaranteed Notes Receivable and USDA Guaranteed Notes
Receivable with respect to a specific Term Loan Debtor even though such
Non-Guaranteed Notes Receivable or USDA Guaranteed Notes Receivable do not meet
the eligibility requirements in Schedule 1.1(a) or Schedule 1.1(b),
respectively, in the form attached as Exhibit I.
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"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.
"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).
"Securitization Transaction" shall mean an accounts receivable
securitization transaction effected pursuant to documentation in form and
substance reasonably acceptable to Lender, pursuant to which Borrower sells all
or a specific portion of its portfolio of Non-Guaranteed Notes Receivable by
pooling and transferring 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.
"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 for the settlement of the sale
of any USDA Guaranteed Note Receivable, as specified by Borrower in a Note Sale
Report for such sale.
"Sold Notes Receivable" shall mean the USDA Guaranteed Notes
Receivable sold by Borrower to purchasers pursuant to Assignment Guarantee
Agreements.
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"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).
"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 B&I
Lender's Agreement.
"Term Loan Debtor" shall mean any Person, other than USDA, 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) May 6, 2000
(unless a later date is agreed to in writing by Borrower, Parent and Lender);
(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.
"USDA" shall mean the United States Department of Agriculture, the
Farmers Home Administration, or any other Federal agency administering the B&I
Act.
"USDA Consent" shall mean any agreement executed by each of USDA,
Borrower and Lender to evidence any required consent by USDA to Borrower's
entering into or continuing to perform under this Agreement and the other Loan
Documents to which it is a party and the transactions contemplated hereunder and
thereunder.
"USDA Guaranteed Note Receivable" shall mean that portion of any
Note Receivable that is actually and fully guaranteed by USDA and in which
Lender has been granted a first priority security interest as set forth in the
Security Agreement.
"USDA Owned Notes Receivable" shall mean any USDA Guaranteed Notes
Receivable that are from time to time held by USDA.
"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
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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 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. 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 B&I Loan 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
(A) the sum of
(1) up to one hundred percent (100%) of Net
Eligible USDA Guaranteed Notes Receivable;
plus
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(2) up to ninety percent (90%) of the Current
Portion of Net Eligible Non-Guaranteed Notes
Receivable relating to B&I Loans with
respect to which both (x) not more than 60
days have elapsed since the final
disbursement of the loans by Borrower
thereunder, and (y) Borrower has not yet
sold the USDA Guaranteed Note Receivable
portion thereof; plus
(3) up to eighty percent (80%) of the Current
Portion of Net Eligible Non-Guaranteed Notes
Receivable relating to B&I Loans with
respect to which either (x) more than 60
days have elapsed since the final
disbursement of the loans by Borrower
thereunder, or (y) Borrower has sold the
USDA Guaranteed Note Receivable portion
thereof; plus
(4) up to fifty percent (50%) of the Delinquent
Portion of Net Eligible Non-Guaranteed Notes
Receivable; plus
(5) up to the lesser of (x) fifty percent (50%)
of the Defaulted Portion of Net Eligible
Non-Guaranteed Notes Receivable with respect
to which payment of interest, principal or
any other amount due thereunder is not more
than 12 months past due, or (y) sixty-five
percent (65%) of the estimated remaining
value of such Defaulted Portion of Net
Eligible Non-Guaranteed Notes Receivable as
determined by Lender in its reasonable
credit judgment; plus
(6) up to the lesser of (x) twenty-five percent
(25%) of the Defaulted Portion of Net
Eligible Non-Guaranteed Notes Receivable
with respect to which payment of interest,
principal or any other amount due thereunder
is not more than 18 months past due, or
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(y) sixty-five percent (65%) of the
estimated remaining value of such Defaulted
Portion of Net Eligible Non-Guaranteed Notes
Receivable as determined by Lender in its
reasonable credit judgment;
exceeds
(B) the sum of
(1) the aggregate amount of Note Sale
Reserves then outstanding; plus
(2) the aggregate amount of Non-Guaranteed
Participation Reserves then outstanding; or
(iii) the maximum amount that Borrower could borrow hereunder
without creating a breach of the consolidated
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 $15,000,000.
Interest on the Revolving Credit Note shall be payable to Lender as provided in
Section 2.3.
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.
(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
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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 one percent (1.0%) 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 on the Revolving Loans and under the Revolving Credit Note shall be
increased to four percent (4.0%) 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.
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
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to Lender an amount equal to the difference between (i) the lesser of (x) 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 (y) 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 computed in accordance with
Section 2.3 had at all times been in effect as of such maturity or final payment
date, and (ii) the amount of interest otherwise accrued on the Revolving Credit
Note in accordance with the provisions of Section 2.3 and this Section 2.4.
2.5 Fees.
(a) Commitment Fees. Borrower agrees to pay Lender on the Execution
Date, solely as consideration for Lender agreeing to enter into this Agreement,
a fully earned and non-refundable commitment fee equal to $75,000.
(b) Success Fees. As additional compensation for Lender's costs and
risks in making the advances hereunder available to Borrower, Borrower agrees to
pay to Lender, the following additional fees:
(i) fees equal to (x) with respect to each Note
Receivable in an original principal amount
equal to or less than Five Million Dollars
($5,000,000), one percent (1%) of that
portion of the Note Receivable that
constitutes a Sold Note Receivable, and
(y) with respect to each Note Receivable in
an original principal amount greater than
Five Million Dollars ($5,000,000), one and
one-half percent (1.5%) of that portion of
the Note Receivable that constitutes a Sold
Note Receivable, which fees shall be payable
on the Settlement Date for the sale of any
Sold Note Receivable; and
(ii) fees equal to fifteen percent (15%) of the
gain to Borrower from a Securitization
Transaction, or other sale or transaction
involving Borrower's interest in any Non-
Guaranteed Notes Receivable, which fees shall
be payable as and when actual cash payments
representing such gain are made available for
Borrower's use. For purposes of calculating
such fees, the "gain" to Borrower from any
transaction shall include any premium, excess
interest spread, or other amounts that
Borrower is entitled to receive for its own
account in excess of the amount that Borrower
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would have been entitled to receive by payment on the
effective date of such transaction of the principal
amount and accrued interest through such date on the
Non-Guaranteed Notes Receivable (or portions thereof)
involved in such transaction.
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 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%)
May 6, 1999 of the Maximum Credit
Line
May 7, 1999 to One Percent (1%)
May 6, 2000 of the Maximum Credit
Line
and further provided, that Borrower shall have no obligation to pay the
Prepayment Fee to Lender if (a) the percentage of Requests for Special
Determination submitted by Borrower from the Effective Date through the date
such notice of termination is given by Borrower that Lender is unwilling to
approve as eligible for advances under this Agreement is greater than or equal
to twenty-five percent (25%), or (b) Lender materially changes the eligibility
criteria set forth in Schedule 1.1(a) or 1.1(b); and further provided, that
notwithstanding any termination of this Agreement, in the event that after the
Termination Date Borrower (i) sells any USDA Guaranteed Notes Receivable that
were financed by Lender prior to the Termination Date or (ii) enters into any
Securitization Transactions or other sale or transaction with respect to any
Non-Guaranteed Notes Receivable that were financed by Lender prior to the
Termination Date, then Borrower shall pay to Lender those fees that would have
been paid to Lender pursuant to Section 2.5(b) had the Termination Date not
occurred, and such fees shall be payable to Lender, in cash, at the time
provided in
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Section 2.5(b) for such payments. Borrower's obligations under Section 2.5(b)
and under this Section 2.6 shall survive the Termination Date.
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 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 fund Borrower's B&I Loan portfolio development (including expenses
related thereto). 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 or collections of the underlying Notes
Receivables, 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
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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 Liabilities, including any Liabilities that are payable after the
Termination Date pursuant to the proviso in Section 2.6, 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; Transfers from Servicer Account. 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 Lender, in form and substance satisfactory to Lender and Borrower, governing
such bank account (the "Blocked Account"). Borrower shall deposit in the Blocked
Account all Items of Payment. Borrower shall deposit in the Servicer Account any
and
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all checks, drafts, cash and other remittances received by Borrower in payment
or on account of payment, with respect to any of the Notes Receivable, and shall
transfer to the Blocked Account from the Servicer Account all Items of Payment
within one (1) Business Day of receipt of cleared funds; provided, that until
Borrower is otherwise notified by Lender or unless an Default or Event of
Default has occurred and is continuing, Borrower may retain or use collections
of Items of Payment for purposes permitted by the Loan Agreement, provided that
Borrower promptly transfers to the Blocked Account any amounts necessary to keep
the outstanding Liabilities from exceeding the Maximum Commitment at such time.
The deposits made in the Servicer Account shall be deposited in precisely the
form received, except for the endorsements of Borrower where necessary to permit
the collection of any such payments, which endorsements Borrower hereby agrees
to make. Notwithstanding the foregoing, Borrower shall cause payment of all Net
Sale Proceeds and 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;
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 Participated
Notes Receivable (if any), the USDA Owned Notes Receivables, and, to the extent
of Borrower's retained interest in any such Notes Receivable, Lender (the
"Servicer Account").
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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 each deposit made to the Servicer Account
pursuant to Section 2.13(a), Borrower shall deliver to Lender information
detailing, with respect to each such deposit, the specific Note Receivable to
which such deposit relates and (i) the amount, if any, of such deposit that
relates to a Sold Note Receivable and that Borrower has determined is payable to
the purchaser of such Sold Note Receivable, (ii) the amount, if any, of such
deposit that relates to a Participated Note Receivable and that Borrower has
determined is payable to the purchaser of such Participated Note Receivable,
(iii) the amount, if any, of such deposit that relates to a USDA Owned Note
Receivable and that Borrower has determined is payable to USDA (any such amount
described in clauses (i), (ii), or (iii) above being the "Allocated Payment
Portion"), and (iv) the amount of such deposit that relates to Borrower's
retained interest in a Note Receivable and that Borrower has determined is
payable to Borrower. 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 except to the extent that Borrower is permitted to retain such
amounts under Section 2.13(a).
(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 applicable USDA rules and regulations and the
terms of any USDA Consent that is subsequently required and entered into by
Borrower, Lender and USDA, 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 USDA
rules and regulations, the taking of such action with respect thereto as Lender
may request or in the absence of such request, as Borrower may deem advisable.
Borrower agrees to pay to Lender any and all reasonable fees, costs and expenses
incurred in connection with
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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 any
applicable USDA rules and regulations and the terms of any USDA Consent that is
subsequently required and entered into by Borrower, Lender and USDA, 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.
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
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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.
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 USDA 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 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 its incorporation, which is Florida and Delaware, respectively; (ii) is
duly qualified or licensed to do business in all other jurisdictions wherein the
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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 Articles or Certificate of Incorporation and its 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.
(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 1, 1998, 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
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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. 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, its bylaws, or any contract, agreement, instrument or
Governmental Requirement to which Borrower is subject; and 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. 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. Without limiting the generality of the
foregoing, 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 a USDA Consent or any other consent or
approval by USDA.
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.
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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,
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. 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 B&I
Lender's Agreement and the Loan Note Guarantees with respect to each USDA
Guaranteed Note Receivable and has complied and will continue to comply with all
statutory, and other regulatory requirements necessary to obtain and maintain
the B&I Lender's Agreement and such Loan Note Guarantees.
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
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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.
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
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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
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;
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(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.
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
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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.
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 and in Section
5.1(c). 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 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;
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(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
(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) Schedule of Eligible Notes Receivable. Accompanying each request
for a Revolving Loan hereunder, and in any event no less frequently than on
monthly basis, Borrower shall provide Lender with (i) 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 USDA 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 (each a "Schedule of Eligible Notes
Receivable"), supported by a Certificate of Eligibility and such
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other information reasonably requested by Lender, and accompanied by all related
B&I Loan credit requests. Borrower and Parent each hereby warrant and represent
to Lender that each of the Notes Receivable listed on any Schedule of Eligible
Notes Receivable or Borrowing Base Report as either a Net Eligible
Non-Guaranteed Note Receivable or a Net Eligible USDA Guaranteed Note Receivable
met as of the time of Lender's initial funding with respect thereto, and
continues to meet, each and every one of the requirements set forth in Schedule
1.1(a) or Schedule 1.1(b), respectively, except for any of such requirements
that Lender specifically waived with respect to a particular Net Eligible
Non-Guaranteed Note Receivable or Net Eligible USDA Guaranteed Note 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 monthly basis, Borrower
shall deliver to Lender a Borrowing Base Report. The Borrowing Base Report shall
indicate (1) any new B&I Loans made by Borrower since the date of delivery of
the last Borrowing Base Report, and (ii) any additional advances made on B&I
Loans that were funded by Borrower after the date of delivery of the last
Borrowing Base Report.
(iii) Request for Special Determination of Eligibility. In the
event that Borrower desires Lender to consider making an advance against any
Non-Guaranteed Note Receivable or USDA Guaranteed Note Receivable that does not
satisfy each and every one of the eligibility requirements set forth in Schedule
1.1(a) or Schedule 1.1(b), respectively, Borrower shall deliver to Lender a
Request for Special Determination of Eligibility.
(iv) Reports Respecting Sale of USDA Guaranteed Notes
Receivable. No later than 2:00 p.m. (Central Time) of the one (1) 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
Assignment Guarantee Agreement reflecting the anticipated sale of the subject
USDA Guaranteed Note Receivable and all instructions of Borrower to Lender with
respect thereto. On the request of Lender, Borrower shall deliver to Lender
copies of any other documents related to such sale.
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(v) 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.
(vi) 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.
(vii) 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 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 B&I Lender's Agreement and the Loan
Note Guarantees with respect to each USDA Guaranteed Note Receivable.
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 USDA rules or regulations, each of
Borrower and Parent at its expense will promptly execute and
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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 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
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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 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. At the request of Lender, each of Borrower and
Parent shall deliver to Lender all supporting documentation and such other
collateral and other information with respect to all B&I Loans. Each of Borrower
and Parent acknowledges that Lender presently anticipates performing a minimum
of four (4) audits in each fiscal year of Borrower and Parent. Without limiting
the generality of the foregoing, Lender shall have the right, at any time, to
examine and redetermine whether the eligibility criteria set forth on Schedules
1.1(a)
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and (b) were met at the time Borrower submitted any USDA Guaranteed Note
Receivable and Non-Guaranteed Note Receivable to Lender for advances and, if
Lender determines that the eligibility criteria for any such Notes Receivable
were not satisfied, then Lender shall deem such Notes Receivable to be
ineligible and Borrower shall immediately repay to Lender the amount by which
the sum of the Revolving Loans exceeds the Maximum Commitment, as set forth in
Section 2.7.
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 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
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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:
(a) Tangible Net Worth. Parent shall maintain, on a consolidated
basis, Tangible Net Worth of not less than $3,500,000 as of the end of each of
fiscal quarter.
(b) EBITDA Ratio. Parent shall achieve, on a consolidated basis, as
measured as of the end of its 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 March 31, 1998 1.2 to 1.0
Fiscal Quarter Ending June 30, 1998 1.2 to 1.0
Fiscal Quarter Ending September 30, 1998 1.3 to 1.0
Fiscal Quarter Ending December 31, 1998 1.3 to 1.0
Fiscal Quarter Ending March 31, 1999 1.3 to 1.0
Fiscal Quarter Ending June 30, 1999 1.3 to 1.0
Fiscal Quarter Ending September 30, 1999 1.3 to 1.0
Fiscal Quarter Ending December 31, 1999 1.3 to 1.0
Fiscal Quarter Ending March 31, 2000 1.3 to 1.0
(c) Consolidated Liabilities to Tangible Net Worth Ratio. Parent
shall maintain, on a consolidated basis, a maximum ratio of (i) the sum of (A)
the Liabilities, and (B) all other liabilities of Parent or any of its
consolidated subsidiaries to Lender, including those arising under the Loan
Agreement dated as of March 25, 1998 between Lender and Business Loan Center,
Inc., 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) Maximum Defaulted Amount. As measured as of the end of each
month, Borrower shall not cause or allow the Defaulted Portion of Non-Guaranteed
Notes Receivable (i) if the aggregate outstanding principal amount of all
Non-Guaranteed Notes Receivable is less than $10,000,000, to include amounts
from more than one (1) Non-Guaranteed Note Receivable, or (ii) if the aggregate
outstanding principal amount of all Non-Guaranteed Notes Receivable is equal to
or greater than $10,000,000, to exceed ten percent (10%) of such aggregate
outstanding principal amount.
(e) Maximum Combined Delinquent and Defaulted Amount. As measured as
of the end of each month, Borrower shall not cause or allow the combined amount
of the Delinquent Portion of Non-
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Guaranteed Notes Receivable and the Defaulted Portion of Non-Guaranteed Notes
Receivable (i) to include amounts from more than three (3) Non-Guaranteed Note
Receivables, or (ii) if the aggregate outstanding principal amount of all
Non-Guaranteed Notes Receivable is equal to or greater than $10,000,000, to
exceed thirty percent (30%) of such aggregate outstanding principal amount.
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.
(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 5.12(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
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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
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. Borrower shall deliver to Lender (or to
an agent appointed by and acting for Lender pursuant to a written agreement in
form and substance satisfactory to Lender) all original B&I 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 other Notes Receivable Documents. Borrower shall at all times
comply with the terms and conditions of the B&I Lender's Agreement and the Loan
Note Guarantees with respect to each of the USDA Guaranteed Notes Receivable.
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 reasonably 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.
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:
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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) other Indebtedness listed on Schedule
6.1.
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 USDA
Guaranteed Notes Receivable and Non-Guaranteed Notes Receivable to the extent
permitted by Section 6.13), lease or otherwise dispose of or transfer, whether
by sale, merger, consolidation, liquidation, dissolution, or otherwise, any of
Borrower's or Parent's assets.
6.4 Capital Expenses. On a consolidated basis, make capital expenditures
(including capitalized leases) during any fiscal year of Parent which, in the
aggregate, exceed $250,000 in the fiscal year ending June 30, 1998 or 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.
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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 $200,000, 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.
6.9 Name of Borrower. Use any corporate name (other than its own) or any
fictitious name, tradestyle or "d/b/a" other than "BLC Commercial Capital"
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:
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(a) sell USDA Guaranteed Notes Receivable to the extent that such
sales are made (i) at par or at a premium, (ii) on ordinary business terms,
(iii) in full conformity with all applicable provisions of the B&I Act and other
applicable law, and (iv) in accordance with the Settlement Date reporting
requirements of Section 5.1(d)(iv);
(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 B&I Act and other applicable
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 that
such sales are made (i) on ordinary business terms, (ii) in full conformity with
all applicable provisions of the B&I Act and other applicable law, and (iii) in
a manner that assures that the Note Participation Amount with respect to each
Non-Guaranteed Pro Rata Participation is received by Lender in accordance with
Section 2.13; and
(d) sell to USDA the USDA Owned Notes Receivable, or otherwise
dispose of Notes Receivable or the collateral therefor, to the extent required
by USDA 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) $2,500,000 for all of such Persons in their
fiscal year ending June 30, 1998, or (B) $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 USDA
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 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 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
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(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
(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 USDA. Borrower shall breach in any
material respect its servicing or any other obligations under the B&I Lender's
Agreement or under any Loan Note Guarantee; or
(h) Default Under Parent Guaranty. Any event of default shall occur
under the Parent Guaranty; or
(i) 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
(j) Involuntary Bankruptcy or Other Proceedings. The filing of a
petition with a court having jurisdiction over
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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
(k) 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
(l) 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 $250,000; provided, that for purposes of this Section 7.1(l), 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
(m) 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
(n) 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
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any notice of the institution of any proceeding or other action which may result
in the termination of such plan; or
(o) 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
(p) 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
(q) Change of Control. A Change of Control shall have occurred; or
(r) Merger. Borrower or Parent shall merge or consolidate with or
acquire the Stock or assets of any Person; or
(s) 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 (except for an Event of
Default arising solely under Section 5.11(d)), 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(j) or Section 7.1(k); 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 USDA rules and regulations and the terms
of any USDA Consent that is subsequently required and entered into by Borrower,
Lender and USDA, including those, if any, relating to the transfer of authority
for collection, servicing, and liquidation of Notes Receivable, Lender shall
have the following rights and remedies:
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(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 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 USDA takes over or transfers to another USDA-participating
lender, designated by the USDA and acceptable to Lender, the collection,
servicing and liquidation functions of the Notes Receivable, enforce and demand
payment of the Accounts and the Notes Receivable, in accordance with their
terms, by legal proceedings or otherwise; (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
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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 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 B&I 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 Participated Notes Receivable, and the
USDA 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 USDA (as a participating lender under the B&I Act or otherwise)
to perform such functions. Upon the transfer of the servicing obligations of
Borrower's
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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 USDA, and in so doing, neither
Lender nor its designee shall incur any liability or obligation to Borrower by
reason thereof; and
(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 USDA Rules and Regulations and Subsequent USDA Consent.
Notwithstanding any other provision of this Article 7, all rights and remedies
of Lender under this Article 7 shall be subject to the applicable provisions, if
any, of all applicable USDA rules and regulations and any USDA Consent that may
subsequently be executed by Borrower, Lender and USDA.
7.7 Rights of Purchasers of Notes Receivable. If Lender exercises its
rights or remedies under this Article 7, Lender will recognize, and will inform
any proposed transferee of
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Lender, of the rights that any purchasers from Borrower of Sold Notes Receivable
or Participated Notes Receivable may have with respect to collections of
particular Notes Receivable or the collateral therefor, to the extent that
Lender has received reasonable evidence thereof. If requested by a purchaser
from Borrower of Sold Notes Receivable or Participated Notes Receivable, Lender
will enter into an agreement recognizing such purchaser's rights with respect to
collections of the particular Notes Receivable involved or the collateral
therefor, so long as such agreement is in form and substance reasonably
satisfactory to Lender.
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.
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) Note. 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.
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(d) No Material Adverse Change. Since December 31, 1997 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 (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) Fees. Lender shall have received the fee described in Section
2.5(a).
(g) 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.
(h) Schedule of Documents. Lender shall have received all other
documents, agreements and items set forth on the Schedule of Documents.
(i) 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 USDA approval, loan closing and servicing, collections,
account/portfolio administration, and liquidation, and such materials shall be
in a form satisfactory to Lender.
(j) 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.
(k) Borrower's Form Loan Documents. Borrower shall have submitted to
Lender the standard form loan agreement,
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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 USDA), and all such loan documents
shall be satisfactory to Lender and its counsel.
(l) Chief Officers. Robert F. Tannenhauser shall be serving as the
Chief Executive Officer of both Parent and Borrower, either Robert F.
Tannenhauser or Jennifer Napier 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 Lender shall be serving in such
positions.
(m) B&I Lender's Agreement. Borrower shall have provided Lender with
evidence satisfactory to Lender that USDA shall have entered into the B&I
Lender's Agreement with Borrower.
(n) Minimum Capitalization. Borrower shall have provided Lender with
evidence satisfactory to Lender that Borrower has shareholders' equity of at
least $500,000 as of the Effective Date.
(o) Other. Lender shall have received such other documents as it may
reasonably have requested at any time at or prior to the Effective Date.
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 (i) a Borrowing Request, (ii) a Borrowing Base Report, (iii)
a Schedule of Eligible Notes Receivable, (iv) in the event Borrower is
requesting that Lender deem an otherwise ineligible USDA Guaranteed Note
Receivable or a Non-Guaranteed Note Receivable to be a Net Eligible Guaranteed
Note Receivable or a Net Eligible Non-Guaranteed Note Receivable, a Request for
Special Determination of Eligibility, and (v) a Certificate of Eligibility, 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 B&I Loan
Notes and copies of all other Notes Receivables Documents shall have been
physically delivered to the possession of Lender or to Lender's agent, as set
forth in Section 5.15.
(c) No Default. No Default or Event of Default shall have occurred
and be continuing or would result from the funding of the advance.
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(d) 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.
(e) 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.
(f) 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.
(g) 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 funding or escrow arrangements for the
disbursement of such new loans shall be satisfactory in form and substance to
Lender.
(h) Subsequent USDA Consent Requirement. If a USDA Consent is
required to be obtained based upon a change in USDA rules or regulations after
the Effective Date, Borrower shall have provided Lender with evidence
satisfactory to Lender that USDA shall have executed a USDA Consent in form and
substance reasonably satisfactory 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.
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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:
(a) If to Lender, at:
Transamerica Business Credit Corporation
Two Ravinia Drive, Suite 700
Atlanta, Georgia 30346
Attention: Account Executive - BLC Commercial
Facsimile: (770) 396-7403
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 Sheneman Julian & Rogers
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
provided, that notice to Lender for purposes of Section 2.13(a)(i) shall be
given to Russell L. Bonder (or another Account Executive for BLC Commercial
designated by Lender) by telephone at (770) 350-8800 or by facsimile at (770)
396-7403, and no copy of such transmission is required to be sent to any other
Person.
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(b) If to Borrower or Parent, at:
BLC Commercial Capital Corp.
645 Madison Avenue, 18th Floor
New York, New York 10022
Attention: Mr. Robert Tannenhauser
President
Facsimile: (212) 751-9345
With copies to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attention: Simeon Gold, Esq.
Facsimile: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered or
sent by facsimile, with receipt acknowledged or confirmed, or three (3) Business
Days after the same shall have been deposited in the United States mail. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
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 applicable
provisions, if any, of any USDA Consent that is subsequently required and
entered into by Borrower, Lender and USDA. 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 Upon Sale of USDA Guaranteed Notes Receivable or
Non-Guaranteed Pro Rata Participations.
(a) Lender's security interest in any USDA Guaranteed Note
Receivable shall be deemed to be automatically released on any Settlement Date
established with respect to such USDA Guaranteed Note Receivable (or other date
of settlement established pursuant to any applicable Note Sale Report)
concurrently with the receipt by Lender of the purchase price therefor.
Notwithstanding any release of a security interest by Lender under this Section
9.3(a), Lender shall not release, but rather shall retain without interruption,
its security interest in and to the Net Sale Proceeds of such sale. If such sale
of the USDA Guaranteed Note Receivable occurs after the original B&I Loan Note
with respect thereto has been delivered to Lender, after Lender has received the
Net Sale Proceeds of such sale Lender shall deliver the original B&I Loan Note
representing the sold USDA Guaranteed Note Receivable in accordance with the
joint written instructions of Borrower and the purchaser.
(b) Lender's security interest with respect to that portion of any
Non-Guaranteed Note Receivable in which Borrower has sold a Non-Guaranteed Pro
Rata Participation in accordance with Section 6.13(c) shall be deemed to be
automatically released concurrently with the receipt by Lender of the Note
Participation Amount therefor. Notwithstanding any release of a security
interest by Lender under this Section 9.3(b), Lender shall not release, but
rather shall retain without interruption, its security interest in and to the
Note Participation Amount with respect to such Non-Guaranteed Pro Rata
Participation and the portion of the affected Non-Guaranteed Note Receivable
retained by Borrower.
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
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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 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 any USDA Consent that is subsequently required and entered
into between Borrower, Lender and USDA, the relevant provisions of such USDA
Consent 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,
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.
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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.
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
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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 USDA 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 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
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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 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 Loan
Agreement to be duly executed as of the date first above written.
BORROWER:
BLC COMMERCIAL CAPITAL CORP.,
a Florida 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/ Terrell W. Harris
-------------------------------------
Terrell W. Harris
Senior Vice President
<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)
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<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)
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Schedule 1.1(a)
Net Eligible Non-Guaranteed Notes Receivable
For the purpose of determining the amounts to be advanced pursuant
to Section 2.1, each Non-Guaranteed Note Receivable and its underlying Note
Receivable (collectively, in each instance, a "Loan") described by Borrower on
any Schedule of Eligible Notes Receivable or any Borrowing Base Report as a Net
Eligible Non-Guaranteed Note Receivable, shall meet each of the following
eligibility requirements described in paragraphs A through Z below. In the event
that any one or more of the requirements set forth below is not satisfied,
Borrower may request that Lender deem such Loan to be a Net Eligible
Non-Guaranteed Note Receivable, and Lender may, in its sole discretion, and
without any obligation to do so, deem such Loan to be a Net Eligible
Non-Guaranteed Note Receivable. Following are the eligibility criteria:
A. All conditions precedent to the effectiveness of the USDA 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 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 USDA guaranty with respect thereto, including any conditions
specified in the Loan Note Guarantee with respect to such Loan;
C. No event or condition subsequent that would release the USDA from its
obligations to Borrower with respect to the Loan or any recovery with respect
thereto has occurred, and the USDA 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 subject original B&I Loan Notes and copies of all other Note Receivables
Documents are in the physical possession of Lender or Lender's agent;
E. The Loan conforms to Borrower's and USDA's written credit and
underwriting guidelines, copies of which have been previously delivered to
Lender by Borrower;
Schedule 1.1(a)
1
<PAGE>
F. The Term Loan Debtor must be an established business (except for
hotel/motels which may be start-ups), and shall not be an agricultural loan, and
the primary underlying collateral for the Loan must be either a hotel/motel, a
multi-purpose commercial structure (such as a warehouse or structure fit for
light industrial use), a multi-tenant retail structure with an established
anchor tenant or a multi-family residential structure, each of which must be
located in an established recreational area, an area adjacent to a major
interstate highway exit, or a community within twenty (20) miles of an urban
area (i.e. a city with a population of not less than 50,000);
G. The value of the primary underlying collateral for the Loan must be
supported by an appraisal acceptable to Lender, underwritten on the basis of a
sale within 12-months, and Borrower's advance rate against such collateral does
not exceed eighty percent (80%) of such appraised value;
H. The value of any machinery and equipment collateral must be supported
by an appraisal acceptable to Lender on a liquidation sale basis and Borrower's
advance against such collateral shall not exceed fifty percent (50%) of such
appraised liquidation value;
I. The principals of the Term Loan Debtor have either a minimum twenty
percent (20%) equity investment in the Term Loan Debtor or have provided their
personal guaranties of the Loan, and the Term Loan Debtor must have either
demonstrated historical cashflow or cashflow based on reasonable projections of
not less than 1.15 times projected debt service on the Loan;
J. If the Loan is a construction loan, it is supported by a completion
bond satisfactory to Lender without rights of subrogation.
K. The original principal amount of the Non-Guaranteed Note Receivable
does not exceed the lesser of (i) $1,000,000 or (ii) twenty-five percent (25%)
of the total Note Receivable; provided, that such Loan will be ineligible only
to the extent of such excess;
L. If such Loan is outstanding at a time when the aggregate amount of
Non-Guaranteed Notes Receivable is equal to or greater than $10,000,000, the
Non-Guaranteed Note Receivable portion of 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;
M. If such Loan is outstanding at a time when the aggregate amount of
Non-Guaranteed Notes Receivable is equal to or greater than $10,000,000, the
Loan does not cause the aggregate amount of Non-Guaranteed Notes Receivable owed
by Term
Schedule 1.1(a)
2
<PAGE>
Loan Debtors whose business activities fall within a single industry, as defined
by the Standard Industrial Classification then in effect, to exceed forty
percent (40%) of the aggregate amount of all Non-Guaranteed Notes Receivable;
provided, that if the industry is the hotel/motel industry (SIC #7011), such
percentage limitation shall not apply; and provided further, that such Loan will
be ineligible only to the extent of such excess;
N. If such Loan is outstanding at a time when the aggregate amount of
Non-Guaranteed Notes Receivable is equal to or greater than $10,000,000, the
Loan does not cause the aggregate amount of Non-Guaranteed Notes Receivable owed
by Term Loan Debtors within either a 250 mile radius or the same state to exceed
twenty percent (20%) of the aggregate amount of Non-Guaranteed Notes Receivable;
provided, that such Loan will be ineligible only to the extent of such excess;
O. 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;
P. 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;
Q. The Term Loan Debtor is not insolvent or the subject of an insolvency
proceeding or a case commenced under the Bankruptcy Code;
R. 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;
S. None of the original payment or interest provisions of the Loan have
been modified without Lender's prior written consent;
T. 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;
U. The subject Note Receivable is subject to no lien or security interest,
except for the security interest of Lender;
Schedule 1.1(a)
3
<PAGE>
V. 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 USDA 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;
W. 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;
X. 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;
Y. The Loan has not been turned over to the USDA or any other Person for
servicing or collection;
Z. The Loan and the respective rights of the USDA, Lender, and Borrower
with respect thereto are subject to the terms of the B&I Lender's Agreement, the
Loan Note Guarantee, any USDA Consent that is subsequently required and entered
into by Borrower, Lender and USDA, or such other agreements with USDA and
Borrower that Lender, in its sole discretion, deems acceptable; and
AA. 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, at any time
after the earlier to occur of the six month anniversary of the date Lender makes
the initial advance under the Loan Agreement or the first date on which the
aggregate amount of outstanding advances under the Loan Agreement with respect
to Non-Guaranteed Notes Receivable is equal to or greater than $7,500,000, 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 USDA Guaranteed Notes Receivable
For the purpose of determining the amounts to be advanced pursuant
to Section 2.1, each USDA Guaranteed Note Receivable and its underlying Note
Receivable (collectively, in each instance, a "Loan") described by Borrower on
any Schedule of Eligible Notes Receivable or any Borrowing Base Report as a Net
Eligible USDA Guaranteed Note Receivable, shall meet each of the following
eligibility requirements described in paragraphs A through T below. In the event
that any one or more of the requirements set forth below is not satisfied,
Borrower may request that Lender deem such Loan to be a Net Eligible USDA
Guaranteed Note Receivable, and Lender may, in its sole discretion, and without
any obligation to do so, deem such Loan to be a Net Eligible USDA Guaranteed
Note Receivable. Following are the eligibility criteria:
A. All conditions precedent to the effectiveness of the USDA 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 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 USDA guaranty with respect thereto, but the USDA guaranteed
portion thereof has not yet been sold by Borrower;
C. The Loan conforms to all requirements of the USDA applicable to the
initial approval and guaranty of the USDA, including any requirements and
conditions specified in the Loan Note Guarantee with respect to such Loan;
D. No event or condition subsequent that would release USDA from its
obligations to Borrower with respect to the Loan or any recovery with respect
thereto has occurred, and USDA has not rejected the Loan or the Note Receivable
Documents in any respect;
E. Not later than three (3) Business Days after the issuance of the Loan,
the subject original B&I Loan Notes and
Schedule 1.1(b)
1
<PAGE>
copies of all other Note Receivables Documents are in the physical possession of
Lender or Lender's agent;
F. The Loan conforms to Borrower's and USDA's written credit and
underwriting guidelines, copies of which have been previously delivered to
Lender by Borrower;
G. If the Loan is a construction loan, it is supported by a completion
bond without rights of subrogation.
H. Not more than 60 days have elapsed since the Loan was fully funded by
Borrower.
I. The original principal amount of the Note Receivable does not exceed
$5,000,000; provided, that such Loan will be ineligible only to the extent of
such excess;
J. 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;
K. 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;
L. The Term Loan Debtor is not insolvent or the subject of an insolvency
proceeding or a case commenced under the Bankruptcy Code;
M. 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;
N. The subject Note Receivable is subject to no lien or security interest,
except for the security interest of Lender;
O. 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 USDA 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;
P. 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;
Schedule 1.1(b)
2
<PAGE>
Q. With respect to the USDA 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;
R. The Loan has not been turned over to the USDA or any other Person for
servicing or collection;
S. The Loan and the respective rights of the USDA, Lender, and Borrower
with respect thereto are subject to the terms of the B&I Lender's Agreement, the
Loan Note Guarantee, any USDA Consent that is subsequently required and entered
into by Borrower, Lender and USDA, or such other agreements with USDA and
Borrower that Lender, in its sole discretion, deems acceptable; and
T. 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, at any time
after the earlier to occur of the six month anniversary of the date Lender makes
the initial advance under the Loan Agreement or the first date on which the
aggregate amount of outstanding advances under the Loan Agreement with respect
to Non-Guaranteed Notes Receivable is equal to or greater than $7,500,000, to
revise or further restrict the criteria for advances, if any, to be made against
Net Eligible USDA 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
<PAGE>
EXHIBIT A
(FORM OF) REVOLVING CREDIT NOTE
$15,000,000 ___________, 1998
BLC COMMERCIAL CAPITAL CORP., a Florida 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, or such
other place as may from time to time be designated by Lender, in coin or
currency of the United States of America that at the time of payment is legal
tender for the payment of public and private debts, the principal sum of FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000), 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 Loan
Agreement of even date herewith, between Borrower, BLC Financial Services, Inc.,
a Delaware corporation, and Lender (such 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.
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
<PAGE>
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 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.
2
<PAGE>
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.
This Note has been delivered as of the date first written above.
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
----------------------------------
Robert F. Tannenhauser
President
3
<PAGE>
EXHIBIT B
BORROWING REQUEST
BLC COMMERCIAL CAPITAL CORP., a Florida corporation ("Borrower"),
hereby requests a Revolving Loan on the date and in the amount as follows:
$_____________ under the Revolving Credit Note.
Requested funding date: ______________
Pursuant to the Loan Agreement dated as or May 7, 1998 (as the same
may be amended, modified, or supplemented from time to time, the "Loan
Agreement") by and between Borrower, BLC Financial Services, Inc., a Delaware
corporation, and Transamerica Business Credit Corporation, a Delaware
corporation ("Lender"), the undersigned certifies that he/she is either the
President or the Chief Financial Officer of Borrower, and that as such he/she is
authorized to Execute this certificate on behalf of Borrower. The undersigned
further certifies, represents and warrants on behalf of Borrower that Borrower
is entitled to receive the requested loan or loans under the terms and
conditions of the Loan Agreement.
EXECUTED AND DELIVERED THIS _____ DAY OF _________, 19__:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
-------------------------------------
Robert F. Tannenhauser
President
OR:
By:
-------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer
<PAGE>
Exhibit C
BLC CAPITAL CORP.
BORROWING BASE REPORT
AS OF______________
I. Collateral Rollforward
----------------------
A. Beginning balance of gross B&I Loans
(per_______ Borrowing Base Report) $ --
Plus:
B. Initial B&I Loan fundings $ --
C. Subsequent B&I Loan disbursements --
Less:
D. Scheduled principal payments applied $ --
E. Principal portion of guaranteed notes sold $ --
F. Principal portion of unguaranteed participations $ --
G. Principal portion of prepayments $ --
Plus/(Less):
E. Other $ --
--------
F. Current principal balance of B&I Loans $ --
========
II. Amount Available under Collateral Formula
<TABLE>
<CAPTION>
Gross Unguaranteed
------------------------------------------------------------------------------
BLC Delinquent/ Defaulted
Guaranteed Current Current Defaulted greater than 12 mos
Funded less than or equal to funded funded less than l2 mos less than 18 mos
60 days less than 60 days greater than 60 days past due past due
------- ----------------- -------------------- -------- --------
<S> <C> <C> <C> <C> <C>
A. Gross collateral $ -- $ -- $ -- $ -- $ --
B. Less: ineligibles
/reserves $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------
C. Net eligible $ -- $ -- $ -- $ -- $ --
D. Applicable advance
rate 100% 90% 80% 50% 25%
-------------------------------------------------------------------------------------------
E. Gross available $ -- $ -- $ -- $ -- $ --
===========================================================================================
</TABLE>
Total
-----
A. Gross collateral
B. Less: ineligibles
/reserves
C. Net eligible
D. Applicable advance
rate
E. Gross available
=======
III. Excess Availability
-------------------
A. Lesser of $25,000.000 or adjusted gross
collateral availability $ --
B. Less: outstanding revolver balance $ --
C. Less: Non-Guaranteed Participations Reserve $ --
---------
D. Less: Note Sale Reserves $ --
=========
E. Excess availability $ --
=========
Pursuant to the Loan and Security Agreement dated as of May __, 1998 (as the
same may be amended, modified or supplemented from time to time, the "Loan
Agreement") by and between Borrower, BLC Financial Services, Inc. a Delaware
corporation, and Transamerica Business Credit Corporation, a Delaware
Corporation ("Lender"), the undersigned certifies that he/she is either the
President or Chief Financial Officer of Borrower, and that as such he/she is
authorized to execute this certificate on behalf of Borrower. The undersigned
further certifies, represents and warrants on behalf of Borrower that the
information and each calculation set forth above is true, correct and complete
as of the date hereof and the calculations are in accordance with the Loan
Agreement.
Executed this __ day of _______, 19__. BLC Capital Corp.
a Delaware corporation
By:
------------------------------
Its:
-----------------------------
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
Robert F. Tannenhauser hereby certifies that he is the President of
each of BLC COMMERCIAL CAPITAL CORP., a Florida corporation ("Borrower"), and
BLC FINANCIAL SERVICES, INC., a Delaware corporation ("Parent"), and the Chief
Financial Officer of Parent, and Jennifer Napier hereby certifies that she is
the Chief Financial Officer of Borrower. The undersigned hereby certify that, in
their respective capacities as President or Chief Financial Officer, as the case
may be, of Borrower and Parent, they are authorized to execute this certificate
on behalf of Borrower and Parent with reference to the Loan Agreement dated as
of May 7, 1998 (together with all amendments, modifications, or supplements
thereto, the "Loan Agreement") by and between Borrower, Parent and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation ("Lender"). Any capitalized
term used herein shall have the same meaning given to it in the Loan Agreement
unless otherwise specified. The undersigned further certify, represent and
warrant in their respective capacities as an officer of Borrower and Parent as
follows:
(a) The representations and warranties of Borrower and Parent
contained in the Loan Agreement, the Security Agreement, the Revolving Credit
Note, the Security Documents, and the Loan Documents and otherwise made in
writing by or on behalf of the Borrower and Parent pursuant to the Loan
Agreement were true and correct when made, and are repeated at and as of the
time of delivery hereof, and at and as of the time of delivery hereof no change
that would cause a Material Adverse Effect on Borrower or Parent or Borrower's
or Parent's business has occurred.
(b) Borrower and Parent have each performed and complied with all
agreements and conditions contained in the Loan Agreement, the Security
Agreement, the Revolving Credit Note, the Loan Documents, and the Security
Documents required to be performed or complied with by it prior to or at the
time of delivery hereof.
(c) Borrower has attached hereto (i) a Borrowing Base Report and
(ii) a Schedule of Eligible Notes Receivable, each as of the date hereof. The
information contained therein is true and accurate, and all Notes Receivable
constituting any part of the security for any Revolving Loan, whether requested
or outstanding, conform in all respects to the criteria set forth in Schedule
1.1(a) (with respect to Net Eligible Non-Guaranteed Notes Receivable) and
Schedule 1.1(b) (with respect to Net Eligible USDA Guaranteed Notes Receivable)
to the Loan Agreement.
(d) There exists and, after giving effect to any Revolving Loans
being requested contemporaneously with the delivery of this certificate, will
exist, no Default or Event of
<PAGE>
Default under the Loan Agreement, the security Agreement, the Revolving Credit
Note, the Security Documents, and the Loan Documents or any event or
circumstance which constitutes, or with notice or lapse of time (or both) would
constitute, an event of default under any loan or credit agreement, indenture,
deed of trust, security agreement or other agreement or instrument evidencing or
pertaining to any Indebtedness of Borrower, or under any material agreement or
instrument to which Borrower is a party or by which Borrower is bound.
(e) Calculations of pertinent financial covenants:
(1) Under Section 5.11(a) of the Loan Agreement, as of the
end of each fiscal quarter Parent is required to have
had, on a consolidated basis, Tangible Net Worth of not
less than $3,500,000
As of the end of the fiscal quarter ended _________ ,
____, Parent, on a consolidated basis, had Tangible Net
Worth of $___________________.
(2) Under Section 5.11(b) of the Loan Agreement, as of the
end of the fiscal quarter ended _____________, _____,
Parent is required to have had, on a consolidated basis,
a ratio of EBITDA for the twelve-month period then ended
to total, actual, interest expense for such
twelve-month period, of not less than _____ to 1.0.
As of the end of the fiscal quarter ended ____________,
____, Parent, on a consolidated basis, had a ratio of
EBITDA for the twelve-month period then ended to total,
actual, interest expense for such twelve-month period,
of ____________ to 1.0.
(3) Under Section 5.11(c) of the Loan Agreement, as of the
end of each fiscal quarter Parent is required to have
had, on a consolidated basis, a ratio of (i) the sum of
(A) the Liabilities, and (B) all other liabilities of
Parent or any of its consolidated subsidiaries to
tender, including those
2
<PAGE>
arising under the Loan Agreement dated as of March 25,
1998 between Lender and Business Loan Center, Inc., to
(ii) Tangible Net Worth, of not more than 5.0 to 1.0.
As of the end of the fiscal quarter ended __________,
____, Parent, on a consolidated basis, had a ratio of
(i) the sum of (A) the Liabilities, and (B) all other
liabilities of Parent or any of its consolidated
subsidiaries to Lender, including those arising under
the Loan Agreement dated as of March 25, 1998 between
Lender and Business Loan Center, Inc., to (ii) Tangible
Net Worth, of _____ to 1.0.
(4) Under Section 5.11(d) of the Loan Agreement, as of the
end of each month, Borrower is not to cause or allow the
Defaulted Portion of Non-Guaranteed Notes Receivable (i)
if the aggregate outstanding principal amount of all
Non-Guaranteed Notes Receivable is less than
$10,000,000, to include amounts from more than one (1)
Non-Guaranteed Note Receivable, or (ii) if the aggregate
outstanding principal amount of all Non-Guaranteed
Notes Receivable is equal to or greater than
$10,000,000, to exceed ten percent (10%) of such
aggregate outstanding principal amount.
As of __________, ____, (i) the Defaulted Portion of
Non-Guaranteed Notes Receivable was $_________ and
included amounts from ____ Non-Guaranteed Notes
Receivable, (ii) the aggregate outstanding principal
amount of all Non-Guaranteed Notes Receivable was
$___________ and the Defaulted Portion of Non-Guaranteed
Notes Receivable represented ______ percent of such
aggregate outstanding principal amount.
(5) Under Section 5.11(e) of the Loan Agreement, as of the
end of each month, Borrower is not to cause or allow the
combined amount of the Delinquent Portion of
Non-Guaranteed Notes Receivable and the Defaulted
Portion of Non-
3
<PAGE>
Guaranteed Notes Receivable (i) to include amounts from
more than three (3) Non-Guaranteed Note Receivables, or
(ii) if the aggregate outstanding principal amount of
all Non-Guaranteed Notes Receivable is equal to or
greater than $10,000,000, to exceed thirty percent (30%)
of such aggregate Outstanding principal amount.
As of _________, 19__, (i) the combined amount of the
Delinquent Portion of Non-Guaranteed Notes Receivable
and the Defaulted Portion of Non-Guaranteed Notes
Receivable was $_________ and included amounts from
________ Non-Guaranteed Note Receivables, and (ii) the
aggregate outstanding principal amount of all
Non-Guaranteed Notes Receivable was $
__________________, and the combined amount of the
Delinquent Portion of Non-Guaranteed Notes Receivable
and the Defaulted Portion of Non-Guaranteed Notes
Receivable represented _______ percent of such aggregate
outstanding principal amount.
EXECUTED AND DELIVERED THIS ______ DAY OF _____________, ____:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation
By:
------------------------------------------
Robert F. Tannenhauser
President of each and
Chief Financial Officer of
BLC Financial Services, Inc.
By:
------------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer of
BLC Commercial Capital Corp.
4
<PAGE>
EXHIBIT E
TRANSAMERICA BUSINESS CREDIT CORPORATION
and
BLC COMMERCIAL CAPITAL CORP.
BLC FINANCIAL SERVICES, INC.
SCHEDULE OF DOCUMENTS
Execution Date: May 7, 1998
Effective Date: May [__], 1998
This Schedule of Documents lists the documents to be delivered in
connection with the financing transactions contemplated by and between
Transamerica Business Credit Corporation ("Lender") and BLC Commercial Capital
Corp. ("Borrower") and BLC Financial Services, Inc. ("Parent"), the terms of
which are set forth in that certain Loan Agreement between Lender, Borrower and
Parent dated as of the Execution Date (the "Loan Agreement"), and in certain
other documents, agreements and instruments referred to herein or executed in
connection therewith.
All capitalized terms used herein without specific definition shall
have the meanings set forth in the Loan Agreement. All documents required
hereunder shall be in form and substance reasonably acceptable to the Lender and
its counsel, and five (5) copies of each document shall be executed and
delivered, all as set forth below. This Schedule of Documents is fully
incorporated in the Loan Agreement and Borrower's and Parent's delivery of the
documents required hereunder is an express condition precedent to any obligation
of Lender under the Loan Agreement.
1.00 Financial Statement's and Other Documents to be Delivered before the
Execution Date.
1.01 The following financial statements and projections:
BLC |X| (A) Audited annual financial statements of Parent, prepared on a
consolidated and consolidating basis, as of the fiscal year
ended June 30, 1997, including balance sheet and the related
statements of income, retained earnings, and cash flows,
<PAGE>
prepared in accordance with GAAP and certified without
qualification by Parent's independent public accountants.
BLC |X| (B) Interim financial statements of Parent, prepared on a
consolidated and consolidating basis, for the six-month
period ending December 31, 1997, including balance sheet and
the related statements of income, retained earnings, and
cash flows.
BLC |X| (C) Financial budget and projections for Parent, prepared on a
consolidated and consolidating basis, through the fiscal
year ending June 2000, done on an annual and monthly basis
for the fiscal years ending June 1998 and 1999 and on an
annual and quarterly basis thereafter.
MWB |_| 1.02 UCC-1 and lien searches for each of Borrower and Parent, in
the following jurisdictions:
(i) New York Secretary of State
(ii) New York County, New York
BLC |X| 1.03 Copies of all leases of real property to which Borrower or
Parent is or proposes to be a party.
BLC |X| 1.04 Copies of the documentation in connection with any other
indebtedness for borrowed money for which Borrower or Parent
will be liable after the Effective Date.
BLC |_| 1.05 Copies of all of Borrower's or Parent's insurance policies.
BLC |X| 1.06 Copies of all labor and employment contracts to which
Borrower or Parent is a party.
BLC |X| 1.07 Information regarding all employee pension benefit plans
under which Borrower or Parent is obligated.
BLC |X| 1.08 Information regarding all certificated motor vehicles owned
or leased by Borrower. [NONE]
BLC |X| 1.09 Schedule of depository accounts listing all banks and the
financial institutions at which Borrower maintains
depository and other accounts, including the name and
address of each depository and a description and number of
the account, and the Person in whose name the account is
held.
BLC |_| 1.10 Borrower's written operating guidelines and written
operations manuals, detailing Borrower's
2
<PAGE>
business development and underwriting processes, credit
granting procedures, loan documentation, and procedures for
packaging and USDA approval, loan closing and servicing,
collections, account/portfolio administration, and
liquidation.
BLC |_| 1.11 Borrower's credit request, loan report and analysis, and
field examination/site visit forms.
BLC |_| 1.12 Borrower's form loan documents, including loan agreement,
security agreement, promissory notes, deed of trust,
guaranty, and subordination agreement.
BLC |X| 1.13 Copies of the Lender's Agreement (Form USDA RBS Form 4279-4)
between Borrower and USDA, and the USDA's standard forms of
Loan Note Guarantee (Form USDA RES Form 4279-5) and
Assignment Guaranty Agreement (Form USDA RBS Form 4279-6).
[NEED EXECUTED COPY OF LENDER'S AGREEMENT]
2.00 Corporate or Other Documents to be Delivered on or Before the Effective
Date.
BLC |X| 2.01 Certificates of the Secretary of State of Florida and
Delaware, respectively, as of a recent date, with respect to
each of Borrower and Parent, certifying the filing of such
corporation's Certificate of Incorporation and any
amendments and documents related thereto on file with such
Secretary of State.
BLC |X| 2.02 Certificates of Good Standing (or their equivalent), as of a
recent date, from the Secretary of State of each of the
states in which Borrower's or Parent's business requires
that it be qualified and in good standing, certifying such
qualification and the good standing of such corporation in
such states, including with respect to Borrower the State of
New York. [AFTER THE EFFECTIVE DATE, PRIOR TO FUNDING A LOAN
IN ANY STATE IN WHICH BORROWER IS NOT CURRENTLY QUALIFIED,
BORROWER WILL PROVIDE LENDER WITH EVIDENCE THAT IT HAS
QUALIFIED TO DO BUSINESS IN SUCH STATE.]
BLC |X| 2.03 Certificates, dated as of the Effective Date, of the
Secretary of each of Borrower and Parent:
(i) Certifying that no action or proceeding for the amendment of
such corporation's Articles or
3
<PAGE>
Certificate of Incorporation or its Bylaws, or for the
merger, consolidation, sale of assets or business,
liquidation, or dissolution of such corporation has been
taken, and no such action or proceeding is pending or
contemplated, except as indicated therein;
(ii) Certifying that a copy of such corporation's Articles or
Certificate of Incorporation and its Bylaws, and all
amendments and other documents related thereto, are attached
to such certificate, and certifying that such documents are
complete and correct as of the Effective Date;
(iii) Certifying that attached to such certificate is a complete
and correct copy of resolutions duly adopted by such
corporation's Board of Directors, which resolutions have not
been modified, amended, or rescinded in any respect and .are
in full force and effect on the Effective Date, and which
resolutions authorize and ratify, among other things, any
actions previously, concurrently, or subsequently taken by
such corporation's officers with respect to:
(a) the execution, delivery, and performance of the Loan
Agreement, the Revolving Credit Note, the Security
Documents, the UCC-1 financing statements and fixture
filings with respect to the Collateral, the Guaranty,
and all other documents or agreements as may be executed
by such corporation in connection with the Loan
Agreement; and
(b) the execution and delivery of such other agreements,
certificates, or instruments, and such other actions as
such officers may consider necessary or appropriate, to
carry out the foregoing resolutions; and
(iv) Certifying that a specimen signature of each officer of such
corporation who has executed or will execute any of the
documents referred to herein or required under the Loan
Agreement is included in the certificate and reciting that
each such officer was duly elected, qualified, and incumbent
as of the date such officer executed such document or
documents.
4
<PAGE>
3.00 Principal Loan Documents to be delivered on or before the Effective Date.
MWB |X| 3.01 Loan Agreement, executed by Borrower, Parent and Lender,
together with the following Exhibits and Schedules:
MWB |X| Exhibit A - Form of Revolving Credit Note
MWB |X| Exhibit B - Form of Borrowing Request
MWB |X| Exhibit C - Form of Borrowing Base Report
MWB |X| Exhibit D - Form of Compliance Certificate
MWB |X| Exhibit E - Schedule of Documents
MWB |X| Exhibit F - Certificate of Validity of
Collateral
MWB |X| Exhibit G - Form of Letter to Parent's and
Borrower's Accountant
MWB |X| Exhibit H - Form of Note Sale Report
MWB |X| Exhibit I - Request for Special Determination of
Eligibility
MWB |X| Exhibit J - Certificate of Eligibility
MWB |X| Schedule 1.1(a) - Net Eligible Non-Guaranteed Notes
Receivable
MWB |X| Schedule 1.1(b) - Net Eligible USDA Guaranteed Notes
Receivable
BLC |X| Schedule 4.3(a) - Ownership of Real Property
BLC |X| Schedule 4.3(b) - Permitted Liens
BLC |X| Schedule 4.4 - Capital Structure
BLC |X| Schedule 4.8 - Borrower's Liabilities and
Litigation
BLC |X| Schedule 4.20 - Insurance Policies
BLC |X| Schedule 4.21 - Deposit Accounts
BLC |X| Schedule 4.23 - Employment Agreements
BLC |X| Schedule 4.27 - Intellectual Property
5
<PAGE>
MWB |X| 3.02 Revolving Credit Note, executed by Borrower, in the amount
of $15,000,000.
MWB |X| 3.03 Security Agreement, executed by Borrower and Lender.
MWB |X| 3.04 UCC-1 financing statements describing the Collateral,
executed by Borrower in favor of Lender, for filing in the
following jurisdictions:
(A) New York Secretary of State
(B) New York County, New York
MWB |_| 3.05 Search reports indicating that the UCC Financing Statements
referred to in Item 3.04 have been filed of record and that
there are no other Liens of record against the Collateral.
MWB |X| 3.06 Guaranty Agreement, executed by Parent in favor of Lender
and acknowledged by Lender.
BLC |X| 3.07 An initial Borrowing Request accompanied by a Borrowing Base
Report reflecting that Borrower holds Net Eligible USDA
Guaranteed Notes Receivable and Net Eligible Non-Guaranteed
Notes Receivable sufficient in value and amount to support
the Revolving Loans, if any, to be made on the Effective
Date.
MWB |X| 3.08 Certificate of Validity of Collateral executed by Borrower's
President and Borrower's Chief Financial Officer.
BLC |_| 3.09 Certificates of Insurance and appropriate lender's loss
payable endorsements and additional insured endorsements for
all of Borrower's insurance policies.
MWB |_| 3.10 Blocked Account Agreement, executed by Borrower, Lender, and
Sterling National Bank, establishing the initial Blocked
Account arrangements for collection of Items of Payment.
MWB |X| 3.11 Letter to Accountants for Parent and Borrower, executed by
Parent and Borrower, in form and substance satisfactory to
Lender and its counsel.
6
<PAGE>
MWB |X| 3.12 Closing Certificate of the President and the Chief Financial
Officer of each of Borrower and Parent, certifying that, as
of the Effective Date:
(i) The interim financial statements attached to such
certificate are complete and correct as of the date
thereof;
(ii) Since the respective dates of the financial statements
and projections required by Items 1.01(A), (B), and (C),
no event that would have a Material Adverse Effect has
occurred;
(iii) Each of the representations and warranties set forth in
Article 4 of the Loan Agreement is true and correct; and
(iv) Borrower is in compliance with all of the terms and
provisions in the Loan Agreement and no event exists or
would exist by reason of the execution of the Loan
Agreement or funding of the Revolving Loans that
constitutes a Default or Event of Default under the Loan
Agreement.
WGM |X| 3.13 Opinion of counsel to Borrower and Parent, in form and
substance satisfactory to Lender and its counsel.
MWB |_| 3.14 Letter Agreement between Borrower, Parent and Lender with
respect to open items on this Schedule of Documents which
are not completed or delivered as of the Effective Date, to
the effect that completion and delivery is a condition
subsequent to additional funding by Lender pursuant to the
Loan Agreement.
7
<PAGE>
EXHIBIT F
CERTIFICATE OF VALIDITY OF COLLATERAL
In order to induce TRANSAMERICA BUSINESS CREDIT CORPORATION, a
Delaware corporation ("Lender"), to enter into that certain Loan Agreement with
BLC COMMERCIAL CAPITAL CORP., a Florida corporation ("Borrower"), and BLC
Financial Services, Inc., a Delaware corporation ("Parent"), dated as of May
[7], 1998 (which agreement, along with any and all present and future
modifications and supplements thereto and each Schedule of Eligible Notes
Receivable and Borrowing Base Report, being hereinafter collectively referred to
as the "Loan Agreement"), and to induce Lender to make Revolving Loans
thereunder to Borrower, and in consideration of any loans and advances or
financial accommodations heretofore or hereafter made by Lender to or for the
account of Borrower, whether pursuant to the Loan Agreement or otherwise, each
of the undersigned officers of Borrower represents, warrants, and hereby
covenants to Lender with reference to the capitalized terms defined in the Loan
Agreement, that:
1. Each and every Note Receivable listed in a Schedule of Eligible
Notes Receivable, or constituting the basis of a Borrowing Base Report, shall
represent a bona fide existing obligation of a bona fide Term Loan Debtor in the
ordinary course of business which will be due and owing in accordance with the
terms set forth in such Schedule of Eligible Notes Receivable or Borrowing Base
Report, and shall not be subject to any Lien whatsoever, except for Permitted
Liens and the security interest of Lender.
2. All proceeds of Notes Receivable, including Sold Notes
Receivable, required by the terms of the Loan Agreement to be held by Borrower
in trust or as property of Lender or to be remitted to Lender will be delivered
to Lender in the identical form received by Borrower and as requested by Lender.
3. All reports, statements and schedules of Borrower submitted
pursuant to the Loan Agreement shall be true and accurate in all material
respects, including, but not limited to, identification of items of Collateral
and the outstanding principal amount and payment status thereof.
4. Borrower will take all actions required to be taken by it in
order to comply with all applicable regulations and requirements of USDA and to
maintain in full force and effect the USDA'S guaranty with respect to each USDA
Guaranteed Note Receivable as well as all of Borrower's rights under or with
respect to the B&I Lender's Agreement and each Loan Note Guarantee.
<PAGE>
In addition, if an event of Default shall occur and be continuing,
each of the undersigned agrees to furnish Lender with such support and
assistance as may reasonably be requested by Lender to obtain payment of the
Liabilities, including through (A) participation in the formulation or plans to
maximize collections of Notes Receivable or other proceeds obtainable through
the collection or sale or other disposition of Collateral, (B) assistance in the
transfer of servicing records and responsibilities to any successor servicer for
the Notes Receivable to the extent permitted under the B&I Lender's Agreement,
applicable USDA rules and regulations and any USDA consent that is subsequently
required and entered into by Borrower, Lender and USDA, and (C) assistance in
reconstructing records and/or assuring that Borrower maintains such records as
Lender or USDA may require or reasonably request.
I understand that Lender is relying upon the foregoing in connection
with consummation of the transactions contemplated by the Loan Agreement.
Executed as of May 7, 1998.
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
-------------------------------------
Robert F. Tannenhauser
President
By:
-------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer
2
<PAGE>
EXHIBIT G
[LETTERHEAD OF BLC FINANCIAL SERVICES, INC.]
May 7, 1998
CERTIFIED MAIL: RETURN RECEIPT REQUESTED
(Name and
Address of
Accountant]
Attention: ____________________
Ladies and Gentlemen:
Reference is made to Section 5.14 of that certain Loan Agreement
dated as of May 7, 1998 (the "Loan Agreement") by and between BLC Commercial
Capital Corp. ("BLC"), BLC Financial Services, Inc. ("Parent") and Transamerica
Business Credit Corporation ("Transamerica").
[Name of Accountant] is hereby authorized and directed to
communicate directly with Transamerica and any representatives designated by
Transamerica and its assignees, if any, and is further authorized and directed
to disclose to Transamerica and such representatives of Transamerica and its
assignees, if any, any and all financial statements and other supporting
financial documents and schedules, including matters relating to the conduct of
the annual audit of Parent and its consolidated subsidiaries and copies of any
management letter with respect to the business, pending litigation, and other
affairs of Parent or BLC.
Please acknowledge your receipt of this letter and your agreement to
comply with the instructions contained herein by signing and returning to us the
enclosed copy of this letter.
Very truly yours,
BLC FINANCIAL SERVICES, INC. BLC COMMERCIAL CAPITAL CORP.
By By
------------------------------- -------------------------------
Its Its
------------------------------ ------------------------------
ACKNOWLEDGED AND AGREED TO:
[NAME OF ACCOUNTANT]
By
-------------------------------
Its
------------------------------
<PAGE>
EXHIBIT H
NOTE SALE REPORT
BLC COMMERCIAL CAPITAL CORP., a Florida corporation ("Borrower"),
submits this Note Sale Report ("Report") to TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation ("Lender"), pursuant to Section 5.1(d)(iv)
of the Loan Agreement by and between Borrower, BLC Financial Services, Inc., a
Delaware corporation, and Lender dated as of May 7, 1998 (as the same may be
amended, modified, or supplemented from time to time, the "Loan Agreement").
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Loan Agreement.
1. As set forth in the accompanying Assignment Guarantee Agreement,
Borrower anticipates the sale of the following USDA Guaranteed Note Receivable:
Term Loan Debtor: _____________________________________________
Amount of USDA Guaranteed Note Receivable: $ __________________
Settlement Date: ______________________________________________
2. Borrower hereby certifies that:
a. Attached hereto are true and correct copies of the
Assignment Guarantee Agreement and any and all other documents relating to
the proposed sale, including Borrower's instructions to the purchaser to
make payment of the Net Sale Proceeds thereof directly to the Blocked
Account and Borrower's instructions to Lender with respect to notation of
the purchaser's interest in the USDA Guaranteed Note Receivable covered
thereby.
b. Borrower's sale of such USDA Guaranteed Note Receivable
complies with all of the requirements of the Loan
<PAGE>
Agreement, including Section 2.13(a) and Section 6.13 of the Loan
Agreement.
EXECUTED AND DELIVERED THIS _____ DAY OF __________, 19__:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
-------------------------------------
Robert F. Tannenhauser
President
OR:
By:
-------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer
<PAGE>
EXHIBIT I
REQUEST FOR SPECIAL DETERMINATION OF ELIGIBILITY
Pursuant to the Loan Agreement dated as of May 7, 1998 (as the same
may be amended, modified, or supplemented from time to time, the "Loan
Agreement") by and between BLC Commercial Capital Corp., a Florida corporation
("Borrower"), BLC Financial Services, Inc., a Delaware corporation, and
Transamerica Business Credit Corporation, a Delaware corporation ("Lender"),
Borrower hereby submits to Lender a Request for Special Determination of
Eligibility with respect to the following proposed loan:
[DESCRIBE LOAN BY BORROWER, AMOUNT, COLLATERAL, OTHER DETAIL
REQUIRED BY LENDER]
The undersigned, being either the President or the Chief Financial
Officer of Borrower, hereby certifies, represents and warrants to Lender on
behalf of Borrower that, if funded, the Non-Guaranteed Notes Receivable and the
USDA Guaranteed Notes Receivable that would arise from the proposed loan would
satisfy each and every one of the applicable eligibility requirements in
Schedules 1.1(a) or 1.1(b) of the Loan Agreement, respectively, except for the
following:
[DESCRIBE IN DETAIL EACH OF THE ELIGIBILITY CRITERIA THAT WOULD NOT
BE SATISFIED AND THE REASON FOR SUCH FAILURE]
EXECUTED AND DELIVERED THIS ____________ DAY OF ________, ____:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
-------------------------------------
Robert F. Tannenhauser
President
OR:
By:
-------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer
<PAGE>
EXHIBIT J
CERTIFICATE OF ELIGIBILITY
The undersigned, in their respective capacities as President and
Chief Financial Officer of BLC COMMERCIAL CAPITAL CORP., a Florida corporation
("Borrower"), hereby deliver this certificate on behalf of Borrower as required
pursuant to the Loan Agreement dated as of May 7, 1998 (together with all
amendments, modifications, or supplements thereto, the "Loan Agreement") by and
between Borrower, BLC FINANCIAL SERVICES, INC., a Delaware corporation
("Parent"), and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation
("Lender"). Any capitalized term used herein shall have the same meaning given
to it in the Loan Agreement unless otherwise specified.
The undersigned further certify, represent and warrant in their
respective capacities as officers of Borrower, that the Schedules attached
hereto (i) describe any USDA Guaranteed Notes Receivable and Non-Guaranteed
Notes Receivable included on any Schedule of Eligible Notes Receivable or
Borrowing Base Report delivered contemporaneously herewith and not previously
advanced against by Lender, (ii) designate which of such USDA Guaranteed Notes
Receivable and Non-Guaranteed Notes Receivable satisfy each and every one of the
eligibility requirements in Schedule 1.1(a) or 1.1(b) of the Loan Agreement, as
the case may be, and which do not satisfy such requirements, and (iii) describes
in detail how each Note Receivable designated as a Net Eligible Guaranteed Note
Receivable or a Net Eligible Non-Guaranteed Note Receivable satisfies or
failures to satisfy such eligibility criteria.
EXECUTED AND DELIVERED THIS _________ DAY OF ____________, ____:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
-------------------------------------
Robert F. Tannenhauser
President
By:
-------------------------------------
Jennifer Napier
Treasurer and
Chief Financial Officer
<PAGE>
[FORM OF SCHEDULES TO BE ATTACHED TO BE WORKED OUT BY BORROWER AND LENDER, BUT
TO INCLUDE SPECIFIC ELIGIBILITY CRITERIA INFORMATION SUCH AS LOAN-TO-VALUE
RATIO, EQUITY INVESTMENT AMOUNT, SIC #, ETC.]
2
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 March 25, 1998
<PAGE>
TABLE OF CONTENTS
RECITALS................................................................... 1
AGREEMENT.................................................................. 1
ARTICLE 1 GENERAL TERMS............................. 1
1.1 Defined Terms.................................................. 1
1.2 Accounting Principles.......................................... 14
1.3 Other Terms.................................................... 14
1.4 Certain Matters of Construction................................ 15
ARTICLE 2 AMOUNT AND TERMS OF LOAN....................... 15
2.1 The Loans and Commitments...................................... 15
2.2 Notice of Borrowing; Disbursement of Advances.................. 16
2.3 Interest Rate.................................................. 17
2.4 Computation.................................................... 17
2.5 Fees........................................................... 18
2.6 Borrower's Termination of Agreement............................ 19
2.7 Mandatory Prepayments.......................................... 19
2.8 Reserves Against Liabilities................................... 20
2.9 All Loans to Constitute One Loan............................... 20
2.10 Loan Purpose................................................... 20
2.11 Term of Agreement.............................................. 20
2.12 Payment Procedure.............................................. 20
2.13 Collection of Borrower's Loans and Payments.................... 21
2.14 Collections; Lender's Right to Notify Account
Debtors........................................................ 23
2.15 Application of Payments and Collections........................ 24
2.16 Refund of Excess Interest; Statement of Account................ 24
2.17 Business Days.................................................. 24
2.18 Sales of and Participations in Non-Guaranteed
Notes Receivable............................................... 24
ARTICLE 3 SECURITY................................ 25
3.1 Borrower's Liabilities......................................... 25
3.2 Further Assurances............................................. 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................... 26
4.1 Corporate Existence............................................ 26
4.2 Corporate Power and Authorization.............................. 26
4.3 Ownership of Property; Permitted Liens......................... 26
4.4 Capital Structure.............................................. 26
4.5 Binding Obligations............................................ 27
4.6 No Legal Bar; No Lien.......................................... 27
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<PAGE>
4.7 No Consent..................................................... 27
4.8 Liabilities; Litigation........................................ 27
4.9 Taxes; Governmental Charges.................................... 28
4.10 Defaults....................................................... 28
4.11 Use of Proceeds; Margin Stock.................................. 28
4.12 Compliance with the Law........................................ 28
4.13 ERISA.......................................................... 29
4.14 No Material Misstatements...................................... 29
4.15 Investment Company Act......................................... 29
4.16 No Financing of Corporate Takeovers............................ 29
4.17 Location of Borrower........................................... 29
4.18 Use of Proceeds................................................ 29
4.19 Hazardous Materials............................................ 29
4.20 Insurance Policies............................................. 31
4.21 Schedule of Deposit Accounts................................... 31
4.22 Labor Matters.................................................. 31
4.23 Employment and Labor Agreements................................ 32
4.24 Solvent Financial Condition.................................... 32
4.25 Brokers........................................................ 32
4.26 True Sales of Notes Receivable................................. 32
4.27 No Material Intellectual Property.............................. 32
4.28 Automatic Warranty and Reaffirmation of Warranties
and Representations; Survival of Warranties and
Representations................................................ 32
ARTICLE 5 AFFIRMATIVE COVENANTS........................ 33
5.1 Financial Statements and Reports and Other Data................ 33
5.2 Taxes and Other Liens.......................................... 36
5.3 Maintenance.................................................... 36
5.4 Further Assurances............................................. 36
5.5 Performance of Obligations..................................... 36
5.6 Insurance; Payment of Premiums................................. 37
5.7 Accounts and Records........................................... 38
5.8 Right of Inspection............................................ 38
5.9 Notice of Certain Events....................................... 38
5.10 ERISA Information and Compliance............................... 39
5.11 Financial Covenants............................................ 39
5.12 Bad Debt Reserve............................................... 40
5.13 Charges; Liens................................................. 40
5.14 Communication With Accountants................................. 41
5.15 Notes Receivable Documents..................................... 41
5.16 Subordination Agreement........................................ 41
5.17 Right of First Refusal for Securitization
Transaction Subordinated Certificates.......................... 41
ii
<PAGE>
ARTICLE 6 NEGATIVE COVENANTS.......................... 42
6.1 Debt........................................................... 42
6.2 Loans and Compensation......................................... 42
6.3 Liens.......................................................... 42
6.4 Capital Expenses............................................... 42
6.5 Dividends, Distributions and Redemptions....................... 43
6.6 Capital Structure.............................................. 43
6.7 Transactions with Affiliates................................... 43
6.8 Change of Business............................................. 43
6.9 Name of Borrower............................................... 43
6.10 Location of Collateral......................................... 43
6.11 Proceeds of Loans.............................................. 43
6.12 ERISA Compliance............................................... 43
6.13 Sale or Discount of Receivables................................ 44
6.14 Compensation and Bonuses....................................... 44
6.15 Payments on Subordinated Debt.................................. 44
6.16 Affiliates..................................................... 45
6.17 Consulting and Brokerage Services.............................. 45
6.18 Survival of Obligations Upon Termination of
Agreement...................................................... 45
ARTICLE 7 EVENTS OF DEFAULT........................... 46
7.1 Events......................................................... 46
7.2 Termination of Agreement and Acceleration of the
Liabilities.................................................... 48
7.3 Remedies....................................................... 48
7.4 Notice of Sale or Other Action................................. 51
7.5 Marshalling; Payments Set Aside................................ 51
7.6 Effect of Multi-Party Agreement................................ 51
ARTICLE 8 CONDITIONS OF LENDING........................ 52
8.1 Initial Advance................................................ 52
8.2 All Advances................................................... 54
ARTICLE 9 MISCELLANEOUS............................ 55
9.1 Notices........................................................ 55
9.2 Modification of Agreement; Sale of Interest.................... 57
9.3 Lien Release Prior to Sale of SBA Guaranteed Notes
Receivable..................................................... 57
9.4 Fees and Expenses.............................................. 57
9.5 Severability................................................... 58
9.6 Waiver by Lender............................................... 58
9.7 Successors and Assigns......................................... 59
9.8 Conflict of Terms.............................................. 59
9.9 Waivers by Borrower and Parent................................. 59
iii
<PAGE>
9.10 Cumulative Rights.............................................. 59
9.11 GOVERNING LAW.................................................. 60
9.12 Taxes, etc..................................................... 60
9.13 Governmental Regulation........................................ 60
9.14 Titles of Articles and Sections................................ 60
9.15 Authorized Signatures.......................................... 60
9.16 Publicity...................................................... 61
9.17 Counterparts................................................... 61
9.18 Entire Agreement............................................... 61
9.19 WAIVER OF JURY TRIAL........................................... 61
iv
<PAGE>
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
v
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of this 25th day of March, 1998, by
and between BUSINESS LOAN CENTER, INC., a Delaware corporation with its
principal offices located at 645 Madison Avenue, 17th Floor, New York, New York
10022 ("Borrower"), BLC FINANCIAL SERVICES, INC., a Delaware corporation with
its principal offices located at 645 Madison 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 has requested that Lender provide to it a working capital
facility in the maximum aggregate principal amount of up to $25,000,000, the
proceeds of which Borrower will use to refinance its existing senior secured
credit facility for SBA 7(a) loans and to fund its SBA 7(a) loan portfolio
development after the Effective Date, as hereinafter defined.
B. Lender is willing to extend such financial accommodations to Borrower
in accordance with and on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the terms and conditions set
forth herein, and of any extension of credit contemplated hereby, now or
hereafter made by the Lender to Borrower, Borrower, Parent and Lender hereby
agree as follows:
ARTICLE 1
GENERAL TERMS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings, unless the context otherwise requires (terms
defined in the singular to have the same meaning when used in the plural and
visa versa):
1
<PAGE>
"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 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.
"Allocated Payment Portion" shall have the meaning ascribed to such
term in Section 2.13(c).
2
<PAGE>
"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.
"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
3
<PAGE>
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, 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
4
<PAGE>
(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.
"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
5
<PAGE>
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 March 25, 1998.
"GAAP" shall mean the generally accepted accounting principles in
the United States of America as in effect from time to time.
"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
6
<PAGE>
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, 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,
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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.
"Items of Payment" shall mean the proceeds of any and all checks,
drafts, cash and other remittances received by Borrower in payment or on account
of payment, with respect to any of the Notes Receivable, after deducting such
portion that constitutes an Allocated Payment Portion, Servicing Fee (as defined
in the Multi-Party Agreement), Intermediary's fee or SBA fee.
"Intermediary" shall mean Colson Services Corp., as fiscal and
transfer agent for the SBA and as the SBA's agent to hold the original SBA 7(a)
Loan Notes pursuant to the Multi-Party Agreement, or any other Person designated
by the SBA to perform the same or similar functions.
"Lender" shall mean Transamerica Business Credit Corporation, a
Delaware corporation, together with its successors and permitted 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
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owing, whether primary, secondary, direct, contingent, fixed, or otherwise,
including obligations of performance.
"Lien" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property.
"Loan 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).
"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.
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"Maximum Commitment" shall have the meaning ascribed to such term in
Section 2.1.
"Maximum Credit Line" shall mean $25,000,000, or such higher amount
as Lender may agree to in its sole discretion.
"Multi-Party Agreement" shall mean the Multi-Party Agreement by and
among Borrower, Lender, Parent, Intermediary, and the SBA, dated as of March 25,
1998, as the same may be supplemented, modified, or amended from time to time.
"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 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
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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; provided, that upon Lender's release of its Lien on a
specific Note Receivable in connection with the transfer by Borrower of such
Note Receivable to the trustee pursuant to a Securitization Transaction, such
obligation shall cease to be considered a Note Receivable and the provisions of
this Agreement shall no longer be applicable thereto.
"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).
"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 $5,000,000 in the aggregate that have been or may be issued by
Parent, 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
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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.
"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.
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"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.
"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).
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"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 (a) the accounts receivable
securitization transaction effected pursuant to the Pooling and Servicing
Agreement dated as of December 1, 1997 between Marine Midland Bank, as
"Trustee," and Borrower, as "Seller" and "Servicer," or (b) any other
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.
"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
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does not have unreasonably small capital to carry on its business.
"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 Revolving Credit Agreement dated
as of December 19, 1994, among Borrower, Parent, Business Loan Center, a New
York general partnership, and Sterling, and all other agreements and documents
executed in connection with the financing arrangements contemplated thereby,
including all amendments, restatements, modifications and supplements thereto
and any appendices, exhibits or schedules to any of the foregoing, and shall
refer to such agreements and documents as the same may be in effect at the time
such reference becomes operative.
"Stock" shall mean all shares, options, warrants, interests,
participation or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, convertible debentures and all agreements, instruments
and documents convertible, in whole or in part, into any one or more or all of
the foregoing.
"Subordinated Debt" shall mean that portion of the Indebtedness
which is subordinated in a manner satisfactory in form and substance to 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
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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
(unless a later date is agreed to in writing by Borrower, Parent and Lender);
(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.
"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
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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 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. 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
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(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
eighty percent (80%) of the Current Portion of Net
Eligible Non-Guaranteed Notes Receivable (provided, that
Lender, in its sole discretion, may increase such
percentage to up to eighty-five percent (85%)), 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.
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(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.
(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 either (i) with respect to those Revolving Loans made based upon Net
Eligible SBA Guaranteed Notes Receivable, the Index Rate plus one and
one-quarter percent (1.25%) per annum, and (ii) with respect to those Revolving
Loans made based upon Net Eligible Non-Guaranteed Notes Receivable, the Index
Rate plus one and one-half percent (1.50%) per annum, in each case adjusted by
Lender on the same day as each change in the 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
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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.
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 has previously paid to Lender fully
earned and non-refundable fees equal to Two Hundred
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Fifty Thousand Dollars ($250,000), for which part of the consideration is
Lender's agreeing to enter into this Agreement.
(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 immediately upon
their establishment for purposes of calculating the Maximum Commitment.
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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 under the Sterling Loan
Documents with respect to SBA 7(a) Loans, and (b) 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 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:
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(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 Lender, in form and substance satisfactory to Lender and Borrower, governing
such bank account (the "Blocked Account"). Borrower shall deposit in the Blocked
Account all Items of Payment. Borrower shall deposit in the Servicer Account any
and all checks, drafts, cash and other remittances received by Borrower in
payment or on account of payment, with respect to any of the Notes Receivable,
and shall transfer to the Blocked Account from the Servicer Account all Items of
Payment within one (1) Business Day of receipt of cleared funds. The deposits
made in the Servicer Account shall be deposited in precisely the form received,
except for the endorsements of Borrower where necessary to permit the collection
of any such payments, which endorsements
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Borrower hereby agrees to make. Notwithstanding 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;
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 each deposit made to the Servicer Account
pursuant to Section 2.13(a), Borrower shall deliver to Lender information
detailing, with respect to
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each such deposit, the specific Note Receivable to which such deposit relates
and (i) the amount, if any, of such deposit 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 deposit 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 deposit that relates to a SBA Owned Note Receivable and that Borrower
has determined is payable to SBA (any such amount described in clauses (i),
(ii), or (iii) above being the "Allocated Payment Portion"), and (iv) the amount
of such deposit that relates to Borrower's retained interest in a Note
Receivable and that Borrower has determined is payable to Borrower. 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 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.
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2.14 Collections; Lender's Right to Notify Account Debtors. Subject to the
Multi-Party Agreement, obtaining the SBA's prior written consent, 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.
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
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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. 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), subject to the SBA's prior written consent and in accordance
with the provisions of the Loan Guaranty Agreement and any applicable SBA rules
and regulations, 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 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
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made in full conformity with all applicable provisions of the SBI Act and other
governing law.
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 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
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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.
(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
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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 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, 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
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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,
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 SBA 7(a) loans. 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
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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 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
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
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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.
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
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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, except for the fees previously paid solely by Parent and
Borrower to Rothschild, Inc. and to D'Loren, Levin & Company.
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.
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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.
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
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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 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
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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
(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").
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(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 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
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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 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.
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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 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
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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 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
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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 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:
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(a) Tangible Net Worth. Maintain, on a consolidated basis, Tangible
Net Worth of not less than $3,500,000 as of the end of each of fiscal quarter.
(b) EBITDA Ratio. Unless otherwise agreed in writing by Lender,
achieve, on a consolidated basis, as measured as of the end of their fiscal
quarters indicated below, a minimum ratio of EBITDA for the twelve-month period
ending on the date of measurement to total, actual, interest expense for such
twelve-month period, of not less than the ratio set forth below for such
measurement date:
Measurement Date EBITDA Ratio
- ---------------- ------------
Fiscal Quarter Ending 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.
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5.13 Charges; Liens.
(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 Intermediary 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 Intermediary. 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.
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:
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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; or (iii) Subordinated Debt, including Subordinated Debt with
respect to the Parent Debentures.
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, 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.
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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.
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.
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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);
(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) $2,500,000 for all of such Persons in their
fiscal year
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ending June 30, 1998, or (B) $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 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 Survival of Obligations Upon Termination of Agreement. Except as
otherwise expressly provided for in this Agreement and
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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 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
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(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
(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 Parent Guaranty. Any event of default shall occur
under the Parent Guaranty; or
(i) 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
(j) 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
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date of such filing or appointment or the entry of such order or decree; or
(k) 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
(l) 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(l), 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
(m) 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
(n) 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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(o) 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
(p) Change of Control. A Change of Control shall have occurred; or
(q) Merger. Borrower or Parent shall merge or consolidate with or
acquire the Stock or assets of any Person; or
(r) 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(j) or Section 7.1(k); 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 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
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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; (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
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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 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
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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
(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
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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. 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.
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.
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.
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(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 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) Fees. Lender shall have received the fees described in Section
2.5 hereof.
(g) 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.
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(h) Schedule of Documents. Lender shall have received all other
documents, agreements and items set forth on the Schedule of Documents.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) 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
Intermediary and copies of the Notes Receivables Documents shall have been
delivered to Lender, as set forth in Section 5.15.
(c) No Default. No Default or Event of Default shall have occurred
and be continuing or would result from the funding of the advance.
(d) 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.
(e) 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.
(f) 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.
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(g) 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:
(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) 380-6179
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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: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
provided, that notice to Lender for purposes of Section 2.13(a)(i) shall be
given to Ari D. Kaplan by telephone at (773) 864-3978 or by facsimile at (773)
380-6179, 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.
645 Madison Avenue, 18th 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
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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. 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.
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
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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 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
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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 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
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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,
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
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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.
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
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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 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,
the Multi-Party Agreement, 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,
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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 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 Loan
Agreement to be duly executed as of the date first above written.
BORROWER:
BUSINESS LOAN CENTER, INC.,
a Delaware corporation
By:
-----------------------------------
Jennifer Napier
Chief Financial Officer
PARENT:
BLC FINANCIAL SERVICES, INC.,
a Delaware corporation
By:
-----------------------------------
Robert F. Tannenhauser
President
LENDER:
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By:
-----------------------------------
Ari D. Kaplan
Senior Account Executive
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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 subject original SBA 7(a) Loan Notes are in the physical possession of
Intermediary;
.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
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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;
.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
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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
Intermediary 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
.S. The Loan is determined by Lender, in its business judgment, to
constitute adequate collateral to support the advance requested by Borrower.
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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.
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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;
.E. Not later than three (3) Business Days after the issuance of the Loan,
the subject original SBA 7(a) Loan Notes are in the physical possession of
Intermediary;
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.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 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;
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.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
Intermediary 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.
3
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT ("First Amendment") is
entered into as of June 24, 1998, by and between BUSINESS LOAN CENTER, INC., a
Delaware corporation ("Borrower"), BLC FINANCIAL SERVICES, INC., a Delaware
corporation, and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware
corporation ("Lender"), with reference to the following facts:
RECITALS
A. Pursuant to the Loan Agreement dated as of March 25, 1998 executed by
Borrower, Parent and Lender (the "Loan Agreement"), Lender agreed to make
certain financial accommodations to or for the benefit of Borrower upon the
terms and conditions set forth therein. Unless otherwise noted in this First
Amendment, (i) capitalized terms used herein shall have the meanings attributed
to them in the Loan Agreement, (ii) references to Sections shall refer to
Sections of the Loan Agreement or Schedules thereto, as applicable, and (iii)
references to Schedules shall refer to Schedules to the Loan Agreement.
B. Borrower has requested, and Lender has agreed, to amend the Loan
Agreement to increase the Maximum Credit Line from $25,000,000 to $35,000,000,
all on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the continued performance by
Borrower of its promises and obligations under the Loan Agreement and the other
Loan Documents, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
A G R E E M E N T
1. Incorporation of Loan Agreement and Other Loan Documents. Except as
expressly modified under this First Amendment, all of the terms and conditions
set forth in the Loan Agreement and the other Loan Documents are incorporated
herein by this reference, and Borrower hereby acknowledges, confirms, and
ratifies its obligations under the Loan Agreement and the other Loan Documents.
2. Amendments to Loan Agreement and other Loan Documents. As of the date
of this First Amendment, the Loan Agreement and
<PAGE>
the other Loan Documents are hereby amended in the following manner:
2.1 Amendment to Maximum Credit Line. The definition of "Maximum
Credit Line" in Section 1.1 is amended by substituting the amount "$35,000,000"
for the amount "$25,000,000" therein. The same substitution shall be deemed made
by this First Amendment with respect to all other references in the Loan
Agreement or the other Loan Documents to the maximum amount of the credit
facility under the Loan Agreement or the principal amount of the Revolving
Credit Note.
2.2 Amendment to Provisions for Certain Notices. Section 9.1(a) of
the Loan Agreement is amended by deleting the existing text thereof in its
entirety and substituting therefor the following amended and restated version
thereof:
(a) If to Lender, at:
Transamerica Business Credit Corporation
Two Ravinia Drive, Suite 700
Atlanta, Georgia 30346
Attention: Account Executive - Business Loan
Center
Facsimile: (770) 396-7403
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 Sheneman Julian & Rogers
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
provided, that notice to Lender for purposes of Section
2.13(a)(i) shall be given to Russell L. Bonder (or another
Account Executive for Business Loan Center designated by
Lender) by telephone at (770) 350-8800 or by facsimile at
(770) 396-7403, and no copy of such transmission is required
to be sent to any other Person.
2
<PAGE>
The addresses specified above for notices to Lender shall be deemed substituted
by this First Amendment for the notice addresses contained in any of the other
Loan Documents.
3. Amendment Fee. Borrower agrees to pay to Lender a fully earned and
non-refundable fee (the "Amendment Fee") in the amount of $58,333 in
consideration of Lender's agreement to enter into this First Amendment. The
Amendment Fee shall be due and payable by Borrower to Lender on the date that
this First Amendment becomes effective pursuant to Section 4 of this First
Amendment.
4. Conditions to Effectiveness. The amendments set forth in Section 2 of
this First Amendment are subject to satisfaction of each of the following
conditions:
(a) receipt by Lender of a copy of this First Amendment, duly
executed by Borrower, Parent, and Lender;
(b) receipt by Lender of an amended and restated version of
the Revolving Credit Note, in the form attached as Exhibit A to this First
Amendment, duly executed by Borrower;
(c) receipt by Lender of such officer's certificates, board of
directors' resolutions, or other evidence satisfactory to Lender of each of
Borrower's and Parent's corporate authority and legal ability to execute,
deliver and perform this First Amendment and to consummate the transaction
contemplated hereunder;
(d) payment by Borrower of the Amendment Fee; and
(e) the absence of any Defaults or Events of Default.
5. Entire Agreement. This First Amendment, together with the Loan
Agreement and the other Loan Documents, is the entire agreement between the
parties hereto with respect to the subject matter hereof. This First Amendment
supersedes all prior and contemporaneous oral and written agreements and
discussions with respect to the subject matter hereof. Except as otherwise
expressly modified herein, the Loan Documents shall remain in full force and
effect.
6. Representations and Warranties. Borrower hereby confirms that the
representations and warranties contained in the Loan Agreement were true and
correct in all material respects when made and, except to the extent (a) that a
particular representation or warranty by its terms expressly applies only to an
earlier date, or (b) Borrower has previously advised Lender in writing as
contemplated under the Loan Agreement, are true and correct in all material
respects as of the date hereof. The Loan
3
<PAGE>
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
7. Miscellaneous.
7.1 Counterparts. This First Amendment may be executed in identical
counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement.
7.2 Headings. Section headings used herein are for convenience of
reference only, are not part of this First Amendment, and are not to be taken
into consideration in interpreting this First Amendment.
7.3 Recitals. The recitals set forth at the beginning of this First
Amendment are true and correct, and such recitals are incorporated into and are
a part of this First Amendment.
7.4 Governing Law. This First Amendment shall be governed by, and
construed and enforced in accordance with, the laws of the State of Illinois
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws.
7.5 No Novation. Except as specifically set forth in paragraph 2 of
this First Amendment, the execution, delivery and effectiveness of this First
Amendment shall not (a) limit, impair, constitute a waiver of or otherwise
affect any right, power or remedy by Lender under the Loan Agreement or any
other Loan Document, (b) constitute a waiver of any provision in the Loan
Agreement or in any of the other Loan Documents, or (c) alter, modify, amend or
in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Loan Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
7.6 Conflict of Terms. In the event of any inconsistency between the
provisions of this First Amendment and any provision of the Loan Agreement, the
terms and provisions of this First Amendment shall govern and control.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been duly executed as
of the date first written above.
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/ Russell L. Bonder
----------------------------------
Russell L. Bonder
Senior Account Executive
5
<PAGE>
EXHIBIT A
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$35,000,000 Chicago, Illinois June __, 1998
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 THIRTY-FIVE
MILLION AND NO/100 DOLLARS ($35,000,000), 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 Amended
and Restated Revolving Credit Note ("Note") shall have the same meanings as in
the Loan Agreement dated as of March 5, 1998, between Borrower, BLC Financial
Services, Inc., a Delaware corporation, and Lender (such 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.
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
<PAGE>
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 reasonable costs and expenses incurred by the holder, including,
without limitation, reasonable attorneys' fees.
This Note amends and restates, and supersedes in its entirety, the
prior Revolving Credit Note dated March 25, 1998 executed by Borrower in the
original principal amount of $25,000,000, which prior Revolving Credit Note is
being marked by Lender "Cancelled and Superseded" contemporaneously with the
execution and delivery to Lender of this Note.
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
2
<PAGE>
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.
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
3
<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)
4
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1997
between
Marine Midland Bank
(Trustee)
and
BUSINESS LOAN CENTER, INC.
(Seller and Servicer)
Business Loan Center SBA Loan-Backed
Adjustable Rate Certificates, Series 1997-1,
Class A and Class B
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund............................II-1
Section 2.02 Possession of SBA Files......................................II-1
Section 2.03 Books and Records............................................II-1
Section 2.04 Delivery of SBA Loan Documents...............................II-2
Section 2.05 Acceptance by Trustee of the Trust Fund;.....................II-4
Section 2.06 [Intentionally Omitted]......................................II-5
Section 2.07 Authentication of Certificates...............................II-5
Section 2.08 Fees and Expenses of the Trustee.............................II-6
Section 2.09 Optional Purchase of
Defaulted SBA Loans...............II-Error! Bookmark not defined.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Seller...............................III-1
Section 3.02 Individual SBA Loans........................................III-3
Section 3.03 Purchase and Substitution of Defective......................III-8
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates.............................................IV-1
Section 4.02 Registration of Transfer and Exchange of Certificates........IV-1
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates............IV-7
Section 4.04 Persons Deemed Owners........................................IV-8
ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 5.01 Duties of the Servicer........................................V-1
Section 5.02 Liquidation of SBA Loans......................................V-4
Section 5.03 Establishment of Principal and................................V-5
Section 5.04 Permitted Withdrawals From the................................V-6
(i)
<PAGE>
Section 5.05 [Intentionally Omitted].......................................V-8
Section 5.06 Transfer of Accounts..........................................V-8
Section 5.07 Maintenance of Hazard Insurance...............................V-8
Section 5.08 [Intentionally Omitted].......................................V-8
Section 5.09 Fidelity Bond.................................................V-8
Section 5.10 Title, Management and Disposition.............................V-9
Section 5.11 [Intentionally Omitted.].....................................V-10
Section 5.12 Collection of Certain SBA Loan Payments......................V-10
Section 5.13 Access to Certain Documentation and..........................V-10
Section 5.14 Superior Liens...............................................V-10
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Certificate Account;........................VI-1
Section 6.02 Establishment of Spread Account;.............................VI-2
Section 6.03 Establishment of Expense Account;............................VI-3
Section 6.04 [Intentionally Omitted]......................................VI-3
Section 6.05 [Intentionally Omitted]......................................VI-5
Section 6.06 Investment of Accounts.......................................VI-6
Section 6.07 Distributions................................................VI-7
Section 6.08 [Intentionally Omitted]......................................VI-8
Section 6.09 Statements...................................................VI-8
Section 6.10 Advances by the Servicer....................................VI-11
Section 6.11 Compensating Interest.......................................VI-12
Section 6.12 Reports of Foreclosure and Abandonment......................VI-12
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 [Omitted]...................................................VII-1
Section 7.02 Satisfaction of Mortgages and Collateral....................VII-1
Section 7.03 Servicing Compensation......................................VII-2
Section 7.04 Annual Statement as to Compliance...........................VII-2
Section 7.05 Annual Independent Public...................................VII-3
Section 7.06 SBA's, and Trustee's Right to Examine.......................VII-3
Section 7.07 Reports to the Trustee; Principal and.......................VII-3
Section 7.08 Premium Protection Fee......................................VII-3
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.......................................VIII-1
(ii)
<PAGE>
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims..........................IX-1
Section 9.02 Merger or Consolidation of the Servicer......................IX-2
Section 9.03 Limitation on Liability of the...............................IX-2
Section 9.04 Servicer Not to Resign.......................................IX-2
ARTICLE X
DEFAULT
Section 10.01 Events of Default............................................X-1
Section 10.02 Trustee to Act; Appointment of...............................X-2
Section 10.03 Waiver of Defaults...........................................X-4
Section 10.04 Control by Majority Certificateholders.......................X-4
ARTICLE XI
TERMINATION
Section 11.01 Termination.................................................XI-5
Section 11.02 Accounting Upon Termination of..............................XI-6
ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee..........................................XII-1
Section 12.02 Certain Matters Affecting the Trustee......................XII-2
Section 12.03 Trustee Not Liable for Certificates........................XII-3
Section 12.04 Trustee May Own Certificates...............................XII-4
Section 12.05 Servicer To Pay Trustee's Fees.............................XII-4
Section 12.06 Eligibility Requirements for Trustee.......................XII-4
Section 12.07 Resignation and Removal of the Trustee.....................XII-5
Section 12.08 Successor Trustee..........................................XII-6
Section 12.09 Merger or Consolidation of Trustee.........................XII-6
Section 12.10 Appointment of Co-Trustee or Separate......................XII-7
Section 12.11 Authenticating Agent.......................................XII-8
Section 12.12 Tax Returns and Reports....................................XII-9
Section 12.13 Protection of Trust Fund...................................XII-9
Section 12.14 Representations and Warranties............................XII-10
(iii)
<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders...............................XIII-1
Section 13.02 Amendment................................................XIII-1
Section 13.03 Recordation of Agreement.................................XIII-2
Section 13.04 Duration of Agreement....................................XIII-2
Section 13.05 Governing Law............................................XIII-2
Section 13.06 Notices..................................................XIII-2
Section 13.07 Severability of Provisions...............................XIII-3
Section 13.08 No Partnership...........................................XIII-3
Section 13.09 Counterparts.............................................XIII-3
Section 13.10 Successors and Assigns...................................XIII-3
Section 13.11 Headings.................................................XIII-3
Section 13.12 Paying Agent.............................................XIII-3
Section 13.13 Notification to Rating Agencies..........................XIII-4
Section 13.14 Third Party Rights.......................................XIII-4
(iv)
<PAGE>
EXHIBIT INDEX
EXHIBIT A Contents of SBA File
EXHIBIT B-1 Form of Class A Certificate
EXHIBIT B-2 Form of Class B Certificate
EXHIBIT C Principal and Interest Account
Letter Agreement
EXHIBIT D [Omitted]
EXHIBIT E [Omitted]
EXHIBIT E(1) Wiring Instructions Form
EXHIBIT F-1 Initial Certification
EXHIBIT F-2 Final Certification
EXHIBIT G [Omitted]
EXHIBIT H SBA Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J Form of Liquidation Report
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Tape Format
EXHIBIT M Multi-Party Agreement
EXHIBIT N Spread Account Agreement
EXHIBIT O-1 Form of Transferee Letter
EXHIBIT O-2 Form of Rule 144A Certification
(v)
<PAGE>
Agreement dated as of December 1, 1997 between Marine Midland Bank,
as trustee (the "Trustee"), and Business Loan Center, Inc., as Seller (the
"Seller") and as Servicer (the "Servicer"):
PRELIMINARY STATEMENT
The Seller, in the ordinary course of its business, originates and
acquires SBA ss. 7(a) Loans (the "SBA ss. 7(a) Loans") to small businesses in
compliance with the provisions of the Small Business Act and the rules and
regulations thereunder, which SBA ss. 7(a) Loans are evidenced by the SBA Notes
in favor of the Seller.
Pursuant to and in accordance with the provisions of the Small
Business Act and the Loan Guaranty Agreement, a portion of each SBA ss. 7(a)
Loan has been guaranteed by the Small Business Administration (the "SBA") (such
portion, the "Guaranteed Interest").
The Guaranteed Interests in the SBA ss.7(a) Loans have previously
been sold to certain Registered Holders pursuant to SBA Form 1086 Agreements. In
accordance with such agreements, the parties hereto acknowledge that the SBA is
the party in interest with respect to the Guaranteed Interest. The Servicer
continues to service the Guaranteed Interests.
Pursuant to and in accordance with policies of the SBA, the Servicer
is required to retain a portion of the interest received on the Guaranteed
Interest of each SBA ss. 7(a) Loan sold to the Trust Fund (such portion, the
"Premium Protection Fee").
To facilitate the sale of (i) the entire portion of each SBA ss.
7(a) Loan not guaranteed by the SBA and sold to Registered Holders or
constituting part of the Premium Protection Fee and (ii) the Excess Spread
(collectively, the "Unguaranteed Interest"), and the servicing of the SBA Loans
by the Servicer, the Seller and the Servicer are entering into this Agreement
with the Trustee. The Seller is transferring the SBA Loans to the Trustee for
the benefit of the SBA and the Certificateholders under this Agreement, pursuant
to which Certificates are being issued, denominated on the face thereof as
Business Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series
1997-1, Class A and Class B, representing in the aggregate a 100% undivided
beneficial ownership interest in the right to receive the principal portion of
the Unguaranteed Interests of the SBA Loans together with interest thereon at
the then applicable Class A or Class B Remittance Rate, as the case may be. The
Unguaranteed Interest of the SBA Loans have an aggregate outstanding principal
balance of $16,366,491.43 as of December 1, 1997 (the "Cut-Off Date"), after
application of payments received by the Servicer on or before such date.
The parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings. This Agreement
relates to a Trust Fund evidenced by Business Loan Center SBA Loan-Backed
Adjustable Rate Certificates, Series 1997-1, Class A and Class B. Unless
otherwise provided, all calculations of interest pursuant to this Agreement
including, but not limited to, the Class A and Class B Interest Distribution
Amounts, are based on a 360-day year and twelve 30-day months.
ACCOUNT: The Certificate Account, the Pre-Funding Account and the
Capitalized Interest Account established by the Trustee for the benefit of the
Certificateholders; the Expense Account established by the Trustee for the
benefit of the Trustee; and the Spread Account held by the Spread Account
Custodian pursuant to the Spread Account Agreement. The Trustee's obligation to
establish and maintain the Certificate Account is not delegable.
ACCOUNT NUMBER: The number assigned to each SBA Loan by the Seller,
as set forth in Exhibit H hereto.
ADDITION NOTICE: With respect to the transfer of Subsequent SBA
Loans to the Trust Fund pursuant to Section 2.09 herein, notice, which shall be
given not later than three Business Days prior to the related Subsequent
Transfer Date, of the Seller's designation of Subsequent SBA Loans to be sold to
the Trust Fund and the aggregate Principal Balance of such Subsequent SBA Loans.
ADDITIONAL FEE: With respect to each Additional Fee SBA Loan, the
fee payable to the SBA by the Seller equal to 40 basis points or 50 basis points
per annum, as the case may be, on the outstanding balance of the Guaranteed
Interest of such Additional Fee SBA Loan.
ADDITIONAL FEE SBA LOAN: An SBA ss. 7(a) Loan sold in the secondary
market on or after September 1, 1993 (unless the related SBA ss. 7(a) Loan was
approved by the SBA on or after October 12, 1995), for which the related
Additional Fee is 40 basis points per annum, or an SBA ss. 7(a) Loan approved by
the SBA on or after October 12, 1995 (regardless of whether it was sold in the
secondary market), for which the related Additional Fee is 50 basis points per
annum.
ADJUSTED CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the product of (A) the aggregate amount of interest payable
with respect to each SBA Loan in accordance with its terms, net of the interest
payable to the Registered Holder, the Premium Protection Fee, the Excess Spread,
the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra Interest and the
Annual Expense Escrow Amount allocable to such interest (plus, for the
Remittance Dates occurring in January, February and March 1998, any amounts
transferred from the Pre-Funding Account and the Capitalized Interest Account
for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the
I-1
<PAGE>
numerator of which is the amounts set forth in clauses (i) and (ii) of the
definition of Class A Interest Distribution Amount with respect to such
Remittance Date, and the denominator of which is the sum of the amounts set
forth in clauses (i) and (ii) of the definition of Class A Interest Distribution
Amount and the amounts set forth in clauses (i) and (ii) of the definition of
Class B Interest Distribution Amount, each with respect to such Remittance Date.
ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the product of (A) the aggregate amount of interest payable
with respect to each SBA Loan in accordance with its terms, net of the interest
payable to the Registered Holder, the Premium Protection Fee, the Excess Spread,
the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra Interest and the
Annual Expense Escrow Amount allocable to such interest (plus, for the
Remittance Dates occurring in January, February and March 1998, any amounts
transferred from the Pre-Funding Account and the Capitalized Interest Account
for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class B Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definition of Class
A Interest Distribution Amount and the amounts set forth in clauses (i) and (ii)
of the definition of Class B Interest Distribution Amount, each with respect to
such Remittance Date.
ADJUSTED SBA LOAN REMITTANCE RATE: With respect to any SBA Loan, an
amount per annum equal to the sum of (i) the then applicable weighted average
Class A and Class B Remittance Rates and (ii) 0.05% per annum, relating to the
Annual Expense Escrow Amount.
ADJUSTMENT DATE: For the Interest Accrual Periods commencing in
February, March and April, the Adjustment Date shall be the first Business Day
of the preceding January. For the Interest Accrual Periods commencing in May,
June and July, the Adjustment Date shall be the first Business Day of the
preceding April. For the Interest Accrual Periods commencing in August,
September and October, the Adjustment Date shall be the first Business Day of
the preceding July. For the Interest Accrual Periods commencing in November,
December and January, the Adjustment Date shall be the first Business Day of the
preceding October.
AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination, the Original Class A Aggregate Certificate Principal Balance less
the sum of all amounts previously distributed to the Class A Certificateholders
in respect of principal.
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination, the Original Aggregate Class B Certificate Principal Balance less
the sum of all amounts previously distributed to the Class B Certificateholders
in respect of principal.
AGREEMENT: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
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ANNUAL EXPENSE ESCROW AMOUNT: $7,500 per annum plus out-of-pocket
expenses (estimated to be approximately $300 per annum).
ASSIGNMENT OF MORTGAGE: With respect to those SBA Loans secured by a
Mortgaged Property, an assignment of the Mortgage, notice of transfer or
equivalent instrument sufficient under the laws of the jurisdiction wherein the
related Mortgaged Property is located to reflect of record the transfer of the
related SBA Loan to the Trustee subject to the Multi-Party Agreement.
AUTHENTICATING AGENT: Initially, Marine Midland Bank and thereafter,
any successor appointed pursuant to Section 12.11.
AVAILABLE FUNDS: With respect to each Remittance Date, the sum of
(i) all amounts received from any source by the Servicer or any Subservicer
during the preceding calendar month (including Excess Spread) with respect to
principal and interest on the SBA Loans (net of the amount payable to the
Registered Holders, the Premium Protection Fee, the FTA's Fee, the Additional
Fee, and the Servicing Fee), (ii) advances by the Servicer, (iii) amounts to be
transferred from the Pre-Funding Account and Capitalized Interest Account with
respect to the January, February and March 1998 Remittance Dates and (iv)
amounts in the Spread Account.
BIF: The Bank Insurance Fund, or any successor thereto.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in the States of New York or Delaware are
authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST REQUIREMENT: With respect to the Remittance
Dates in January, February and March 1998, the excess, if any, of (i) 30 days'
interest (or, with respect to the Remittance Date in January 1998, the actual
number of days from the Closing Date to but not including such Remittance Date)
calculated at the weighted average Class A and Class B Remittance Rates on the
excess of (a) the Aggregate Class A and Class B Certificate Principal Balances
for such Remittance Date over (b) the aggregate Principal Balances of the SBA
Loans for such Remittance Date over (ii) any Pre-Funding Earnings to be
transferred to the Certificate Account on such Remittance Date pursuant to
Section 6.04(d).
CERTIFICATE: Any Class A or Class B Certificate executed by the
Servicer and authenticated by the Trustee or the Authenticating Agent
substantially in the form annexed hereto as Exhibits B-1 and B-2.
CERTIFICATE ACCOUNT: As described in Section 6.01.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class A or
Class B Certificate is registered in the Certificate Register, except that,
solely for the purposes of giving any consent, waiver, request or demand
pursuant to this Agreement, any Certificate registered in the name of the
Seller, the Servicer, any Subservicer or any affiliate of any of them,
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shall be deemed not to be outstanding and the undivided Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained.
CERTIFICATE REGISTER: As described in Section 4.02.
CERTIFICATE REGISTRAR: Initially, Marine Midland Bank, and
thereafter, any successor appointed pursuant to Section 4.02.
CLASS A CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the
Class A Principal Distribution Amount with respect to any preceding Remittance
Date exceeded (ii) the amount of the actual principal distribution to the Class
A Certificates on such Remittance Date.
CLASS A CERTIFICATE: A Certificate denominated as a Class A
Certificate.
CLASS A CERTIFICATEHOLDER: A holder of a Class A Certificate.
CLASS A CERTIFICATE PRINCIPAL BALANCE: $18,078,507.20.
CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class A Remittance Rate on the Aggregate
Class A Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class A Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class A
Remittance Rate compounded monthly; provided, however, that on each Remittance
Date the Class A Interest Distribution Amount will be increased or decreased, as
the case may be, to equal the Adjusted Class A Interest Distribution Amount for
such Remittance Date.
CLASS A PERCENTAGE: With respect to each Remittance Date, 91%,
representing the beneficial ownership interest of the Class A Certificates in
the Trust Fund.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the Class A Percentage multiplied by the sum of, without
duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the Class
A Certificateholders have previously received the Class A Percentage of the
Principal Balance of such SBA Loans; (ii) the principal portion of any
Unguaranteed Interest actually purchased by the Seller or the Servicer and
actually received by the Trustee as of the related Determination Date; (iii) any
Substitution Adjustments deposited in the Principal and Interest Account and
transferred to the Certificate Account as of the related Determination Date;
(iv) the Unguaranteed Percentage of all losses on SBA Loans which were
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finally liquidated during the applicable Due Period; and (v) the Unguaranteed
Percentage of the then outstanding principal balance of any SBA Loan which, as
of the first day of the related Due Period, has been delinquent 24 months or has
been determined to be uncollectible, in whole or in part, by the Servicer and
(vi) the amount, if any, released from the Pre-Funding Account on the January,
February and March 1998 Remittance Dates.
CLASS A REMITTANCE RATE: During the initial Interest Accrual Period
6.60% per annum. During each subsequent Interest Accrual Period, the Prime Rate
in effect on the preceding Adjustment Date minus 1.90% per annum.
CLASS B CARRY-FORWARD AMOUNT: The amount, if any, by which (i) the
Class B Principal Distribution Amount with respect to any preceding Remittance
Date exceeded (ii) the amount of the actual principal distribution to the Class
B Certificates on such Remittance Date.
CLASS B CERTIFICATE: A Certificate denominated as a Class B
Certificate.
CLASS B CERTIFICATEHOLDER: A holder of a Class B Certificate.
CLASS B CERTIFICATE PRINCIPAL BALANCE: $1,787,984.23.
CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class B Remittance Rate on the Aggregate
Class B Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class B Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class B
Remittance Rate compounded monthly; provided, however, that on each Remittance
Date the Class B Interest Distribution Amount will be increased or decreased, as
the case may be, to equal the Adjusted Class B Interest Distribution Amount for
such Remittance Date.
CLASS B PERCENTAGE: With respect to each Remittance Date, 9%,
representing the beneficial ownership interest of the Class B Certificates in
the Trust Fund.
CLASS B PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the Class B Percentage multiplied by the sum of, without
duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the Class
B Certificateholders have previously received the Class B Percentage of the
Principal Balance of such SBA Loans; (ii) the principal portion of any
Unguaranteed Interest actually purchased by the Seller or the Servicer and
actually received by the Trustee as of the related Determination Date; (iii) any
Substitution Adjustments deposited in the Principal and Interest Account and
transferred to the Certificate Account as of the related
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Determination Date; (iv) the Unguaranteed Percentage of all losses on SBA Loans
which were finally liquidated during the applicable Due Period; and (v) the
Unguaranteed Percentage of the then outstanding principal balance of any SBA
Loan which, as of the first day of the related Due Period, has been delinquent
24 months or has been determined to be uncollectible, in whole or in part, by
the Servicer, and (vi) the amount, if any, released from the Pre-Funding Account
on the January, February and March 1998 Remittance Dates.
CLASS B REMITTANCE RATE: During the initial Interest Accrual Period
7.00% per annum. During each subsequent Interest Accrual Period, the Prime Rate
in effect on the preceding Adjustment Date minus 1.50% per annum.
CLOSING DATE: December 19, 1997
CODE: The Internal Revenue Code of 1986, as amended, or any
successor legislation thereto.
COLLATERAL: All items of property (including a Mortgaged Property),
whether real or personal, tangible or intangible, or otherwise, pledged by an
Obligor or others to a Seller (including guarantees on behalf of the Obligor) to
secure payment under an SBA Loan.
COMMERCIAL PROPERTY: Real property (other than agricultural property
or Residential Property) that generally is used by the Obligor in the conduct of
its business.
COMPENSATING INTEREST: As defined in Section 6.11.
CONFIDENTIAL PLACEMENT MEMORANDUM: The Confidential Private
Placement Memorandum dated December 19, 1997 prepared by the Seller in
connection with the offer and sale of the Class A Certificates.
CURTAILMENT: With respect to an SBA Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of five
times the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the SBA Loan in full, nor is intended to cure a delinquency.
CUT-OFF DATE: December 1, 1997.
DEFINITIVE CERTIFICATES: Certificates of any Class issued in
definitive, full registered, certificated form without interest coupons in
minimum denominations of $100,000 and integral multiples of $1,000 in excess of
such minimum amount.
DEFAULTED SBA LOAN: Any SBA Loan as to which the Obligor has failed
to make payment in full of three or more consecutive Monthly Payments.
DELETED SBA LOAN: An SBA Loan replaced by a Qualified Substitute SBA
Loan.
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DESIGNATED DEPOSITORY INSTITUTION: With respect to the Principal and
Interest Account, an entity which is an institution whose deposits are insured
by either the BIF or SAIF administered by the FDIC, the unsecured and
uncollateralized long-term debt obligations of which shall be rated A or better
by the Rating Agency or A1 by the Rating Agency, and which is either (i) a
federal savings association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (iii) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, or (iv) a principal subsidiary
of a bank holding company, in each case acting or designated by the Servicer as
the depository institution for the Principal and Interest Account.
DETERMINATION DATE: That day of each month which is the third
Business Day prior to the 15th day of such month.
DUE DATE: The day of the month on which the Monthly Payment is due
from the Obligor on an SBA Loan.
DUE PERIOD: With respect to each Remittance Date, the calendar month
preceding the month in which such Remittance Date occurs.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation thereto.
EVENT OF DEFAULT: As described in Section 10.01.
EXCESS PAYMENTS: With respect to a Due Period, any amounts received
on an SBA Loan in excess of the Monthly Payment due on the Due Date relating to
such Due Period which does not constitute either a Curtailment or a Principal
Prepayment or a payment with respect to an overdue amount. Excess Payments are
payments of principal for purposes of this Agreement.
EXCESS PROCEEDS: As of any Remittance Date, with respect to any
Liquidated SBA Loan, the excess, if any, of (a) the Unguaranteed Percentage of
the total Net Liquidation Proceeds, over (b) the Principal Balance of such SBA
Loan as of the date such SBA Loan became a Liquidated SBA Loan plus 30 days
interest thereon at the then applicable Adjusted SBA Loan Remittance Rate;
provided, however, that such excess shall be reduced by the amount by which
interest accrued on the advance, if any, made by the Servicer at the related SBA
Loan Interest Rate(s) exceeds interest accrued on such advance at the then
applicable weighted average Class A and Class B Remittance Rates.
EXCESS SPREAD: With respect to any Remittance Date, the amount, if
any, by which (i) the interest collected by the Servicer or any Subservicer on
the principal portion of the Guaranteed Interest of each SBA ss.7(a) Loan
exceeds (ii) the sum of (a) the interest payable to the
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Registered Holder, (b) the FTA's Fee, (c) the Premium Protection Fee, (d) with
respect to the Additional Fee SBA Loans, the Additional Fee and (e) the
Servicing Fee.
EXPENSE ACCOUNT: The expense account established and maintained by
the Trustee in accordance with Section 6.03 hereof.
EXTRA INTEREST: With respect to each SBA Loan, for each Remittance
Date the product of (i) the principal portion of the Unguaranteed Interest of
such SBA Loan for such Remittance Date and (ii) one-twelfth of the applicable
Extra Interest Percentage.
EXTRA INTEREST PERCENTAGE: With respect to each SBA Loan, the excess
of (i) the SBA Loan Interest Rate that would be in effect for such SBA Loan as
of the Cut-Off Date without giving effect to any applicable lifetime floors or
caps over (ii) the sum of the rates used in determining the Servicing Fee and
the Annual Expense Escrow Amount and 6.65% per annum (i.e., the initial weighted
average Class A and Class B Remittance Rates without giving effect to any
applicable lifetime floors or caps on the SBA Loans).
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FIDELITY BOND: As described in Section 5.09.
FNMA: The Federal National Mortgage Association and any successor
thereto.
FORECLOSED PROPERTY: As described in Section 5.10.
FORECLOSED PROPERTY DISPOSITION: The final sale of a Foreclosed
Property acquired in foreclosure or by deed in lieu of foreclosure. The proceeds
of any Foreclosed Property Disposition constitute part of the definition of
Liquidation Proceeds.
FTA: Colson Services Corp., in its capacity as the Fiscal and
Transfer Agent of the SBA under the Multi-Party Agreement, or any successor
thereto appointed by the SBA.
FTA'S FEE: With respect to the Guaranteed Interest of each SBA ss.
7(a) Loan sold into the secondary market, the monthly fee payable to the FTA in
accordance with Form 1086 and the SBA Rules and Regulations.
FUNDING PERIOD: The period commencing on the Closing Date and ending
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account is less than $100,000, (ii) the date on which an Event of
Default occurs or (iii) the March 1998 Determination Date.
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GUARANTEED INTEREST: As to any SBA ss. 7(a) Loan, the right to
receive the guaranteed portion of the principal balance thereof together with
interest thereon at a per annum rate in effect from time to time in accordance
with the terms of the related SBA Form 1086. Certificateholders have no right or
interest in the Guaranteed Interest.
INDIVIDUAL CERTIFICATE: Any Certificate registered in the name of a
holder.
INITIAL DEPOSIT: A deposit of $490,994.75 required to be made by the
Spread Account Depositor into the Spread Account on the Closing Date, such
deposit being equal to 3.00% of the Original Pool Principal Balance.
INITIAL SBA LOANS: The SBA Loans listed on Exhibit H hereto and
delivered to the Trustee on the Closing Date.
INSTITUTIONAL ACCREDITED INVESTOR: Any Person satisfying the
definition of "Accredited Investor" within the meaning of Rule 501(a)(1), (2) or
(3) of Regulation D under the Securities Act.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering an SBA Loan, Collateral or Foreclosed Property,
including but not limited to title, hazard, life, health and/or accident
insurance policies.
INTEREST ACCRUAL PERIOD: With respect to each Remittance Date, the
period commencing on the 15th day of the month preceding such Remittance Date
and ending on the 14th day of the month of such Remittance Date. However, for
the Remittance Date occurring in January 1998, the period commencing on the
Closing Date and ending on January 14, 1998.
LIQUIDATED SBA LOAN: Any defaulted SBA Loan or Foreclosed Property
as to which the Servicer has determined that all amounts which it reasonably and
in good faith expects to recover have been recovered from or on account of such
SBA Loan.
LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds, proceeds
of any Foreclosed Property Disposition, revenues received with respect to the
conservation and disposition of a Foreclosed Property, and any other amounts
received in connection with the liquidation of defaulted SBA Loans, whether
through trustee's sale, foreclosure sale or otherwise.
LOAN GUARANTY AGREEMENT: The Loan Guaranty Agreement (Deferred
Participation) (SBA Form 750) dated March 27, 1997 between the SBA and Business
Loan Center, Inc., as such agreement may be amended from time to time.
LOAN-TO-VALUE RATIO OR LTV: With respect to any SBA Loan, (a) the
outstanding principal amount of such SBA Loan as of the Cut-off Date, divided by
(b) the excess of (i) the total net collateral value (as determined by the
Seller in accordance with its underwriting criteria) of the primary and
secondary Collateral securing such loan at the time of
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origination over (ii) the principal balance of any Prior Lien as of the date of
origination of the related SBA Loan.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A and
Class B Certificates evidencing an Aggregate Class A Certificate Principal
Balance and Aggregate Class B Certificate Principal Balance in excess of 50% of
the Aggregate Class A Certificate Principal Balance and Aggregate Class B
Certificate Principal Balance.
MONTHLY ADVANCE: An advance made by the Servicer pursuant to Section
6.10 hereof.
MONTHLY PAYMENT: The monthly payment of principal and/or interest
required to be made by an Obligor on the related SBA Loan, as adjusted pursuant
to the terms of the related SBA Note.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
lien on a Mortgaged Property.
MORTGAGED PROPERTY: The underlying real property, if any, securing
an SBA Loan, consisting of a Commercial Property or Residential Property and any
improvements thereon.
MULTI-PARTY AGREEMENT: That certain Multi-Party Agreement dated as
of December 1, 1997 among the Seller, the Trustee, the SBA and the FTA,
substantially in the form of Exhibit M hereto, as amended from time to time by
the parties thereto.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of (i) any
reimbursements to the Servicer made therefrom pursuant to Section 5.04(b) and
(ii) amounts required to be released to the related Obligor pursuant to
applicable law.
1933 ACT: The Securities Act of 1933, as amended.
OBLIGOR: The obligor on an SBA Note.
OFFICER'S CERTIFICATE: A certificate delivered to the Trustee signed
by the Chairman of the Board, the President, an Executive Vice President, a Vice
President, an Assistant Vice President, the Treasurer, the Secretary, or one of
the Assistant Secretaries of a Seller or the Servicer as required by this
Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may, without
limitation, be counsel for the Seller or Servicer, reasonably acceptable to the
Trustee and experienced in matters relating thereto.
ORIGINAL POOL PRINCIPAL BALANCE: $16,363,652.29.
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ORIGINAL PRE-FUNDED AMOUNT: $3,502,839.14 representing the amount
deposited in the Pre-Funding Account on the Closing Date.
OVERFUNDED INTEREST AMOUNT: With respect to each Subsequent Transfer
Date occurring in January 1998, the difference between (i) three-months'
interest on the aggregate Principal Balances of the Subsequent SBA Loans
acquired by the Trust Fund on such Subsequent Transfer Date, calculated at the
weighted average Class A and Class B Remittance Rates, and (ii) three-months'
interest on the aggregate Principal Balances of the Subsequent SBA Loans
acquired by the Trust Fund on such Subsequent Transfer Date, calculated at the
rate at which Pre-Funding Account moneys are invested as of such Subsequent
Transfer Date.
With respect to each Subsequent Transfer Date occurring in February
1998, the difference between (i) two-months' interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the weighted average Class A and Class B
Remittance Rates, and (ii) two-months' interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the rate at which Pre-Funding Account
moneys are invested as of such Subsequent Transfer Date.
With respect to each Subsequent Transfer Date occurring in March
1998, the difference between (i) one-month's interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the weighted average Class A and Class B
Remittance Rates, and (ii) one-month's interest on the aggregate Principal
Balances of the Subsequent SBA Loans acquired by the Trust Fund on such
Subsequent Transfer Date, calculated at the rate at which Pre-Funding Account
moneys are invested as of such Subsequent Transfer Date.
PAYING AGENT: Initially, Marine Midland Bank, and thereafter, any
other Person that meets the eligibility standards for the Paying Agent specified
in Section 13.12 hereof and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.
PERCENTAGE INTEREST: With respect to a Class A or Class B
Certificate, the portion of the Trust Fund evidenced by such Class A or Class B
Certificate, expressed as a percentage, the numerator of which is the
denomination represented by such Class A or Class B Certificate and the
denominator of which is the Original Class A Certificate Principal Balance or
Original Class B Certificate Principal Balance, as the case may be. The
Certificates are issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $100,000 and integral multiples of $1,000 in excess
thereof, except for one Certificate of each Class which may be issued in a
different denomination to equal the remainder of the Original Class A
Certificate Principal Balance or Original Class B Certificate Principal Balance,
as the case may be.
PERMITTED INSTRUMENTS: As used herein, Permitted Instruments shall
include the following:
(i) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any
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agency or instrumentality thereof, provided such obligations are backed by
the full faith and credit of the United States, FHA debentures, Federal
Home Loan Bank consolidated senior debt obligations, and FNMA senior debt
obligations, but excluding any of such securities whose terms do not
provide for payment of a fixed dollar amount upon maturity or call for
redemption;
(ii) federal funds, certificates of deposit, time deposits and
banker's acceptances (having original maturities of not more than 365
days) of any bank or trust company incorporated under the laws of the
United States or any state thereof, provided that the short-term debt
obligations of such bank or trust company at the date of acquisition
thereof have been rated Duff 1+ or better by the Rating Agency;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $3,000,000
which deposits are held only up to the limits insured by the BIF or SAIF
administered by the FDIC, provided that the unsecured long-term debt
obligations of such bank or savings and loan association have been rated
AAA or better by the Rating Agency;
(iv) commercial paper (having original maturities of not more than
365 days) rated Duff 1+ or better by the Rating Agency;
(v) debt obligations rated AAA by the Rating Agency (other than any
such obligations that do not have a fixed par value and/or whose terms do
not promise a fixed dollar amount at maturity or call date);
(vi) investments in money market funds rated AAA or better by the
Rating Agency the assets of which are invested solely in instruments
described in clauses (i)-(v) above;
(vii) guaranteed investment contracts or surety bonds providing for
the investment of funds in an account or insuring a minimum rate of return
on investments of such funds, which contract or surety bond shall:
(a) be an obligation of an insurance company or other
corporation whose debt obligations or insurance financial strength
or claims paying ability are rated "AAA" by the Rating Agency; and
(b) provide that the Trustee may exercise all of the rights of
the Seller under such contract or surety bond without the necessity
of the taking of any action by the Seller;
(viii) A repurchase agreement that satisfies the following criteria:
(a) Must be between the Trustee and a dealer bank or
securities firm described in 1. or 2. below:
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1. Primary dealers on the Federal Reserve reporting
dealer list which are rated AA" or better by the
Rating Agency, or
2. Banks rated "AA" or better by the Rating Agency.
(b) The written repurchase agreement must include the
following:
1. Securities which are acceptable for the transfer
are:
A. Direct U.S. government securities, or
B. Securities of Federal Agencies backed by the
full faith and credit of the U.S. government
(and FNMA & FHLMC)
2. the term of the repurchase agreement may be up to
60 days
3. the collateral must be delivered to the Trustee or
third party custodian acting as agent for the
Trustee by appropriate book entries and
confirmation statements must have been delivered
before or simultaneous with payment (perfection by
possession of certificated securities)
4. Valuation of collateral
The securities must be valued weekly,
marked-to-market at current market price plus
accrued interest. The value of the collateral
must be equal to at least 104% of the amount of
cash transferred by the Trustee or custodian
for the Trustee to the dealer bank or security
firm under the repurchase agreement plus
accrued interest. If the value of securities
held as collateral slips below 104% of the
value of the cash transferred by the Trustee
plus accrued interest, then additional cash
and/or acceptable securities must be
transferred. If, however, the securities used
as collateral are FNMA or FHLMC, then the value
of collateral must equal at least 105%; and
(ix) any other investment acceptable to the Rating Agency, written
confirmation of which shall be furnished to the Trustee prior to any such
investment. Provided that if such Permitted Instrument is not so rated by
the Rating Agency, there must be an equivalent rating by a Substitute
Rating Agency.
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PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of any
date of determination.
PRE-FUNDED AMOUNT: With respect to any date of determination, the
amount on deposit in the Pre-Funding Account.
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.04 hereof and maintained by the Trustee.
PRE-FUNDING EARNINGS: With respect to the Remittance Date in January
1998, the actual investment earnings earned during the period from the Closing
Date through the Business Day immediately preceding the Determination Date in
January 1998 (inclusive) on the Pre-Funded Amount. With respect to the
Remittance Dates in February and March 1998, the actual investment earnings
earned during the period from the Determination Date in January and February
1998, respectively, through the Business Day immediately preceding the
Determination Date in February and March 1998, respectively (inclusive), on the
Pre-Funded Amount.
PREMIUM PROTECTION FEE: As to any SBA Loan and any date of
determination, an amount equal to 0.60% per annum of the then outstanding
principal balance of the related Guaranteed Interest.
PRIME RATE: With respect to any date of determination, the lowest
prime lending rate published in the Money Rate Section of The Wall Street
Journal.
PRINCIPAL AND INTEREST ACCOUNT: The principal and interest account
established by the Servicer pursuant to Section 5.03 hereof.
PRINCIPAL BALANCE: With respect to any SBA Loan or related
Foreclosed Property, at any date of determination, (i) the Unguaranteed
Percentage of the principal balance of the SBA Loan outstanding as of the
Cut-Off Date (or applicable Subsequent Cut-Off Date with respect to Subsequent
SBA Loans) after application of principal payments received on or before such
date, minus (ii) the sum of (a) the Unguaranteed Percentage of the principal
portion of the Monthly Payments received during each Due Period ending prior to
the most recent Remittance Date, which were distributed pursuant to Section 6.07
on any previous Remittance Date, and (b) the Unguaranteed Percentage of all
Principal Prepayments, Curtailments, Excess Payments, Insurance Proceeds,
Released Mortgaged Property Proceeds, Net Liquidation Proceeds and net income
from a Foreclosed Property to the extent applied by the Servicer as recoveries
of principal in accordance with the provisions hereof, which were distributed
pursuant to Section 6.07 on any previous Remittance Date. The Principal Balance
of any Liquidated SBA Loan or any SBA Loan that has been paid off will equal $0.
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PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on
an SBA Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy an SBA Loan
in full.
PRIOR LIEN: With respect to any SBA Loan secured by a lien on a
Mortgaged Property which is not a first priority lien, each mortgage loan
relating to the corresponding Mortgaged Property having a prior priority lien.
QUALIFIED INSTITUTIONAL BUYER: As used herein, has the meaning
ascribed to such term in Rule 144A under the Securities Act.
QUALIFIED SUBSTITUTE SBA LOAN: An SBA loan or SBA loans substituted
for a Deleted SBA Loan pursuant to Section 2.05 or 3.03 hereof, which (i) has or
have an SBA Loan interest rate or rates of not less than (and not more than two
percentage points more than) the SBA Loan Interest Rate for the Deleted SBA
Loan, (ii) relates or relate to the same type of Collateral as the Deleted SBA
Loan, (iii) matures or mature no later than (and not more than one year earlier
than) the Deleted SBA Loan, (iv) has or have a Loan-to-Value Ratio or
Loan-to-Value Ratios at the time of such substitution no higher than the Loan-to
Value Ratio of the Deleted SBA Loan at such time, (v) has or have a principal
balance or principal balances relating to an unguaranteed interest or
unguaranteed interests (after application of all payments received on or prior
to the date of substitution) equal to or less than the Principal Balance of the
Unguaranteed Interest or Unguaranteed Interests as of such date of the Deleted
SBA Loan, (vi) has or have the same Unguaranteed Percentage at the time of
substitution as the Deleted SBA Loan; (vii) was or were originated under the
same program type as the Deleted SBA Loan; and (viii) complies or comply as the
date of substitution with each representation and warranty set forth in Section
3.02.
RATING AGENCY: Duff & Phelps Credit Rating Co. or any successor
thereto.
RATING AGENCY CONDITION: With respect to any specified action, that
the Rating Agency shall have notified the Servicer and the Trustee, orally or in
writing, that such action will not result in a reduction or withdrawal of the
rating assigned by the Rating Agency to either Class of Certificates.
RECORD DATE: With respect to any Remittance Date, the close of
business on the last day of the month immediately preceding the month of the
related Remittance Date and with respect to the Special Remittance Date,
February 28, 1998.
REGISTERED HOLDER: With respect to any SBA ss. 7(a) Loan, the Person
identified as such in the applicable SBA Form 1086, and any permitted assignees
thereof.
REIMBURSABLE AMOUNTS: As of any date of determination, an amount
payable to the Servicer and/or the Seller with respect to (i) the Monthly
Advances and Servicing Advances reimbursable pursuant to Section 5.04(b), (ii)
any advances reimbursable pursuant to
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Section 9.01 and not previously reimbursed pursuant to Section 6.03(c)(i), and
(iii) any other amounts reimbursable to the Servicer or the Seller pursuant to
this Agreement.
RELEASED MORTGAGED PROPERTY PROCEEDS: As to any SBA Loan secured by
a Mortgaged Property, proceeds received by the Servicer in connection with (a) a
taking of an entire Mortgaged Property by exercise of the power of eminent
domain or condemnation or (b) any release of part of the Mortgaged Property from
the lien of the related Mortgage, whether by partial condemnation, sale or
otherwise, which are not released to the Obligor in accordance with applicable
law, the SBA or the Registered Holder in accordance with the SBA Rules and
Regulations, the Servicer's customary SBA loan servicing procedures and this
Agreement.
REMITTANCE DATE: The 15th day of any month or if such 15th day is
not a Business Day, the first Business Day immediately following, commencing in
January 1998.
RESIDENTIAL PROPERTY: Any one or more of the following, (i) single
family dwelling unit not attached in any way to another unit, (ii) row house,
(iii) two-family house, (iv) low-rise condominium, (v) planned unit development,
(vi) three- or four-family house, (vii) high-rise condominium, (viii) mixed use
building or (ix) manufactured home (as defined in the FNMA/FHLMC
Seller-Servicers' Guide) to the extent that it constitutes real property in the
state in which it is located.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division, including any Vice President,
Assistant Vice President any Assistant Secretary, any trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject. When
used with respect to the Seller, the President, any Vice President, Assistant
Vice President, Treasurer or any Secretary or Assistant Secretary.
RULE 144A CERTIFICATION: A letter substantially in the form attached
hereto as Exhibit O-2.
SAIF: The Savings Association Insurance Fund, or any successor
thereto.
SBA: The United States Small Business Administration, an agency of
the United States Government.
SBA FILE: As described in Exhibit A.
SBA Form 1086: The Secondary Participation Guaranty Agreement on SBA
Form 1086, pursuant to which investors purchased the Guaranteed Interest.
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SBA LOAN: An individual loan which is transferred to the Trust Fund
pursuant to this Agreement, together with the rights and obligations of a holder
thereof and payments thereon and proceeds therefrom, the SBA Loans originally
subject to this Agreement being identified on the SBA Loan Schedule. Any loan
which, although intended by the parties hereto to have been, and which
purportedly was, transferred and assigned to the Trust Fund by the Seller (as
indicated by the SBA Loan Schedule), in fact was not transferred and assigned to
the Trust Fund for any reason whatsoever, including, without limitation, the
incorrectness of the statement set forth in Section 3.02(h) hereof with respect
to the loan, shall nevertheless be considered an "SBA Loan" for all purposes of
this Agreement. For the purposes of this Agreement, references to SBA Loans are
equivalent to references to SBA ss. 7(a) Loans.
SBA LOAN INTEREST RATE: With respect to any date of determination,
the then applicable annual rate of interest borne by an SBA Loan, pursuant to
its terms, which, as of the Cut-Off Date, is shown on the SBA Loan Schedule.
SBA LOAN SCHEDULE: The schedule of Initial SBA Loans listed on
Exhibit H attached hereto and delivered to the Trustee on the Closing Date, such
schedule identifying each Initial SBA Loan by address of the related premises,
and the name of the Obligor and setting forth as to each Initial SBA Loan the
following information: (i) the Principal Balance as of the close of business on
the Cut-Off Date, (ii) the Account Number, (iii) the original principal amount
of the SBA Loan, (iv) the Initial SBA Loan date and original number of months to
maturity, (v) the SBA Loan Interest Rate as of the Cut-Off Date and guaranteed
rate payable to the Registered Holder and the FTA, (vi) when the first Monthly
Payment was due, (vii) the Monthly Payment as of the Cut-Off Date, (viii) the
remaining number of months to maturity as of the Cut-Off Date, (ix) the
Unguaranteed Percentage, (x) the SBA loan number, (xi) the margin which is added
to the Prime Rate to determine the SBA Loan Interest Rate or, in the case of
fixed rate SBA Loans, the note rate, and (xii) the lifetime minimum and maximum
SBA Loan Interest Rates, if applicable.
SBA NOTE: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under an SBA Loan.
SBA RULES AND REGULATIONS: The Small Business Act, as amended,
codified at 15 U.S.C. 631 et. seq., all rules and regulations promulgated from
time to time thereunder, the Loan Guaranty Agreement and SBA Standard Operating
Procedures and official notices as from time to time are in effect.
SBA ss. 7(a) LOAN: An SBA Loan originated pursuant to Section 7(a)
of the SBA Rules and Regulations. For purposes of this Agreement, references to
SBA ss. 7(a) Loans are equivalent to references to SBA Loans.
SECURITIES ACT: The Securities Act of 1933, as amended.
SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF
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ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS
CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) IN
CERTIFICATED FORM (A) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1)-(3) UNDER THE SECURITIES ACT)
PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, IN EACH CASE SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT. "
SELLER: Business Loan Center, Inc., a Delaware corporation, and its
respective successors and assigns as Seller hereunder.
SERIES: 1997-1.
SERVICER: Business Loan Center, Inc., a Delaware corporation, and
its successors and assigns as Servicer hereunder.
SERVICER'S CERTIFICATE: The certificate as defined in Section 6.09.
SERVICING ADVANCES: All reasonable and customary "out-of-pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property or other Collateral, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the Foreclosed Property, (iv) compliance with the
obligations under clause (iv) of Section 5.01(a) and Sections 5.02 and 5.07,
which Servicing Advances are reimbursable to the Servicer to the extent provided
in Section 5.04(b) and (v) in connection with the liquidation of an SBA Loan,
expenditures relating to the purchase or maintenance of any Prior Lien pursuant
to Section 5.14, for all of which costs and expenses the Servicer is entitled to
reimbursement thereon up to a maximum rate per annum equal to the
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related SBA Loan Interest Rate, except that any amount of such interest accrued
at a rate in excess of the weighted average Class A and Class B Remittance Rates
with respect to the Remittance Date on or prior to which the Unguaranteed
Percentage of the Net Liquidation Proceeds will be distributed shall be
reimbursable only from Excess Proceeds.
SERVICING FEE: As to each SBA Loan, the annual fee payable to the
Servicer. Such fee shall be calculated and payable monthly from the amounts
received in respect of interest on the Guaranteed Interest and the Unguaranteed
Interest of such SBA Loan, shall accrue at the rate of 0.40% per annum and shall
be computed on the basis of the same principal amount and for the period
respecting which any related interest payment on an SBA Loan is computed. The
Servicing Fee is payable solely from the interest portion of related (i) Monthly
Payments, (ii) Liquidation Proceeds or (iii) Released Mortgaged Property
Proceeds collected by the Servicer, or as otherwise provided in Section 5.04.
The Servicing Fee includes any servicing fees owed or payable to any
Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the SBA Loans whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
SPECIAL REMITTANCE DATE: The March 1998 Remittance Date.
SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of Spread
Balance required to be on deposit at any time in the Spread Account which, with
respect to any Remittance Date, shall be equal to the sum of (i) the then
outstanding Principal Balance with respect to all SBA Loans 180 days or more
delinquent and (ii) the greater of (a) 6.00% of the then outstanding Pool
Principal Balance or (b) 3.00% of the Original Pool Principal Balance; provided,
however, that for purposes of clauses (i) and (ii)(a), there shall be excluded
the Principal Balance of SBA Loans which have been delinquent 24 months or have
been determined to be uncollectible, in whole or in part, by the Servicer, to
the extent that the Certificateholders have previously received the Principal
Balance of such SBA Loans.
SPREAD ACCOUNT: The Spread Account established in accordance with
the terms of the Spread Account Agreement and maintained by the Spread Account
Custodian for distribution in accordance with the provisions of Section 6.02
hereof.
SPREAD ACCOUNT AGREEMENT: The Agreement dated as of December 19,
1997 by and among the Spread Account Depositor and the Spread Account Custodian,
substantially in the form attached hereto as Exhibit N, as amended from time to
time by the parties thereto.
SPREAD ACCOUNT CUSTODIAN: Marine Midland Bank, in its capacity as
Spread Account Custodian under the Spread Account Agreement, or any successor
thereto.
SPREAD ACCOUNT DEPOSITOR: Business Loan Center Financial Corp., a
Delaware corporation, a wholly owned subsidiary of Business Loan Center, Inc.
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SPREAD ACCOUNT EXCESS: As defined in Section 6.02(b)(iii).
SPREAD BALANCE: As of any date of determination, the sum of the
aggregate amount then on deposit in the Spread Account.
SUBSEQUENT CUT-OFF DATE: The beginning of business on the first day
of the month on which the related Subsequent SBA Loans are transferred and
assigned to the Trust Fund pursuant to the related Subsequent Transfer
Agreement.
SUBSEQUENT SBA LOANS: The SBA Loans sold to the Trust Fund pursuant
to Section 2.09, which shall be listed on the Schedule of SBA Loans attached to
the related Subsequent Transfer Agreement.
SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Trustee and the Seller,
by which Subsequent SBA Loans are sold and assigned to the Trust Fund.
SUBSEQUENT TRANSFER DATE: The date specified as such in each
Subsequent Transfer Agreement.
SUBSERVICER: Any person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies any requirements set forth in Section
5.01(b) hereof in respect of the qualification of a Subservicer.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain SBA Loans
as provided in Section 5.01(b), a copy of which shall be delivered, along with
any modifications thereto, to the Trustee and the SBA.
SUBSTITUTE RATING AGENCY: Moody's Investors Service, Inc. and/or
Standard & Poor's Rating Services, a division of the McGraw-Hill Companies.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution
occurs pursuant to Sections 2.05 or 3.03, the amount (if any) by which the
aggregate unguaranteed portions of the principal balances (after application of
principal payments received on or before the date of substitution) of any
Qualified Substitute SBA Loans as of the date of substitution are less than the
aggregate of the Principal Balance of the related Deleted SBA Loans.
TAX RETURN: The federal income tax return to be filed on behalf of
the Trust Fund together with any and all other information reports or returns
that may be required to be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing authority under any
applicable provision of federal, state or local tax laws.
TERMINATION PRICE: The price defined in Section 11.01
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hereof.
TRANSFEREE LETTER: A letter substantially in the form attached
hereto as Exhibit O-1.
TRUST FUND: The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) the Unguaranteed Interest of such SBA Loans as from time to
time are subject to this Agreement, together with the SBA Files relating thereto
and all proceeds thereof, (ii) the Unguaranteed Interest of such assets
(including any Permitted Instruments) as from time to time are identified as
Foreclosed Property or are deposited in or constitute the Certificate Account,
(iii) the Trustee's rights under all insurance policies with respect to the SBA
Loans required to be maintained pursuant to this Agreement and the Unguaranteed
Interest of any Insurance Proceeds, (iv) the Unguaranteed Interest of any
Liquidation Proceeds and (v) the Unguaranteed Interest of any Released Mortgaged
Property Proceeds, including all earnings thereon and proceeds thereof. Amounts
deposited in the Principal and Interest Account, Pre-Funding Account,
Capitalized Interest Account and the Spread Account shall not constitute part of
the Trust Fund.
TRUSTEE: Marine Midland Bank, or its successor in interest, or any
successor trustee appointed as herein provided.
TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to Section
2.04.
UNGUARANTEED INTEREST: The sum of (i) that portion of an SBA Loan
not guaranteed by the SBA pursuant to the SBA Rules and Regulations and sold to
Registered Holders or constituting part of the Premium Protection Fee or
Servicing Fee, and (ii) the Excess Spread.
UNGUARANTEED PERCENTAGE: With respect to any SBA ss. 7(a) Loan, the
quotient, expressed as a percentage, the numerator of which shall be the
principal portion of the Unguaranteed Interest of such SBA ss. 7(a) Loan as of
the Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the Subsequent
Cut-Off Date) and the denominator of which shall be the sum of the principal
portion of the Unguaranteed Interest and the principal portion of the Guaranteed
Interest of such SBA ss. 7(a) Loan as of the Cut-Off Date (or, in the case of a
Subsequent SBA Loan, as of the Subsequent Cut-Off Date).
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ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01. Sale and Conveyance of Trust Fund.
(a) The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trustee without recourse and for the benefit of the SBA and the
Certificateholders, as its interests may appear, subject to the terms of this
Agreement and the Multi-Party Agreement, all of the right, title and interest of
the Seller in and to the Unguaranteed Interests of the Initial SBA Loans, and
all other assets included or to be included in the Trust Fund.
(b) The rights of the Certificateholders to receive payments with
respect to the SBA Loans in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth in
this Agreement. The Servicing Fee shall not constitute part of the Trust Fund
and Certificateholders shall have no interest in, and are not entitled to
receive any portion of, the Servicing Fee.
Section 2.02. Possession of SBA Files.
(a) Upon the issuance of the Certificates, the ownership of each SBA
Note, the Mortgage and the contents of the related SBA File relating to the
Initial SBA Loans is, and upon each Subsequent Transfer Date the ownership of
each Mortgage Note, the Mortgage and the contents of the related Mortgage File
relating to the applicable Subsequent SBA Loans will be, vested in the Trustee
for the benefit of the SBA and the Certificateholders, as their interests may
appear.
(b) Pursuant to Section 2.04, with respect to the Initial SBA Loans,
the Seller has delivered or caused to be delivered, and, on each Subsequent
Transfer Date, the Seller will deliver or cause to be delivered, each SBA Note
relating to an SBA ss. 7(a) Loan to the FTA.
Section 2.03. Books and Records.
The sale of the Unguaranteed Interest of each SBA Loan shall be
reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller and the Seller shall respond to any third-party
inquiry that such transfer is so reflected as a sale. The Seller shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each SBA Loan which shall be clearly marked to reflect the ownership
of the Unguaranteed Interest in each SBA Loan by the Trustee for the benefit of
the SBA and the Certificateholders, as its interests may appear.
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Section 2.04. Delivery of SBA Loan Documents.
The Seller, (i) contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Trustee or, with
respect to the SBA Notes relating to the SBA ss. 7(a) Loans being delivered
pursuant to (a) below, to the FTA, each of the following documents for each
Initial SBA Loan and (ii) on each Subsequent Transfer Date, will deliver or
cause to be delivered to the Trustee or to the FTA, each of the following
documents listed in (a) - (e) below for each Subsequent SBA Loan originated by
the Seller:
(a) The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of Marine Midland Bank, and its successors and
assigns, as trustee under that certain Pooling and Servicing Agreement dated as
of December 1, 1997, for the benefit of the United States Small Business
Administration and holders of Business Loan Center SBA Loan-Backed Certificates,
Series 1997-1, Class A and Class B, as their respective interests may appear,
without recourse" and signed, by facsimile or manual signature, in the name of
the Seller by a Responsible Officer, with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to the Seller, if
the Seller was not the originator;
(b) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Mortgage, with evidence of recording thereon, (ii) a
copy of the Mortgage certified as a true copy by a Responsible Officer of the
Seller where the original has been transmitted for recording until such time as
the original is returned by the public recording officer or duly licensed title
or escrow officer or (iii) a copy of the Mortgage certified by the public
recording officer in those instances where the original recorded Mortgage has
been lost;
(c) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) the original Assignment of Mortgage from the Seller endorsed as
follows: "Marine Midland Bank, ("Assignee") its successors and assigns, as
trustee under the Pooling and Servicing Agreement dated as of December 1, 1997
subject to the Multi-Party Agreement dated as of December 1, 1997" with evidence
of recording thereon (provided, however, that where permitted under the laws of
the jurisdiction wherein the Mortgaged Property is located, the Assignment of
Mortgage may be effected by one or more blanket assignments for SBA Loans
secured by Mortgaged Properties located in the same county), or (ii) a copy of
such Assignment of Mortgage certified as a true copy by a Responsible Officer of
the Seller where the original has been transmitted for recording (provided,
however, that where the original Assignment of Mortgage is not being delivered
to the Trustee, each such Responsible Officer may complete one or more blanket
certificates attaching copies of one or more Assignments of Mortgage relating to
the Mortgages originated by the Seller);
(d) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all intervening assignments, if any, showing a complete
chain of title from the originator to the Seller, including warehousing
assignments, with evidence of recording thereon if such assignments were
recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the public recording
officer, or (iii) copies of any assignments
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certified by the public recording officer in any instances where the original
recorded assignments have been lost;
(e) With respect to those SBA Loans secured by Mortgaged Properties,
either: (i) originals of all title insurance policies relating to the Mortgaged
Properties to the extent the Seller obtained such policies or (ii) copies of any
title insurance policies or other evidence of lien position, including but not
limited to PIRT policies, limited liability reports and lot book reports, to the
extent the Seller obtains such policies or other evidence of lien position,
certified as true by the Seller;
(f) For all SBA Loans, blanket assignment of all Collateral securing
the SBA Loan, including without limitation, all rights under applicable
guarantees and insurance policies;
(g) For all SBA Loans, irrevocable power of attorney of the Seller
to the Trustee to execute, deliver, file or record and otherwise deal with the
Collateral for the SBA Loans in accordance with the Agreement. The power of
attorney will be delegable by the Trustee to the Servicer and any successor
servicer and will permit the Trustee or its delegate to prepare, execute and
file or record UCC financing statements and notices to insurers; and
(h) For all SBA Loans, blanket UCC-1 financing statements
identifying by type all Collateral for the SBA Loans in the SBA Loan Pool and
naming the Trustee as secured party and the Seller as the debtor. The UCC-1
financing statements will be filed promptly following the Closing Date in New
York and Delaware and will be in the nature of protective notice filings rather
than true financing statements.
The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the Closing Date (or with respect
to the Subsequent SBA Loans, within one year of the related Subsequent Transfer
Date), deliver or cause to be delivered to the Trustee: (i) the original
recorded Mortgage in those instances where a copy thereof certified by the
Seller was delivered to the Trustee; (ii) the original recorded Assignment of
Mortgage from the Seller to the Trustee, which, together with any intervening
assignments of Mortgage, evidences a complete chain of title from the originator
to the Trustee in those instances where copies thereof certified by the Seller
were delivered to the Trustee; and (iii) any intervening assignments of Mortgage
in those instances where copies thereof certified by the Seller were delivered
to the Trustee. Notwithstanding anything to the contrary contained in this
Section 2.04, in those instances where the public recording office retains the
original Mortgage, Assignment of Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Seller shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, Assignment of Mortgage or assignments of Mortgage certified by
the public recording office to be a true copy of the recorded original thereof.
All SBA Loan documents held by the Trustee or the FTA, as the case may be, as to
each SBA Loan are referred to herein as the "Trustee's Document File."
Although it is the intent of the parties to this Agreement that the
conveyance of the Seller's right, title and interest in and to the Unguaranteed
Interests of the SBA Loans and other
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assets in the Trust Fund pursuant to this Agreement shall constitute a purchase
and sale and not a loan, in the event that such conveyance is deemed to be a
loan, it is the intent of the parties to this Agreement that the Seller shall be
deemed to have granted, and hereby does grant, to the Trustee a first priority
perfected security interest in all of the Seller's right, title and interest in,
to and under the Unguaranteed Interests of the SBA Loans and other assets in the
Trust Fund, and that this Agreement shall constitute a security agreement under
applicable law.
All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.
Section 2.05. Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee.
(a) The SBA shall cause the FTA to execute and deliver on the
Closing Date (or, with respect to the Subsequent SBA Loans, on the related
Subsequent Transfer Date), for each SBA ss. 7(a) Loan, an acknowledgment of
receipt of the SBA Note by the FTA in the form attached as Exhibit 1 to the
Multi-Party Agreement, and declares that the FTA will hold such documents and
any amendments, replacements or supplements thereto, as agent for the benefit of
the SBA and the Certificateholders. The Trustee agrees, for the benefit of the
SBA and the Certificateholders, to review each Trustee's Document File within 90
days after the Closing Date or Subsequent Closing Date, as the case may be (or,
with respect to any Subsequent SBA Loan or Qualified Substitute SBA Loan, within
45 days after the assignment thereof), and to deliver to the Certificateholders,
the Seller, the SBA and the Servicer a certification in the form attached hereto
as Exhibit F-1. Within 360 days after the Closing Date (or, with respect to any
Qualified Substitute SBA Loan, within 360 days after the assignment thereof),
the Trustee shall deliver to the Servicer, the Seller, the SBA, the Rating
Agency and any Certificateholder who requests a copy from the Trustee a final
certification in the form attached hereto as Exhibit F-2 evidencing the
completeness of the Trustee's Document Files.
(b) If the Trustee or the SBA, as the case may be, during the
process of reviewing the Trustee's Document Files finds any document
constituting a part of a Trustee's Document File which is not properly executed,
has not been received, is unrelated to an SBA Loan identified in the SBA Loan
Schedule, or does not conform in a material respect to the requirements of
Section 2.04 or the description thereof as set forth in the SBA Loan Schedule,
the Trustee or the SBA, as the case may be, shall promptly so notify the
Servicer and the Seller. In performing any such review, the Trustee or the SBA,
as the case may be, may conclusively rely on the Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Trustee's and the SBA's review of the SBA Files is limited
solely to confirming that the documents listed in Section 2.04 have been
executed and received and relate to the SBA Loans identified in the SBA Loan
Schedule. The Seller agrees to use reasonable efforts to remedy a material
defect in a document constituting part of an SBA File of which it is so notified
by the Trustee or the SBA, as the case may be. If, however, within 60 days after
the Trustee's or the SBA's notice to it respecting such material defect the
Seller has not remedied the defect and such defect materially and adversely
affects the value of the related SBA Loan, the Seller will (i) substitute in
lieu of such SBA Loan a Qualified Substitute SBA Loan in
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the manner and subject to the conditions set forth in Section 3.03 or (ii)
purchase the Unguaranteed Interest of such SBA Loan at a purchase price equal to
the Principal Balance of such Unguaranteed Interest as of the date of purchase,
plus 30 days' interest on such Principal Balance, computed at the Adjusted SBA
Loan Remittance Rate as of the next succeeding Determination Date, plus any
accrued unpaid Servicing Fees, Monthly Advances and Servicing Advances
reimbursable to the Servicer, which purchase price shall be deposited in the
Principal and Interest Account on the next succeeding Determination Date.
(c) Upon receipt by the Trustee and the SBA of a certification of a
Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Trustee and the SBA
shall release to the Servicer for release to the Seller the related Trustee's
Document File and the Trustee and the SBA shall execute, without recourse, and
deliver such instruments of transfer necessary to transfer such SBA Loan to the
Seller. All costs of any such transfer shall be borne by the Servicer.
(d) If in connection with taking any action the Servicer requires
any item constituting part of the Trustee's Document File, or the release from
the lien of the related SBA Loan of all or part of any Mortgaged Property or
other Collateral, the Servicer shall deliver to the Trustee and the SBA a
certificate to such effect in the form attached as Exhibit I hereto. Upon
receipt of such certification, the Trustee or the SBA, as the case may be, shall
deliver to the Servicer the requested documentation and the Trustee shall
execute, without recourse, and deliver such instruments of transfer necessary to
release all or the requested part of the Mortgaged Property or other Collateral
from the lien of the related SBA Loan.
On the Remittance Date in March of each year, the Trustee shall
deliver to the Seller, the SBA and the Servicer a certification detailing all
transactions with respect to the SBA Loans for which the Trustee holds a
Trustee's Document File pursuant to this Agreement during the prior calendar
year. Such certification shall list all Trustee's Document Files which were
released by or returned to the Trustee or the FTA during the prior calendar
year, the date of such release or return and the reason for such release or
return.
Section 2.06. [Intentionally Omitted]
Section 2.07. Authentication of Certificates.
The Trustee acknowledges the assignment to it of the Unguaranteed
Interests in the SBA Loans and the delivery to the Trustee and the FTA of the
Trustee's Document Files and, concurrently with such delivery, has authenticated
or caused to be authenticated and delivered to or upon the order of the Seller,
in exchange for the Unguaranteed Interests in the SBA Loans, the Trustee's
Document Files and the other assets included in the definition of Trust Fund,
Certificates duly authenticated by the Trustee in authorized denominations.
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Section 2.08. Fees and Expenses of the Trustee.
The fees and expenses of the Trustee including (i) the annual fees
of the Trustee, payable quarterly in advance, and subject to rebate to the
Servicer as additional servicing compensation hereunder for any fraction of a
calendar quarter in which this Agreement terminates, (ii) any other fees and
expenses to which the Trustee is entitled, and (iii) reimbursements to the
Servicer for any advances made by the Servicer to the Expense Account pursuant
to Section 6.03 hereof, shall be paid from the Expense Account in the manner set
forth in Section 6.03 hereof; provided, however, that the Seller shall be liable
for any expenses of the Trust Fund incurred prior to the Closing Date. The
Servicer and the Trustee hereby covenant with the Certificateholders that every
material contract or other material agreement entered into by the Trustee, or
the Servicer, acting as attorney-in-fact for the Trustee, on behalf of the Trust
Fund shall expressly state therein that no Certificateholder shall be personally
liable in connection with such contract or agreement.
Section 2.09. Sale and Conveyance of the Subsequent SBA Loans.
(a) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
to or upon the order of the Seller of all or a portion of the balance of funds
in the Pre-Funding Account, the Seller shall on any Subsequent Transfer Date
sell, transfer, assign, set over and otherwise convey without recourse, to the
Trustee all right, title and interest of the Seller in and to the Unguaranteed
Interest of each Subsequent SBA Loan listed on the SBA Loan Schedule delivered
by the Seller on such Subsequent Transfer Date, all its right, title and
interest in and to principal collected and interest accruing on the Unguaranteed
Interest of each such Subsequent SBA Loan on and after the related Subsequent
Cut-Off Date and all its right, title and interest in the Unguaranteed Interest
in all insurance policies; provided, that the Seller reserves and retains all of
its right, title and interest in and to principal (including Principal
Prepayments) collected and interest accruing on each such Subsequent SBA Loan
prior to the related Subsequent Cut-Off Date. The transfer by the Seller of the
Unguaranteed Interest of the Subsequent SBA Loans set forth on the SBA Loan
Schedule to the Trustee shall be absolute and shall be intended by all parties
hereto to be treated as a sale by the Seller.
The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances as of the related
Subsequent Cut-Off Date of the Subsequent SBA Loans so transferred on the
related Subsequent Transfer Date.
(b) The Seller shall transfer to the Trustee the Unguaranteed
Interest of the Subsequent SBA Loans and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee with a timely
Addition Notice and shall have provided any information reasonably
requested by it with respect to the Subsequent SBA Loans;
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(ii) the Seller shall have delivered to the Trustee a duly
executed written assignment (including an acceptance by the Trustee)
that shall include SBA Loan Schedules, listing the Subsequent SBA
Loans and any other exhibits listed thereon;
(iii) the Seller shall have deposited in the Principal and
Interest Account all collections in respect of the Subsequent SBA
Loans received on or after the related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, none of the Seller,
the Servicer or the Spread Account Depositor was insolvent nor will
any of them have been made insolvent by such transfer nor is any of
them aware of any pending insolvency;
(v) such addition will not result in a material adverse tax
consequence to the Trust Fund or the Holders of the Certificates;
(vi) the Funding Period shall not have terminated;
(vii) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related
Subsequent Transfer Agreement;
(viii) the Seller shall have delivered to the Rating Agency
and the Trustee, Opinions of Counsel with respect to the transfer of
the Subsequent SBA Loans substantially in the form of the Opinions
of Counsel delivered to the Trustee on the Closing Date (bankruptcy,
corporate and tax opinions); and
(ix) the FTA shall have delivered, pursuant to Section 2.05(a)
hereof, an acknowledgment of receipt of the SBA Loan by the FTA
relating to such SBA Loan in the form attached as Exhibit 1 to the
Multi-Party Agreement.
(c) The obligation of the Trust Fund to purchase the Unguaranteed
Interest of a Subsequent SBA Loan on any Subsequent Transfer Date is subject to
the requirement, as evidenced by a certificate from a Responsible Officer of the
Seller, that such Subsequent SBA Loan conforms in all material respects to the
representations and warranties concerning the individual Initial SBA Loans set
forth in Sections 3.01 and 3.02 (except that any reference therein to the
Cut-Off Date shall be deemed a reference to the applicable Subsequent Cut-Off
Date) and that the inclusion of all Subsequent SBA Loans being transferred to
the Trust Fund on such Subsequent Transfer Date will not change, in any material
respect, the characteristics of the Initial SBA Loans, in the aggregate, set
forth in Sections 3.1 and 3.2 or in the Confidential Placement Memorandum dated
December 19, 1997 under the headings "Summary of Terms -- The SBA Loan Pool" and
"The SBA Loan Pool." Further, each Subsequent SBA Loan must be an SBA ss.7(a)
Loan. Additionally, following each Subsequent Transfer Date, the weighted
average number of months since origination of all the SBA ss.7(a) Loans
(including the SBA ss.7(a) Loans
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being purchased on such Subsequent Transfer Date) shall be no less than
approximately four months.
(d) In connection with the transfer and assignment of the Subsequent
SBA Loans, the Seller agrees to satisfy the conditions set forth in Sections
2.01, 2.02, 2.03, 2.04 and 2.05.
(e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in January, February and March 1998 and the Special Remittance
Date, the Seller shall determine, and the Trustee shall cooperate with the
Seller in determining (i) the amount and correct dispositions of the Capitalized
Interest Requirements, Overfunded Interest Amounts, and Pre-Funding Earnings and
(ii) any other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. If any amounts are
incorrectly released to the Seller from the Capitalized Interest Account, the
Seller shall immediately repay such amounts to the Trustee.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Seller.
The Seller hereby represents and warrants to the Trustee and the
Certificateholders that as of the Closing Date:
(a) The Seller is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation and
has all licenses necessary to carry on its business as now being conducted and
is licensed, qualified and in good standing in each state where the laws of such
state require licensing or qualification in order to conduct business of the
type conducted by the Seller and perform its obligations hereunder; the Seller
has corporate power and authority to execute and deliver this Agreement and to
perform in accordance herewith and therewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action; this Agreement evidences the
valid, binding and enforceable obligation of the Seller; and all requisite
action has been taken by the Seller to make this Agreement valid, binding and
enforceable upon the Seller in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity, none of
which will affect the ownership of the SBA Loans by the Trustee, as trustee.
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Seller of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
documents on the part of the Seller and the performance by the Seller of its
obligations under this Agreement and such of the other documents to which it is
a party;
(c) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
articles of incorporation or bylaws of the Seller or result in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement, indenture
or
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loan or credit agreement or other material instrument to which the Seller or its
property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is subject;
(d) Neither this Agreement nor any statement, report or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby and thereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading;
(e) The Seller does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
(f) There is no action, order, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against the Seller
which, either in any one instance or in the aggregate, may (i) except as
described in the Confidential Placement Memorandum, result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted, or in any
material liability on the part of the Seller or of any action taken or to be
taken in connection with the obligations of the Seller contemplated herein, or
which would be likely to impair materially the ability of the Seller to perform
under the terms of this Agreement or (ii) which would draw into question the
validity of this Agreement or the SBA Loans;
(g) The Trust Fund will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(h) The Seller is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of the Seller or its properties or might have consequences that would materially
and adversely affect its performance hereunder;
(i) The statements contained in the Confidential Placement
Memorandum which describe the Seller or the SBA Loans or matters or activities
for which the Seller is responsible in accordance with the Confidential
Placement Memorandum, this Agreement and all documents referred to therein or
herein or delivered in connection therewith or herewith, or which are
attributable to the Seller therein or herein are true and correct in all
material respects, and the Confidential Placement Memorandum does not contain
any untrue statement of a material fact with respect to the Seller or the SBA
Loans and does not omit to state a material fact necessary to make the
statements contained therein with respect to the Seller or the SBA Loans not
misleading. The Seller is not aware that the Confidential Placement Memorandum
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained therein not misleading. There is
no fact peculiar to the Seller or the SBA Loans and known to the Seller that
materially adversely affects or in the future may (so far as the Seller can now
reasonably foresee) materially adversely affect the Seller or the SBA Loans or
the
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ownership interests therein represented by the Certificates that has not been
set forth in the Confidential Placement Memorandum;
(j) No Certificateholder is subject to state licensing requirements
solely by virtue of holding the Certificates;
(k) The transfer, assignment and conveyance of the SBA Notes and the
Mortgages by the Seller pursuant to this Agreement are not, or with respect to
the Subsequent SBA Loans, will not be, subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction and do not
violate the SBA Rules and Regulations;
(l) The origination and collection practices used by the Seller with
respect to each SBA Note and Mortgage have been, and the origination and
collection practices to be used by the Seller with respect to each Subsequent
SBA Loan and Mortgage relating to each Subsequent SBA Loan will have been in all
material respects legal, proper, prudent and customary in the SBA loan
origination and servicing business;
(m) Each Initial SBA Loan was and each Subsequent SBA Loan will be,
selected from among the existing SBA loans in the Seller's portfolio at the date
hereof, or in the case of the Subsequent SBA Loans, at the related Subsequent
Cut-Off Date, in a manner not designed to adversely affect the
Certificateholders;
(n) The Seller received fair consideration and reasonably equivalent
value or, in the case of Subsequent SBA Loans, will have received fair
consideration and reasonably equivalent value, in exchange for the sale of the
Unguaranteed Interest of the SBA Loans evidenced by the Certificates;
(o) Neither the Seller nor any of its affiliates sold, or in the
case of the Subsequent SBA Loans will have sold, any interest in any SBA Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
their respective creditors;
(p) The Seller is solvent, and the Seller will not be rendered
insolvent as a result of the transfer of the SBA Loans to the Trust Fund or the
sale of the Certificates, the Seller is paying its debts and after giving effect
to the transactions contemplated herein, the Seller will have adequate capital
to conduct its business; and
(q) The chief executive office and legal name of the Seller is as
set forth on the respective UCC-1 financing statement filed on behalf of the
Seller pursuant to Section 2.04(h), such office is the place where the Seller is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Seller has changed in the past four months. The Seller
has no trade names, fictitious names, or "doing business as" names, except for
"Business Loan Center."
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(r) The Seller will treat the transfer of the SBA Loans as a sale
for federal income tax and accounting purposes.
(s) To the best of Seller's knowledge, all tax returns have been
filed on a timely basis.
Section 3.02. Individual SBA Loans.
The Seller hereby represents and warrants to the Trustee, and the
Certificateholders, with respect to each Initial SBA Loan originated or acquired
by the Seller, as of the Closing Date, and with respect to each Subsequent SBA
Loan originated by the Seller, as of the related Subsequent Transfer Date:
(a) The information with respect to each SBA Loan set forth in the
SBA Loan Schedule is true and correct;
(b) All of the original or certified documentation set forth in
Section 2.04 (including all material documents related thereto) has been or will
be delivered to the Trustee or the FTA, on behalf of the Trustee, on the Closing
Date or as otherwise provided in Section 2.04;
(c) Each Mortgaged Property is improved by a Commercial Property or
a Residential Property and does not constitute other than real property under
state law;
(d) Except with respect to no more than 1% of the SBA Loans, each
SBA Loan has been originated by the Seller or its predecessors and is being
serviced by the Servicer;
(e) Each SBA Loan is an SBA ss. 7(a) Loan and is secured by one or
more items of Collateral;
(f) Except for approximately 2.0% which adjust monthly, each SBA
Note will, with respect to principal payments, adjust quarterly and provide for
a schedule of Monthly Payments which are, if timely paid, sufficient to fully
amortize the principal balance of such SBA Note on its maturity date;
(g) With respect to those SBA Loans secured by a Mortgaged Property,
each Mortgage is a valid and subsisting lien of record on the Mortgaged Property
subject only to any applicable Prior Liens on such Mortgaged Property and
subject in all cases to such exceptions that are generally acceptable to banking
institutions in connection with their regular commercial lending activities, and
such other exceptions to which similar properties are commonly subject and which
do not individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(h) Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Seller
subject to no liens, charges, mortgages, encumbrances or
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rights of others except as set forth in Section 3.02(g) or other liens which
will be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the Trustee
will hold good and indefeasible title, to, and be the sole owner of, each SBA
Loan subject to no liens, charges, mortgages, encumbrances or rights of others
except (i) as set forth in Section 3.02(g), (ii) the interests of the SBA or
(iii) other liens which will be released simultaneously with such transfer and
assignment;
(i) As of the Cut-Off Date (or, with respect to any Subsequent SBA
Loan, as of the related Subsequent Cut-Off Date), no SBA Loan is 30 or more days
delinquent in payment;
(j) To the best of the Seller's knowledge, there is no delinquent
tax or assessment lien on any Mortgaged Property, and each Mortgaged Property is
free of material damage and is in good repair;
(k) The SBA Loan is not subject to any right of rescission,
subordination, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the SBA Note or any related
Mortgage, or the exercise of any right thereunder, render either the SBA Note or
any related Mortgage unenforceable in whole or in part, or subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(l) Each SBA Loan at the time it was made complied and, as of the
Closing Date, complies in all material respects with applicable state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and, if applicable, the SBA Rules and
Regulations;
(m) Each SBA Loan originated by the Seller was originated in
accordance with the underwriting criteria set forth in the Confidential
Placement Memorandum.
(n) Pursuant to the SBA Rules and Regulations, the Seller requires
that the improvements upon each Mortgaged Property are covered by a valid and
existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage described in
Section 5.07;
(o) Pursuant to the SBA Rules and Regulations, the Seller requires
that if a Mortgaged Property is in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards, a flood
insurance policy is in effect with respect to such Mortgaged Property with a
generally acceptable carrier in an amount representing coverage described in
Section 5.07;
(p) Each SBA Note, any related Mortgage and any other agreement
pursuant to which Collateral is pledged to a Seller is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered
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in a proceeding or action in equity or at law), none of which will prevent the
ultimate realization of the security provided by the Collateral or other
agreement, and all parties to each SBA Loan had full legal capacity to execute
all SBA Loan documents and convey the estate therein purported to be conveyed;
(q) The Servicer has caused and will cause to be performed any and
all acts reasonably required to be performed to preserve the rights and remedies
of the Trustee in any insurance policies applicable to the SBA Loans including,
without limitation, in each case, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the Trustee or Seller,
respectively;
(r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Seller (or, subject to Section 2.04 hereof, are in
the process of being recorded);
(s) Each SBA Loan conforms, and all such SBA Loans in the aggregate
conform, to the description thereof set forth in the Confidential Placement
Memorandum;
(t) The terms of the SBA Note and the related Mortgage or other
security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the SBA and
the Certificateholders and which has been delivered to the Trustee;
(u) To the best of the Seller's knowledge there are no material
defaults in complying with the terms of any applicable Mortgage, and all taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due and
owing have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has been
assessed but is not yet due and payable;
(v) To the best of the Seller's knowledge there is no proceeding
pending or threatened for the total or partial condemnation of any Mortgaged
Property, nor is such a proceeding currently occurring, and such property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the SBA Loan or the use for which the premises were
intended;
(w) Each Mortgaged Property which is the primary collateral for the
related SBA Loan was, at the time of origination of such SBA Loan, and to the
best of the Seller's knowledge, is, as of the Cut-off Date, free of
contamination from toxic substances or hazardous wastes or is subject to ongoing
environmental rehabilitation approved by the SBA;
(x) The proceeds of the SBA Loan have been fully disbursed, and
there is no obligation on the part of the Seller to make future advances
thereunder and the Guaranteed
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Portion of the SBA Loan has been sold in the Secondary Market pursuant to SBA
Form 1086. Any and all requirements as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording the SBA Loans were paid;
(y) There is no obligation on the part of the Seller or any other
party (except for any guarantor of an SBA Loan) to make Monthly Payments in
addition to those made by the Obligor;
(z) No statement, report or other document signed by the Seller
constituting a part of the SBA File contains any untrue statement of fact
provided by the Seller or omits to state a fact necessary to make the statements
contained therein provided by the Seller not misleading;
(aa) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Certificateholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Obligor;
(bb) No SBA Loan has a shared appreciation feature, or other
contingent interest feature;
(cc) With respect to each SBA Loan secured by a Mortgaged Property
and that is not a first mortgage loan, either (i) no consent for the SBA Loan is
required by the holder of any related Prior Lien or (ii) such consent has been
obtained;
(dd) Each SBA Loan was originated to a business located in the State
identified in the SBA Loan Schedule;
(ee) All parties which have had any interest in the SBA Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
any Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state;
(ff) Any related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage;
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(gg) There is no default, breach, violation or event of acceleration
existing under the SBA Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration; and neither the Servicer
nor the Seller have waived any default, breach, violation or event of
acceleration;
(hh) All parties to the SBA Note and any related Mortgage or other
document pursuant to which Collateral was pledged had legal capacity to execute
the SBA Note and any such Mortgage or other document and each SBA Note and
Mortgage or other document have been duly and properly executed by such parties;
(ii) The SBA Loan was not selected for inclusion under this
Agreement from the Seller's portfolio of comparable SBA loans on any basis which
would have a material adverse affect on a Certificateholder;
(jj) All amounts received on and after the Cut-Off Date or, with
respect to the Subsequent SBA Loans, received on and after the related
Subsequent Cut-Off Date, with respect to the SBA Loans have been, to the extent
required by this Agreement, deposited into the Principal and Interest Account
and are, as of the Closing Date, or, with respect to the Subsequent SBA Loans,
as of the related Subsequent Transfer Date, in the Principal and Interest
Account;
(kk) With respect to those SBA Loans secured by Collateral other
than a Mortgaged Property, the related Note, security agreements, if any, and
UCC-1 filed with respect to such Collateral creates a valid and subsisting lien
of record on such Collateral subject only to any Prior Liens, if any, on such
Collateral and subject in all cases to such exceptions that are generally
acceptable to lending institutions in connection with their regular commercial
lending activities, and such other exceptions to which similar Collateral is
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Note, security agreement and UCC-1; and
(ll) Each SBA Loan is secured by one or more items of Collateral and
at the time the related SBA Loan was originated, the aggregate value of all
Collateral securing such SBA Loan was at least equal to the original principal
amount of the related SBA Loan and all Prior Liens securing the related
Collateral.
(mm) To the best of Seller's knowledge, there are no governmental
proceedings or investigations pending or threatened which would adversely affect
payment on the SBA Loans.
Section 3.03 Purchase and Substitution of Defective SBA Loans.
It is understood and agreed that the representations and warranties
set forth in Sections 3.01 and 3.02 shall survive delivery of the Certificates
to the Certificateholders. Upon discovery by the Servicer, any Subservicer or
the Trustee of a breach of any of such representations and warranties which
materially and adversely affects the value of the SBA Loans or the interest of
the Certificateholders or the SBA therein or which materially and adversely
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affects the interests of the Certificateholders and the SBA in the related SBA
Loan in the case of a representation and warranty relating to a particular SBA
Loan (notwithstanding that such representation and warranty was made to the
Seller's best knowledge), the party discovering such breach shall give prompt
written notice to the others. Within 60 days of the earlier of its discovery or
its receipt of notice of any breach of a representation or warranty, the Seller
shall (a) promptly cure such breach in all material respects, (b) purchase the
Unguaranteed Interest of such SBA Loan by depositing in the Principal and
Interest Account, on the next succeeding Determination Date, an amount and in
the manner specified in Section 2.05(b), or (c) if within two years of the
Closing Date, remove such SBA Loan from the Trust Fund (in which case it shall
become a Deleted SBA Loan) and substitute one or more Qualified Substitute SBA
Loans. Any such substitution shall be accompanied by payment by the Seller of
the Substitution Adjustment, if any.
As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the Servicer shall effect such
substitution by delivering to the Trustee and the FTA a certification in the
form attached hereto as Exhibit I, executed by a Servicing Officer, and shall
also deliver to the Trustee and the FTA, as applicable, the documents
constituting the Trustee's Document File for such Qualified Substitute SBA Loan
or Loans.
The Servicer shall deposit in the Principal and Interest Account the
Unguaranteed Percentage of all payments of principal received in connection with
such Qualified Substitute SBA Loan or Loans after the date of such substitution
together with all interest (net of the portion thereof required to be paid to
the related Registered Holder, the FTA's Fee, the Premium Protection Fee and the
Servicing Fee with respect to each SBA Loan and the Additional Fee with respect
to each Additional Fee SBA Loan). Monthly Payments received with respect to
Qualified Substitute SBA Loans on or before the date of substitution will be
retained by the Seller. The Trust Fund will own all payments received with
respect to the Unguaranteed Interest on the Deleted SBA Loan on or before the
date of substitution, and the Seller shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted SBA Loan. The Servicer
shall give written notice to the Trustee that such substitution has taken place
and shall amend the SBA Loan Schedule to reflect the removal of such Deleted SBA
Loan from the terms of this Agreement and the substitution of the Qualified
Substitute SBA Loan or Loans. Upon such substitution, such Qualified Substitute
SBA Loan or Loans shall be subject to the terms of this Agreement in all
respects, including Sections 2.04 and 2.05, and the Seller shall be deemed to
have made with respect to such Qualified Substitute SBA Loan or Loans, as of the
date of substitution, the covenants, representations and warranties set forth in
Sections 3.01 and 3.02. On the date of such substitution, the Seller will remit
to the Servicer, and the Servicer will deposit into the Principal and Interest
Account an amount equal to the Substitution Adjustment.
In addition to the cure, purchase and substitution obligation in
Section 2.05 and this Section 3.03, the Seller shall indemnify and hold harmless
the Trust Fund, the Trustee and the Certificateholders against any loss,
damages, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of the
Seller's representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of
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the Seller set forth in Sections 2.05 and 3.03 to cure, purchase or substitute
for a defective SBA Loan and to indemnify the Certificateholders and the Trustee
as provided in Sections 2.05 and 3.03 constitute the sole remedies of the
Trustee and the Certificateholders respecting a breach of the foregoing
representations and warranties.
Any cause of action against the Servicer or the Seller relating to
or arising out of the breach of any representations and warranties made in
Sections 2.05, 3.01 or 3.02 shall accrue as to any SBA Loan upon (i) discovery
of such breach by any party and notice thereof to the Seller and or notice
thereof by the Seller to the Trustee, (ii) failure by the Seller to cure such
breach or purchase or substitute such SBA Loan as specified above, and (iii)
demand upon the Seller by the Trustee for all amounts payable hereunder in
respect of such SBA Loan.
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ARTICLE IV
THE CERTIFICATES
Section 4.01. Certificates.
The Class A and Class B Certificates shall be substantially in the
forms annexed hereto as Exhibits B-1 and B-2 and shall, upon original issue, be
executed and delivered by the Servicer to the Trustee for authentication and
redelivery to or upon the order of the Seller, upon receipt by the Trustee and
the FTA of the documents specified in Section 2.04. All Certificates shall be
executed on behalf of the Servicer by its President, its Treasurer, one of its
Executive Vice Presidents, one of its Vice Presidents or one of its Assistant
Vice Presidents, in the denominations specified in the definition of Percentage
Interest, and shall be authenticated on behalf of the Trustee by one of its
Responsible Officers. Certificates bearing the signatures of individuals who
were at the time of the execution or authentication of the Certificates the
proper officers of the Servicer or a Responsible Officer of the Trustee, as the
case may be, shall bind the Servicer or the Trustee, as the case may be,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of such Certificates or did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.
Section 4.02. Registration of Transfer and Exchange of Certificates
(a) The Trustee shall cause to be kept at the office of the
Certificate Registrar, in New York, New York, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, it shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series. Marine Midland Bank is initially
appointed Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided.
(b) Each Class of Certificates shall be issued in minimum
denominations of $100,000 original principal amount and integral multiples of
$1,000 in excess thereof, except that one Class A Certificate and one Class B
Certificate may be in a different denomination so that the sum of the
denominations of all outstanding Class A Certificates and Class B Certificates
shall equal the Original Class A Certificate Principal Balance and the Original
Class B Certificate Principal Balance, respectively. On the Closing Date, the
Trustee will execute and authenticate Individual Certificates all in an
aggregate principal amount that shall equal the Original Class A Certificate
Principal Balance and the Original Class B Certificate Principal Balance.
(c) [Intentionally Omitted.]
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(d) [Intentionally Omitted.]
(e) [Intentionally Omitted.]
(f) [Intentionally Omitted.]
(g) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Certificate
Registrar and, upon satisfaction of the conditions set forth below, the Servicer
shall execute in the name of the designated transferee or transferees, a new
Certificate of the same Percentage Interest and dated the date of authentication
by the Trustee. The Certificate Registrar shall notify the Servicer and the
Trustee of any such transfer.
At the option of the Certificateholders, Certificates may be
exchanged for other Certificates in authorized denominations of a like Class and
aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Servicer shall execute the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall be accompanied by wiring
instructions, if applicable, in the form of Exhibit E(1).
(h) No service charge shall be made for any transfer or exchange of
Certificates, but prior to transfer the Certificate Registrar may require
payment by the transferor of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.
All Certificates surrendered for transfer and exchange shall be
marked canceled by the Authenticating Agent and retained for one year and
destroyed thereafter.
(i) By acceptance of an Individual Certificate, whether upon
original issuance or subsequent transfer, each holder of such a Certificate
acknowledges the restrictions on the transfer of such Certificate set forth in
the Securities Legend and agrees that it will transfer such a Certificate only
as provided herein. In addition to the provisions of Section 4.02(n) the
following restrictions shall apply with respect to the transfer and registration
of transfer of an Individual Certificate to a transferee that takes delivery in
the form of an Individual Certificate:
(i) The Certificate Registrar shall register the transfer of
an Individual Certificate if the requested transfer is being made to
a transferee who has provided the Certificate Registrar with a Rule
144A Certification.
(ii) The Certificate Registrar shall register the transfer of
any Individual Certificate (other than the initial delivery of the
Class B Certificates to the Spread Account Depositor) if (x) the
transferor has advised the Certificate Registrar in writing that the
Certificate is being transferred to an Institutional Accredited
Investor; and (y) prior to the transfer the transferee furnishes to
the Certificate
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Registrar a Transferee Letter, provided that, if based upon an
Opinion of Counsel to the effect that the delivery of (x) and (y)
above are not sufficient to confirm that the proposed transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and
other applicable laws, the Certificate Registrar may as a condition
of the registration of any such transfer require the transferor to
furnish other certifications, legal opinions or other information
prior to registering the transfer of an Individual Certificate.
(j) [Intentionally Omitted.]
(k) [Intentionally Omitted.]
(l) [Intentionally Omitted.]
(m) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another Individual
Certificate or of a beneficial interest in the Global Certificate.
(n) Subject to the restrictions on transfer and exchange set forth
in this Section 4.02, the holder of any Individual Certificate may transfer or
exchange the same in whole or in part (in an initial certificate balance equal
to the minimum authorized denomination or any integral multiple of $1,000 in
excess thereof) by surrendering such Certificate at the Corporate Trust Office,
or at the office of any transfer agent, together with an executed instrument of
assignment and transfer satisfactory in form and substance to the Certificate
Registrar in the case of transfer and a written request for exchange in the case
of exchange. The holder of a beneficial interest in a Global Certificate may,
subject to the rules and procedures of the Depository, cause the Depository (or
its nominee) to notify the Certificate Registrar in writing of a request for
transfer or exchange of such beneficial interest for an Individual Certificate
or Certificates. Following a proper request for transfer or exchange, the
Certificate Registrar shall, within five Business Days of such request made at
such Corporate Trust Office, cause the Trustee to authenticate and the
Certificate Registrar to deliver at such Corporate Trust Office, to the
transferee (in the case of transfer) or holder (in the case of exchange) or send
by first class mail at the risk of the transferee (in the case of transfer) or
holder (in the case of exchange) to such address as the transferee or holder, as
applicable, may request, an Individual Certificate or Certificates, as the case
may require, for a like aggregate Percentage Interest and in such authorized
denomination or denominations as may be requested. The presentation for transfer
or exchange of any Individual Certificate shall not be valid unless made at the
Corporate Trust Office by the registered holder in person, or by a duly
authorized attorney-in-fact.
(o) No transfer of any Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, unless such transfer is made in
reliance upon Rule 144A under the Securities Act and except for the initial
issuance of the Class B Certificates to the Spread Account Depositor, (i) the
Trustee may require
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a written Opinion of Counsel (which may be in-house counsel) acceptable to and
in form and substance reasonably satisfactory to the Trustee that such transfer
may be made pursuant to an exemption, describing the applicable exemption and
the basis therefor, from said Act and laws or is being made pursuant to said Act
and laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Seller, the Servicer or the Trust Fund and (ii) the Trustee shall require the
transferee to execute a Transferee Letter certifying to the Seller and the
Trustee the facts surrounding such transfer, which Transferee Letter shall not
be an expense of the Trustee, the Seller, the Servicer or the Trust Fund. The
holder of a Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Seller and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws. None of the Seller, the Servicer,
the Trustee or the Trust Fund intends or is obligated to register or qualify any
Certificate under the Securities Act or any state securities laws.
(p) No Class B Certificate may be acquired directly or indirectly,
for or on behalf of: (i) an employee benefit plan or other retirement
arrangement subject to ERISA, and/or Section 4975 of the Code, or (ii) any
entity, the assets of which would be deemed plan assets under the Department of
Labor regulations set forth at 29 C.F.R. ss.2510.3-101, other than an "insurance
company general account" within the meaning of Section V(e) of Prohibited
Transaction Class Exemption 95-60 (collectively, a "Plan"). No transfer of a
Class B Certificate representing an Individual Certificate shall be made unless
the Trustee shall have received a certification from the transferee of such
Individual Certificate, acceptable to and in form and substance satisfactory to
the Trustee and the Seller, to the effect that such transferee is either: (i)
not acquiring a Class B Certificate, directly or indirectly, for or on behalf of
a Plan, or (ii) is acquiring such Class B Certificate, directly or indirectly,
for or on behalf of an "insurance company general account" within the meaning of
Section V(e) of Prohibited Transaction Class Exemption 95-60. Notwithstanding
anything else to the contrary herein, in the event any purported transfer of any
Class B Certificate representing an Individual Certificate is made without
delivery of the certification referred to above, such certification shall be
deemed to have been made by the Transferee by its acceptance of such Individual
Certificate. In addition, any purported transfer of a Class B Certificate
representing an Individual Certificate directly or indirectly to or on behalf of
a Plan other than an "insurance company general account" within the meaning of
Section V(e) of Prohibited Transaction Class Exemption 95-60 shall be void and
of no effect. The acquisition of a Class B Certificate representing an interest
in a Global Certificate shall be deemed a representation by the acquirer that it
is either: (i) not acquiring a Class B Certificate, directly or indirectly, for
or on behalf of a Plan, or (ii) is acquiring such Class B Certificate directly
or indirectly, for or on behalf of an "insurance company general account" within
the meaning of Section V(e) of Prohibited Transaction Class Exemption 95-60.
(q) Notwithstanding any other provision of this Agreement to the
contrary, on the Closing Date, the Trustee shall authenticate in the name of,
and deliver to, the Spread Account Depositor, the Class B Certificate in the
form of a single Individual Certificate in an aggregate principal amount equal
to the Original Class B Principal Balance. The Class B Certificate may not be
sold, pledged, transferred, assigned or otherwise conveyed, in whole or in
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part, without the prior written approval of the SBA, a copy of which approval
shall be furnished to the Trustee. A legend to such effect shall be placed on
the Class B Certificate.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Trustee and the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate, and (ii)
there is delivered to the Servicer, the Trustee and the Certificate Registrar
such security or indemnity as may be required by each of them to save each of
them harmless, then, in the absence of notice to the Servicer, the Trustee and
the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Servicer shall execute and deliver, and the Trustee shall
authenticate, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like Class, tenor and Percentage
Interest, but bearing a number not contemporaneously outstanding. Upon the
issuance of any new Certificate under this Section 4.03, the Servicer and the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. Any duplicate Certificate issued pursuant to this
Section 4.03 shall constitute complete and indefeasible evidence of ownership in
the Trust Fund, as if originally issued, whether or not the mutilated,
destroyed, lost or stolen Certificate shall be found at any time.
Section 4.04. Persons Deemed Owners
Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Seller, the Trustee, the Paying Agent and the
Certificate Registrar may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
remittances pursuant to Section 6.07 and for all other purposes whatsoever, and
the Seller, the Servicer, the Trustee and the Certificate Registrar shall not be
affected by notice to the contrary.
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ARTICLE V
ADMINISTRATION AND SERVICING OF SBA LOANS
Section 5.01. Duties of the Servicer.
(a) The Servicer covenants and agrees that it shall act as agent
(and the Servicer is hereby appointed to act as agent) on behalf of the Trust
Fund and that, in such capacity, it shall: (i) prepare and file, or cause to be
prepared and filed, in a timely manner, any Tax Return required to be filed by
the Trust Fund; (ii) prepare and forward, or cause to be prepared and forwarded,
to the Trustee, the Certificateholders and to the Internal Revenue Service and
any other relevant governmental taxing authority all information returns or
reports as and when required to be provided to them in accordance with any
provision of federal, state or local income tax laws; (iii) to the extent that
the affairs of the Trust Fund are within its control, conduct such affairs at
all times that any Certificates are outstanding so as to maintain the status of
the Trust Fund as a grantor trust under any applicable federal, state and local
laws; (iv) pay the amount of any and all federal, state, and local taxes,
imposed on the Trust Fund when and as the same shall be due and payable (but
such obligation shall not prevent the Servicer or any other appropriate Person
from contesting any such tax in appropriate proceedings and shall not prevent
the Servicer from withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings); (v) ensure that any such returns or reports
filed on behalf of the Trust Fund are properly executed by the appropriate
person; and (vi) represent the Trust Fund in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of the
Trust Fund, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any item of the Trust Fund
and otherwise act on behalf of the Trust Fund in relation to any tax matter
involving the Trust Fund. The Servicer shall indemnify the Trustee and the Trust
Fund for any liability it may incur in connection with this Section 5.01(a),
which indemnification shall survive the termination of the Trust Fund; provided,
however, that the Servicer shall not indemnify the Trustee for the Trustee's
negligence or willful misconduct.
(b) The Servicer, as independent contract servicer, shall service
and administer the SBA Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the Multi-Party Agreement and the SBA Rules
and Regulations. The Servicer may enter into Subservicing Agreements for any
servicing and administration of SBA ss. 7(a) Loans with any entity approved with
prior written consent by the SBA. Any such Subservicing Agreement shall be
consistent with and not violate the provisions of this Agreement and the
Multi-Party Agreement. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and to either itself directly service the related SBA
ss. 7(a) Loans or enter into a Subservicing Agreement with a successor
subservicer which qualifies hereunder.
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(c) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the SBA and the Certificateholders for the servicing and administering
of the SBA Loans in accordance with the provisions of this Agreement and the
Multi-Party Agreement and the SBA Rules and Regulations, without diminution of
such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the SBA Loans. For purposes of this Agreement,
the Servicer shall be deemed to have received payments on SBA Loans when any
Subservicer has received such payments. The Servicer shall be entitled to enter
into any agreement with a Subservicer for indemnification of the Servicer by
such Subservicer, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the SBA Loans involving a Subservicer in
its capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone, and the Trustee, the SBA and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 5.01(e).
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee shall, subject to Section 10.02 hereof and the Multi-Party Agreement,
thereupon assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Trustee is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The Trustee, its designee or the successor servicer
for the Trustee shall be deemed to have assumed all of the Servicer's interest
therein and to have replaced the Servicer as a party to each Subservicing
Agreement to the same extent as if the Subservicing Agreements had been assigned
to the assuming party, except that the Servicer shall not thereby be relieved of
any liability or obligations under the Subservicing Agreements. The Servicer at
its expense and without right of reimbursement therefor, shall, upon request of
the Trustee, deliver to the assuming party all documents and records relating to
each Subservicing Agreement and the SBA Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) So long as it is consistent with the terms of this Agreement and
the Multi-Party Agreement, the SBA Agreement (as defined in the Multi-Party
Agreement) and the SBA Rules and Regulations, the Servicer may waive, modify or
vary any term of any SBA Loan or consent to the postponement of strict
compliance with any such term or in any manner grant indulgence to any Obligor
if in the Servicer's determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the SBA and the
Certificateholders, provided, however, that (unless (x) the Obligor is in
default with respect to the SBA Loan, or such default is, in the judgment of the
Servicer, imminent and (y) the Servicer
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determines that any modification would not be considered a new loan for federal
income tax purposes) the Servicer may not permit any modification with respect
to any SBA Loan that would change the SBA Loan Interest Rate, defer (subject to
Section 5.12), or forgive the payment of any principal or interest (unless in
connection with the liquidation of the related SBA Loan), or extend the final
maturity date on such SBA Loan without the consent of the SBA, if such consent
is then required by the SBA Rules and Regulations. The Servicer may exercise all
unilateral servicing actions permitted by participating lenders in accordance
with the SBA Rules and Regulations. No costs incurred by the Servicer or any
Subservicer in respect of Servicing Advances shall for the purposes of
distributions to Certificateholders be added to the amount owing under the
related SBA Loan. Without limiting the generality of the foregoing, so long as
it is consistent with the SBA Rules and Regulations, the Servicer shall
continue, and is hereby authorized and empowered to execute and deliver on
behalf of the Trustee, the SBA and each Certificateholder, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the SBA Loans and with respect to
any Mortgaged Properties or other Collateral. If reasonably required by the
Servicer, each Certificateholder and/or the Trustee shall furnish the Servicer,
within 5 Business Days of receipt of the Servicer's request, with any powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement. Any such
request to the Trustee shall be accompanied by a certification in the form of
Exhibit I attached hereto signed by a Servicing Officer.
The Servicer, in servicing and administering the SBA Loans, shall
employ or cause to be employed procedures (including collection, foreclosure and
Foreclosed Property management procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering SBA Loans for
its own account, in accordance with the SBA Rules and Regulations and giving due
consideration to the Certificateholders' and the SBA's reliance on the Servicer.
(g) On and after such time as the Trustee receives the resignation
of, or notice of the removal of, the Servicer from its rights and obligations
under this Agreement, and with respect to resignation pursuant to Section 9.04,
after receipt of the Opinion of Counsel required pursuant to Section 9.04
addressed to the SBA and the Trustee, the Trustee or its designee shall assume
all of the rights and obligations of the Servicer, subject to Section 10.02
hereof and the Multi-Party Agreement. The Servicer shall, upon request of the
Trustee but at the expense of the Servicer, deliver to the Trustee all documents
and records (including computer tapes and diskettes) relating to the SBA Loans
and an accounting of amounts collected and held by the Servicer and otherwise
use its best efforts to effect the orderly and efficient transfer of servicing
rights and obligations to the assuming party.
(h) For so long as any of the Certificates are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) of the Securities
Act, (1) the Servicer will provide or cause to be provided to any holder of such
Certificates and any prospective purchaser thereof designated by such a holder,
upon the request of such holder or prospective purchaser, the information
required to be provided to such holder or prospective purchaser by Rule
144A(d)(4) under the Securities Act; and (2) the Servicer shall update such
information from time to time in
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order to prevent such information from becoming false and misleading and will
take such other actions as are necessary to ensure that the safe harbor
exemption from the registration requirements of the Securities Act under Rule
144A is and will be available for resales of such Certificates conducted in
accordance with Rule 144A.
Section 5.02. Liquidation of SBA Loans.
In the event that any payment due under any SBA Loan and not
postponed pursuant to Section 5.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the SBA Loan, the Servicer shall take such action in accordance
with the applicable SBA Rules and Regulations as it shall deem to be in the best
interests of the Certificateholders and the SBA. With respect to any such SBA
ss. 7(a) Loan for which the SBA has expressed to the Servicer the SBA's desire
to assume servicing of such SBA Loan consistent with the SBA Rules and
Regulations, the Trustee shall, upon written direction of the Servicer, deliver
to the SBA or its designee all or any portion of the Trustee's Document File
relating to such SBA ss. 7(a) Loan and the Trustee shall execute such documents,
including but not limited to an endorsement of the related SBA Note and an
assignment of the related Mortgage, as the Servicer shall request. Expenses
incurred in connection with any such action shall be the responsibility of the
Servicer and shall not be chargeable to the Principal and Interest Account or
the Certificate Account. Subject to the SBA Rules and Regulations and with the
prior written consent of the SBA (if required by the SBA Rules and Regulations),
the Servicer shall foreclose upon or otherwise comparably effect the ownership
in the name of the SBA of Mortgaged Properties or other Collateral relating to
defaulted SBA ss. 7(a) Loans for which the related SBA ss. 7(a) Loan is still
outstanding, as to which no satisfactory arrangements can be made for collection
of delinquent payments in accordance with the provisions of Section 5.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise collection and foreclosure procedures with the same degree of care and
skill in its exercise or use as it would exercise or use under the circumstances
in the conduct of its own affairs. The Unguaranteed Percentage of any amounts
advanced in connection with such foreclosure or other action shall constitute
"Servicing Advances." The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes on Mortgaged Properties
in determining whether to foreclose upon or otherwise comparably convert the
ownership of such Mortgaged Property, and will not foreclose on a Mortgaged
Property where it has cause to believe such substances exist unless it has
received a Phase I environmental report and such report reveals no environmental
problems, or such Mortgaged Property is subject to an environmental
rehabilitation for which the Seller is not responsible.
After an SBA Loan has become a Liquidated SBA Loan, the Servicer
shall promptly prepare and forward to the Trustee and the SBA and upon request,
any Certificateholder, a Liquidation Report, in the form attached hereto as
Exhibit J, detailing the Liquidation Proceeds received from the Liquidated SBA
Loan, expenses incurred with respect thereto, and any loss incurred in
connection therewith.
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Section 5.03. Establishment of Principal and Interest Accounts;
Deposits in Principal and Interest Accounts.
(a) The Servicer shall cause to be established and maintained one or
more Principal and Interest Accounts, in one or more Designated Depository
Institutions, in the form of time deposit or demand accounts, which may be
interest-bearing or such accounts may be trust accounts wherein the moneys
therein are invested in Permitted Instruments, titled "Business Loan Center,
Inc., in trust for the registered holders of Business Loan Center, SBA
Loan-Backed Adjustable Rate Certificates, Series 1997-1, Class A and Class B."
Such Principal and Interest Accounts shall be insured by the BIF or SAIF
administered by the FDIC to the maximum extent provided by law. The creation of
any Principal and Interest Account shall be evidenced by a letter agreement in
the form of Exhibit C hereto.
A copy of such letter agreement shall be furnished to the Trustee,
the SBA and, upon request, any Certificateholder.
(b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the Principal and
Interest Account and retain therein:
(i) the Unguaranteed Percentage of all payments received
after the Cut-Off Date on account of principal on the SBA Loans,
including the Unguaranteed Percentage of all Excess Payments,
Principal Prepayments and Curtailments collected after the Cut-Off
Date;
(ii) all payments received after the Cut-Off Date on
account of interest on the SBA Loans (net of the portion thereof
required to be paid to the related Registered Holders, the Premium
Protection Fee, the FTA's Fee and the Servicing Fee with respect to
each SBA Loan, the Additional Fee with respect to each Additional
Fee SBA Loan, and other servicing compensation payable to the
Servicer as permitted herein);
(iii) the Unguaranteed Percentage of all Net Liquidation
Proceeds;
(iv) the Unguaranteed Percentage of all Insurance
Proceeds (other than amounts to be applied to restoration or repair
of any related Mortgaged Property, or to be released to the Obligor
in accordance with customary servicing procedures);
(v) the Unguaranteed Percentage of all Released
Mortgaged Property Proceeds;
(vi) any amounts paid in connection with the repurchase
of the Unguaranteed Interest of any SBA Loan and the amount of any
Substitution Adjustment received pursuant to Sections 2.05 and 3.03;
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(vii) any amount required to be deposited in the
Principal and Interest Account pursuant to Section 5.10; and
(viii) the amount of any losses incurred in connection
with investments in Permitted Instruments.
(c) The foregoing requirements for deposit in the Principal and
Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest, the Premium Protection Fee, the FTA's Fee and the Servicing
Fee (to the extent received and permitted by Section 7.03), with respect to each
SBA Loan and the Additional Fee with respect to each Additional Fee SBA Loan,
together with the difference between any Liquidation Proceeds and the related
Net Liquidation Proceeds, need not be deposited by the Servicer in the Principal
and Interest Account.
(d) Any interest earnings on funds held in the Principal and
Interest Account paid by a Designated Depository Institution shall be for the
account of the Servicer and may only be withdrawn from the Principal and
Interest Account by the Servicer immediately following its monthly remittance to
the Trustee pursuant to Section 5.04(a). Any reference herein to amounts on
deposit in the Principal and Interest Account shall refer to amounts net of such
investment earnings.
Section 5.04. Permitted Withdrawals From the Principal and Interest
Account
The Servicer shall withdraw funds from the Principal and Interest
Account for the following purposes:
(a) to effect the remittance to the Trustee on each Determination
Date for deposit in the Certificate Account, the portion of the Available Funds
for the related Remittance Date that is net of Compensating Interest, Monthly
Advances and amounts then on deposit in the Spread Account;
(b) to reimburse itself for any accrued unpaid Servicing Fees and
Premium Protection Fees, unreimbursed Monthly Advances and for unreimbursed
Servicing Advances to the extent deposited in the Principal and Interest Account
(and not netted from Monthly Payments received). The Servicer's right to
reimbursement for unpaid Servicing Fees and, except as provided in the following
sentence, Servicing Advances and Monthly Advances shall be limited to
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and such other amounts as may be collected by the Servicer from the Obligor or
otherwise relating to the SBA Loan in respect of which such unreimbursed amounts
are owed. The Servicer's right to reimbursement for Servicing Advances and
Monthly Advances in excess of such amounts shall be limited to any late
collections of interest received on the SBA Loans generally, including
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and any other amounts;
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(c) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(d) (i) to make investments in Permitted Instruments and (ii) to pay
to itself, as permitted by Section 5.03(d), interest paid in respect of
Permitted Instruments or by a Designated Depository Institution on funds
deposited in the Principal and Interest Account;
(e) to withdraw any funds deposited in the Principal and Interest
Account that were not required to be deposited therein or were deposited therein
in error;
(f) to pay itself servicing compensation pursuant to Section 7.03
hereof or interest as permitted under the definition of Excess Proceeds; and
(g) to clear and terminate the Principal and Interest Account upon
the termination of this Agreement.
So long as no default or Event of Default shall have occurred and be
continuing, and consistent with any requirements of the Code, the Principal and
Interest Account shall either be maintained with a Designated Depository
Institution as an interest-bearing account meeting the requirements set forth in
Section 5.03(a), or the funds held therein may be invested by the Servicer (to
the extent practicable) in Permitted Instruments, as directed in writing by the
Servicer. In either case, funds in the Principal and Interest Account must be
available for withdrawal without penalty, and any Permitted Instruments must
mature not later than the Business Day immediately preceding the Determination
Date next following the date of such investment (except that if such Permitted
Instrument is an obligation of the institution that maintains such account, then
such Permitted Instrument shall mature not later than such Determination Date)
and shall not be sold or disposed of prior to its maturity. All Permitted
Instruments must be held by or registered in the name of "Business Loan Center,
Inc. in trust for the registered holders of Business Loan Center SBA Loan-Backed
Adjustable Rate Certificates, Series 1997-1." All interest or other earnings
from funds on deposit in the Principal and Interest Account (or any Permitted
Instruments thereof) shall be the exclusive property of the Servicer, and may be
withdrawn from the Principal and Interest Account pursuant to clause (d) above.
The amount of any losses incurred in connection with the investment of funds in
the Principal and Interest Account in Permitted Instruments shall be deposited
in the Principal and Interest Account by the Servicer from its own funds
immediately as realized without reimbursement therefor.
Section 5.05. [Intentionally Omitted]
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Section 5.06. Transfer of Accounts.
The Servicer may, upon written notice to the Trustee and the SBA,
transfer any Principal and Interest Account to a different Designated Depository
Institution.
Section 5.07. Maintenance of Hazard Insurance.
The Servicer shall comply with the SBA Rules and Regulations
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of an SBA Loan, to the best of the Servicer's knowledge after
reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the SBA Rules and Regulations, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged Property, or (ii) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain, to the extent such insurance is
available and required by the SBA Rules and Regulations, on Foreclosed Property
constituting real property, fire and hazard insurance in the amounts described
above and liability insurance. Any amounts collected by the Servicer under any
such policies (other than amounts to be applied to the restoration or repair of
the Mortgaged Property, or to be released to the Obligor in accordance with the
SBA Rules and Regulations) shall be deposited in the Principal and Interest
Account, subject to withdrawal pursuant to Section 5.04. It is understood and
agreed that no earthquake or other additional insurance need be required by the
Servicer of any Obligor or maintained on Foreclosed Property, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. All policies required
hereunder shall be endorsed with standard mortgagee clauses with losses payable
to the Servicer or its affiliates.
Section 5.08. [Intentionally Omitted]
Section 5.09. Fidelity Bond.
The Servicer shall maintain with a responsible company, and at its
own expense, a blanket fidelity bond and an errors and omissions insurance
policy, in a minimum amount equal to $500,000, and a maximum deductible of
$25,000, if commercially available, with coverage on all employees acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the SBA Loans ("Servicer Employees"). The fidelity bond shall insure
the Trustee, its officers and employees against losses resulting from forgery,
theft, embezzlement or fraud by such Servicer Employees. The errors and
omissions policy shall insure against losses resulting from the errors,
omissions and negligent acts of such Servicer Employees. No provision of this
Section 5.09 requiring such fidelity bond and errors and omissions insurance
shall relieve the Servicer from its duties as set forth in this Agreement. Upon
the request of the Trustee, the SBA or any Certificateholder, the Servicer shall
cause to be delivered to the Trustee, the SBA or such Certificateholder a
certified true copy of such fidelity bond and insurance policy. The
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current issuer of such fidelity bond is Aetna Casualty and Surety and the
current issuer of such insurance policy is Lloyd's of London.
Section 5.10. Title, Management and Disposition of Foreclosed
Property
In the event that title to a Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosed Property"), the
deed or certificate of sale may be taken in the name of the Trustee on behalf of
the Trust for the benefit of the Certificates and the SBA, as their interests
may appear.
Unless the servicing of a Foreclosed Property relating to an SBA ss.
7(a) Loan is assumed by the SBA pursuant to the SBA Rules and Regulations, the
Servicer, subject to Sections 5.01 and 5.02 hereof, shall manage, conserve,
protect and operate each Foreclosed Property for the SBA and the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosed Property in the
same manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the Foreclosed Property is managed. The Servicer shall
attempt to sell the same (and may temporarily rent the same) on such terms and
conditions as the Servicer deems to be in the best interest of the SBA and the
Certificateholders.
The Servicer shall cause to be deposited in the Principal and
Interest Account, no later than five Business Days after the receipt thereof,
the Unguaranteed Percentage of all revenues received with respect to the
conservation and disposition of the related Foreclosed Property net of Servicing
Advances.
The disposition of Foreclosed Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer,
with SBA concurrence (if required by the SBA Rules and Regulations), deems to be
in the best interest of the SBA and the Certificateholders. The Unguaranteed
Percentage of the proceeds of sale of the Foreclosed Property shall promptly,
but in no event later than two Business Days after receipt, be deposited in the
Principal and Interest Account as received from time to time and, as soon as
practicable thereafter, the expenses of such sale shall be paid. The Servicer
shall, subject to Section 5.04, reimburse itself for any related unreimbursed
Servicing Advances, unpaid Servicing Fees and unreimbursed Monthly Advances, and
the Servicer shall deposit in the Principal and Interest Account the
Unguaranteed Percentage of the net cash proceeds of such sale to be distributed
to the Certificateholders in accordance with Section 6.07 hereof.
In the event any Mortgaged Property is acquired as aforesaid or
otherwise in connection with a default or imminent default on an SBA Loan, the
Servicer shall dispose of such Mortgaged Property within two years after its
acquisition unless the Servicer and the Trustee shall have received an Opinion
of Counsel also addressed to the SBA to the effect that such longer retention
will not cause the Trust Fund to be subject to Federal income tax.
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Section 5.11. [Intentionally Omitted.]
Section 5.12. Collection of Certain SBA Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the SBA Loans, and shall, to the
extent such procedures shall be consistent with this Agreement, comply with the
terms and provisions of any applicable hazard insurance policy. Consistent with
the foregoing and the SBA Rules and Regulations, the Servicer may in its
discretion waive or permit to be waived any fee or charge (other than the
Servicing Fee, without the written consent of the SBA) which the Servicer would
be entitled to retain hereunder as servicing compensation and extend the due
date for payments due on an SBA Note for a period (with respect to each payment
as to which the due date is extended) not greater than 180 days after the
initially scheduled due date for such payment provided that the Servicer
determines such extension would not be considered a new mortgage loan for
federal income tax purposes. In the event the Servicer shall consent to the
deferment of the due dates for payments due on an SBA Note, the Servicer shall
nonetheless make payment of any required Monthly Advance with respect to the
payments so extended to the same extent as if such installment were due, owing
and delinquent and had not been deferred, and shall be entitled to reimbursement
therefor in accordance with Section 5.04(b) hereof.
Section 5.13. Access to Certain Documentation and Information
Regarding the SBA Loans.
The Servicer shall provide to the Trustee and the SBA access to the
documentation regarding the SBA Loans required by applicable local, state and
federal regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it.
Section 5.14. Superior Liens.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior Lien, or
has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the SBA and the Trust Fund, whatever actions are necessary to protect
the interests of the Certificateholders and the SBA, and/or to preserve the
security of the related SBA Loan. The Servicer shall immediately notify the
Trustee, the Rating Agency and the SBA of any such action or circumstances. The
Servicer will advance the necessary funds to cure the default or reinstate the
superior lien, if such advance is in the best interests of the
Certificateholders and the SBA. The Servicer shall thereafter take such action
as is necessary to recover the amount so advanced.
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ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Establishment of Certificate Account; Deposits in
Certificate Account; Permitted Withdrawals from
Certificate Account.
(a) No later than the Closing Date, the Trustee will establish and
maintain with itself in its trust department a trust account, which shall not be
interest-bearing, titled "Certificate Account, Marine Midland Bank, as trustee
for the registered holders of Business Loan Center SBA Loan-Backed Adjustable
Rate Certificates, Series 1997-1, Class A and Class B" (the "Certificate
Account"). The Trustee shall, promptly upon receipt, deposit in the Certificate
Account and retain therein:
(i) the Available Funds (net of the amount of Monthly
Advances and Compensating Interest deposited pursuant to subclause
(ii) below and amounts then on deposit in the Spread Account)
remitted by the Servicer;
(ii) the Compensating Interest and the portion of the
Monthly Advance remitted to the Trustee by the Servicer;
(iii) amounts transferred from the Spread Account
pursuant to Section 6.02(b)(i);
(iv) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on investments
of amounts in the Certificate Account; and
(v) amounts transferred from the Pre-Funding Account and
the Capitalized Interest Account on the Special Remittance Date
pursuant to Sections 6.04(c) and (d) respectively.
(b) Amounts on deposit in the Certificate Account shall be withdrawn
on each Remittance Date by the Trustee, or the Paying Agent, on its behalf, to
effect the distribution described in Section 6.07(b) and thereafter by the
following parties in no particular order of priority:
(i) by the Trustee, to invest amounts on deposit in the
Certificate Account in Permitted Instruments pursuant to Section
6.06;
(ii) by the Trustee, to pay on a monthly basis to the
Servicer as additional servicing compensation interest paid and
earnings realized on Permitted Instruments;
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(iii) by the Trustee, to withdraw any amount not
required to be deposited in the Certificate Account or deposited
therein in error; and
(iv) by the Trustee, to clear and terminate the
Certificate Account upon the termination of this Agreement in
accordance with the terms of Section 11.01 hereof.
Section 6.02. Establishment of Spread Account; Deposits in Spread
Account; Permitted Withdrawals from Spread Account.
(a) No later than the Closing Date, the Trustee will establish with
the Spread Account Custodian an Account in accordance with the terms of the
Spread Account Agreement (the "Spread Account"). The Spread Account shall be the
property of the Spread Account Depositor, subject to the terms hereof and of the
Spread Account Agreement, and the funds held therein may be invested in
Permitted Instruments. The Spread Account shall not constitute part of the Trust
Fund. The Trustee or the Spread Account Custodian, as the case may be, shall,
promptly upon receipt, deposit into the Spread Account or, in the case of the
Trustee, transfer to the Spread Account Custodian for deposit in the Spread
Account:
(i) on the Closing Date, the Initial Deposit made by the
Spread Account Depositor;
(ii) on each Remittance Date, that portion of the
Available Funds, if any, required to be deposited into the Spread
Account pursuant to Section 6.07(b)(vii) until the Spread Balance
equals the then applicable Specified Spread Account Requirement; and
(iii) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on investments
of amounts in the Spread Account.
(b) Amounts on deposit in the Spread Account shall be withdrawn by
the Spread Account Custodian and transferred to the Trustee for distribution in
the manner set forth in subclause (c) below on each Remittance Date in the
following order of priority:
(i) to deposit in the Certificate Account an amount by
which (a) the sum of the Class A and Class B Interest Distribution
Amounts, the Class A and Class B Principal Distribution Amounts and
the Class A and Class B Carry Forward Amounts exceeds (b) the
Available Funds for such Remittance Date (but excluding from such
definition of Available Funds, amounts in the Spread Account);
(ii) to deposit in the Certificate Account the amount,
if any, required to make the full distribution to the Expense
Account pursuant to Section 6.07(b)(v); and
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(iii) to the extent that the amount then on deposit in
the Spread Account after giving effect to all required transfers
from the Spread Account to the Certificate Account on such
Remittance Date then exceeds the Specified Spread Account
Requirement as of such Remittance Date (such excess, a "Spread
Account Excess"), an amount equal to such Spread Account Excess
shall be distributed by the Spread Account Custodian to the Spread
Account Depositor;
and also, in no particular order of priority:
(iv) to invest amounts on deposit in the Spread Account
in Permitted Instruments pursuant to Section 6.06;
(v) to withdraw any amount not required to be deposited
in the Spread Account or deposited therein in error; and
(vi) to clear and terminate the Spread Account upon the
termination of this Agreement in accordance with the terms of
Section 11.01.
(c) Any amounts which are required to be withdrawn from the Spread
Account pursuant to paragraph (b) above shall be withdrawn from the Spread
Account in the following order of priority: (i) first, from any uninvested funds
therein, and (ii) second, from the proceeds of the liquidation of any
investments therein pursuant to Section 6.06(b).
Section 6.03. Establishment of Expense Account; Deposits in Expense
Account; Permitted Withdrawals from Expense Account
(a) No later than the Closing Date, the Trustee will establish with
itself an account for the benefit of the Trustee to pay its fees and expenses
related to the Trust Fund (the "Expense Account"). The Expense Account shall not
constitute part of the Trust Fund and is for the benefit of the Trustee and, on
a subordinate basis, for the benefit of the Servicer as described in (b)(ii) and
(c) below. The Trustee shall deposit into the Expense Account:
(i) on each Remittance Date from the amounts on deposit
in the Certificate Account an amount equal to one-twelfth of the
Annual Expense Escrow Amount; and
(ii) upon receipt, amounts required to be paid by the
Servicer pursuant to Section 6.06(e) in connection with losses on
investments of amounts in the Expense Account.
If, at any time the amount then on deposit in the Expense Account shall be
insufficient to pay in full the fees and expenses of the Trustee then due, the
Trustee shall make demand on the Servicer to advance the amount of such
insufficiency, and the Servicer shall promptly advance such amount. Thereafter,
the Servicer shall be entitled to reimbursement from the Expense Account
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for the amount of any such advance from any excess funds available pursuant to
subclause (c)(ii) below. Without limiting the obligation of the Servicer to
advance such insufficiency, in the event the Servicer does not advance the full
amount of such insufficiency by the Business Day immediately preceding the
Determination Date, the amount of such insufficiency shall be deposited into the
Expense Account for payment to the Trustee pursuant to Section 6.07(b)(v), to
the extent of available funds in the Certificate Account.
(b) The Trustee may invest amounts on deposit in the Expense Account
in Permitted Instruments pursuant to Section 6.06 hereof, and the Trustee shall
withdraw amounts on deposit in the Expense Account to:
(i) pay the Trustee's fees and expenses as described in
Section 2.08 hereof;
(ii) pay on a monthly basis to the Servicer as additional
servicing compensation interest paid and earnings realized on
Permitted Instruments;
(iii) withdraw any amounts not required to be deposited in the
Expense Account or deposited therein in error; and
(iv) clear and terminate the Expense Account upon the
termination of this Agreement in accordance with the terms of
Section 11.01.
(c) On the twelfth Remittance Date following the Closing Date, and
on each twelfth Remittance Date thereafter, the Trustee shall determine that all
payments required to be made during the prior twelve month period pursuant to
subclauses (b)(i), (b)(ii) and (b)(iii) above, have been made, and, if all such
payments have been made, from the amounts remaining in the Expense Account, the
Trustee shall (in the following order of priority):
(i) reimburse the Servicer and/or the Seller, for reimbursable
advances made pursuant to Section 9.01;
(ii) reimburse the Servicer for advances made by it pursuant
to the last paragraph of subclause (a) above; and
(iii) remit to the Servicer as additional servicing
compensation any amounts remaining in the Expense Account after
payments made pursuant to subclauses (b)(i), (b)(ii), (b)(iii),
(c)(i) and (c)(ii), above.
Section 6.04 Establishment of Pre-Funding Account; Deposits in
Pre-Funding Account; Permitted Withdrawals from
Pre-Funding Account.
(a) No later than the Closing Date, the Spread Account Depositor
shall establish and maintain with the Trustee in its trust department a trust
account, which shall not be interest-bearing, titled "Business Loan Center SBA
Pre-Funding Account 1997-1" (the "Pre-
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Funding Account"). The Pre-Funding Account shall not constitute part of the
Trust Fund. The Seller shall be deemed the owner of the Pre-Funding Account for
Federal income tax purposes. The Trustee shall, promptly upon receipt, depsit
into the Pre-Funding Account and retain therein the Original Pre-Funded Amount
from the proceeds of the sale of the Certificates.
(b) On each Subsequent Transfer Date, the Seller shall
instruct the Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Principal Balances of the Subsequent SBA Loans as of the
related Subsequent Cut-Off Date sold to the Trust Fund on such Subsequent
Transfer Date and pay such amount to or upon the order of the Seller with
respect to such transfer.
(c) If at the end of the Funding Period amounts still remain
in the Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw
from the Pre-Funding Account on the immediately following Remittance Date and
deposit such amounts in the Certificate Account. However, if at the close of
business on the March 1998 Determination Date, amounts still remain in the
Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw from
the Pre-Funding Account on the Special Remittance Date and deposit in the
Certificate Account any Pre-Funded Amount then remaining in the Pre-Funding
Account.
(d) On the Remittance Dates occurring in January, February,
and March 1998, the Trustee shall transfer from the Pre-Funding Account to the
Certificate Account, the Pre-Funding Earnings, if any, applicable to each such
Remittance Date.
Section 6.05. Establishment of Capitalized Interest Account;
Deposits in Capitalized Interest Account; Permitted
Withdrawals from Capitalized Interest Account.
(a) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department a trust account, which
shall not be interest bearing, titled "Business Loan Center SBA Capitalized
Interest Account 1997-1" (the "Capitalized Interest Account"). The Capitalized
Interest Account shall not constitute part of the Trust Fund. The Seller shall
be deemed the owner of the Capitalized Interest Account for Federal income tax
purposes. The Trustee shall, promptly upon receipt, deposit into the Capitalized
Interest Account $23,065.00. If prior to the end of the Funding Period the funds
on deposit in the Pre-Funding Account are invested in a guaranteed investment
contract, repurchase agreement or other arrangement acceptable to the Rating
Agency, that constitutes a Permitted Instrument, the Trustee shall, within one
Business Day of its receipt of notification of satisfaction of the Rating Agency
Condition, withdraw from the Capitalized Interest Account and pay to the Seller
the amount set forth in such notification.
(b) On each Subsequent Transfer Date the Seller may instruct
the Trustee to withdraw from the Capitalized Interest Account and pay on such
Subsequent Transfer Date to the Seller the Overfunded Interest Amount for such
Subsequent Transfer Date, as calculated by the Seller pursuant to Section
2.09(e) hereof.
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(c) On the Remittance Dates occurring in January, February and
March 1998 the Trustee shall transfer from the Capitalized Interest Account to
the Certificate Account, the Capitalized Interest Requirement, if any, for such
Remittance Dates.
(d) On the Special Remittance Date, the Trustee shall transfer
from the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Special Remittance Date. Any amounts
remaining in the Capitalized Interest Account after taking into account such
transfer shall be paid on such Special Remittance Date to the Seller, and the
Capitalized Interest Account shall be closed.
Section 6.06. Investment of Accounts.
(a) So long as no default or Event of Default shall have occurred
and be continuing, and consistent with any requirements of the Code, all or a
portion of any Account which is not by the terms of this Agreement to be held
uninvested held by the Trustee or the Spread Account Custodian shall be invested
and reinvested by the Trustee or the Spread Account Custodian, as directed in
writing by the Servicer, in one or more Permitted Instruments in the name of the
Trustee or the Spread Account Custodian, as the case may be, bearing interest or
sold at a discount. No such investment in the Certificate Account, the
Pre-Funding Account, the Capitalized Interest Account, the Expense Account and
the Spread Account shall mature later than the Business Day immediately
preceding the next Remittance Date and no such investment in the Expense Account
shall mature later than the Business Day immediately preceding the date such
funds will be needed to pay fees or premiums; provided, however, the Trustee or
any affiliate thereof, may be the obligor on any investment which otherwise
qualifies as a Permitted Instrument and any investment on which the Trustee is
the obligor may mature on such Remittance Date or date when needed, as the case
may be.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee or the Spread Account Custodian and sufficient uninvested funds
are not available to make such disbursement, the Trustee or the Spread Account
Custodian, as the case may be, shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Account. Neither the Trustee
nor the Spread Account Custodian shall be liable for any investment loss or
other charge resulting therefrom.
(c) Subject to Section 12.01 hereof, neither the Trustee nor the
Spread Account Custodian shall in any way be held liable by reason of any
insufficiency in any Account held by the Trustee or the Spread Account Custodian
resulting from any investment loss on any Permitted Instrument included therein
(except to the extent that the Trustee is the obligor thereon).
(d) The Trustee and the Spread Account Custodian shall invest and
reinvest funds in the Accounts held by the Trustee or the Spread Account
Custodian, to the fullest extent practicable, in such manner as the Servicer
shall from time to time direct in writing, but only in one or more Permitted
Instruments.
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(e) All income or other gain from investments in any Account held by
the Trustee or the Spread Account Custodian shall be deposited in such Account,
as the case may be, immediately on receipt, and the Trustee or the Spread
Account Custodian shall notify the Servicer of any loss resulting from such
investments. The Servicer shall remit the amount of any such loss from its own
funds, without reimbursement therefor, to the Trustee or the Spread Account
Custodian, as the case may be, for deposit in the Account from which the related
funds were withdrawn for investment by the next Determination Date following
receipt by the Servicer of such notice.
Section 6.07. Distributions.
(a) The rights of the Certificateholders to receive distributions
from the proceeds of the Trust Fund, and all ownership interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement.
(b) On each Remittance Date the Trustee shall withdraw from the
Certificate Account the sum of (A) that portion of the Available Funds received
from the Servicer pursuant to Section 6.01(a)(i), (ii) and (iv) and (B) the
amounts deposited therein pursuant to Section 6.02(b)(i), and make distributions
thereof in the following order of priority:
(i) First, to the Class A Certificates in an amount up to the
Class A Interest Distribution Amount;
(ii) Second, to the Class B Certificates in an amount up to
the Class B Interest Distribution Amount;
(iii) Third, to the Class A Certificates in an amount up to
the sum of (a) the Class A Principal Distribution Amount and (b) the
Class A Carry Forward Amount;
(iv) Fourth, to the Class B Certificates, in an amount up to
the sum of (a) the Class B Principal Distribution Amount and (b) the
Class B Carry Forward Amount;
(v) Fifth, to the Expense Account in an amount up to
one-twelfth of the Annual Expense Escrow Amount plus any amount
required to be paid to the Trustee pursuant to Section 6.03(a)
resulting from insufficiencies in the Expense Account;
(vi) Sixth, to the Servicer in an amount up to the
Reimbursable Amounts;
(vii) Seventh, to the Spread Account, any remaining Available
Funds unless and until the amount therein equals the Specified
Spread Account Requirement; and
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(viii) Eighth, to the Spread Account Depositor, any amounts in
excess of the Specified Spread Account Requirement.
Additionally, on the Special Remittance Date, the Trustee shall
withdraw from the Certificate Account the amount, if any, deposited therein
pursuant to Section 6.01(a)(v) and make distributions thereof as follows: from
amounts transferred from the Pre-Funding Account, distributions of principal to
the Class A and Class B Certificates pro rata based upon the Class A and Class B
Percentages.
(c) All distributions made to the Certificateholders of a particular
Class will be made on a pro rata basis among the Certificateholders of record of
the applicable Class on the next preceding Record Date based on the Percentage
Interest represented by their respective Certificates, and shall be made by
check or, upon request by a Certificateholder, by wire transfer of immediately
available funds to the account of such Certificateholder at a bank or other
entity having appropriate facilities therefor, and, in the case of wire
transfers, at the expense of such Certificateholder unless such
Certificateholder shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Section 6.08. [Intentionally Omitted]
Section 6.09. Statements.
Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Trustee, by telecopy, for
distribution to the Certificateholders, the receipt and legibility of which
shall be confirmed telephonically, with hard copy thereof and the Servicer's
Monthly Computer Tape in the form attached hereto as Exhibit L (both in hard
copy and in computer tape form) to be delivered on the Business Day following
the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Certificates, the date of this Agreement, and, as of the close of
business on the Record Date for such month:
(i) Available Funds for the related Remittance Date, in the
aggregate and by component;
(ii) The Aggregate Class A Certificate Principal Balance, the
Aggregate Class B Certificate Principal Balance and the Pool
Principal Balance as reported in the prior Servicer's Certificate
pursuant to subclause (xii) below, or, in the case of the first
Determination Date, the Original Class A and Class B Certificate
Principal Balance and the Original Pool Principal Balance;
(iii) The number and Principal Balances of all SBA Loans which
were the subject of Principal Prepayments during the Due Period and
the number and Principal Balances of all Defaulted SBA Loans
purchased by the Servicer during the Due Period;
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(iv) The product of the Unguaranteed Percentage multiplied by
all Curtailments which were received during the Due Period;
(v) The product of the Unguaranteed Percentage multiplied by
all Excess Payments and the product of the Unguaranteed Percentage
multiplied by all Monthly Payments in respect of principal received
during the Due Period;
(vi) The aggregate amount of interest received on each SBA
Loan net of the FTA's Fee, the Premium Protection Fee, the
Additional Fee and the portion thereof payable to the Registered
Holders;
(vii) The amount of the Monthly Advances to be made on the
Determination Date and the Compensating Interest payment to be made
on the Determination Date;
(viii) The delinquency and foreclosure information set forth
in the form attached hereto as Exhibit K;
(ix) The product of the Unguaranteed Percentage multiplied by
the amount of any losses realized on a Liquidated SBA Loan;
(x) The Class A and Class B Interest Distribution Amounts and
Principal Distribution Amounts for the Remittance Date with the
components thereof stated separately;
(xi) The amount, if any, to be transferred from the Spread
Account to the Certificate Account pursuant to Section 6.02(b)(i);
(xii) The Aggregate Class A Certificate Principal Balance,
Aggregate Class B Certificate Principal Balance and the Pool
Principal Balance after giving effect to the distribution to be made
on the Remittance Date;
(xiii) The Excess Spread and the Specified Spread Account
Requirement with respect to such Remittance Date;
(xiv) The weighted average maturity and weighted average SBA
Loan Interest Rate;
(xv) The Servicing Fees and amounts to be deposited to the
Expense Account;
(xvi) The amount of all payments and reimbursements to the
Servicer pursuant to Section 5.04 (b), (c), (d)(ii), (e) and (f);
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<PAGE>
(xvii) The Class A and Class B Remittance Rates with respect
to such Remittance Date; and
(xviii) During the Funding Period, the aggregate Principal
Balance of the Subsequent SBA Loans purchased during the prior Due
Period and the amount on deposit in the Pre-Funding Account as of
the end of such Due Period; and
(xix) Such other information as the Certificateholders or the
Rating Agency may reasonably require.
The Trustee shall forward such report to the Certificateholders and
the Rating Agency on the Remittance Date, together with a separate report
indicating the amount of funds deposited in the Certificate Account pursuant to
Section 6.01(a)(iv); and the amounts which are reimbursable to the Servicer or
the Seller pursuant to Sections 6.03(c)(i), 6.03(c)(ii) and 6.07(b)(vi) (all
reports prepared by the Trustee of such withdrawals and deposits will be based
in whole or in part upon the information provided to the Trustee by the
Servicer).
To the extent that there are inconsistencies between the telecopy of
the Servicer's Certificate and the hard copy thereof, the Trustee shall be
entitled to rely upon the telecopy. In the case of information furnished
pursuant to subclauses (ii), (iii), (iv), (v), (x) and (xii), above, the amounts
shall be expressed in a separate section of the report as a dollar amount for
each Class per $1,000 original dollar amount as of the Cut-Off Date.
Additionally, on the Special Remittance Date the Trustee shall,
based upon information received from the Servicer, forward to the
Certificateholders and the Rating Agency a report setting forth the amount of
principal and interest, if any, being paid to each Class of Certificates on the
Special Remittance Date.
(a) Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee for distribution to
each Person who at any time during the calendar year was a Certificateholder
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (vi), (x), and
(xiv), above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Servicer pursuant to any
requirements of the Code as from time to time are in force.
(b) Upon reasonable advance notice in writing, the Servicer will
provide to each Certificateholder which is a savings and loan association, bank
or insurance company certain reports and access to information and documentation
regarding the SBA Loans sufficient to permit such Certificateholder to comply
with applicable regulations of the Office of Thrift Supervision or other
regulatory authorities with respect to investment in the Certificates.
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<PAGE>
(c) The Servicer shall furnish to each Certificateholder, during the
term of this Agreement, such periodic, special, or other reports or information,
whether or not provided for herein, as shall be necessary, reasonable, or
appropriate with respect to the Certificateholder or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
by and in accordance with such applicable instructions and directions as the
Certificateholder may reasonably require; provided, that the Servicer shall be
entitled to be reimbursed by such Certificateholder for the Servicer's actual
expenses incurred in providing such reports if such reports are not producible
in the ordinary course of the Servicer's business. The Rating Agency shall
receive copies of any such reports or information furnished to the
Certificateholders.
Section 6.10. Advances by the Servicer.
Not later than the close of business on each Determination Date, the
Servicer shall remit to the Trustee for deposit in the Certificate Account an
amount (as indicated in the Servicer's Certificate prepared pursuant to Section
6.09), to be distributed on the related Remittance Date pursuant to Section
6.07, equal to the amount by which (i) 30 days' interest at a rate equal to the
then applicable Adjusted SBA Loan Remittance Rate on the aggregate Class A and
Class B Principal Balances immediately prior to the related Remittance Date
(plus or minus the difference, if any, between (A) the sum of the Class A and
Class B Interest Distribution Amounts and (B) the sum of the Adjusted Class A
and Adjusted Class B Interest Distribution Amounts for the related Remittance
Date) exceeds (ii) the amount received by the Servicer as of the related Record
Date in respect of interest on the SBA Loans minus the interest payable to the
Registered Holders (plus, for the Remittance Dates in January, February and
March 1998, the sum of (i) all funds to be transferred to the Certificate
Account from the Capitalized Interest Account for such Remittance Date pursuant
to Section 6.05(c) and (ii) the Pre-Funding Earnings for the applicable
Remittance Date), the Premium Protection Fee, the Additional Fee, the Servicing
Fee, and the FTA's Fee, such excess being defined herein as the "Monthly
Advance." The Servicer may reimburse itself for Monthly Advances made pursuant
to Section 5.04. Notwithstanding the foregoing, the Servicer shall not be
required to make a Monthly Advance with respect to an SBA Loan if it determines,
in good faith, that such advance would be nonrecoverable from amounts received
in respect of the SBA Loans.
Section 6.11. Compensating Interest.
The Certificateholders shall be entitled to a full month's interest
on the principal portion of the Unguaranteed Interest of each SBA Loan at the
then applicable Class A or Class B Remittance Rate, as the case may be. Not
later than the close of business on each Determination Date, with respect to
each SBA Loan for which a Principal Prepayment or Curtailment was received
during the related Due Period, the Servicer shall remit to the Trustee for
deposit in the Certificate Account from amounts otherwise payable to it as
servicing compensation, an amount (such amount required to be delivered to the
Trustee is referred to herein as "Compensating Interest") (as indicated in the
Servicer's Certificate prepared pursuant to Section 6.09) equal to the
difference between (a) 30 days' interest at the Adjusted SBA Loan Remittance
Rate on the Principal Balance of each such SBA Loan as of the beginning of the
Due Period applicable to the
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Remittance Date on which such amount will be distributed, and (b) the amount of
interest actually received on each such SBA Loan for such Due Period net of the
portion thereof payable to the Registered Holder, the Premium Protection Fee,
the FTA's Fee, the Servicing Fee and the Excess Spread and, with respect to each
Additional Fee SBA Loan, the Additional Fee.
Section 6.12. Reports of Foreclosure and Abandonment of Mortgaged
Property
Each year the Servicer shall make the reports of foreclosures and
abandonments of any Mortgaged Property required by Section 6050J of the Code.
Promptly after filing each such report with the Internal Revenue Service, the
Servicer shall provide the Trustee with an Officer's Certificate certifying that
such report has been filed.
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ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 [Intentionally Omitted]
Section 7.02 Satisfaction of Mortgages and Collateral and
Release of SBA Files
The Servicer shall maintain the Fidelity Bond as provided for in
Section 5.09 insuring the Servicer against any loss it may sustain with respect
to any SBA Loan not satisfied in accordance with the procedures set forth
herein.
Upon the payment in full of any SBA Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the FTA and
the Trustee by a certification in the form of Exhibit I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Trustee's Document File. Upon receipt of such certification and
request, the FTA and the Trustee shall release, within 3 Business Days, the
related Trustee's Document File to the Servicer. Expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be payable
only from and to the extent of servicing compensation and shall not be
chargeable to the Principal and Interest Account or the Certificate Account.
From time to time and as appropriate for the servicing or
foreclosure of any SBA Loan, the FTA and the Trustee shall, upon request of the
Servicer and delivery to the FTA and the Trustee of a certification in the form
of Exhibit I attached hereto signed by a Servicing Officer, release the related
Trustee's Document File to the Servicer within 3 Business Days, and the Trustee
shall execute such documents as shall be necessary to the prosecution of any
such proceedings. The Servicer shall return the Trustee's Document File to the
FTA and the Trustee when the need therefor by the Servicer no longer exists,
unless the SBA Loan has been liquidated and the Unguaranteed Percentage of the
Liquidation Proceeds relating to the SBA Loan have been deposited in the
Principal and Interest Account and remitted to the Trustee for deposit in the
Certificate Account or the SBA File or such document has been delivered to an
attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property or other Collateral either judicially or
non-judicially, and the Servicer has delivered to the FTA and the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to whom such SBA File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing Officer
stating that such SBA Loan was liquidated, the servicing receipt shall be
released by the Trustee to the Servicer.
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<PAGE>
The Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or other
Collateral or to any legal action brought to obtain judgment against any Obligor
on the SBA Note or Mortgage or other agreement securing Collateral or to obtain
a deficiency judgment, or to enforce any other remedies or rights provided by
the SBA Note or Mortgage or other agreement securing Collateral or otherwise
available at law or in equity. Together with such documents or pleadings, the
Servicer shall deliver to the Trustee a certificate of a Servicing Officer
requesting that such pleadings or documents be executed by the Trustee and
certifying as to the reason such documents or pleadings are required and that
the execution and delivery thereof by the Trustee will not invalidate or
otherwise affect the lien of the Mortgage or other agreement securing
Collateral, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale. The Trustee shall, upon receipt of a written
request from a Servicing Officer, execute any document provided to the Trustee
by the Servicer or take any other action requested in such request, that is, in
the opinion of the Servicer as evidenced by such request, required by any state
or other jurisdiction to discharge the lien of a Mortgage or other agreement
securing Collateral upon the satisfaction thereof and the Trustee will sign and
post, but will not guarantee receipt of, any such documents to the Servicer, or
such other party as the Servicer may direct, within five Business Days of the
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Trustee's satisfaction that the related SBA
Loan has been paid in full by or on behalf of the Obligor and that such payment
has been deposited in the Principal and Interest Account.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to withdraw from the Principal and Interest Account or to retain from
interest payments on the SBA Loans the Servicer's Servicing Fee and the Premium
Protection Fee in accordance with Section 5.04(b). Additional servicing
compensation in the form of assumption and other administrative fees, interest
paid on funds on deposit in the Principal and Interest Account, interest paid
and earnings realized on Permitted Instruments, amounts remitted pursuant to
Section 6.03(c)(iii) and late payment charges shall be retained by or remitted
to the Servicer to the extent not required to be remitted to the Trustee for
deposit in the Certificate Account. The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement therefor except as specifically
provided for herein.
Section 7.04 Annual Statement as to Compliance.
The Servicer will deliver to the Trustee, the SBA and the Rating
Agency on or before September 30 of each year beginning September 30, 1998, an
Officer's Certificate stating that (i) the Servicer has fully complied with the
provisions of Articles V and VII, (ii) a review of the activities of the
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (iii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such
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obligation, specifying each such default known to such officers and the nature
and status thereof and the action being taken by the Servicer to cure such
default.
Section 7.05 Annual Independent Public Accountants' Servicing Report
On or before September 30 of each year relating to the fiscal year
ending on the preceding June 30th (commencing with the fiscal year ending June
30, 1998), the Servicer, at its expense, shall cause (i) Richard A. Eisner &
Company, LLP or (ii) a firm of nationally recognized independent public
accountants reasonably acceptable to the Trustee to furnish a letter or letters
to the Trustee and the Rating Agency to the effect that such firm has with
respect to the Servicer's overall servicing operations examined such operations
in accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.
Section 7.06 SBA's, and Trustee's Right to Examine Servicer Records
and Audit Operations
The SBA and the Trustee shall have the right upon reasonable prior
notice, during normal business hours and as often as reasonably required, to
examine and audit any and all of the books, records or other information of the
Servicer, whether held by the Servicer or by another on behalf of the Servicer,
which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. No amounts payable in respect
of the foregoing shall be paid from the Trust Fund.
Section 7.07 Reports to the Trustee; Principal and Interest Account
Statements.
Not later than 20 days after each Record Date, the Servicer shall
forward to the Trustee and the SBA a statement, certified by a Servicing
Officer, setting forth the status of the Principal and Interest Account as of
the close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Principal and
Interest Account for each category of deposit specified in Section 5.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 5.04, the aggregate amount of
permitted withdrawals not made in the related Due Period, and the amount of any
Monthly Advances or payments of Compensating Interest, in each case, for the
related Due Period.
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Section 7.08 Premium Protection Fee.
Pursuant to and in accordance with the policies of the SBA and SBA
Form 1086, the Servicer shall retain the Premium Protection Fee for each SBA ss.
7(a) Loan. The Premium Protection Fee shall not constitute part of the Trust
Fund and Certificateholders shall have no interest in, and are not entitled to
receive any portion of, the Premium Protection Fee. If the Servicer is replaced
as servicer pursuant to any provision of this Agreement, it shall no longer be
entitled to the Premium Protection Fee but, instead, the successor servicer
shall be entitled thereto.
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ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of
the Certificates, Certificateholders may request that the Servicer make
available to prospective Certificateholders the annual audited financial
statements of the Servicer for one or more of the most recently completed five
fiscal years, which request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to
any prospective Certificateholder a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the Servicer
and to permit any prospective Certificateholder to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
such prospective Certificateholder that the Servicer has the ability to service
the SBA Loans in accordance with this Agreement.
VIII-1
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ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Trustee, the SBA,
and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer
to perform its duties and service the SBA Loans in compliance with the terms of
this Agreement. The Servicer shall immediately notify the Trustee, the SBA and
each Certificateholder if a claim is made by any party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
SBA, and/or a Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Section 6.03(c)(i)
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the failure of the Servicer to service and
administer the SBA Loans in compliance with the terms of this Agreement.
(b) The Seller agrees to indemnify and hold the Trustee, the SBA and
each Certificateholder harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Trustee, the SBA, and any Certificateholder
may sustain in any way related to the failure of the Servicer, if it is an
affiliate thereof, or the failure of the Seller to perform its respective duties
in compliance with the terms of this Agreement and in the best interests of the
SBA and the Certificateholders. The Seller shall immediately notify the Trustee,
the SBA, and each Certificateholder if a claim is made by a third party with
respect to this Agreement, and the Seller shall assume (with the consent of the
Trustee) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Servicer, the
Seller, the Trustee, the SBA and/or a Certificateholder in respect of such
claim. The Trustee may reimburse the Seller from the Expense Account pursuant to
Section 6.03(c)(i) for all amounts advanced by them pursuant to the preceding
sentence except when the claim relates directly to the Seller's indemnification
pursuant to Section 2.05 and Section 3.03 or to the failure of the Servicer, if
it is an affiliate of a Seller, to perform its obligations to service and
administer the Mortgages in compliance with the terms of this Agreement, or the
failure of the Seller to perform its duties in compliance with the terms of this
Agreement and in the best interests of the SBA and the Certificateholders.
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Section 9.02 Merger or Consolidation of the Servicer.
The Servicer will keep in full effect its existence, rights and
franchises as a limited liability company, and will obtain and preserve its
qualification to do business as a foreign limited liability company, in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the SBA Loans and to perform its duties under this
Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an established mortgage loan servicing institution that has a
net worth of at least $15,000,000 and shall be an approved SBA guaranteed lender
in good standing, operating pursuant to an effective Loan Guaranty Agreement,
and shall be the successor of the Servicer, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Servicer shall send notice
of any such merger or consolidation to the Trustee, the Rating Agency and the
SBA.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. Subject to the terms of
Section 9.01 herein, the Servicer shall have no obligation to appear with
respect to, prosecute or defend any legal action which is not incidental to the
Servicer's duty to service the SBA Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign.
The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the SBA, the Trustee and the Majority Certificateholders, or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law or administrative determination and such incapacity cannot
be cured by the Servicer. Any such determination permitting the resignation of
the Servicer shall be evidenced by a written Opinion of Counsel (who may be
counsel for the Servicer) to such effect delivered to the Trustee, the SBA and
to each Certificateholder, which Opinion of Counsel shall be in form and
substance acceptable to the Trustee. No such resignation shall become effective
until a successor has assumed the Servicer's responsibilities and obligations
hereunder in accordance with Section 10.02.
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ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) (A) the failure by the Servicer to make any required
Servicing Advance, to the extent such failure materially and
adversely affects the interests of the Certificateholders; (B) the
failure by the Servicer to make any required Monthly Advance; (C)
the failure by the Servicer to remit any Compensating Interest; or
(D) any failure by the Servicer to remit to Certificateholders, or
to the Trustee for the benefit of the Certificateholders, any
payment required to be made under the terms of this Agreement which
continues unremedied after the date upon which written notice of
such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Trustee or to the Servicer and the
Trustee by any Certificateholder; or
(ii) failure by the Servicer or the Seller duly to observe or
perform, in any material respect, any other covenants, obligations
or agreements of the Servicer or the Seller as set forth in this
Agreement, which failure continues unremedied for a period of 60
days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer or the Seller, as the case may be, by the Trustee or to the
Servicer, or the Seller, as the case may be, and the Trustee by any
Certificateholder; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of 60 days;
or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating
to all or substantially all of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations.
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(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, and in the case of clause (i) above
(except for clause (i)(B)), if such Event of Default shall not have been
remedied within 30 days after the Servicer has received notice of such Event of
Default, (x) with respect solely to clause (i)(B) above, if such Monthly Advance
is not made earlier than 4:00 p.m. New York time on the Determination Date, the
Trustee shall give immediate telephonic notice of such failure to a Servicing
Officer of the Servicer and, unless such failure is cured, either by receipt of
payment or receipt of evidence (e.g., a wire reference number communicated by
the sending bank) that such funds have been sent, by 12:00 Noon New York time on
the second Business Day thereafter, the Trustee shall immediately assume,
pursuant to Section 10.02 hereof, the duties of a successor Servicer; and (y) in
the case of clauses (i)(A), (i)(C), (i)(D), (iii), (iv) and (v), the Majority
Certificateholders, by notice in writing to the Servicer (except with respect to
(iii), (iv) and (v) for which no notice is required) may, in addition to
whatever rights such Certificateholders may have at law or equity including
damages, injunctive relief and specific performance, in each case immediately
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the SBA Loans and the proceeds thereof, as Servicer. Upon such
receipt by the Servicer of a second written notice from the Majority
Certificateholders stating that they or it intend to terminate the Servicer as a
result of such Event of Default, all authority and power of the Servicer under
this Agreement, whether with respect to the SBA Loans or otherwise, shall,
subject to Section 10.02 and the Multi-Party Agreement, pass to and be vested in
the Trustee and the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the SBA Loans and related documents. The Servicer agrees to
cooperate with the Trustee in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee for administration by it of all amounts which shall at
the time be credited by the Servicer to each Principal and Interest Account or
thereafter received with respect to the SBA Loans. The Trustee shall provide
notice to the SBA of any Event of Default hereunder.
Section 10.02 Trustee to Act; Appointment of Successor
On and after the time of the Servicer's immediate termination, or
the Servicer's receipt of notice if required by Section 10.01, or at any time if
the Trustee receives the resignation of the Servicer evidenced by an Opinion of
Counsel pursuant to Section 9.04 or the Servicer is removed as Servicer pursuant
to this Article X, the Trustee shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any Servicer prior to it, and that the Trustee
shall not be obligated to make advances or payments pursuant to Sections 6.03,
6.10, 6.11, 5.10 or 5.14 but only to the extent the Trustee determines
reasonably and in good faith that such advances would not be recoverable, such
determination to be evidenced with respect to each such advance by a
certification of a Responsible Officer of the Trustee. As compensation therefor,
the Trustee shall be entitled to all funds relating to the SBA Loans which the
Servicer would have been
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entitled to receive from the Servicing Fee, the Premium Protection Fee and from
the Principal and Interest Account pursuant to Section 5.04, if the Servicer had
continued to act as Servicer hereunder, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 7.01 and 7.03.
Notwithstanding the above, the Trustee shall, if it is unable to so
act or if the SBA so requests in writing to the Trustee, appoint, or petition a
court of competent jurisdiction to appoint, any established servicing
institution acceptable to the SBA and satisfying the Rating Agency Condition
that has a net worth of not less than $15,000,000, and which is an approved SBA
guaranteed lender in good standing, operating pursuant to an effective Loan
Guaranty Agreement, as the successor to the Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the
Servicer hereunder. Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly to the
Trustee or, at the direction of the Trustee, to the successor servicer. The
compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the aggregate Servicing Fees and other servicing
compensation in the form of assumption fees, late payment charges or otherwise.
The successor servicer also shall be entitled to the Premium Protection Fee
pursuant to Section 7.08. In the event the Trustee is required to solicit bids
as provided herein, the Trustee shall solicit, by public announcement, bids from
banks and mortgage servicing institutions meeting the qualifications set forth
above. Such public announcement shall specify that the successor servicer shall
be entitled to the full amount of the aggregate Servicing Fees as servicing
compensation, together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise. Within thirty days after any
such public announcement, the Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Trustee shall
deduct from any sum received by the Trustee from the successor to the Servicer
in respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Monthly Advances. After such deductions, the remainder of
such sum shall be paid by the Trustee as a servicing fee to the SBA at the time
of such sale, transfer and assignment to the Servicer's successor. The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. The Servicer agrees to
cooperate with the Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor servicer, as applicable, all amounts which then
have been or should have been deposited in the Principal and Interest Account or
Spread Account by the Servicer or which are thereafter received with respect to
the SBA Loans. Neither the Trustee nor any other successor servicer shall be
held liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Trustee to each
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<PAGE>
Certificateholder and the SBA and the Trustee and the SBA shall have consented
thereto. The Trustee shall not resign as servicer until a successor servicer
reasonably acceptable to the SBA has been appointed.
Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on SBA Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 7.03 or otherwise as
provided in this Agreement. The Servicer, the Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 10.03 Waiver of Defaults
The SBA or the Majority Certificateholders may, on behalf of all
Certificateholders, and subject to the consent of the SBA, which consent may not
be unreasonably withheld, and satisfaction of the Rating Agency Condition, waive
any events permitting removal of the Servicer pursuant to this Article X;
provided, however, that the Majority Certificateholders or the SBA may not waive
a default in making a required distribution on a Certificate without the consent
of the holder of such Certificate. Upon any waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent expressly so waived.
Section 10.04 Control by Majority Certificateholders and Others.
The SBA or the Majority Certificateholders with the consent of the
SBA may direct the time, method and place of conducting any proceeding relating
to the Trust Fund or the Certificates or for any remedy available to the Trustee
with respect to the Certificates or exercising any trust or power conferred on
the Trustee with respect to the Certificates or the Trust Fund provided that:
(i) such direction shall not be in conflict with any rule
of law or with this Agreement;
(ii) the Trustee shall have been provided with indemnity
satisfactory to it; and
(iii) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction; provided,
however, that the Trustee, as the case may be, need not take any
action which it determines might involve it in liability or may be
unjustly prejudicial to the Holders not so directing.
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<PAGE>
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Trustee of the
earlier of the following events: (a) the final payment or other liquidation of
the last SBA Loan or the disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any SBA Loan and the remittance of all funds
due thereunder, or (b) mutual consent of the Servicer and all Certificateholders
in writing; provided, however, that in no event shall the Trust established by
this Agreement terminate later than twenty-one years after the death of the last
surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United
States to the Court of St. James, alive as of the date hereof.
The Servicer may, at its option, terminate this Agreement on any
date on which the Pool Principal Balance is less than 10% of the sum of (i) the
Original Pool Principal Balance and (ii) the Original Pre-Funded Amount by
purchasing, on the next succeeding Remittance Date, all of the Unguaranteed
Interests in the SBA Loans and Foreclosed Properties at a price equal to the sum
of (i) 100% of the then outstanding Aggregate Class A and Class B Certificate
Principal Balances, and (ii) 30 days' interest thereon at the then applicable
Class A and Class B Remittance Rates, as the case may be (the "Termination
Price"). Notwithstanding the prior sentence, if at the time the Servicer
determines to exercise such option the unsecured long-term debt obligations of
the Servicer are not rated at least BBB by the Rating Agency, if the Rating
Agency is still rating the Certificates, the Servicer shall give the Rating
Agency prior written notice of the Servicer's determination to exercise such
option and shall not exercise such option, without the consent of the Rating
Agency, prior to furnishing the Rating Agency with an Opinion of Counsel, in
form and substance reasonably satisfactory to the Rating Agency, that the
exercise of such option would not be deemed a fraudulent conveyance by the
Servicer.
Notice of any termination, specifying the Remittance Date upon which
the Trust Fund will terminate and that the Certificateholders shall surrender
their Certificates to the Trustee for payment of the final distribution and
cancellation shall be given promptly by the Servicer by letter to
Certificateholders mailed during the month of such final distribution before the
Determination Date in such month, specifying (i) the Remittance Date upon which
final payment of the Certificates will be made upon presentation and surrender
of Certificates at the office of the Trustee therein designated, (ii) the amount
of any such final payment and (iii) that the Record Date otherwise applicable to
such Remittance Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Servicer shall give such notice to the Trustee therein
specified. The Servicer shall give such notice to the Trustee at the time such
notice is given to Certificateholders. Any obligation of the Servicer to pay
amounts due to the Trustee shall survive the termination of this Agreement.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice,
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the Servicer shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto and shall at the expense of the
Trust Fund cause to be published once, in the national edition of The Wall
Street Journal notice that such money remains unclaimed. If within six months
after the second notice all of the Certificates shall not have been surrendered
for cancellation, the Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Certificates and the cost thereof shall be paid
out of the funds and other assets which remain subject hereto. If within the
period then specified in the escheat laws of the State of New York after the
second notice all the Certificates shall not have been surrendered for
cancellation, the Seller shall be entitled to all unclaimed funds and other
assets which remain subject hereto and the Trustee upon transfer of such funds
shall be discharged of any responsibility for such funds and the
Certificateholders shall look to the Seller for payment.
Section 11.02 Accounting Upon Termination of Servicer
Upon termination of the Servicer under Article X hereof, the
Servicer shall:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all SBA Files and related documents and statements
held by it hereunder and a SBA Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the SBA Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the SBA Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.
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ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred and has not been cured or waived,
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement, provided, however that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Seller hereunder. If any such instrument is
found not to conform to the requirements of this Agreement in a material manner,
the Trustee shall take action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
(a) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(b) The Trustee shall not be personally liable for an error of
judgment made in good faith by officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of the
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Certificateholders, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement;
(d) In the absence of actual knowledge of an Event of Default, the
Trustee shall not be required to take notice or be deemed to have notice or
knowledge of any default or Event of Default unless the Trustee shall be
specifically notified in writing by the Servicer or any of the
Certificateholders. In the absence of actual knowledge or receipt of such
notice, the Trustee may conclusively assume that there is no default or Event of
Default; and
(e) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability for the performance of any of its
duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Section 12.02 Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may request and rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party
or parties;
(ii) The Trustee may consult with counsel and any opinion of
counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such opinion of counsel;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend by litigation hereunder or in relation
hereto at the request, order or direction of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
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(v) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have
occurred, the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested
in writing to do so by Holders of Certificates evidencing Percentage
Interests aggregating not less than 25% provided, however, that if
the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms
of this Agreement, the Trustee may require reasonable indemnity
against such expense or liability as a condition to taking any such
action. The reasonable expense of every such examination shall be
paid by the Servicer or, if paid by the Trustee, shall be repaid by
the Servicer upon demand from the Servicer's own funds;
(vi) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and
the Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act;
(vii) The Trustee shall not be required to give any bond or
surety in respect of the execution of the trust created hereby or
the powers granted hereunder; and
(viii) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
Section 12.03 Trustee Not Liable for Certificates or SBA Loans.
The recitals contained herein and in the Certificates (other than
the certificate of authentication on the Certificates) shall be taken as the
statements of the Servicer, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any SBA Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the SBA Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
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<PAGE>
Section 12.04 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights it would have if it were
not Trustee, and may otherwise deal with the parties hereto.
Section 12.05 Servicer To Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Servicer will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith, provided that the Trustee shall have no
lien on the Trust Fund for the payment of its fees and expenses. To the extent
that actual fees and expenses of the Trustee exceed the amount available for
payment thereof on deposit in the Expense Account as of the date such fees and
expenses are due and payable, the Servicer shall reimburse the Trustee for such
shortfall out of its own funds without reimbursement therefor, except as
provided in Section 6.03. The Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Servicer and held harmless
against any loss, liability or expense (i) incurred in connection with any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder, and (ii) resulting from any error
in any tax or information return prepared by the Servicer. The obligations of
the Servicer under this Section 12.05 shall survive payment of the Certificates,
and shall extend to any co-trustee appointed pursuant to this Article XII.
Section 12.06 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be (i) a national banking
association or banking corporation or trust company organized and doing business
under the laws of any state or the United States of America, (ii) authorized
under such laws to exercise corporate trust powers, (iii) having a combined
capital and surplus of at least $30,000,000, (iv) having unsecured and
unguaranteed long-term debt obligations rated at least Baa2 by Moody's Investors
Service, Inc., BBB by the Rating Agency (provided the Rating Agency is rating
the unsecured and unguaranteed long-term debt obligations of the Trustee) or
such other rating as is acceptable to the SBA, (v) is subject to supervision or
examination by federal or state authority, (vi) is an approved SBA guaranteed
lender in good standing, operating pursuant to an effective Loan Guaranty
Agreement, and (vii) is reasonably acceptable to the SBA. If such banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the
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aforesaid supervising or examining authority, then for the purposes of this
Section its combined capital and surplus shall be deemed to be as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall (a) give prompt notice to the SBA and each
Certificateholder that it has so ceased to be eligible to be the Trustee and (b)
resign, upon the request of the SBA or the Majority Certificateholders, in the
manner and with the effect specified in Section 12.07.
Section 12.07 Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer, the SBA, and to
all Certificateholders. Upon receiving such notice of resignation, the Servicer
shall with the consent of the SBA promptly appoint a successor trustee by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders by the Servicer. Unless a successor
trustee shall have been so appointed and have accepted appointment within 60
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee. If the resigning Trustee fails to petition an appropriate court, the
SBA may, after such 60 day period, petition any court of competent jurisdiction
for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 12.06 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Servicer
may remove the Trustee and appoint, subject to the approval of the SBA, a
successor trustee by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders and the SBA by the
Servicer.
The Majority Certificateholders with the consent of the SBA, which
consent will not be unreasonably withheld, and upon satisfaction of the Rating
Agency Condition, or the SBA may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one complete set of
which instruments shall be delivered to the Servicer, one complete set to the
Trustee so removed and one complete set to the successor Trustee so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.08.
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<PAGE>
Section 12.08 Successor Trustee.
Any successor trustee appointed as provided in Section 12.07 shall
execute, acknowledge and deliver to the Servicer and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all SBA
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 12.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Servicer fails to mail such notice within 10 days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of the Servicer.
Section 12.09 Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the trustee, shall be the successor of the Trustee hereunder,
provided such corporation or national banking association shall be eligible
under the provisions of Section 12.06, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Trustee shall send notice of any
such merger or consolidation to the Rating Agency.
XII-6
<PAGE>
Section 12.10 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and the SBA pursuant to the procedure set forth below, to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 12.06 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof. The Trustee shall notify the SBA prior to
the appointment of any co-trustee(s) or separate trustee(s) and the SBA shall
have ten Business Days from its receipt of such notice to notify the Trustee
whether it, in its reasonable judgment, disapproves of such co-trustee(s) or
separate trustee(s). If the SBA does not notify the Trustee within such time
frame, it will be deemed to have approved such co-trustee(s) or separate
trustee(s). If the SBA notifies the Trustee within such time frame that it, in
its reasonable judgment, disapproves of such co-trustee(s) or separate
trustee(s) (which notice shall be accompanied by the name(s) of the SBA's
alternative proposed co-trustee(s) or separate trustee(s)), such appointments
shall not be effective.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 12.10, all rights, powers, duties and obligations
conferred or imposed upon the trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or as
successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of
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<PAGE>
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. The Trustee shall not be responsible
for any action or inaction of any such separate trustee or co-trustee. If any
separate trustee or co-trustee shall die, become incapable of acting, resign or
be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
Section 12.11 Authenticating Agent.
Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, Marine Midland Bank, with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of the Certificates in connection with transfers and exchanges under Section
4.02, as fully to all intents and purposes as though the Authenticating Agent
had been expressly authorized by that Section to authenticate and deliver
Certificates. For all purposes of this Agreement, the authentication and
delivery of Certificates by the Authenticating Agent pursuant to this Section
shall be deemed to be the authentication and delivery of Certificates by the
Trustee. Such Authenticating Agent shall at all times be a Person meeting the
requirements for the Trustee set forth in Section 12.06.
Any corporation or national banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation or national
banking association is otherwise eligible under this Section, without the
execution or filing of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving notice of
resignation to the Trustee and the Servicer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Servicer. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor Authenticating Agent and shall give written
notice of such appointment to all Certificateholders as their names and
addresses appear on the Certificate Register. The Servicer agrees to pay to the
Authenticating Agent from time to time reasonable compensation for its services.
The provisions of Sections 4.04 and 12.03 shall be applicable to any
Authenticating Agent.
XII-8
<PAGE>
Section 12.12 Tax Returns and Reports.
The Trustee, upon request, will furnish the Servicer with all such
information as may be reasonably required in connection with the Servicer's
preparation of all Tax Returns of the Trust Fund and, upon request within five
(5) Business Days after its receipt thereof, shall (i) sign on behalf of the
Trust Fund any Tax Return that the Trustee is required to sign pursuant to
applicable federal, state or local tax laws, and (ii) cause such Tax Return to
have been returned to the Servicer for filing; provided, however, the Trustee
shall have no liability for any taxes required pursuant to any such Tax Return.
The Servicer shall prepare and file or cause to be filed with the
Internal Revenue Service Federal tax information returns with respect to the
Trust Fund and the Certificates containing such information and at the times and
in the manner as may be required by the Code or applicable Treasury regulations,
and shall furnish to each Holder of Certificates at any time during the calendar
year for which such returns or reports are made such statements or information
at the times and in the manner as may be required thereby. The Trustee shall
sign all tax information returns filed pursuant to this Section and any other
returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer.
Section 12.13 Protection of Trust Fund.
(a) The Trustee will hold the Trust Fund and such other assets as
may from time to time be deposited with it hereunder in trust for the benefit of
the Holders and the SBA and at the request of the Seller or the SBA will from
time to time execute and deliver all such supplements and amendments hereto
pursuant to Section 13.02 hereof and all instruments of further assurance and
other instruments, and will take such other action upon such request as it deems
reasonably necessary or advisable, to:
(i) more effectively hold in trust all or any portion of the
Trust Fund or such other assets;
(ii) perfect, publish notice of, or protect the validity of
any grant made or to be made by this Agreement;
(iii) enforce any of the SBA Loans; or
(iv) preserve and defend title to the Trust Fund and the
rights of the Trustee, and the ownership interests of the
Certificateholders represented thereby, in such Trust Fund against
the claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Seller or the SBA to take any action pursuant to this Section 12.13 to the
Holders.
XII-9
<PAGE>
(b) Subject to Article X hereof, the Trustee shall have the power to
enforce, and shall enforce the obligations of the other parties to this
Agreement by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Holders; provided, however,
that nothing in this Section 12.13 shall require any action by the Trustee
unless the Trustee shall first (i) have been furnished indemnity satisfactory to
it and (ii) when required by this Agreement, have been requested to take such
action by the Majority Certificateholders, the SBA or the Seller in accordance
with the terms of this Agreement.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
Section 12.14 Representations and Warranties and Covenants of
Trustee.
The Trustee hereby makes the following representations, warranties
and covenants on which the Seller, the Servicer, the SBA and the
Certificateholders shall rely:
(a) The Trustee is a banking corporation and trust company duly
organized, validly existing and in good standing under the laws of the State of
New York.
(b) The Trustee has full power, authority and legal right to
execute, deliver and perform this Agreement, and shall have taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement.
(c) The execution, delivery and performance by the Trustee of this
Agreement shall not (i) violate any provision of any law or any order, writ,
judgment or decree of any court, arbitrator or governmental authority applicable
to the Trustee or any of its assets, (ii) violate any provision of the corporate
charter or By-laws of the Trustee or (iii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any lien on any properties included in the
Trust Fund pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or lien could reasonably be expected to materially and adversely affect the
Trustee's performance or ability to perform its duties under this Agreement or
the transactions contemplated in this Agreement.
(d) The execution, delivery and performance by the Trustee of this
Agreement shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the taking of any other
action in respect of any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the Trustee,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other
XII-10
<PAGE>
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity. The Trustee hereby agrees and covenants that it will not at any time in
the future, deny that this Agreement constitutes the legal, valid and binding
agreement of the Trustee.
(f) The Trustee shall not take any action, or fail to take any
action, if such action or failure to take action will materially interfere with
the enforcement of any rights of the SBA or the Certificateholders under this
Agreement or the Certificates.
(g) The Trustee will comply at all times with the provisions of the
SBA Rules and Regulations in respect of its activities concerning the SBA Loans,
and will at all times hold an effective Loan Guaranty Agreement.
XII-11
<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders.
Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.
Section 13.02 Amendment.
(a) This Agreement may be amended from time to time by the Seller,
the Servicer and the Trustee by written agreement, upon the prior written
consent of the SBA, without the notice to or consent of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions herein, to comply
with any changes in the Code, or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Trustee, adversely affect the interests of any Certificateholder or any other
party and further provided that no such amendment shall reduce in any manner the
amount of, or delay the timing of, any amounts received on SBA Loans which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate, or change the rights or obligations of any other party
hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the Seller,
the Servicer, the Trustee and the Majority Certificateholders, upon the prior
written consent of the SBA, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
any amounts which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate or reduce the percentage of Holders
which are required to consent to any such amendment without the consent of the
Holders of 100% of the Certificates affected thereby and, provided further, that
no amendment affecting only one class of Certificates shall require the approval
of Holders of Certificates of the other Class.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
<PAGE>
Section 13.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement is subject
to recordation in all appropriate public offices for real property records in
all of the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the Certificateholders' expense on direction of the Majority
Certificateholders, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders or is necessary for the administration or servicing of
the SBA Loans.
Section 13.04 Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided.
SECTION 13.05 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Servicer and the Seller, Business Loan Center, Inc.,
919 Third Avenue, 17th Floor, New York, New York 10022, Attn: Robert
Tannenhauser or such other addresses as may hereafter be furnished to the
Certificateholders in writing by the Seller and the Servicer, (ii) in the case
of the Trustee, Marine Midland Bank, 140 Broadway, New York, New York 10005,
12th Floor, Attention: Corporate Trust Department, (iii) in the case of the
Certificateholders, as set forth in the Certificate Register, (iv) in the case
of Duff & Phelps Credit Rating Co. to 55 East Monroe Street, Chicago, Illinois,
60603, to, and (v) in the case of the SBA, the United States Small Business
Administration, 409 Third Street, S.W., Washington, D.C. 20416, Attention:
Associate Administrator for Financial Assistance. Any such notices shall be
deemed to be effective with respect to any party hereto upon the receipt of such
notice by such party, except that notices to the Certificateholders shall be
effective upon mailing or personal delivery.
<PAGE>
Section 13.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
Nothing herein contained shall be deemed or construed to create a
co-partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor and not as agent for
the Certificateholders.
Section 13.09 Counterparts.
This Agreement may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
Section 13.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Seller and the Servicer, the Trustee and the Certificateholders and their
respective successors and assigns.
Section 13.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 13.12 Paying Agent.
The Trustee hereby appoints Marine Midland Bank as Paying Agent. The
Trustee may appoint one or more other Paying Agents or successor Paying Agents
meeting the eligibility requirements of a Trustee set forth in Section 12.06
(i), (ii), (iii), (iv), (v) and (vii) hereof.
Each Paying Agent, immediately upon such appointment, shall signify
its acceptance of the duties and obligations imposed upon it by this Agreement
by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of Section 6.06, that such Paying Agent
will:
<PAGE>
(a) allocate all sums received for distribution to the Holders of
Certificates for which it is acting as Paying Agent on each Remittance Date
among such Holders in the proportion specified by the Trustee; and
(b) hold all sums held by it for the distribution of amounts due
with respect to the Certificates in trust for the benefit of the Holders
entitled thereto until such sums shall be paid to such Holders or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided.
Any Paying Agent other than the Trustee may at any time resign and
be discharged of the duties and obligations created by this Agreement by giving
at least sixty (60) days written notice to the Trustee. Any such Paying Agent
may be removed at any time by an instrument filed with such Paying Agent signed
by the Trustee.
In the event of the resignation or removal of any Paying Agent other
than the Trustee such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
Upon the appointment, removal or notice of resignation of any Paying
Agent, the Trustee shall notify the Certificateholders by mailing notice thereof
to their addresses appearing on the Certificate Register.
Section 13.13 Notification to Rating Agency.
The Trustee shall give prompt notice to the Rating Agency of the
occurrence of any of the following events of which it has received notice: (1)
any modification or amendment to this Agreement, (2) any change of the Trustee,
the Servicer or the Paying Agent, (3) any Event of Default or waiver of an Event
of Default, (4) that any superior lienholder has accelerated or intends to
accelerate the obligations secured by a Prior Lien, and (5) the final payment of
all the Certificates. The Servicer shall promptly deliver to the Rating Agency a
copy of each of the Servicer's Certificates. Further, the Servicer shall give
prompt notice to the Rating Agency if the Servicer or any of its affiliates
acquire any Certificates.
Section 13.14 Third Party Rights
The Trustee, the FTA, the Spread Account Custodian and the Servicer
agree that the SBA shall be deemed a third-party beneficiary of this Agreement
entitled to all the rights and benefits set forth herein as fully as if it were
a party hereto.
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.
BUSINESS LOAN CENTER, INC.,
as Seller and Servicer
By: /s/ Robert Tannenhauser
--------------------------------
Name: Robert Tannenhauser
Title: President
MARINE MIDLAND BANK,
as Trustee
By: /s/ Susan Barstock
--------------------------------
Name: Susan Barstock
Title: Assistant Vice President
<PAGE>
Acceptance of Marine Midland Bank
Marine Midland Bank hereby accepts its appointment under the within
instrument to serve as initial Authenticating Agent, Certificate Registrar and
Paying Agent. In connection therewith, Marine Midland Bank agrees to be bound by
all applicable provisions of such instrument.
MARINE MIDLAND BANK, as initial
Authenticating Agent, Certificate
Registrar and Paying Agent
By: /s/ Susan Barstock
--------------------------------
Name: Susan Barstock
Title: Assistant Vice President
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 19th day of December, 1997 before me, a Notary Public in and
for said State, personally appeared Susan Barstock known to me to be an
officer of the Trustee, the trust company that executed the within instrument,
and also known to me to be the person who executed it on behalf of said banking
corporation, and acknowledged to me that such banking corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Amanda C. Scuder
--------------------------
Notary Public
My Commission expires 1999
--------------------------
AMANDA C. SCUDER
Notary Public, State of New York
No. 01SC5088771
Qualified in Westchester County
Commission Expires 11/24/1999
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 19th day of December, 1997 before me, a Notary Public in and
for the State of New York, personally appeared Robert Tannenhauser known to me
to be the President of Business Loan Center, Inc., one of the entities that
executed the within instrument and also known to me to be the person who
executed it on behalf of said entity, and acknowledged to me that such entity
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Amanda C. Scuder
--------------------------
Notary Public
My Commission expires 1999
--------------------------
AMANDA C. SCUDER
Notary Public, State of New York
No. 01SC5088771
Qualified in Westchester County
Commission Expires 11/24/1999
<PAGE>
EXHIBIT A
CONTENTS OF SBA FILE
With respect to each SBA Loan, the SBA File shall include a copy of
any of the following items delivered to the Trustee or, with respect to 1 below
for the SBA ss. 7(a) Loans, the FTA:
1. The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of Marine Midland Bank, and its
successors and assigns, as trustee under that certain Pooling
and Servicing Agreement dated as of December 1, 1997, for the
benefit of the United States Small Business Administration and
holders of Business Loan Center SBA Loan-Backed Adjustable
Rate Certificates, Series 1997-1, Class A and Class B, as
their respective interests may appear, without recourse" and
signed, by facsimile or manual signature, in the name of the
Seller by a Responsible Officer, with all prior and
intervening endorsements showing a complete chain of
endorsement from the originator to the Seller, if the Seller
was not the originator;
2. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Mortgage, with evidence
of recording thereon, (ii) a copy of the Mortgage certified as
a true copy by a Responsible Officer of the Seller where the
original has been transmitted for recording until such time as
the original is returned by the public recording officer or
duly licensed title or escrow officer or (iii) a copy of the
Mortgage certified by the public recording officer in those
instances where the original recorded Mortgage has been lost;
3. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of Mortgage
from the Seller endorsed as follows: "Marine Midland Bank,
("Assignee") its successors and assigns, as trustee under the
Pooling and Servicing Agreement dated as December 1, 1997
subject to the Multi-Party Agreement dated as of December 1,
1997" with evidence of recording thereon (provided, however,
that where permitted under the laws of the jurisdiction
wherein the Mortgaged Property is located, the Assignment of
Mortgage may be effected by one or more blanket assignments
for SBA Loans secured by Mortgaged Properties located in the
same county), or (ii) a copy of such Assignment of Mortgage
certified as a true copy by a Responsible Officer of the
Seller where the original has been transmitted for recording
(provided, however, that where the original Assignment of
Mortgage is not being delivered to the Trustee, each such
Responsible Officer may complete one or more blanket
certificates attaching copies of one or more Assignments of
Mortgage relating to the Mortgages originated by the Seller);
A-1
<PAGE>
4. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all intervening
assignments, if any, showing a complete chain of title from
the originator to the Seller, including warehousing
assignments, with evidence of recording thereon if such
assignments were recorded, (ii) copies of any assignments
certified as true copies by a Responsible Officer of the
Seller where the originals have been submitted for recording
until such time as the originals are returned by the public
recording officer, or (iii) copies of any assignments
certified by the public recording office in any instances
where the original recorded assignments have been lost;
5. With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all title insurance
policies relating to the Mortgaged Properties to the extent
the Seller obtained such policies or (ii) copies of any title
insurance policies or other evidence of lien position,
including but not limited to PIRT policies, limited liability
reports and lot book reports, to the extent the Seller obtains
such policies or other evidence of lien position, certified as
true by the Seller;
6. For all SBA Loans, blanket assignment of all Collateral
securing the SBA Loan, including without limitation, all
rights under applicable guarantees and insurance policies;
7. For all SBA Loans, irrevocable power of attorney of the Seller
to the Trustee to execute, deliver, file or record and
otherwise deal with the Collateral for the SBA Loans in
accordance with the Agreement. The power of attorney will be
delegable by the Trustee to the Servicer and any successor
servicer and will permit the Trustee or its delegate to
prepare, execute and file or record UCC financing statements
and notices to insurers; and
8. For all SBA Loans, blanket UCC-1 financing statements
identifying by type all Collateral for the SBA Loans in the
SBA Loan Pool and naming the Trustee and the SBA as Secured
Parties and the Seller as the Debtor. The UCC-1 financing
statements will be filed promptly following the Closing Date
in New York and Delaware and will be in the nature of
protective notice filings rather than a true financing
statement.
A-2
<PAGE>
EXHIBIT B-1
[FORM OF CLASS A CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) IN CERTIFICATED FORM (A) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE
TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B)
THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-1-1
<PAGE>
BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1997-1 Original Class A Certificate
Class A Principal Balance:
No. 1 $18,078,507.20
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate: 100%
$18,078,507.20
Remittance Rate: Percentage Interest of
Variable the Class A Certificates
Evidenced by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement Business Loan Center, Inc.
and Cut-Off Date:
December 1, 1997
First Remittance Date: Latest Maturity Date: March 15, 2023
January 15, 1998
CUSIP No.: 123280 AA7
Closing Date: Trustee:
December 19, 1997 Marine Midland Bank
Business Loan Center, Inc. certifies that Banc One Capital
Corporation is the registered owner of a percentage interest (the "Percentage
Interest") in the Unguaranteed Interest in a pool of loans partially guaranteed
by the U.S. Small Business Administration (the "SBA Loans") and serviced by
Business Loan Center, Inc. (hereinafter called the "Servicer," in its capacity
as the Servicer, and the "Seller," in its capacity as the Seller, which terms
include any successor entity under the Agreement referred to below). The SBA
Loans were originated or purchased by the Seller. The SBA Loans will be serviced
pursuant to the terms and conditions of that certain Pooling and Servicing
Agreement dated as of December 1, 1997 (the "Agreement") between Marine Midland
Bank, as trustee (the "Trustee") and Business Loan Center, Inc., as Seller and
Servicer, certain of the pertinent provisions of which are set forth herein. To
the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions
B-1-2
<PAGE>
of the Agreement, to which Agreement the holder of this Certificate by virtue of
the acceptance hereof assents and by which such holder is bound.
On each Remittance Date, commencing on January 15, 1998, the Trustee
or Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class A Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class A
Certificates on such Remittance Date pursuant to Section 6.07 of the Agreement.
During the initial Interest Accrual Period, this Certificate will
bear interest at the rate of 6.60% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 1.90% per annum,
subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the
Certificate Registrar in New York, New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Business Loan Center SBA Loan-Backed, Adjustable Rate
Certificates, Series 1997-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to receive the
principal portion of the Unguaranteed Interests of the SBA Loans together with
interest thereon at the then applicable Class A or Class B Remittance Rate, as
the case may be.
Neither the Certificates nor the SBA Loans represent an obligation
of, or an interest in, the Servicer and (except for the Excess Spread) are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Small
Business Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
SBA Loans, all as more specifically set forth herein and in the Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
B-1-3
<PAGE>
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made by
the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Seller, the Servicer
and the Trustee without the consent of the Certificateholders and (b) by the
Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Certificate Registrar in
New York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the
B-1-4
<PAGE>
owner hereof for all purposes, and none of the foregoing shall be affected by
notice to the contrary.
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Agreement shall terminate upon notice to the Trustee
of the later of the following events: (i) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder or (ii) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by the Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date of the Agreement.
B-1-5
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
Business Loan Center, Inc.
Servicer
By:
----------------------------
Name:
Title:
Dated:
-------------------
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
Marine Midland Bank,
as Trustee
By:
----------------------
Authorized Signatory
or
Marine Midland Bank,
as Authenticating Agent
By:
Authorized Signatory
B-1-6
<PAGE>
EXHIBIT B-2
[FORM OF CLASS B CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) IN CERTIFICATED FORM (A) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE
TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B)
THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE MAY NOT BE ACQUIRED FOR OR ON BEHALF OF (1) AN EMPLOYEE BENEFIT
PLAN OR RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR (2) ANY ENTITY, THE ASSETS OF WHICH WOULD BE DEEMED
PLAN ASSETS UNDER THE DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R.
ss.2510.3-101, OTHER THAN AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60.
B-2-1
<PAGE>
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE DISTRIBUTIONS
WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
[SO LONG AS THIS CLASS B CERTIFICATE IS REGISTERED IN THE NAME OF BUSINESS LOAN
CENTER FINANCIAL CORP., THIS CLASS B CERTIFICATE MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, ASSIGNED OR OTHERWISE CONVEYED, IN WHOLE OR IN PART, WITHOUT THE
PRIOR WRITTEN APPROVAL OF THE UNITED STATES SMALL BUSINESS ADMINISTRATION.
B-2-2
<PAGE>
BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1997-1 Original Class B Certificate
Class B Principal Balance:
No. 1 $ 1,787,984.23
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$ 1,787,984.23
Remittance Rate: Percentage Interest of
Variable the Class B Certificates
Evidenced by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement Business Loan Center, Inc.
and Cut-Off Date:
December 1, 1997
First Remittance: Latest Maturity Date: March 15, 2023
Date:
January 15, 1998 CUSIP No.: 123280 AB 5
Closing Date: Trustee:
December 19, 1997 Marine Midland Bank
Business Loan Center, Inc. certifies that Business Loan Center
Financial Corp. is the registered owner of a percentage interest (the
"Percentage Interest") in the Unguaranteed Interest in a pool of loans partially
guaranteed by the U.S. Small Business Administration (the "SBA Loans") and
serviced by Business Loan Center, Inc. (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The SBA Loans were originated or purchased by the Seller. The SBA Loans will be
serviced pursuant to the terms and conditions of that certain Pooling and
Servicing Agreement dated as of December 1, 1997 (the "Agreement") between
Marine Midland Bank, as trustee (the "Trustee") and Business Loan Center, Inc.,
as Seller and Servicer, certain of the pertinent provisions of which are set
forth herein. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound.
B-2-3
<PAGE>
On each Remittance Date, commencing on January 15, 1998, the Trustee
or Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class B Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class B
Certificates on such Remittance Date pursuant to Section 6.07 of the Agreement.
During the initial Interest Accrual Period, this Certificate will
bear interest at the rate of 7.0% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 1.50%, subject
to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Business Loan Center SBA Loan-Backed, Adjustable Rate
Certificates, Series 1997-1, Class A and Class B (herein called the
"Certificates") and representing undivided ownership in the right to receive the
principal portion of the Unguaranteed Interests of the SBA Loans together with
interest thereon at the then applicable Class A or Class B Remittance Rate, as
the case may be.
Neither the Certificates nor the SBA Loans represent an obligation
of, or an interest in, the Servicer and (except for the Excess Spread) are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Small
Business Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
SBA Loans, all as more specifically set forth herein and in the Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made by
the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including
B-2-4
<PAGE>
reimbursement to the Servicer of advances made, or certain expenses incurred, by
it, and investment in Permitted Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Seller, the Servicer
and the Trustee without the consent of the Certificateholders and (b) by the
Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Certificate Registrar in
New York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
B-2-5
<PAGE>
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Agreement shall terminate upon notice to the Trustee
of the later of the following events: (i) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder or (ii) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by the Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date of the Agreement.
B-2-6
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
Business Loan Center, Inc.
Servicer
By:
----------------------------
Name:
Title:
Dated:
-------------------
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
Marine Midland Bank,
as Trustee
By:
----------------------
Authorized Signatory
or
Marine Midland Bank,
as Authenticating Agent
By:
Authorized Signatory
B-2-7
<PAGE>
EXHIBIT C
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
(date)
To: _______________________________
_______________________________
_______________________________ (the "Depository")
As "Servicer" under the Pooling and Servicing Agreement, dated as of
December 1, 1997, Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates, Series 1997-1 Class A and Class B (the "Agreement"), we hereby
authorize and request you to establish an account, as a Principal and Interest
Account pursuant to Section 5.03 of the Agreement, to be designated as
______________________________________ in trust for the registered holders of
Business Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series
1997-1." All deposits in the account shall be subject to withdrawal therefrom by
order signed by the Servicer. You may refuse any deposit which would result in
violation of the requirement that the account be fully insured as described
below. This letter is submitted to you in duplicate. Please execute and return
one original to us.
BUSINESS LOAN CENTER, INC.
By:
------------------------------
Name:
Title:
C-1
<PAGE>
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number __________, at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The amounts deposited at any time in the account
will be insured to the maximum amount provided by applicable law by the Federal
Deposit Insurance Corporation.
---------------------------------
(Name of Depository)
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
C-2
<PAGE>
EXHIBIT D
[OMITTED]
D-1
<PAGE>
EXHIBIT E
[OMITTED]
E-1
<PAGE>
EXHIBIT E(1)
WIRING INSTRUCTIONS FORM
_______________, 19__
[Paying Agent]
[Trustee]
______________________
______________________
______________________
Re: Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates, Series 1997-1, [Class A] [Class B]
Number
Dear Sir:
In connection with the sale of the above-captioned Certificate by
___________________________________ to _________________________________,
("Transferee") you, as Paying Agent, are instructed to make all remittances to
Transferee as Certificateholder as of ____________, 19__ by wire transfer. For
such wire transfer, the wiring instructions are as follows:
______________________
______________________
______________________
________________________________
Transferee
Certificateholder's mailing address:
Name:
Address:
E(1)-1
<PAGE>
EXHIBIT F-1
FORM OF INITIAL CERTIFICATION
____________ , 199_
[Seller]
[Servicer]
[SBA]
Re: Pooling and Servicing Agreement
Business Loan Center SBA Loan-Backed
Adjustable Rate Certificates,
Series 1997-1, dated as of December 1, 1997
between Business Loan Center, Inc.
and Marine Midland Bank, as Trustee
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling and
Servicing Agreement (the "Agreement"), the undersigned, as Trustee, hereby
certifies that, except as noted on the attachment hereto, if any (the "Loan
Exception Report"), it has received each of the documents required to be
delivered to it pursuant to Section 2.04 of the Agreement (not including the
original SBA Notes relating to the SBA ss. 7(a) Loans, which are to be delivered
to the FTA) with respect to each SBA Loan listed in the SBA Loan Schedule and
the documents contained therein appear to bear original signatures.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement.
F-1-1
<PAGE>
The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents or
any of the SBA Loans identified on the SBA Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such SBA Loan.
MARINE MIDLAND BANK, as Trustee
By:
-----------------------------
Name:
Title:
F-1-2
<PAGE>
EXHIBIT F-2
FORM OF FINAL CERTIFICATION
[date]
[Servicer]
[Seller]
[SBA]
Re: Pooling and Servicing Agreement, Business Loan Center
SBA Loan-Backed Adjustable Rate Certificates,
Series 1997-1, dated as of December 1, 1997
between Business Loan Center, Inc.
and Marine Midland Bank, as Trustee
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the attachment hereto, as to each SBA Loan listed in the SBA Loan
Schedule (other than any SBA Loan paid in full or listed on the attachment
hereto) it has reviewed the documents delivered to it pursuant to Section 2.04
of the Pooling and Servicing Agreement and has determined that (i) all such
documents are in its possession, (ii) such documents have been reviewed by it
and have not been mutilated, damaged, torn or otherwise physically altered and
relate to such SBA Loan and (iii) based on its examination, and only as to the
foregoing documents, the information set forth in the SBA Loan Schedule
respecting such SBA Loan is correct. The SBA has made no independent examination
of such documents beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The SBA makes no
representations as to: (i) the validity, legality, enforceability or genuineness
of any such documents contained in each or any of the Loans identified on the
SBA Loan Schedule, or (ii) the collectibility, insurability, effectiveness or
suitability of any such SBA Loan.
MARINE MIDLAND BANK
as Trustee
By:
--------------------
Name:
------------------
Title:
------------------
F-2-1
<PAGE>
EXHIBIT G
[OMITTED]
G-1
<PAGE>
EXHIBIT H
SBA LOAN SCHEDULE
[NOT ATTACHED]
H-1
<PAGE>
EXHIBIT I
REQUEST FOR RELEASE OF DOCUMENTS
To: [Trustee]
[FTA]
Re: Pooling and Servicing Agreement,
Business Loan Center SBA Loan-Backed Adjustable
Rate Certificates, Series 1997-1,
dated as of December 1, 1997
In connection with the administration of the pool of SBA Loans held
by you, we request the release, and acknowledge receipt, of the (Trustee's SBA
File/[specify document]) for the SBA Loan described below, for the reason
indicated.
Obligor's Name, Address & Zip Code:
SBA Loan Number:
Reason for Requesting Documents (check one)
____ 1. SBA Loan Paid in Full
(Servicer hereby certifies that all amounts received in
connection therewith have been credited to the Principal and
Interest Account and remitted to the Trustee for deposit into
the Certificate Account pursuant to the Pooling and Servicing
Agreement.)
____ 2. SBA Loan Liquidated
(Servicer hereby certifies that all proceeds of foreclosure,
insurance or other liquidation have been finally received and
credited to the Principal and Interest Account and remitted to
the Trustee for deposit into the Certificate Account pursuant
to the Pooling and Servicing Agreement.)
____ 3. SBA Loan in Foreclosure
_____4. SBA Loan Repurchased Pursuant to Section 11.01
of the Pooling and Servicing Agreement.
I-1
<PAGE>
_____5. SBA Loan Repurchased or Substituted Pursuant to Article II or
III of the Pooling and Servicing Agreement (Servicer hereby
certifies that the repurchase price or Substitution Adjustment
has been credited to the Principal and Interest Account and/or
remitted to the Trustee for deposit into the Certificate
Account pursuant to the Pooling and Servicing Agreement.)
____ 6. Collateral Being Released Pursuant to Section 5.01(f) of the Pooling
and Servicing Agreement.
____ 7. SBA Loan Collateral being substituted or subordinated.
If box 1 or 2 above is checked, and if all or part of the Trustee's
SBA File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified SBA Loan.
If box 3, 4, 5, 6 or 7 above is checked, upon our return of all of
the above documents to you, please acknowledge your receipt by signing in the
space indicated below, and returning this form.
BUSINESS LOAN CENTER, INC.,
as Servicer
By:
---------------------------------
Name:
------------------------------
Date:
------------------------------
Documents returned to Trustee:
- -------------------------------
Trustee
By:
------------------------------
Date:
----------------------------
I-2
<PAGE>
EXHIBIT J
FORM OF LIQUIDATION REPORT
Customer Name:
Account number:
Original Principal Balance:
1. Unguaranteed Percentage of Liquidation Proceeds
Principal Prepayment $________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (Itemize) ________
Unguaranteed Percentage of
Total Proceeds $_______
2. Servicing Advances $________
Monthly Advances ________
Total Advances $_______
3. Net Liquidation Proceeds $_______
(Line 1 minus Line 2)
4. Principal Balance of the SBA
Loan on date of liquidation $_______
5. Realized (Loss) or Gain $_______
(Line 3 minus Line 4)
J-1
<PAGE>
EXHIBIT K
FORM OF DELINQUENCY REPORT
DELINQUENCY AND FORECLOSURE INFORMATION
RANGES # GROSS GROSS CERT. UNGTD
SERIES (IN DAYS) ACCT AMOUNT PCT AMOUNT PCT
- --------------------------------------------------------------------------------
1 TO 29 DAYS
30 TO 59 DAYS
60 TO 89 DAYS
90 TO 179 Days
180 to 719 Days
720 AND OVER
FORECLOSURE
REO PROPERTY
DELINQUENCY
OUTSTANDING
K-1
<PAGE>
EXHIBIT L
SERVICER'S MONTHLY COMPUTER TAPE FORMAT
The computer tape to be delivered to the Trustee pursuant to Section
6.09 shall contain the following information for each SBA Loan as of the related
Record Date:
1. Name of the Obligor, address of the Mortgaged Property, if
applicable, and Account Number.
2. The SBA Loan Interest Rate.
3. The Monthly Payment.
4. The dates on which the payments were received for the
applicable Due Period and the amount of such payments
segregated into the following categories; (a) total interest
received (including Servicing Fee, interest payable to holder
of the Guaranteed Interest, the Premium Protection Fee, FTA's
Fee, Excess Spread, Extra Interest and, if applicable,
Additional Fee); (b) interest payable to the holder of the
Guaranteed Interest and FTA's Fee; (c) principal and Excess
Payments received; (d) Curtailments received; and (e)
Principal Prepayments received.
5. The SBA Loan principal balance.
6. The SBA Loan date and original term to maturity.
7. A "Delinquency Flag" noting that the SBA Loan is current or
delinquent. If delinquent, state the date on which the last
payment was received.
8. For any SBA Loan that is not either 24 months delinquent or
otherwise determined to be uncollectible, a "Foreclosure Flag"
noting that the SBA Loan is the subject of foreclosure
proceedings.
9. For any SBA Loan that is not either 24 months delinquent or
otherwise determined to be uncollectible, an "REO Flag" noting
that the Mortgaged Property is an REO Property.
10. A "Liquidated SBA Loan Flag" noting that the SBA Loan is a
Liquidated SBA Loan and the Net Liquidation Proceeds received
in connection therewith.
11. Any additional information reasonably requested by the
Trustee.
L-1
<PAGE>
EXHIBIT M
MULTI-PARTY AGREEMENT
AMONG BUSINESS LOAN CENTER, INC., MARINE MIDLAND BANK,
COLSON SERVICES CORP. AND SBA
This Multi-Party Agreement is entered into as of December 1, 1997 (this
"Agreement"), by and among Business Loan Center, Inc. (the "SBA Lender"), Marine
Midland Bank, as Trustee ("Trustee"), Colson Services Corp. ("FTA"), and the
United States Small Business Administration ("SBA").
SBA Lender has made and intends to continue to make loans to small
businesses under the Small Business Act, as amended ("SBA Lender Loans").
SBA guarantees a portion of each SBA Lender Loan in accordance with
13 C.F.R. Part 120 and a Small Business Administration Loan Guaranty Agreement
(SBA Form 750), dated March 27, 1997, between SBA and Business Loan Center, Inc.
("the SBA Agreement").
Because SBA guarantees a portion of each SBA Lender Loan, SBA has an
interest in the SBA Lender Loans, the underlying collateral, and the Loan
Documents.
SBA Lender has entered into certain Secondary Participation Guaranty
Agreements on SBA Form 1086 (each, a "Participation Agreement") with a purchaser
(each, a "Guaranteed Holder"), FTA and SBA. Under the Participation Agreements,
SBA Lender has sold the guaranteed portion (the "Guaranteed Interest") in
certain SBA Lender Loans (the "Loan Pool"). SBA has caused FTA to issue a
certificate to each Guaranteed Holder which entitles the Guaranteed Holder to
receive the payments and other recoveries of principal relating to the
Guaranteed Interest on the related SBA Lender Loans, together with interest on
the Guaranteed
M-1
<PAGE>
Interest at a per annum rate in effect from time to time in accordance with the
Participation Agreement.
The SBA Lender and the Trustee have entered into a Pooling and
Servicing Agreement dated as of December 1, 1997 (the "Pooling and Servicing
Agreement") which establishes a trust (the "Trust"). Under the Pooling and
Servicing Agreement, SBA Lender will convey the Conveyed Interest to the Trust.
The Trust will issue certificates (the "Certificates") evidencing the right to
receive the Unguaranteed Interest in the SBA Lender Loans in the Loan Pool
together with interest.
13 C.F.R. Section 120.420 and the SBA Agreement require the SBA
Lender to obtain SBA's written consent before it sells the Unguaranteed
Interest.
The SBA Lender, the Trustee and SBA want to assure consistency
between the SBA Agreement and the Pooling and Servicing Agreement and clarify
the respective rights of the parties.
SBA Lender, Trustee, FTA and SBA agree as follows:
1. Definitions. In this Agreement, the following terms have
the following meanings:
a. "Conveyed Interest": the Unguaranteed Interest plus
the amount by which the interest collected by the Servicer on
the principal portion of the Guaranteed Interest of each SBA
Lender Loan in the Loan Pool exceeds the sum of (a) the
interest payable to the Registered Holder, (b) the fees
payable to SBA and FTA, (c) the Servicing Fee and (d) the
Premium Protection Fee.
M-2
<PAGE>
b. "Event of Default": as defined in the Pooling and
Servicing Agreement.
c. "Loan Documents": all Notes, mortgages, deeds of
trust, security deeds, security agreements, instruments of
hypothecation, guarantees and other agreements and documents
that relate to the SBA Lender Loans.
d. "Notes": the notes evidencing the SBA Lender Loans in
the Loan Pool.
e. "Premium Protection Fee": 0.60% per annum of the then
outstanding principal balance of the Guaranteed Interest.
f. "SBA Lender Loan Debtor": any debtor obligated under
an SBA Lender Loan.
g. "SBA Rules and Regulations": the Small Business Act,
as amended, the SBA Agreement, all rules and regulations
promulgated from time to time under the Small Business Act,
and SBA Standard Operating Procedures and official Notices as
from time to time in effect.
h. "Servicer": the Servicer (as defined in the Pooling
and Servicing Agreement).
i. "Servicing Fee": 0.4% per annum of the then
outstanding principal balance of the entire SBA Lender Loan.
j. "Unguaranteed Interest": the portion of each SBA
Lender Loan in the Loan Pool not guaranteed by SBA.
M-3
<PAGE>
2. SBA's Guaranteed Interest. Each of the SBA Lender, Trustee (on
behalf of itself and the holders of the Certificates) and FTA acknowledge SBA's
interest in the Guaranteed Interest of all SBA Lender Loans, together with the
collateral securing the SBA Lender Loans and the Loan Documents and agree to
recognize and uphold such interest under SBA Rules and Regulations. SBA Lender
and Trustee will execute any release, assignment, endorsement or other document
that SBA may from time to time reasonably request with respect to the Guaranteed
Interest. Each of SBA Lender and Trustee will remit funds it receives in respect
of the Guaranteed Interest in the SBA Lender Loans to FTA, or SBA, as required.
If SBA purchases the Guaranteed Interest in any SBA Lender Loan, any recoveries
from the SBA Lender Loan Debtor or the collateral underlying the SBA Lender Loan
will be distributed pro rata to SBA as holder of the Guaranteed Interest and to
Trustee as holder of the Unguaranteed Interest.
3. Unguaranteed Interest. SBA acknowledges that it has no interest
in the Unguaranteed Interest, Servicing Fee or the Premium Protection Fee. SBA
further acknowledges that it has no interest in any collateral that secures any
SBA Lender Loan or any Loan Document, except to the extent the collateral
secures or a Loan Document relates to the Guaranteed Interest. The collateral
for an SBA Lender Loan secures the Guaranteed Interest and the Unguaranteed
Interest pari passu. If SBA receives any amount in respect of the Conveyed
Interest, SBA will remit the sum to Trustee for the credit of the SBA Lender,
provided that in no event will SBA have any obligation to pay any amount not
owed by SBA under SBA Rules and Regulations. If SBA receives any amount in
respect of the Servicing Fee or the Premium Protection Fee, SBA will remit the
sum to the SBA Lender, or if SBA Lender is not the Servicer, the Servicer,
provided that Trustee shall have given FTA 15 days prior written notice under
this Agreement of the change in Servicer. This Agreement constitutes a notice of
claims assignment for the full term
M-4
<PAGE>
of the Pooling and Servicing Agreement under the Federal Assignment of Claims
Act of 1940, as amended, 31 U.S.C. Section 3727, with respect to any right to
payment of any Unguaranteed Interest or the Servicing Fee or the Premium
Protection Fee.
4. SBA Consent to Pooling and Servicing Agreement.
(a) SBA consents to the SBA Lender's execution and performance
of the Pooling and Servicing Agreement and the transactions contemplated in it
including, but not limited to, the sales of the Class A Certificates.
(b) Notwithstanding anything to the contrary contained in the
Pooling and Servicing Agreement, a default by SBA Lender under another agreement
or a default by an entity other than the SBA Lender under another agreement may
not be an event of default under the Pooling and Servicing Agreement. Trustee
waives any rights it may have, including rights of set-off and banker's liens,
to any account of SBA Lender into which payments from SBA Lender Loan Debtors
are received and the Principal and Interest Account (as defined in the Pooling
and Servicing Agreement).
5. SBA Lender to Retain Ultimate Risk of Loss. As required by 13
C.F.R. Section 120.420(b)(2), SBA Lender must retain an economic risk in and
bear the ultimate risk of loss on the Unguaranteed Interest. SBA Lender will
establish the Spread Account under the Pooling and Servicing Agreement and cause
a wholly-owned subsidiary to be and remain the Spread Account Depositor (as
defined in the Pooling and Servicing Agreement) and cause a wholly-owned
subsidiary to retain the Class B Certificates in accordance with Section 11
hereof.
6. Premium Protection Fee. SBA Lender will retain the Premium
Protection Fee with respect to its SBA Lender Loans.
M-5
<PAGE>
7. Restriction on Use of SBA Lender Loans. SBA Lender will not use
the SBA Lender Loans or the collateral supporting the SBA Lender Loans for any
borrowing or other financing not related to financing of the guaranteed or
unguaranteed portions of SBA Lender Loans.
8. FTA To Hold Original SBA Lender Notes; Possession of Loan
Documents.
(a) SBA Lender will deliver all original Notes relating to the
Initial SBA Loans (as defined in the Pooling and Servicing Agreement) to FTA
prior to the issuance of the Certificates and SBA Lender will deliver all
original Notes relating to the Subsequent SBA Loans (as defined in the Pooling
and Servicing Agreement) to FTA prior to each Subsequent Transfer of the
Subsequent SBA Loans. Each Note will be endorsed by means of an allonge (an
endorsement of the Note constituting a separate piece of paper) as follows: "Pay
to the order of Marine Midland Bank, and its successors and assigns, as trustee
under the Pooling and Servicing Agreement dated as of December 1, 1997, for the
benefit of the United States Small Business Administration and the holders of
Business Loan Center SBA Loan-Backed Certificates, Series 1997-1, Class A and
Class B as their respective interests may appear, without recourse." Upon
receiving the Note, FTA will deliver to SBA Lender and the Trustee a receipt for
such Note in the form of Exhibit 1.
(b) The Notes are being delivered to FTA for the purposes of
protecting the SBA's and the Certificateholders' respective interests. SBA
appoints FTA as its fiscal and transfer agent and each of SBA and Trustee
appoint FTA as its agent to hold the Notes. FTA does not and will not during the
term of this Agreement have any interest in the SBA Lender Loans in the Loan
Pool or the related Loan Documents.
(c) FTA will not release any Note to SBA Lender or any other person
except (i) upon receipt from an SBA Lender of a Request for Release of Note in
the form of Exhibit 3,
M-6
<PAGE>
along with a confirmation of release from Trustee, or (ii) with SBA's prior
written consent. Upon receipt of the required request and confirmation or
consent, FTA shall release, within 3 Business Days, the related Note. The
Servicer shall return the Notes to FTA in accordance with the appropriate
provisions of the Pooling and Servicing Agreement and when the Notes are
returned to FTA, FTA will issue a receipt in the form of Exhibit 1 hereto.
(d) Upon reasonable notice to FTA, SBA will have the right during
normal business hours to inspect the original Notes at FTA's office.
(e) SBA Lender will deliver to Trustee the Loan Documents and
assignments of Loan Documents in accordance with the Pooling and Servicing
Agreement. All instruments of assignment shall assign the applicable collateral
to "Marine Midland Bank ("Assignee") its successors and assigns, as trustee
under the Pooling and Servicing Agreement dated as of December 1, 1997, subject
to the Multi-Party Agreement dated as of December 1, 1997". All financing
statements will name the Trustee as secured party. Any power of attorney from
SBA Lender to Trustee must require the Trustee to deal with the collateral in
accordance with the terms of the Pooling and Servicing Agreement and this
Agreement.
(f) If the Servicer or the SBA must be the record owner or secured
party with respect to any Note or any collateral securing any Note for any
purpose including, without limitation, to liquidate (including by any judicial
means) or otherwise pursue remedies against any SBA Lender Loan Debtor or the
collateral, Trustee will assign such Note or collateral to the Servicer, or SBA,
as necessary.
9. Servicing of SBA Lender Loans. SBA Lender will service the SBA
Lender Loans in the Loan Pool. The Servicer will remit funds to which the
Guaranteed Holders or SBA is entitled in accordance with the terms of the
Participation Agreements, and will remit funds
M-7
<PAGE>
which are required to be remitted to Trustee in accordance with the terms of the
Pooling and Servicing Agreement. SBA Lender must proceed with all collection,
enforcement of remedies and liquidation actions against SBA Lender Loan Debtors
in default in accordance with SBA Rules and Regulations. SBA Lender must perform
all servicing activities in accordance with SBA Rules and Regulations, the
Participation Agreements and, to the extent there is no conflict, the Pooling
and Servicing Agreement. Property acquired through foreclosure or deed in lieu
of foreclosure will be titled in the name of Trustee for the benefit of the SBA
and the holders of the Certificates, as their interests may appear, subject to
the terms of this Agreement. The SBA Lender will continue to administer such
property and will be responsible for its disposition in accordance with the
terms of the Pooling and Servicing Agreement. The SBA Lender will distribute
disposition proceeds to the SBA, as party in interest with respect to the
Guaranteed Interest, and to Trustee in respect of the Unguaranteed Interest, pro
rata. SBA may, at its option, assume servicing of any SBA Lender Loan in
accordance with SBA Rules and Regulations. Prior to an Event of Default, Trustee
will not take (i) any action regarding the servicing of any SBA Lender Loan or
(ii) any action with respect to any SBA Lender Loan Debtor or any collateral
securing any SBA Lender Loan. Any actions required of SBA Lender under the
Pooling and Servicing Agreement or this Agreement may be performed by or through
a subservicer approved by SBA under an agreement approved by SBA, but any such
subservicing arrangement will not limit or reduce SBA Lender's obligations or
liabilities as servicer under the Pooling and Servicing Agreement or this
Agreement.
10. Default Under Pooling and Servicing Agreement. Trustee will give
SBA prompt written notice of an Event of Default and prompt written notice of
any termination of SBA Lender as Servicer under the Pooling and Servicing
Agreement. Upon an Event of Default
M-8
<PAGE>
and termination of SBA Lender as Servicer in accordance with the terms of the
Pooling and Servicing Agreement, Trustee may be substituted as Servicer so long
as Trustee is then an approved SBA participating lender in good standing,
operating under a current Small Business Administration Loan Guaranty Agreement
(Deferred Participation) (Form 750). If Trustee does not meet that condition or
is otherwise unable to act or if the SBA requests in writing, Trustee will
appoint another Servicer in accordance with the Pooling and Servicing Agreement.
Any successor Servicer must agree to be bound by the terms of this Agreement and
must execute an agreement in the form of Exhibit 2. Any substitute Servicer will
be entitled to receive the Servicing Fee and the Premium Protection Fee.
11. Transferees. Other than the issuance of the Certificates,
Trustee will not sell, participate, pledge, hypothecate, enter into any
repurchase agreement with respect to, or otherwise transfer any of its interest
in any SBA Lender Loan or any Note without SBA's prior written consent. The
proposed transferee must be an approved SBA participating lender in good
standing, operating under a current Small Business Administration Loan Guaranty
Agreement (Deferred Participation) (Form 750) and must be acceptable to SBA.
Upon consenting to any proposed transfer, SBA will give FTA prompt written
notice. Any transferee must agree to be bound by the terms of this Agreement.
Upon initial issuance, the Class B Certificates will be registered in the name
of Business Loan Center Financial Corp., a wholly-owned subsidiary of the SBA
Lender. The SBA Lender agrees that Business Loan Center Financial Corp. may not
sell, pledge, transfer, assign or otherwise convey, in whole or in part, the
Class B Certificates without the prior written consent of SBA.
12. SBA Lender Acknowledgment of Continuing Obligation; No
Assumption of Liabilities. No action taken by Trustee, SBA or the Servicer under
this Agreement, SBA
M-9
<PAGE>
Agreement, or the Pooling and Servicing Agreement will release or relieve SBA
Lender of any of its obligations to SBA or Trustee. None of SBA, Trustee, FTA or
the Servicer will incur any liability or obligation to SBA Lender by reason of
any reasonable or customary action taken in carrying out the provisions of this
Agreement. Neither the execution of this Agreement, nor the taking of any action
by Trustee, SBA, FTA or the Servicer under this Agreement will be an assumption
by Trustee, SBA, FTA or the Servicer of any liabilities or obligations of SBA
Lender. The provisions of this Section will survive termination of this
Agreement.
13. FTA's and SBA's Limited Liability and Expenses. (a) FTA may rely
upon any signature, notice, certificate, or other document reasonably believed
by it to be genuine and to have been signed by the party purporting to sign it.
SBA Lender will assume liability for and indemnify, protect, and hold harmless
FTA from any liabilities or losses arising out of this Agreement, except in the
case of FTA's gross negligence or willful misconduct. SBA Lender will reimburse
FTA for all expenses, taxes, and other charges that FTA incurs in administering
this Agreement. SBA Lender will pay FTA its standard fee for its services under
this Agreement. In performing its obligations under this Agreement, FTA will not
follow instructions from any party other than SBA or, pursuant to Section 8(c),
upon the request of the SBA Lender and concurring instructions of Trustee. The
SBA Lender will not hold FTA liable for any action taken in accordance with such
instructions.
(b) SBA may rely on any signature, notice, certificate, request or
other document reasonably believed by it to be genuine and to have been signed
by the party purporting to sign it. SBA Lender will assume liability for and
indemnify, protect and hold harmless SBA from all liabilities or losses arising
out of this Agreement, except in the case of gross negligence or willful
M-10
<PAGE>
misconduct. Upon request by SBA, SBA Lender will reimburse SBA for all expenses
and other charges that SBA incurs in connection with this Agreement.
(c) The provisions of this Section 13 shall survive any termination
of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts each of which will be an original.
15. Inconsistencies. If any provision of this Agreement is
inconsistent with any provision in any other agreement, including but not
limited to the Pooling and Servicing Agreement, the provision of this Agreement
controls. The Pooling and Servicing Agreement and any agreements entered into in
connection with such agreement are amended to the extent necessary to give
effect to the prior sentence. The SBA Agreement is amended to provide that FTA
will hold the Notes that are transferred pursuant to the Pooling and Servicing
Agreement and that the Trustee may hold the Loan Documents as provided in this
Agreement.
16. Amendment and Term. This Agreement may not be terminated or
amended without the prior written consent of the parties. Neither the SBA
Agreement nor the Pooling and Servicing Agreement may be amended in any manner
that would impair the respective rights of the SBA or the Trustee under this
Agreement without the prior written consent of the party so affected.
17. Governing Law. This Agreement will be interpreted and construed
in accordance with the laws of the State of New York, without reference to its
conflict of laws rules.
18. Successors and Assigns. This Agreement binds and benefits the
parties and their respective successors and assigns.
M-11
<PAGE>
19. Section Headings. The section headings in this Agreement are for
convenience only, and are without substantive meaning or content.
20. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will be given no effect and
shall not invalidate any other provision of this Agreement.
21. Notices and Deliveries. Except as otherwise expressly provided
in this document, all notices or deliveries under this Agreement will be given
by actual delivery to the parties at the addresses below or to such other
addresses that any party may designate for itself by written notice to each of
the other parties. All notices will be effective upon receipt by the applicable
party.
If to the SBA Lender, at:
Business Loan Center, Inc.
919 Third Avenue
New York, New York 10022
Telecopy No.:
Attention:
If to the Trustee, at:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
If to FTA, at:
Colson Services Corp.
150 Nassau Street
New York, New York 10038
Attn: President
If to SBA, at:
U.S. Small Business Administration
409 3rd Street, S.W.
Washington, D.C. 20416
Attn: Associate Administrator for
Financial Assistance
M-12
<PAGE>
In witness whereof the SBA Lender, the Trustee, FTA, and SBA have
executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By:
-------------------------------
M-13
<PAGE>
MARINE MIDLAND BANK, as Trustee
By:
-------------------------------
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By:
-------------------------------
Jane Palsgrove Butler
COLSON SERVICES CORP.
By:
-------------------------------
M-14
<PAGE>
EXHIBIT 1
ACKNOWLEDGMENT OF RECEIPT OF NOTE
___________, 199_
In accordance with Section 8 of the Multi-Party Agreement, dated as
of December 1, 1997, by and among Business Loan Center, Inc., Marine Midland
Bank, Colson Services Corp. ("Colson") and the United States Small Business
Administration ("SBA"), Colson, as agent for SBA, hereby acknowledges receipt of
the SBA guaranteed Note described below with respect to the following:
MAKER:
ORIGINAL PRINCIPAL AMOUNT:
DATE OF NOTE:
SBA LOAN NUMBER (GP NUMBER):
BUSINESS LOAN CENTER, INC. ACCOUNT NUMBER:
COLSON SERVICES CORP.,
AS AGENT FOR THE UNITED STATES
SMALL BUSINESS ADMINISTRATION
By:
-------------------------------
Its:
------------------------------
INSTRUCTIONS TO COLSON SERVICES CORP. One original executed copy of this receipt
should be made available for pick-up at the office of Colson or delivered to
Marine Midland Bank, as trustee, 140 Broadway, 12th Floor, New York, New York
10005, and a copy to Business Loan Center, Inc., 919 Third Avenue, New York, New
York 10022.
1-1
<PAGE>
EXHIBIT 2
The undersigned consent and agree to be bound as _____________ by
the terms of foregoing Multi-Party Agreement dated as of December 1, 1997 among
Business Loan Center, Inc., Marine Midland Bank, as Trustee, Colson Services
Corp. and SBA.
-----------------------------------
By:
--------------------------------
Name:
Title:
2-1
<PAGE>
EXHIBIT 3
REQUEST FOR RELEASE OF NOTE
_____________, 199_
Colson Services Corp.
As Agent for the United States
Small Business Administration
150 Nassau Street
New York, NY 10038
In accordance with Section 8(c) of the Multi-Party Agreement dated
as of December 1, 1997 by and among Business Loan Center, Inc., Marine Midland
Bank, Colson Services Corp. ("Colson") and the United States Small Business
Administration ("SBA") and, subject to your receipt of concurrence from Marine
Midland Bank, as Trustee, Business Loan Center, Inc. hereby requests release of
the Note described below:
OBLIGOR'S NAME AND ADDRESS:
SBA LOAN NUMBER (GP NUMBER):
Reason for Requesting Note
(ONE OF THESE MUST BE CHECKED)
____1. SBA Loan Paid in Full
____2. SBA Loan Liquidated
____3. SBA Loan in Foreclosure
____4. SBA Loan repurchased pursuant to Section 11.01 of the Pooling and
Servicing Agreement, dated as of December 1, 1997, relating to Business
Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series 1997-1
(The "Pooling and Servicing Agreement")
____5. SBA Loan repurchased or substituted pursuant to Article II or Article III
of the Pooling and Servicing Agreement
____6. Collateral being released pursuant to Section 5.01(f) of the Pooling and
Servicing Agreement
3-1
<PAGE>
____7. SBA Loan collateral being substituted or subordinated
BUSINESS LOAN CENTER, INC.
By:
-------------------------------
Its:
------------------------------
3-2
<PAGE>
EXHIBIT N
SPREAD ACCOUNT AGREEMENT
This Spread Account Agreement is dated as of December 19, 1997 (the
"Agreement") among Business Loan Center Financial Corp., a Delaware corporation,
as Spread Account Depositor (the "Spread Account Depositor"), Marine Midland
Bank, as trustee (the "Trustee"), and Marine Midland Bank, in its capacity as
custodian hereunder (the "Spread Account Custodian"). All capitalized terms used
but not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement referred to below.
WHEREAS, Business Loan Center, Inc. (the "Seller"), and Marine
Midland Bank, in its capacity as Trustee, have entered into a Pooling and
Servicing Agreement, dated as of December 1, 1997 (the "Pooling and Servicing
Agreement"), in connection with the establishment of a Trust (the "Trust") and
the issuance of Business Loan Center SBA Loan-Backed, Adjustable Rate
Certificates, Series 1997-1, representing an undivided beneficial ownership
interest in the Trust;
WHEREAS, the Spread Account Depositor wishes to establish the Spread
Account (the "Account") with the Spread Account Custodian, to be used in
accordance with the provisions of Section 6.02 of the Pooling and Servicing
Agreement; and
WHEREAS, the Spread Account Custodian herein agrees to maintain the
Account in accordance with the terms of this Agreement and the Pooling and
Servicing Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Section 1. Definitions. In addition to those terms defined in the
Pooling and Servicing Agreement and otherwise herein, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"Account Property" has the meaning set forth in Section 3
hereof.
"Account" has the meaning set forth in the second WHEREAS
clause hereof.
"Certificated Securities" has the meaning set forth in Section
8-102(4) of the UCC.
"Clearing Corporation" has the meaning set forth in Section
8-102(5) of the UCC.
N-1
<PAGE>
"Eligible Deposit Account" means either (a) a segregated
account with a Designated Depository Institution (as defined in the
Pooling and Servicing Agreement) or (b) a segregated trust account
with the corporate trust department of a depository institution
organized under the laws of the United States of America or any one
of the States (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in
such account.
"Delivery" when used with respect to Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
instruments and are susceptible of physical delivery ("Physical Property"):
(i) transfer of possession thereof to the Spread Account
Custodian, endorsed to, or registered in the name of, the Spread
Account Custodian or its nominee or endorsed in blank;
(b) with respect to a certificated security:
(i) delivery thereof in bearer form to the Spread Account
Custodian; or
(ii) delivery thereof in registered form to the Spread Account
Custodian and
(A) the certificate is endorsed to the Spread Account
Custodian or in blank by effective endorsement; or
(B) the certificate is registered in the name of the
Spread Account Custodian, upon original issue or registration of
transfer by the issuer;
(c) with respect to an uncertificated security:
(i) the delivery of the uncertificated security to the Spread
Account Custodian; or
(ii) the issuer has agreed that it will comply with
instructions originated by the Spread Account Custodian without
further consent by the registered owner;
(d) with respect to any security issued by the U.S. Treasury that is
a book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations:
N-2
<PAGE>
(i) a Federal Reserve Bank by book entry credits the
book-entry security to the securities account (as defined in 31 CFR
Part 357) of a participant (as defined in 31 CFR Part 357) which is
also a securities intermediary; and
(ii) the participant indicates by book entry that the
book-entry security has been credited to the Spread Account
Custodian's securities account;
(e) with respect to a security entitlement:
(i) the Spread Account Custodian becomes the entitlement
holder; or
(ii) the securities intermediary has agreed that it will
comply with entitlement orders originated by the Spread Account
Custodian without further consent by the entitlement holder;
(f) for the purpose of clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security:
(A) the Spread Account Custodian acquires possession
thereof;
(B) another person (other than a securities
intermediary) either acquires possession thereof on behalf of the
Spread Account Custodian or, having previously acquired possession
thereof, acknowledges that it holds for the Spread Account
Custodian; or
(C) a securities intermediary acting on behalf of the
Spread Account Custodian acquires possession of thereof, only if the
certificate is in registered form and has been specially endorsed to
the Spread Account Custodian by an effective endorsement;
(ii) with respect to an uncertificated security:
(A) the issuer registers the Spread Account Custodian as
the registered owner, upon original issue or registration of
transfer; or
(B) another person (other than a securities
intermediary) either becomes the registered owner thereof on behalf
of the Spread Account Custodian or, having previously become the
registered owner, acknowledges that it holds for the Spread Account
Custodian;
(g) for purposes of this definition, except as otherwise indicated,
the following terms shall have the meaning assigned to each such term in the
UCC:
(i) "certificated security"
N-3
<PAGE>
(ii) "effective endorsement"
(iii) "entitlement holder"
(iv) "instrument"
(v) "securities account"
(vi) "securities entitlement"
(vii) "securities intermediary"
(viii) "uncertificated security"
(h) in each case of Delivery contemplated herein, the Spread Account
Custodian shall make appropriate notations on its records, and shall cause same
to be made on the records of its nominees, indicating that securities are held
in trust pursuant to and as provided in this Agreement.
"Depositary" has the meaning set forth in 31 C.F.R. 306.118 or
similar federal regulations governing the transfer of securities
issued by the United States Treasury which are maintained in
book-entry form.
"Securities Intermediary" has the meaning set forth in Section
8-102 (a)(14) of the UCC.
"Instruments" has the meaning set forth in Section
9-105(l)(ii) of the UCC but excludes any "instruments" that are
"certificated securities" as defined in Section 8-102(l) (a) of the
UCC.
"Physical Property" has the meaning set forth in clause (i) of
the definition of "Delivery" in this Section 1.
"UCC" means the New York Uniform Commercial Code.
"Uncertificated Security" has the meaning set forth in Section
8-102(a)(18) of the UCC.
Section 2. Appointment of Spread Account Custodian. The Spread
Account Depositor and the Trustee hereby appoint Marine Midland Bank as their
agent under this Agreement to act on their behalf in accordance with the terms
of this Agreement with respect to their interests in the Account and all amounts
and investments deposited therein or credited thereto. Marine Midland Bank
hereby accepts and acknowledges its appointment as agent on behalf of the Spread
Account Depositor and the Trustee.
N-4
<PAGE>
Section 3. Pledge of Security Interest. The Spread Account Depositor
hereby assigns, sells, conveys and transfers to the Spread Account Custodian and
its successors and assigns, and grants thereto a security interest in, all of
its right, title and interest in and to all amounts payable to the Spread
Account pursuant to Section 6.02 of the Pooling and Servicing Agreement, the
Account, all amounts deposited therein or credited thereto, from time to time,
and all proceeds of the foregoing, including, without limitation, all other
amounts and investments held from time to time in the Account (whether in the
form of deposit accounts, Physical Property, book-entry securities,
Uncertificated Securities, or otherwise) in consideration of its right to
receive Excess Spread in accordance with Section 6.02 of the Pooling and
Servicing Agreement (all of the foregoing, collectively, the "Account
Property"), to have and to hold all the aforesaid property, rights and
privileges unto the Spread Account Custodian, its successors and assigns, in
trust for the benefit of the Trustee and the Certificateholders, subject to the
terms and provisions, set forth in this Agreement. The Spread Account Custodian
hereby acknowledges such transfer and, upon receipt, shall hold and distribute
the Account Property in accordance with the terms and provisions of this
Agreement.
Section 4. Establishment of the Account. In consideration of its
right to receive Excess Spread in accordance with Section 6.02 of the Pooling
and Servicing Agreement, the Spread Account Depositor hereby establishes and
shall hereafter maintain with the Spread Account Custodian the Account as a
separate trust account to include the money and other property deposited and
held therein pursuant hereto. The Account shall be a segregated trust account
maintained in New York and initially established with the Spread Account
Custodian and maintained with the Spread Account Custodian in the Corporate
Trust Department of the Spread Account Custodian. The Spread Account Custodian
acknowledges the interest of the Trustee in the Account, as set forth herein and
in Article VI of the Pooling and Servicing Agreement. The Spread Account
Custodian further acknowledges and agrees that (i) any deposits to the Account
shall be made solely by the Servicer or the Trustee in accordance with Section
6.02(a) of the Pooling and Servicing Agreement; (ii) any withdrawals from the
Account shall be made by the Spread Account Custodian solely upon instructions
therefor given by the Trustee as specifically set forth in Section 6.02(b) of
the Pooling and Servicing Agreement; and (iii) the Seller, the Servicer and the
Spread Account Depositor shall have no rights to receive any amounts in the
Account other than as specifically set forth herein and in Section 6.02(b) of
the Pooling and Servicing Agreement.
Section 5. Delivery of Account Property. With respect to the Account
Property, the Spread Account Depositor and the Spread Account Custodian agree
that:
(a) any Account Property that is held in deposit accounts
shall be held solely in an Eligible Deposit Account; and each such
deposit account shall be subject to the exclusive dominion and
control of the Spread Account Custodian, and the Spread Account
Custodian shall have sole signature authority with respect thereto;
N-5
<PAGE>
(b) any Account Property that is Physical Property shall be
delivered to the Spread Account Custodian in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Spread Account
Custodian or a securities intermediary (as such term is defined in
Section 8-102(a)(14) of the Relevant UCC);
(c) any Account Property that is a "certificated security"
under Article 8 of the Relevant UCC shall be delivered to the Spread
Account Custodian in accordance with paragraph (b) of the definition
of "Delivery" and shall be held, pending maturity or disposition,
solely by the Spread Account Custodian or a securities intermediary
(as such term is defined in Section 8-102(a)(14) of the Relevant
UCC);
(d) any Account Property that is an "uncertificated security"
under Article 8 of the Relevant UCC shall be delivered to the Spread
Account Custodian in accordance with paragraph (c) of the definition
of "Delivery" and shall be maintained by the Spread Account
Custodian, pending maturity or disposition, through continued
registration on the books and records of the issuer thereof of the
ownership of such security by the Spread Account Custodian (or its
nominee) or a securities intermediary (as such term is defined in
Section 8-102(a)(14) of the Relevant UCC);
(e) any Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered to the Spread Account Custodian in
accordance with paragraph (d) of the definition of "Delivery" and
shall be maintained by the Spread Account Custodian, pending
maturity or disposition, through continued book-entry registration
of such Account Property in the name of the Spread Account Custodian
or a securities intermediary (as such term is defined in Section
8-102(a)(14) of the Relevant UCC);
(f) any Account Property held through a securities
intermediary (as such term is defined in Section 8-102(a)(14) of the
Relevant UCC) shall be held in a securities account (as such term is
defined in Section 8-501(a) of the Relevant UCC) that is established
by such securities intermediary in the name of the Spread Account
Custodian for which the Spread Account Custodian is the sole
entitlement holder (as defined in Section 8-102(a)(7) of the
Relevant UCC).
Section 6. Investment. Amounts held in the Account shall be invested
in Permitted Instruments in accordance with the provisions of Section 6.06 of
the Pooling and Servicing Agreement. All such investments shall be made in the
name of the Spread Account Custodian or its nominee, and all income and gain
realized thereon shall be retained in the Account until withdrawals are
permitted under Section 6.02(b)(iii) of the Pooling and Servicing Agreement.
N-6
<PAGE>
Section 7. Statement of Account. On or before each Determination
Date, the Spread Account Custodian shall deliver to the Trustee, the Servicer
and the Spread Account Depositor an Officer's Certificate of the Spread Account
Custodian setting forth, as of such date, (i) the amount on deposit in the
Account, (ii) the activity in the Account for the preceding month and (iii) the
amount of any income or gain (or loss) on amounts held in the Account.
Section 8. Termination. This Agreement shall terminate upon the
termination of the Pooling and Servicing Agreement in accordance with its terms.
Upon termination of this Agreement, any amounts on deposit in the Account shall
be paid by the Spread Account Custodian to the Spread Account Depositor in
accordance with the terms of the Pooling and Servicing Agreement.
Section 9. Amendment. This Agreement may be amended by the Spread
Account Depositor and the Spread Account Custodian with the consent of the
Trustee. The parties hereto agree to make any changes to this Agreement required
by the Rating Agency in order to obtain an investment-grade rating.
Section 10. Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same Agreement.
SECTION 11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
Section 12. Notices. All demands, notices and communications upon or
to the Spread Account Depositor, the Servicer, the Spread Account Custodian or
the Trustee under this Agreement shall be in writing, personally delivered or
mailed by certified mail, return receipt requested, and shall be deemed to have
been duly given upon receipt (a) in the case of the Trustee, at the address
therefor set forth in Section 13.06 of the Pooling and Servicing Agreement; (b)
in the case of the Spread Account Custodian, c/o Marine Midland Bank at 140
Broadway, New York, New York 10005, 12th Floor, Attention: Corporate Trust
Department; and (c) in the case of the Spread Account Depositor, c/o Business
Loan Center, Inc., 919 Third Avenue, New York, New York 10022.
Section 13. Severability of Provisions. If any one or more of the
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such agreements, provisions or terms shall be
deemed severable from the remaining agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
N-7
<PAGE>
Section 14. Assignment; Benefit of Agreement. Notwithstanding
anything to the contrary contained herein, this Agreement may not be assigned by
the Spread Account Depositor Spread Account Custodian without the prior written
consent of the Trustee. Subject to the foregoing, this Agreement will inure to
the benefit of and be binding upon the parties hereto and the Trustee and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the Spread Account Depositor, the Trustee and
the Spread Account Custodian have caused this Spread Account Agreement to be
duly executed by their respective officers as of the day and year first above
written.
Marine Midland Bank,
as Trustee
By
-------------------------------
Authorized Officer
MARINE MIDLAND BANK,
as Spread Account Custodian
By
-------------------------------
Name:
Title:
BUSINESS LOAN CENTER FINANCIAL CORP.
as Spread Account Depositor
By
-------------------------------
Name:
Title:
N-8
<PAGE>
EXHIBIT O-1
FORM OF TRANSFEREE LETTER [NON-RULE 144A]
Marine Midland Bank, as Trustee
140 Broadway, 12th Floor
New York, New York 10005
Business Loan Center, Inc.,
as Servicer
919 Third Avenue
New York, New York 10022
Attention: Corporate Trust Administration
__________, 199_
Re: Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates, Series 1997-1, Class __
Ladies and Gentlemen:
In connection with our acquisition of the above-captioned
Certificates, we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we are an institutional "Accredited Investor," as defined in the Pooling and
Servicing Agreement pursuant to which the Certificates were issued (the
"Agreement"), and have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in
the Certificates, (c) we have had the opportunity to ask questions of and
receive answers from the Seller concerning the purchase of the Certificates and
all matters relating thereto or any additional information deemed necessary to
our decision to purchase the Certificates, (d) we are acquiring the Certificates
for investment for our own account and not with a view to any distribution of
such Certificates (but without prejudice to our right at all times to sell or
otherwise dispose of the Certificates in accordance with clause (f) below), (e)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, or taken any other action which would result in a
violation of Section 5 of the Act, (f) we will not sell, transfer or otherwise
dispose of any Certificates unless (1) such sale, transfer or other disposition
is made pursuant to
O-1-1
<PAGE>
an effective registration statement under the Act or is exempt from such
registration requirements, and if requested, we will at our expense provide an
opinion of counsel satisfactory to the addressees of this Certificate that such
sale, transfer or other disposition may be made pursuant to an exemption from
the Act, (2) the purchaser or transferee of such Certificate has executed and
delivered to you a certificate to substantially the same effect as this
certificate if required by the Agreement, and (3) the purchaser or transferee
has otherwise complied with any conditions for transfer set forth in the
Agreement and (g) with respect to a Class B Certificate, the purchaser is not
acquiring a Class B Certificate, directly or indirectly, for or on behalf of:
(i) an employee benefit plan or other retirement arrangement subject to the
Employee Retirement Income Security Act of 1974, as amended, and/or Section 4975
of the Internal Revenue Code of 1986, as amended, or (ii) any entity, the assets
of which would be deemed plan assets under the Department of Labor regulations
set forth at 29 C.F.R. ss.2510.3-101.
Very truly yours,
_________________________
Print Name of Transferee
By:
Authorized Officer
O-1-2
<PAGE>
EXHIBIT O-2
FORM OF RULE 144A CERTIFICATION
Business Loan Center, Inc.,
as Servicer
919 Third Avenue
New York, New York 10022
Marine Midland Bank, as Trustee
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
_________, 199_
Re: Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates, Series 1997-1, Class __
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have had
the opportunity to ask questions of and receive answers from the Seller
concerning the purchase of the Certificates and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Certificates, (c) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Act or that would render the
disposition of the Certificates a violation of Section 5 of the Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
(d) we are a "qualified institutional buyer" as that term is defined in Rule
144A under the Act and have completed the form of certification to that effect
attached hereto as Annex 1 and (e) with respect to a Class B Certificate, we are
not acquiring a Class B Certificate, directly or indirectly, for or on behalf
of: (i) an employee benefit plan or other retirement arrangement subject to the
Employee Retirement Income Security Act of 1974,
O-2-1
<PAGE>
as amended, and/or Section 4975 of the Internal Revenue Code of 1986, as
amended, or (ii) any entity, the assets of which would be deemed plan assets
under the Department of Labor regulations set forth at 29 C.F.R. ss.2510.3-101.
We are aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Act.
O-2-2
<PAGE>
ANNEX 1 TO EXHIBIT O-2
[Date]
[Placement Agent]
[Address]
[Issuer]
[Address]
Re: Business Loan Center SBA Loan-Backed Adjustable Rate
Certificates, Series 1997-1, Class A and Class B
(the "Confidentially Offered Securities")
Ladies and Gentlemen:
In connection with our purchase of Confidentially Offered
Securities, the undersigned certifies to each of the parties to whom this letter
is addressed that it is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Act")) as follows:
1. It owns and/or invests on a discretionary basis eligible securities
(excluding affiliate's securities, bank deposit notes and CD's, loan
participations, repurchase agreements, securities owned but subject to a
repurchase agreement and currency, interest rate and commodity swaps), as
described below:
Amount: (1) $_________________; and
2. The dollar amount set forth above is:
a. greater than $100 million and the undersigned is one of the
following entities:
(1) |_| an insurance company as defined in Section 2(13) of the
Act;* or
- ----------
(1) Must be calculated using only securities which the undersigned
beneficially held as of the date below.
O-2-3
<PAGE>
(2) |_| an investment company registered under the Investment
Company Act or any business development company as
defined in Section 2(a)(48) of the Investment Company
Act of 1940 or as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940; or
(3) |_| a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; or
(4) |_| a plan (i) established and maintained by a state, its
political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, the laws of
which permit the purchase of securities of this type,
for the benefit of its employees and (ii) the governing
investment guidelines of which permit the purchase of
securities of this type; or
(5) |_| a corporation (other than a U.S. bank, savings and loan
association or equivalent foreign institution),
partnership, Massachusetts or similar business trust, or
an organization described in Section 501(c)(3) of the
Internal Revenue Code; or
(6) |_| a U.S. bank, savings and loan association or equivalent
foreign institution, which has an audited net worth of
at least $25 million as demonstrated in its latest
annual financial statements as of a date not more than
16 months preceding the date of sale in the case of a
U.S. institution or 18 months in the case of a foreign
institution.; or
- ----------
* A purchase by an insurance company for one or more of its separate
accounts, as defined by section 2(a)(37) of the Investment Company Act of
1940, which are neither registered nor required to be registered
thereunder, shall be deemed to be a purchase for the account of such
insurance company.
O-2-4
<PAGE>
(7) |_| an investment adviser registered under the Investment
Advisers Act; or
b. |_| greater than $10 million, and the undersigned is a
broker-dealer registered with the SEC; or
c. |_| less than $10 million, and the undersigned is a broker-dealer
registered with the SEC and will only purchase Rule 144A
securities in riskless principal transactions (as defined in
Rule 144A); or
d. |_| less than $100 million, and the undersigned is an investment
company registered under the Investment Company Act of 1940,
which, together with one or more registered investment
companies having the same or an affiliated investment adviser,
owns at least $100 million of eligible securities; or
e. |_| less than $100 million, and the undersigned is an entity, all
the equity owners of which are qualified institutional buyers.
The undersigned further certifies that it is purchasing
Confidentially Offered Securities for its own account or for the account of
others that independently qualify as "Qualified Institutional Buyers" as defined
in Rule 144A. It is aware that the sale of the Confidentially Offered Securities
are being made in reliance on its continued compliance with Rule 144A. It is
aware that the transferor may rely on the exemption from the provisions of
Section 5 of the Act provided by Rule 144A. The undersigned understands that the
Confidentially Offered Securities may be resold, pledged or transferred only to
a person reasonably believed to be a Qualified Institutional Buyer that
purchases for its own account or for the account of a Qualified Institutional
Buyer to whom notice is given that the resale, pledge or transfer is being made
in reliance in Rule 144A.
The undersigned agrees that if at some time before the expiration of
the holding period described in Rule 144 it wishes to dispose of or exchange any
of the Confidentially Offered Securities, it will not transfer or exchange any
of the Confidentially Offered Securities to a Qualified Institutional Buyer
without first obtaining a letter in the form hereof from the transferee and
delivering such certificate to the addressees hereof.
O-2-5
<PAGE>
IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned
Qualified Institutional Buyer on the _____ day of ___________, 1997.
Name of Institution
Signature
Name
Title**
- --------
** Must be President, Chief Financial Officer, or other executive officer.
O-2-6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into
as of March 25, 1998 between BUSINESS LOAN CENTER, INC., a Delaware corporation
with its principal place of business located at 645 Madison 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, and
Secured Party are concurrently entering into a Loan Agreement pursuant to which
Secured Party has agreed to provide a revolving credit facility in the maximum
amount of up to Twenty-Five Million Dollars ($25,000,000) to Debtor upon the
terms and conditions set forth therein (as the same may from time to time be
amended, modified or supplemented, being hereinafter called the "Loan
Agreement").
B. Secured Party has conditioned its obligations under the Loan Agreement
upon the execution and delivery by Debtor of this Agreement and Debtor has
agreed to enter into this Agreement.
C. In order to comply with the terms and conditions of the Loan Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor hereby agrees with Secured Party as
follows:
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.
"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, 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 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
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of every kind and nature, whether similar or dissimilar to the foregoing.
General Intangibles shall not include Debtor's rights under its Loan
Guaranty Agreement, Form 750, or its SBLC Participation Agreement, Form
1082.
"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.
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
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 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;
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(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, except
for funds earned by Debtor as the "Servicing Fee" under the
Multi-Party Agreement;
(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;
(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.
ARTICLE III
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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, securing the payment of the
Liabilities and constitutes a legal, valid and binding obligation of Debtor
enforceable against Debtor in 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 will be obtained on or before the Effective Date
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
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shall not execute any such financing statement or other public notice or
recording in favor of any Person other than Secured Party 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 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 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 Intermediary 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
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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.
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 Intermediary pursuant to the Multi-Party Agreement.
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
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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, 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 Intermediary 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.
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
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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 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.
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(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.
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);
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(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;
(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 the Multi-Party 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
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of dishonor as to any action taken by Secured Party in connection with this
Agreement, any note or other document.
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 the Items of Payment (as
defined in the Loan Agreement) into the Blocked Account to the extent required
by the Loan Agreement, or to instruct Account Debtors to make deposits directly
into 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, Secured
Party may take any or all of the following actions without notice (except where
expressly required below) or demand to Debtor:
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(a) Declare all or part of the Indebtedness pursuant to the
Liabilities immediately due and payable and enforce payment of the same by
Debtor.
(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
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any public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any 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 and subject to the Multi-Party 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.
7.2 Settlement of Accounts. In the event that Secured Party exercises its
right to settle or adjust any disputes or
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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,
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 receipt confirmed, or (c) by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
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(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) 380-6179
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: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
(b) If to Debtor, at:
Business Loan Center, Inc.
645 Madison Avenue, 18th 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
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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 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
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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 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.
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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.
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.
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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.
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:
--------------------------------
Robert F. Tannenhauser
President
SECURED PARTY:
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By:
--------------------------------
Ari D. Kaplan
Senior Account Executive
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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)
--------------------------------
<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)
-------------------------------
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into
as of May 7, 1998 between BLC COMMERCIAL CAPITAL CORP., a Florida corporation
with its principal place of business located at 645 Madison Avenue, 18th 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, and
Secured Party are concurrently entering into a Loan Agreement pursuant to which
Secured Party has agreed to provide a revolving credit facility in the maximum
amount of up to Fifteen Million Dollars ($15,000,000) to Debtor upon the terms
and conditions set forth therein (as the same may from time to time be amended,
modified or supplemented, being hereinafter called the "Loan Agreement").
B. Secured Party has conditioned its obligations under the Loan Agreement
upon the execution and delivery by Debtor of this Agreement and Debtor has
agreed to enter into this Agreement.
C. In order to comply with the terms and conditions of the Loan Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Debtor hereby agrees with Secured Party as
follows:
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):
"Accounts" means all accounts, contract rights, chattel paper,
instruments and documents (as such terms are defined
<PAGE>
in the UCC), including all Notes Receivable, 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.
"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 B&I 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 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
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of every kind and nature, whether similar or dissimilar to the foregoing.
"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.
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
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 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;
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(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;
(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.
ARTICLE III
DEBTOR'S REPRESENTATIONS AND WARRANTIES
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<PAGE>
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 B&I Lender's 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, securing the payment of the
Liabilities and constitutes a legal, valid and binding obligation of Debtor
enforceable against Debtor in 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, 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 so long as any of the Liabilities are
outstanding.
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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,
BLC Commercial Capital 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 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 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 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.
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3.8 Federal Taxpayer Identification Number. Debtor's federal taxpayer
identification number is 58-2319663.
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.
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
BLC Commercial Capital or Debtor's name hereunder.
4.3 Delivery of B&I Loan Notes. Debtor shall, within three (3) Business
Days of Debtor's receipt thereof, deliver possession of all B&I Loan Notes to
Lender.
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.
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4.6 Proceeds of Collateral. Except as otherwise provided under Section
2.13 of the Loan 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 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.
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
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<PAGE>
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 USDA rules or
regulations, Debtor shall promptly execute and deliver all further instruments
and documents, and take 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 B&I Lender's Agreement, the
Loan Note Guarantees, applicable USDA rules and regulations and any USDA Consent
that is subsequently required and entered into by Debtor, Secured Party and
USDA, 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.
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(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.
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, and subject to applicable USDA rules and regulations and any USDA
Consent that is subsequently required and entered into by Debtor, Secured Party
and USDA:
(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;
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(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;
(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 any USDA Consent
that is subsequently required and entered into by Debtor, Secured Party and
USDA, or otherwise receiving the written approval of USDA, 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.
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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.
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 applicable USDA rules and regulations and any USDA
Consent that is subsequently required and entered into by Debtor, Secured Party
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and USDA, 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.
(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
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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 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
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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 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
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possession of Secured Party and deliver the same to Document Agent.
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, subject to
applicable USDA rules and regulations and any USDA Consent that is subsequently
required and entered into by Debtor, Secured Party and USDA.
7.3 Servicing of B&I Loans. Upon the occurrence and during the continuance
of any Event of Default, subject to applicable USDA rules and regulations and
any USDA Consent that is subsequently required and entered into by Debtor,
Secured Party and USDA, 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
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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 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
Two Ravinia Drive, Suite 700
Atlanta, Georgia 30346
Attention: Account Executive - BLC Commercial
Facsimile: (770) 396-7403
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 Sheneman Julian & Rogers
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
(b) If to Debtor, at:
BLC Commercial Capital Corp.
645 Madison Avenue, 18th 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 future as well as existing transactions. Provisions of
this
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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 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
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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.
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
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obligations hereunder without the prior written consent of Secured Party.
8.9 Conflict with USDA Consent. In the event any provision of this
Agreement conflicts or is inconsistent with any USDA Consent that is
subsequently required and entered into by Debtor, Secured Party and USDA, the
relevant provisions of such USDA Consent 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.
[SIGNATURE PAGE FOLLOWS]
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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:
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
---------------------------
Robert F. Tannenhauser
President
SECURED PARTY:
TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation
By:
---------------------------
Terrell W. Harris
Senior Vice President
22
REVOLVING CREDIT NOTE
$15,000,000 May 7, 1998
BLC COMMERCIAL CAPITAL CORP., a Florida 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, or such
other place as may from time to time be designated by Lender, in coin or
currency of the United States of America that at the time of payment is legal
tender for the payment of public and private debts, the principal sum of FIFTEEN
MILLION AND NO/100 DOLLARS ($15,000,000), 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 Loan
Agreement of even date herewith, between Borrower, BLC Financial Services, Inc.,
a Delaware corporation, and Lender (such 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.
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.
<PAGE>
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 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
2
<PAGE>
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.
This Note has been delivered as of the date first written above.
BLC COMMERCIAL CAPITAL CORP.,
a Florida corporation
By:
---------------------------
Robert F. Tannenhauser
President
3
REVOLVING CREDIT NOTE
$25,000,000 Chicago, Illinois March 25, 1998
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 Loan
Agreement of even date herewith, between Borrower, BLC Financial Services, Inc.,
a Delaware corporation, and Lender (such 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.
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
<PAGE>
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 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
2
<PAGE>
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.
This Note has been delivered as of the date first written above.
BUSINESS LOAN CENTER, INC.,
a Delaware corporation.
By:
---------------------------
3
<PAGE>
Robert F. Tannenhauser
President
4
<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)
-------------------------------
5
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$35,000,000 Chicago, Illinois June __, 1998
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 THIRTY-FIVE
MILLION AND NO/100 DOLLARS ($35,000,000), 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 Amended
and Restated Revolving Credit Note ("Note") shall have the same meanings as in
the Loan Agreement dated as of March 5, 1998, between Borrower, BLC Financial
Services, Inc., a Delaware corporation, and Lender (such 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.
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
<PAGE>
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 reasonable costs and expenses incurred by the holder, including,
without limitation, reasonable attorneys' fees.
This Note amends and restates, and supersedes in its entirety, the
prior Revolving Credit Note dated March 25, 1998 executed by Borrower in the
original principal amount of
2
<PAGE>
$25,000,000, which prior Revolving Credit Note is being marked by Lender
"Cancelled and Superseded" contemporaneously with the execution and delivery to
Lender of this Note.
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.
This Note has been delivered as of the date first written above.
3
<PAGE>
BUSINESS LOAN CENTER, INC.,
a Delaware corporation.
By:
---------------------------
Robert F. Tannenhauser
President
4
<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)
-------------------------------
5
MULTI-PARTY AGREEMENT
BETWEEN
BUSINESS LOAN CENTER, INC., BLC FINANCIAL SERVICES, INC,
TRANSAMERICA BUSINESS CREDIT CORPORATION, COLSON SERVICES CORP.,
AND THE UNITED STATES SMALL BUSINESS ADMINISTRATION
This Multi-Party Agreement (this "Agreement") is entered into as of
March 25, 1998, by and among Business Loan Center, Inc. ("SBA Lender"), BLC
Financial Services, Inc. ("Guarantor"), Transamerica Business Credit Corporation
("Warehouse Lender"), Colson Services Corp. ("FTA"), and the United States Small
Business Administration ("SBA").
SBA Lender has made and intends to continue to make loans to small
businesses under the Small Business Act, as amended ("SBA Lender Loans").
SBA guarantees a portion of each SBA Lender Loan in accordance with
13 C.F.R. Part 120 ("SBA Regulations") and a Small Business Administration Loan
Guaranty Agreement (SBA Form 750), dated March 27, 1997, between SBA and SBA
Lender ("the SBA Agreement").
SBA Lender, Guarantor and Warehouse Lender have entered into a Loan
Agreement (together with any related security agreement and other related
documents, the "Warehouse Lender Agreement") dated as of March 25, 1998, under
which SBA Lender is borrowing money from Warehouse Lender to make SBA Lender
Loans.
<PAGE>
SBA Lender has granted to Warehouse Lender a security interest in all SBA Lender
Loans, together with all collateral securing the SBA Lender Loans and all
related Loan Documents.
Because SBA guarantees a portion of each SBA Lender Loan, SBA has an
interest in the SBA Lender Loans, the underlying collateral, and Loan Documents.
13 C.F.R. Section 120.420 and the SBA Agreement require the SBA
Lender to obtain SBA's written consent before it pledges the SBA Lender Loans.
SBA Lender, Guarantor, Warehouse Lender, and SBA want to assure
consistency between the SBA Agreement and the Warehouse Lender Agreement and
clarify the respective rights of the parties.
NOW THEREFORE, SBA Lender, Warehouse Lender, Guarantor, FTA and SBA agree
as follows:
1. Definitions. In this Agreement, the following terms have
the following meanings:
a. "Guaranteed Interest": the guaranteed portion of a SBA Lender
Loan.
b. "SBA Lender's Permanent Fee": as defined in SBA Form 1086,
Secondary Participation Guaranty and
2
<PAGE>
Certification Agreement ("Participation Agreement") as compensation
for servicing and liquidation activities.
c. "Loan Documents": all Notes, mortgages, deeds of trust, security
deeds, security agreements, instruments of hypothecation, and other
agreements and documents that relate to the SBA Lender Loans.
d. "Notes": the notes evidencing the SBA Lender Loans.
e. "Retained Interest": the unguaranteed portion of a SBA Lender
Loan.
f. "SBA Lender Loan Debtor": any debtor obligated under a SBA Lender
Loan.
g. "Demand Notice": a written notice given by Warehouse Lender
following an Event of Default (as defined in the Warehouse Lender
Agreement) that states that Warehouse Lender intends to deliver a
demand for repayment.
h. "Servicing Fee": for those SBA Lender Loans sold in the secondary
market pursuant to a Participation Agreement, SBA Lender's Permanent
Fee plus .40% of the outstanding principal balance of such SBA
Lender Loans, and for those SBA Lender Loans not sold in the
3
<PAGE>
secondary market, a fee equal to 1% of the outstanding principal
balance of such SBA Lender Loans.
2. SBA's Guaranteed Interest. Warehouse Lender and FTA
acknowledge SBA's interest in the Guaranteed Interest of all SBA Lender Loans,
together with the collateral securing the SBA Lender Loans and the Loan
Documents, and in all payments and recoveries with respect to the SBA Lender
Loans and the collateral, including insurance proceeds. Warehouse Lender will
execute any release, assignment, endorsement or other document that SBA may from
time to time reasonably request with respect to the Guaranteed Interest. If SBA
purchases the Guaranteed Interest in any SBA Lender Loan from SBA Lender, SBA
will remit the purchase price to SBA Lender. If SBA receives a Demand Notice
prior to its purchase of the Guaranteed Interest from SBA Lender, SBA will remit
the purchase price to Warehouse Lender for the credit of SBA Lender. If SBA
purchases the Guaranteed Interest in any SBA Lender Loan, any recoveries from
the SBA Lender Loan Debtor or the collateral underlying the SBA Lender Loan will
be distributed pro rata to SBA as the holder of the Guaranteed Interest and to
SBA Lender as holder of the Retained Interest. If SBA receives a Demand Notice
prior to receipt of any such recoveries, SBA will remit SBA Lender's pro rata
share
4
<PAGE>
of such recoveries to Warehouse Lender for the credit of SBA Lender.
3. SBA Lender's Retained Interest. SBA acknowledges that it
has no interest in any Retained Interest. SBA further acknowledges that it has
no interest in any collateral that secures any SBA Lender Loan or any Loan
Document, except to the extent the collateral secures or a Loan Document relates
to the Guaranteed Interest. The collateral for a SBA Lender Loan secures the
Guaranteed Interest and the Retained Interest pari passu and all recoveries from
insurance or any other source will be shared pro rata. If SBA receives any
amount to which SBA Lender is entitled on account of any Retained Interest (or
any Guaranteed Interest, if still held by SBA Lender), SBA will remit the sum to
SBA Lender. If SBA receives a Demand Notice prior to receipt of any such amount,
SBA will remit such amount to Warehouse Lender for the credit of SBA Lender.
This Agreement constitutes a notice of claims assignment for the full term of
the Warehouse Lender Agreement under the Federal Assignment of Claims Act of
1940, as amended, 31 U.S.C. Section 3727, with respect to any right to payment
of any Retained Interest (or Guaranteed Interest, if still held by SBA Lender).
4. SBA Consent to Warehouse Lender Agreement. (a) SBA consents
to SBA Lender's execution and performance of the
5
<PAGE>
Warehouse Lender Agreement and the transactions contemplated in it. SBA
specifically consents to SBA Lender's grant to Warehouse Lender of a security
interest in SBA Lender's interest in the Notes, together with all collateral
securing the Notes, and all Loan Documents as described in the Warehouse Lender
Agreement.
(b) Notwithstanding anything to the contrary contained in the
Warehouse Lender Agreement, (i) the collateral for the loans Warehouse Lender
makes to SBA Lender will not include SBA Lender's rights under its Loan Guaranty
Agreement, Form 750, or its SBLC Participation Agreement, Form 1082, to make SBA
Lender Loans or the Servicing Fee, (ii) a default under another agreement by SBA
Lender or by an entity other than SBA Lender under another agreement may not
constitute an Event of Default under the Warehouse Lender Agreement, (iii)
except for Loan Documents held by a Servicer pursuant to Section 10 below, SBA
Lender will retain the originals of all Loan Documents other than the Notes, and
(iv) except for payments made to a Servicer pursuant to Section 10 below, all
payments made by SBA Lender Loan Debtors will be made directly to SBA Lender.
Warehouse Lender waives any right it may have, including rights of set-off and
any bankers' lien, to any account of SBA Lender into which payments from SBA
Lender Loan Debtors are received.
6
<PAGE>
5. SBA Lender to Retain Ultimate Risk of Loss. As required by
13 C.F.R. Section 120.420(b)(2), SBA Lender must retain all economic risk in and
bear the ultimate risk of loss on the unguaranteed portions of the SBA Lender
Loans.
6. Restriction on Use of SBA Loans. SBA Lender will not use
the SBA Lender Loans or the collateral supporting the SBA Lender Loans for any
borrowing not related to financing of the guaranteed or unguaranteed portions of
the SBA Lender Loans.
7. FTA To Hold Original SBA Lender Notes. SBA Lender will
deliver all existing original Notes pledged to Warehouse Lender to FTA
concurrently with executing this Agreement. No later than three business days
after it closes a new SBA Lender Loan, SBA Lender will deliver the original Note
to FTA. SBA appoints FTA as its fiscal and transfer agent and as its agent to
hold the Notes. Warehouse Lender hereby notifies FTA that it has a security
interest in all Notes SBA Lender delivers to FTA until the sale of the
Guaranteed Interest in the related SBA Lender Loan pursuant to a Participation
Agreement as provided in Section 8 below. If the Guaranteed Interest is sold,
Warehouse Lender will continue to hold a security interest in the Notes to the
extent of SBA Lender's Retained Interest. FTA will hold the Notes as agent for
SBA, and as bailee for Warehouse
7
<PAGE>
Lender for the purpose of perfecting Warehouse Lender's security interest in the
Notes. FTA will not release any Note to Warehouse Lender, SBA Lender, or any
other person without SBA's prior written consent. If SBA Lender sells the
Guaranteed Interest in an SBA Lender Loan pursuant to a Participation Agreement,
FTA will deliver the original Note to SBA Lender to record the sale. SBA Lender
will promptly return the Note to FTA. FTA is not required to obtain SBA consent
before FTA delivers the Notes to SBA Lender to record the secondary market sale.
8. Sales of Guaranteed Interests by SBA Lender. If SBA Lender
sells the Guaranteed Interest of any SBA Lender Loans pursuant to a
Participation Agreement, Warehouse Lender's security interest with respect to
such Guaranteed Interest will automatically be released concurrently with the
receipt of the purchase price by FTA.
9. Servicing of SBA Lender Loans. Except as set forth in
Section 10 below, SBA Lender will service the SBA Lender Loans. Under no
circumstances may Warehouse Lender take any action regarding the servicing or
take action against any SBA Lender Loan Debtor or to foreclose on collateral
securing any SBA Lender Loan without obtaining SBA's prior written consent.
10. Default Under Warehouse Lender Agreement.
8
<PAGE>
(a) If an Event of Default (as defined in the Warehouse Lender
Agreement) occurs with respect to which Warehouse Lender intends to deliver to
SBA Lender a demand for repayment, Warehouse Lender must give SBA and SBA Lender
written notice of its intent to deliver a demand for repayment at least three
business days before it delivers such a demand for repayment to SBA Lender. Upon
the occurrence of an Event of Default (as defined in the Warehouse Lender
Agreement), SBA may take over or transfer to another SBA participating lender
(SBA or such SBA participating lender being a "Servicer") all collection,
servicing, enforcement of remedies and liquidation of the SBA Lender Loans. SBA
Lender will transfer to the Servicer all Loan Documents under its control. FTA
will retain possession of the original Notes. The Servicer will remit to
Warehouse Lender, for the credit of SBA Lender, SBA Lender's pro rata share of
each Note payment. The Servicer may retain the Servicing Fee as compensation for
servicing and liquidation activities. SBA Lender will be liable to the Servicer
for costs of servicing, collection, and liquidation in excess of the Servicing
Fee.
(b) If an event of default occurs under the Warehouse Lender
Agreement, Warehouse Lender may not transfer the SBA Lender Loans or the Notes
pursuant to a foreclosure sale or otherwise (including any transfer to itself)
without the SBA's
9
<PAGE>
prior written consent. The proposed transferee must be an SBA participating
lender, operating under a current Small Business Administration Loan Guaranty
Agreement (Form 750) and must be acceptable to SBA. Any transferee must agree to
be bound by this Agreement.
(c) If (i) Warehouse Lender delivers a demand for repayment to
SBA Lender and SBA, (ii) SBA has not after 90 days either appointed a Servicer
or taken over servicing of the SBA Lender Loans, and (iii) the Event of Default
(as defined in the Warehouse Lender Agreement) to which the demand for repayment
relates has not been cured, then SBA will authorize FTA to collect payments on
the Notes. In such event, SBA Lender will notify all remitters of payments in
respect of the Notes to forward payments to FTA. Upon receipt of such payments,
FTA will segregate from the payments all amounts due holders of interests in the
Notes in the secondary market and all fees due SBA and/or FTA in connection with
such SBA Lender Loans and remit the balance to Warehouse Lender for the credit
of SBA Lender. In providing these services, FTA will be entitled to its
customary fees for such activities in effect at that time.
11. Transferees. Warehouse Lender will not sell, participate,
pledge, hypothecate, enter into any repurchase agreement with respect to, or
otherwise transfer any of its
10
<PAGE>
interest in the loans made to SBA Lender under the Warehouse Lender Agreement,
or the SBA Lender Loans or the Notes (other than after an Event of Default and
subject to this Agreement), without SBA's prior written consent.
12. SBA Lender Acknowledgement of Continuing Obligation: No
Assumption of Liabilities. No action taken by Warehouse Lender, SBA, FTA or a
Servicer under this Agreement, the SBA Agreement, or the Warehouse Lender
Agreement will release or relieve SBA Lender of any of its obligations to SBA or
Warehouse Lender. None of SBA, Warehouse Lender, FTA or a Servicer will incur
any liability or obligation to SBA Lender by reason of any reasonable or
customary action taken in carrying out the provisions of this Agreement. Neither
the execution of this Agreement, nor the taking of any action by Warehouse
Lender, SBA, FTA or a Servicer under this Agreement will be an assumption by
Warehouse Lender, SBA, FTA or a Servicer of any liabilities or obligations of
SBA Lender. The provisions of this Section will survive termination of this
Agreement.
13. FTA's and SBA's Limited Liability and Expenses.
(a) FTA may rely upon any signature, notice, certificate, or
other document reasonably believed by it to be genuine and to have been signed
by the person purporting to sign
11
<PAGE>
it. SBA Lender will assume liability for and indemnify, protect, and hold
harmless FTA from any liabilities or losses arising out of this Agreement,
except in the case of FTA's gross negligence or willful misconduct. SBA Lender
will reimburse FTA for all expenses, taxes, and other charges that FTA incurs in
administering this Agreement. SBA Lender will pay FTA its standard fee for its
services under this Agreement. In performing its obligations under this
Agreement, FTA will not follow instructions from any other party other than SBA.
SBA Lender will not hold FTA liable for any action taken in accordance with
SBA's instructions. The indemnities in this Section will survive the termination
of this Agreement.
(b) SBA may rely upon any signature, notice, certificate, or
other document reasonably believed by it to be genuine and to have been signed
by the person purporting to sign it. SBA Lender will assume liability for and
indemnify, protect, and hold harmless SBA from any liabilities or losses arising
out of this Agreement, except in the case of SBA's gross negligence or willful
misconduct. Upon request by SBA, SBA Lender will reimburse SBA for all expenses
and other charges that SBA incurs in connection with this Agreement. The
indemnities in this Section will survive the termination of this Agreement.
12
<PAGE>
14. Counterparts. This Agreement may be executed in any number
of counterparts each of which will be an original.
15. Inconsistencies. If any provision of this Agreement is
inconsistent with any provision in any other agreement, including but not
limited to the Warehouse Lender Agreement, the provision of this Agreement
controls. The Warehouse Lender Agreement and any agreements entered into in
connection with such agreement are amended to the extent necessary to give
effect to the prior sentence. The SBA Agreement is amended to provide that FTA
will hold the Notes that are pledged pursuant to the Warehouse Lender Agreement.
16. Amendment and Term. This Agreement may not be terminated
or amended without the prior written consent of Warehouse Lender, FTA, SBA and
SBA Lender.
17. Governing Law. This Agreement will be interpreted and
construed in accordance with the laws of the State of New York, without
reference to its conflict of laws rules.
18. Successors and Assigns. This Agreement binds and benefits
the parties and their respective successors and assigns.
13
<PAGE>
19. Section Headings. The section headings in this Agreement
are for convenience only, and are without substantive meaning or content.
20. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will be given no effect and
shall not invalidate any other provision of this Agreement.
21. Notices and Deliveries. Except as otherwise expressly
provided in this document, all notices or deliveries under this Agreement will
be given by actual delivery to the parties at the addresses below or to such
other addresses that any party may designate for itself by written notice to
each of the other parties. All notices will be effective upon receipt by the
applicable party.
If to SBA Lender, at:
Business Loan Center, Inc.
645 Madison Avenue, 18th Floor
New York, New York 10022
Attn.: Mr. Robert F. Tannenhauser
President
with a copy to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attn.: Simeon Gold, Esq.
14
<PAGE>
If to Warehouse Lender, at:
Transamerica Business Credit Corporation
8750 W. Bryn Mawr Avenue, Suite 720
Chicago Illinois 60631
Attn.: Account Executive - BLC
and
Transamerica Business Credit Corporation
9399 West Higgins Road, Suite 600
Rosemont, Illinois 60018
Attn.: Mary F. Krakowski, Esq.
With copies to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attn.: Hill Blackett, III, Esq.
If to Guarantor, at:
BLC Financial Services, Inc.
645 Madison Avenue, 18th Floor
New York, New York 10022
Attn.: Mr. Robert F. Tannenhauser
President
with a copy to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue, 31st Floor
New York, New York 10153
Attn.: Simeon Gold, Esq.
If to FTA, at:
Colson Services Corp.
150 Nassau Street
New York, New York 10038
Attn: Clarke H. Ulmer
15
<PAGE>
If to SBA, at:
U.S. Small Business Administration
409 3rd Street, S.W.
Washington, DC 20416
Attn: Associate Administrator
for Financial Assistance
22. Guarantor. If Guarantor pays Warehouse Lender pursuant to
its guaranty and Guarantor becomes subrogated to the rights of Warehouse Lender
under the Warehouse Lender Agreement, Guarantor will be bound by all of the
terms of this Agreement relating to Warehouse Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE>
IN WITNESS WHEREOF, SBA Lender, Guarantor, Warehouse Lender, FTA,
and SBA have executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By:
-----------------------
Robert F. Tannenhauser
President
BLC FINANCIAL SERVICES, INC.
By:
-----------------------
Robert F. Tannenhauser
President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
-----------------------
Terrell W. Harris
Senior Vice President
COLSON SERVICES CORP.
By:
-----------------------
Name:
------------------------
Title:
------------------------
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By:
-----------------------
Jane Palsgrove Butler
Title:
------------------------
17
[12]
MULTI-PARTY AGREEMENT
AMONG BUSINESS LOAN CENTER, INC., MARINE MIDLAND BANK,
COLSON SERVICES CORP. AND SBA
This Multi-Party Agreement is entered into as of December 1, 1997 (this
"Agreement"), by and among Business Loan Center, Inc. (the "SBA Lender"), Marine
Midland Bank, as Trustee ("Trustee"), Colson Services Corp. ("FTA"), and the
United States Small Business Administration ("SBA").
SBA Lender has made and intends to continue to make loans to small
businesses under the Small Business Act, as amended ("SBA Lender Loans").
SBA guarantees a portion of each SBA Lender Loan in accordance with
13 C.F.R. Part 120 and a Small Business Administration Loan Guaranty Agreement
(SBA Form 750), dated March 27, 1997, between SBA and Business Loan Center, Inc.
("the SBA Agreement").
Because SBA guarantees a portion of each SBA Lender Loan, SBA has an
interest in the SBA Lender Loans, the underlying collateral, and the Loan
Documents.
SBA Lender has entered into certain Secondary Participation Guaranty
Agreements on SBA Form 1086 (each, a "Participation Agreement") with a purchaser
(each, a "Guaranteed Holder"), FTA and SBA. Under the Participation Agreements,
SBA Lender has sold the guaranteed portion (the "Guaranteed Interest") in
certain SBA Lender Loans (the "Loan Pool"). SBA has caused FTA to issue a
certificate to each Guaranteed Holder which entitles the Guaranteed Holder to
receive the payments and other recoveries of principal relating to the
Guaranteed Interest on the related SBA Lender Loans, together with interest on
the Guaranteed Interest at a per annum rate in effect from time to time in
accordance with the Participation Agreement.
The SBA Lender and the Trustee have entered into a Pooling and
Servicing Agreement dated as of December 1, 1997 (the "Pooling and Servicing
Agreement") which establishes a trust (the
<PAGE>
"Trust"). Under the Pooling and Servicing Agreement, SBA Lender will convey the
Conveyed Interest to the Trust. The Trust will issue certificates (the
"Certificates") evidencing the right to receive the Unguaranteed Interest in the
SBA Lender Loans in the Loan Pool together with interest.
13 C.F.R. Section 120.420 and the SBA Agreement require the SBA
Lender to obtain SBA's written consent before it sells the Unguaranteed
Interest.
The SBA Lender, the Trustee and SBA want to assure consistency
between the SBA Agreement and the Pooling and Servicing Agreement and clarify
the respective rights of the parties.
SBA Lender, Trustee, FTA and SBA agree as follows:
1. Definitions. In this Agreement, the following terms have
the following meanings:
a. "Conveyed Interest": the Unguaranteed Interest plus
the amount by which the interest collected by the Servicer on
the principal portion of the Guaranteed Interest of each SBA
Lender Loan in the Loan Pool exceeds the sum of (a) the
interest payable to the Registered Holder, (b) the fees
payable to SBA and FTA, (c) the Servicing Fee and (d) the
Premium Protection Fee.
b. "Event of Default": as defined in the Pooling and
Servicing Agreement.
c. "Loan Documents": all Notes, mortgages, deeds of
trust, security deeds, security agreements, instruments of
hypothecation, guarantees and other agreements and documents
that relate to the SBA Lender Loans.
d. "Notes": the notes evidencing the SBA Lender Loans in
the Loan Pool.
e. "Premium Protection Fee": 0.60% per annum of the then
outstanding principal balance of the Guaranteed Interest.
2
<PAGE>
f. "SBA Lender Loan Debtor": any debtor obligated under
an SBA Lender Loan.
g. "SBA Rules and Regulations": the Small Business Act,
as amended, the SBA Agreement, all rules and regulations
promulgated from time to time under the Small Business Act,
and SBA Standard Operating Procedures and official Notices as
from time to time in effect.
h. "Servicer": the Servicer (as defined in the Pooling
and Servicing Agreement).
i. "Servicing Fee": 0.4% per annum of the then
outstanding principal balance of the entire SBA Lender Loan.
j. "Unguaranteed Interest": the portion of each SBA
Lender Loan in the Loan Pool not guaranteed by SBA.
2. SBA's Guaranteed Interest. Each of the SBA Lender, Trustee (on
behalf of itself and the holders of the Certificates) and FTA acknowledge SBA's
interest in the Guaranteed Interest of all SBA Lender Loans, together with the
collateral securing the SBA Lender Loans and the Loan Documents and agree to
recognize and uphold such interest under SBA Rules and Regulations. SBA Lender
and Trustee will execute any release, assignment, endorsement or other document
that SBA may from time to time reasonably request with respect to the Guaranteed
Interest. Each of SBA Lender and Trustee will remit funds it receives in respect
of the Guaranteed Interest in the SBA Lender Loans to FTA, or SBA, as required.
If SBA purchases the Guaranteed Interest in any SBA Lender Loan, any recoveries
from the SBA Lender Loan Debtor or the collateral underlying the SBA Lender Loan
will be distributed pro rata to SBA as holder of the Guaranteed Interest and to
Trustee as holder of the Unguaranteed Interest.
3. Unguaranteed Interest. SBA acknowledges that it has no interest
in the Unguaranteed Interest, Servicing Fee or the Premium Protection Fee. SBA
further acknowledges that it has no interest in any collateral that secures any
SBA Lender Loan or any Loan Document, except to the extent the collateral
3
<PAGE>
secures or a Loan Document relates to the Guaranteed Interest. The collateral
for an SBA Lender Loan secures the Guaranteed Interest and the Unguaranteed
Interest pari passu. If SBA receives any amount in respect of the Conveyed
Interest, SBA will remit the sum to Trustee for the credit of the SBA Lender,
provided that in no event will SBA have any obligation to pay any amount not
owed by SBA under SBA Rules and Regulations. If SBA receives any amount in
respect of the Servicing Fee or the Premium Protection Fee, SBA will remit the
sum to the SBA Lender, or if SBA Lender is not the Servicer, the Servicer,
provided that Trustee shall have given FTA 15 days prior written notice under
this Agreement of the change in Servicer. This Agreement constitutes a notice of
claims assignment for the full term of the Pooling and Servicing Agreement under
the Federal Assignment of Claims Act of 1940, as amended, 31 U.S.C. Section
3727, with respect to any right to payment of any Unguaranteed Interest or the
Servicing Fee or the Premium Protection Fee.
4. SBA Consent to Pooling and Servicing Agreement.
(a) SBA consents to the SBA Lender's execution and performance
of the Pooling and Servicing Agreement and the transactions contemplated in it
including, but not limited to, the sales of the Class A Certificates.
(b) Notwithstanding anything to the contrary contained in the
Pooling and Servicing Agreement, a default by SBA Lender under another agreement
or a default by an entity other than the SBA Lender under another agreement may
not be an event of default under the Pooling and Servicing Agreement. Trustee
waives any rights it may have, including rights of set-off and banker's liens,
to any account of SBA Lender into which payments from SBA Lender Loan Debtors
are received and the Principal and Interest Account (as defined in the Pooling
and Servicing Agreement).
5. SBA Lender to Retain Ultimate Risk of Loss. As required by 13
C.F.R. Section 120.420(b)(2), SBA Lender must retain an economic risk in and
bear the ultimate risk of loss on the Unguaranteed Interest. SBA Lender will
establish the Spread Account under the Pooling and Servicing Agreement and cause
a wholly-owned subsidiary to be and remain the Spread Account Depositor (as
4
<PAGE>
defined in the Pooling and Servicing Agreement) and cause a wholly-owned
subsidiary to retain the Class B Certificates in accordance with Section 11
hereof.
6. Premium Protection Fee. SBA Lender will retain the Premium
Protection Fee with respect to its SBA Lender Loans.
7. Restriction on Use of SBA Lender Loans. SBA Lender will not use
the SBA Lender Loans or the collateral supporting the SBA Lender Loans for any
borrowing or other financing not related to financing of the guaranteed or
unguaranteed portions of SBA Lender Loans.
8. FTA To Hold Original SBA Lender Notes; Possession of Loan
Documents. (a) SBA Lender will deliver all original Notes relating to the
Initial SBA Loans (as defined in the Pooling and Servicing Agreement) to FTA
prior to the issuance of the Certificates and SBA Lender will deliver all
original Notes relating to the Subsequent SBA Loans (as defined in the Pooling
and Servicing Agreement) to FTA prior to each Subsequent Transfer of the
Subsequent SBA Loans. Each Note will be endorsed by means of an allonge (an
endorsement of the Note constituting a separate piece of paper) as follows: "Pay
to the order of Marine Midland Bank, and its successors and assigns, as trustee
under the Pooling and Servicing Agreement dated as of December 1, 1997, for the
benefit of the United States Small Business Administration and the holders of
Business Loan Center SBA Loan-Backed Certificates, Series 1997-1, Class A and
Class B as their respective interests may appear, without recourse." Upon
receiving the Note, FTA will deliver to SBA Lender and the Trustee a receipt for
such Note in the form of Exhibit 1.
(b) The Notes are being delivered to FTA for the purposes of
protecting the SBA's and the Certificateholders' respective interests. SBA
appoints FTA as its fiscal and transfer agent and each of SBA and Trustee
appoint FTA as its agent to hold the Notes. FTA does not and will not during the
term of this Agreement have any interest in the SBA Lender Loans in the Loan
Pool or the related Loan Documents.
(c) FTA will not release any Note to SBA Lender or any other person
except (i) upon receipt from an SBA Lender of a Request for Release of Note in
the form of Exhibit 3, along with a confirmation of release from Trustee, or
(ii) with SBA's prior written consent. Upon receipt of the required
5
<PAGE>
request and confirmation or consent, FTA shall release, within 3 Business Days,
the related Note. The Servicer shall return the Notes to FTA in accordance with
the appropriate provisions of the Pooling and Servicing Agreement and when the
Notes are returned to FTA, FTA will issue a receipt in the form of Exhibit 1
hereto.
(d) Upon reasonable notice to FTA, SBA will have the right during
normal business hours to inspect the original Notes at FTA's office.
(e) SBA Lender will deliver to Trustee the Loan Documents and
assignments of Loan Documents in accordance with the Pooling and Servicing
Agreement. All instruments of assignment shall assign the applicable collateral
to "Marine Midland Bank ("Assignee") its successors and assigns, as trustee
under the Pooling and Servicing Agreement dated as of December 1, 1997, subject
to the Multi-Party Agreement dated as of December 1, 1997". All financing
statements will name the Trustee as secured party. Any power of attorney from
SBA Lender to Trustee must require the Trustee to deal with the collateral in
accordance with the terms of the Pooling and Servicing Agreement and this
Agreement.
(f) If the Servicer or the SBA must be the record owner or secured
party with respect to any Note or any collateral securing any Note for any
purpose including, without limitation, to liquidate (including by any judicial
means) or otherwise pursue remedies against any SBA Lender Loan Debtor or the
collateral, Trustee will assign such Note or collateral to the Servicer, or SBA,
as necessary.
9. Servicing of SBA Lender Loans. SBA Lender will service the SBA
Lender Loans in the Loan Pool. The Servicer will remit funds to which the
Guaranteed Holders or SBA is entitled in accordance with the terms of the
Participation Agreements, and will remit funds which are required to be remitted
to Trustee in accordance with the terms of the Pooling and Servicing Agreement.
SBA Lender must proceed with all collection, enforcement of remedies and
liquidation actions against SBA Lender Loan Debtors in default in accordance
with SBA Rules and Regulations. SBA Lender must perform all servicing activities
in accordance with SBA Rules and Regulations, the Participation Agreements and,
to the extent there is no conflict, the Pooling and Servicing Agreement.
Property acquired through foreclosure or deed in
6
<PAGE>
lieu of foreclosure will be titled in the name of Trustee for the benefit of the
SBA and the holders of the Certificates, as their interests may appear, subject
to the terms of this Agreement. The SBA Lender will continue to administer such
property and will be responsible for its disposition in accordance with the
terms of the Pooling and Servicing Agreement. The SBA Lender will distribute
disposition proceeds to the SBA, as party in interest with respect to the
Guaranteed Interest, and to Trustee in respect of the Unguaranteed Interest, pro
rata. SBA may, at its option, assume servicing of any SBA Lender Loan in
accordance with SBA Rules and Regulations. Prior to an Event of Default, Trustee
will not take (i) any action regarding the servicing of any SBA Lender Loan or
(ii) any action with respect to any SBA Lender Loan Debtor or any collateral
securing any SBA Lender Loan. Any actions required of SBA Lender under the
Pooling and Servicing Agreement or this Agreement may be performed by or through
a subservicer approved by SBA under an agreement approved by SBA, but any such
subservicing arrangement will not limit or reduce SBA Lender's obligations or
liabilities as servicer under the Pooling and Servicing Agreement or this
Agreement.
10. Default Under Pooling and Servicing Agreement. Trustee will give
SBA prompt written notice of an Event of Default and prompt written notice of
any termination of SBA Lender as Servicer under the Pooling and Servicing
Agreement. Upon an Event of Default and termination of SBA Lender as Servicer in
accordance with the terms of the Pooling and Servicing Agreement, Trustee may be
substituted as Servicer so long as Trustee is then an approved SBA participating
lender in good standing, operating under a current Small Business Administration
Loan Guaranty Agreement (Deferred Participation) (Form 750). If Trustee does not
meet that condition or is otherwise unable to act or if the SBA requests in
writing, Trustee will appoint another Servicer in accordance with the Pooling
and Servicing Agreement. Any successor Servicer must agree to be bound by the
terms of this Agreement and must execute an agreement in the form of Exhibit 2.
Any substitute Servicer will be entitled to receive the Servicing Fee and the
Premium Protection Fee.
11. Transferees. Other than the issuance of the Certificates,
Trustee will not sell, participate, pledge, hypothecate, enter into any
repurchase agreement with respect to, or otherwise transfer
7
<PAGE>
any of its interest in any SBA Lender Loan or any Note without SBA's prior
written consent. The proposed transferee must be an approved SBA participating
lender in good standing, operating under a current Small Business Administration
Loan Guaranty Agreement (Deferred Participation) (Form 750) and must be
acceptable to SBA. Upon consenting to any proposed transfer, SBA will give FTA
prompt written notice. Any transferee must agree to be bound by the terms of
this Agreement. Upon initial issuance, the Class B Certificates will be
registered in the name of Business Loan Center Financial Corp., a wholly-owned
subsidiary of the SBA Lender. The SBA Lender agrees that Business Loan Center
Financial Corp. may not sell, pledge, transfer, assign or otherwise convey, in
whole or in part, the Class B Certificates without the prior written consent of
SBA.
12. SBA Lender Acknowledgment of Continuing Obligation; No
Assumption of Liabilities. No action taken by Trustee, SBA or the Servicer under
this Agreement, SBA Agreement, or the Pooling and Servicing Agreement will
release or relieve SBA Lender of any of its obligations to SBA or Trustee. None
of SBA, Trustee, FTA or the Servicer will incur any liability or obligation to
SBA Lender by reason of any reasonable or customary action taken in carrying out
the provisions of this Agreement. Neither the execution of this Agreement, nor
the taking of any action by Trustee, SBA, FTA or the Servicer under this
Agreement will be an assumption by Trustee, SBA, FTA or the Servicer of any
liabilities or obligations of SBA Lender. The provisions of this Section will
survive termination of this Agreement.
13. FTA's and SBA's Limited Liability and Expenses. (a) FTA may rely
upon any signature, notice, certificate, or other document reasonably believed
by it to be genuine and to have been signed by the party purporting to sign it.
SBA Lender will assume liability for and indemnify, protect, and hold harmless
FTA from any liabilities or losses arising out of this Agreement, except in the
case of FTA's gross negligence or willful misconduct. SBA Lender will reimburse
FTA for all expenses, taxes, and other charges that FTA incurs in administering
this Agreement. SBA Lender will pay FTA its standard fee for its services under
this Agreement. In performing its obligations under this Agreement, FTA will not
follow instructions from any party other than SBA or, pursuant to Section 8(c),
upon the request of the SBA
8
<PAGE>
Lender and concurring instructions of Trustee. The SBA Lender will not hold FTA
liable for any action taken in accordance with such instructions.
(b) SBA may rely on any signature, notice, certificate, request or
other document reasonably believed by it to be genuine and to have been signed
by the party purporting to sign it. SBA Lender will assume liability for and
indemnify, protect and hold harmless SBA from all liabilities or losses arising
out of this Agreement, except in the case of gross negligence or willful
misconduct. Upon request by SBA, SBA Lender will reimburse SBA for all expenses
and other charges that SBA incurs in connection with this Agreement.
(c) The provisions of this Section 13 shall survive any termination
of this Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts each of which will be an original.
15. Inconsistencies. If any provision of this Agreement is
inconsistent with any provision in any other agreement, including but not
limited to the Pooling and Servicing Agreement, the provision of this Agreement
controls. The Pooling and Servicing Agreement and any agreements entered into in
connection with such agreement are amended to the extent necessary to give
effect to the prior sentence. The SBA Agreement is amended to provide that FTA
will hold the Notes that are transferred pursuant to the Pooling and Servicing
Agreement and that the Trustee may hold the Loan Documents as provided in this
Agreement.
16. Amendment and Term. This Agreement may not be terminated or
amended without the prior written consent of the parties. Neither the SBA
Agreement nor the Pooling and Servicing Agreement may be amended in any manner
that would impair the respective rights of the SBA or the Trustee under this
Agreement without the prior written consent of the party so affected.
17. Governing Law. This Agreement will be interpreted and construed
in accordance with the laws of the State of New York, without reference to its
conflict of laws rules.
9
<PAGE>
18. Successors and Assigns. This Agreement binds and benefits the
parties and their respective successors and assigns.
19. Section Headings. The section headings in this Agreement are for
convenience only, and are without substantive meaning or content.
20. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will be given no effect and
shall not invalidate any other provision of this Agreement.
21. Notices and Deliveries. Except as otherwise expressly provided
in this document, all notices or deliveries under this Agreement will be given
by actual delivery to the parties at the addresses below or to such other
addresses that any party may designate for itself by written notice to each of
the other parties. All notices will be effective upon receipt by the applicable
party.
If to the SBA Lender, at:
Business Loan Center, Inc.
919 Third Avenue
New York, New York 10022
Telecopy No.:
Attention:
If to the Trustee, at:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
If to FTA, at:
Colson Services Corp.
150 Nassau Street
New York, New York 10038
Attn: President
If to SBA, at:
U.S. Small Business Administration
409 3rd Street, S.W.
Washington, D.C. 20416
Attn: Associate Administrator for
Financial Assistance
10
<PAGE>
IN WITNESS WHEREOF the SBA Lender, the Trustee, FTA, and SBA have
executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
------------------------
Name: Robert Tannenhauser
Title: President
MARINE MIDLAND BANK, as Trustee
By: /s/ Susan Barstock
------------------------
Name: Susan Barstock
Title: Assistant Vice President
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By:
------------------------
Name: Jane Palsgrove Butler
Title:
COLSON SERVICES CORP.
By:
------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF the SBA Lender, the Trustee, FTA, and SBA have
executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
--------------------------
Name: Robert Tannenhauser
Title: President
MARINE MIDLAND BANK, as Trustee
By:
--------------------------
Name: Susan Barstock
Title: Assistant Vice President
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By: /s/ Jane Palsgrove Butler
--------------------------
Name: Jane Palsgrove Butler
Title:
COLSON SERVICES CORP.
By:
--------------------------
Name:
Title:
<PAGE>
Ins witness whereof the SBA Lender, the Trustee, FTA, and SBA have
executed this Agreement below.
BUSINESS LOAN CENTER, INC.
By:
-------------------
MARINE MIDLAND BANK, as Trustee
By:
--------------------
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By:
----------------------
Jane Palsgrove Butler
COLSON SERVICES CORP.
By: /s/ [ILLEGIBLE]
----------------------
11
<PAGE>
EXHIBIT 1
ACKNOWLEDGMENT OF RECEIPT OF NOTE
___________, 199_
In accordance with Section 8 of the Multi-Party Agreement, dated as
of December 1, 1997, by and among Business Loan Center, Inc., Marine Midland
Bank, Colson Services Corp. ("Colson") and the United States Small Business
Administration ("SBA"), Colson, as agent for SBA, hereby acknowledges receipt of
the SBA guaranteed Note described below with respect to the following:
MAKER:
ORIGINAL PRINCIPAL AMOUNT:
DATE OF NOTE:
SBA LOAN NUMBER (GP NUMBER):
BUSINESS LOAN CENTER, INC. ACCOUNT NUMBER:
COLSON SERVICES CORP.,
AS AGENT FOR THE UNITED STATES
SMALL BUSINESS ADMINISTRATION
By:
-------------------------------
By:
-------------------------------
INSTRUCTIONS TO COLSON SERVICES CORP. One original executed copy of this receipt
should be made available for pick-up at the office of Colson or delivered to
Marine Midland Bank, as trustee, 140 Broadway, 12th Floor, New York, New York
10005, and a copy to Business Loan Center, Inc., 919 Third Avenue, New York, New
York 10022.
1
<PAGE>
EXHIBIT 2
The undersigned consent and agree to be bound as _____________ by
the terms of foregoing Multi-Party Agreement dated as of December 1, 1997 among
Business Loan Center, Inc., Marine Midland Bank, as Trustee, Colson Services
Corp. and SBA.
___________________________________
By:
--------------------------------
Name:
Title:
1
<PAGE>
EXHIBIT 3
REQUEST FOR RELEASE OF NOTE
_____________, 199_
Colson Services Corp.
As Agent for the United States
Small Business Administration
150 Nassau Street
New York, NY 10038
In accordance with Section 8(c) of the Multi-Party Agreement dated as of
December 1, 1997 by and among Business Loan Center, Inc., Marine Midland Bank,
Colson Services Corp. ("Colson") and the United States Small Business
Administration ("SBA") and, subject to your receipt of concurrence from Marine
Midland Bank, as Trustee, Business Loan Center, Inc. hereby requests release of
the Note described below:
OBLIGOR'S NAME AND ADDRESS:
SBA LOAN NUMBER (GP NUMBER):
Reason for Requesting Note
(ONE OF THESE MUST BE CHECKED)
____1. SBA Loan Paid in Full
____2. SBA Loan Liquidated
____3. SBA Loan in Foreclosure
____4. SBA Loan repurchased pursuant to Section 11.01 of the Pooling and
Servicing Agreement, dated as of December 1, 1997, relating to Business
Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series 1997-1
(The "Pooling and Servicing Agreement")
____5. SBA Loan repurchased or substituted pursuant to Article II or Article
III of the Pooling and Servicing Agreement
____6. Collateral being released pursuant to Section 5.01(f) of the Pooling and
Servicing Agreement
2
<PAGE>
____7. SBA Loan collateral being substituted or subordinated
BUSINESS LOAN CENTER, INC.
By:
-----------------------
Its:
-----------------------
3
CLASS A CERTIFICATE
NUMBER R-002
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) IN CERTIFICATED FORM (A) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE
TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B)
THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS OR, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS
OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2)
PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID
REGISTRATION STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
<PAGE>
BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1997-1 Original Class A Certificate
Class A Principal Balance:
No. R-002 $18,078,507.20
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$4,000,00.00
Remittance Rate: Percentage Interest of
Variable the Class A Certificates
Evidenced by this
Certificate: 22.1257206%
Date of Pooling and Servicer:
Servicing Agreement Business Loan Center, Inc.
and Cut-Off Date:
December 1, 1997
First Remittance Date: Latest Maturity Date: March 15, 2023
January 15, 1998
CUSIP No.: 123280 AA7
Closing Date: Trustee:
December 19, 1997 Marine Midland Bank
Business Loan Center, Inc. certifies that Banc One Capital
Corporation is the registered owner of a percentage interest (the "Percentage
Interest") in the Unguaranteed Interest in a pool of loans partially guaranteed
by the U.S. Small Business Administration (the "SBA Loans") and serviced by
Business Loan Center, Inc. (hereinafter called the "Servicer," in its capacity
as the Servicer, and the "Seller," in its capacity as the Seller, which terms
include any successor entity under the Agreement referred to below). The SBA
Loans were originated or purchased by the Seller. The SBA Loans will be serviced
pursuant to the terms and conditions of that certain Pooling and Servicing
Agreement dated as of December 1, 1997 (the "Agreement") between Marine Midland
Bank, as trustee (the "Trustee") and Business Loan Center, Inc., as Seller and
Servicer, certain of the pertinent provisions of which are set forth herein. To
the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and
<PAGE>
conditions of the Agreement, to which Agreement the holder of this Certificate
by virtue of the acceptance hereof assents and by which such holder is bound.
On each Remittance Date, commencing on January 15, 1998, the Trustee
or Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class A Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class A
Certificates on such Remittance Date pursuant to Section 6.07 of the Agreement.
During the initial Interest Accrual Period, this Certificate will
bear interest at the rate of 6.60% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 1.90% per annum,
subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the
Certificate Registrar in New York, New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Business Loan Center SBA Loan-Backed Adjustable Rate Certificates,
Series 1997-1, Class A and Class B (herein called the "Certificates") and
representing undivided ownership in the right to receive the principal portion
of the Unguaranteed Interests of the SBA Loans together with interest thereon at
the then applicable Class A or Class B Remittance Rate, as the case may be.
Neither the Certificates nor the SBA Loans represent an obligation
of, or an interest in, the Servicer and (except for the Excess Spread) are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Small
Business Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
SBA Loans, all as more specifically set forth herein and in the Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
<PAGE>
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made by
the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Seller, the Servicer
and the Trustee without the consent of the Certificateholders and (b) by the
Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Certificate Registrar in
New York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the
<PAGE>
owner hereof for all purposes, and none of the foregoing shall be affected by
notice to the contrary.
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Agreement shall terminate upon notice to the Trustee
of the later of the following events: (i) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder or (ii) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by the Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date of the Agreement.
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
Business Loan Center, Inc.
Servicer
By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:
Dated: December 19, 1997
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
Marine Midland Bank,
as Trustee
By:
----------------------
Authorized Signatory
or
Marine Midland Bank,
as Authenticating Agent
By: /s/ [ILLEGIBLE]
----------------------
Authorized Signatory
CLASS B CERTIFICATE
NUMBER R-001
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) IN CERTIFICATED FORM (A) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (A) THE RECEIPT BY THE
TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B)
THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS OR, IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS
OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (2)
PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (3) PURSUANT TO A VALID
REGISTRATION STATEMENT.
THIS CERTIFICATE MAY NOT BE ACQUIRED FOR OR ON BEHALF OF (1) AN EMPLOYEE BENEFIT
PLAN OR RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR (2) ANY ENTITY, THE ASSETS OF WHICH WOULD BE DEEMED
PLAN ASSETS UNDER THE DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R.
ss.2510.3-101, OTHER THAN AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60.
<PAGE>
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
THE RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES TO RECEIVE DISTRIBUTIONS
WITH RESPECT TO INTEREST AND PRINCIPAL WILL BE SUBORDINATED TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
SO LONG AS THIS CLASS B CERTIFICATE IS REGISTERED IN THE NAME OF BUSINESS LOAN
CENTER FINANCIAL CORP., THIS CLASS B CERTIFICATE MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, ASSIGNED OR OTHERWISE CONVEYED, IN WHOLE OR IN PART, WITHOUT THE
PRIOR WRITTEN APPROVAL OF THE UNITED STATES SMALL BUSINESS ADMINISTRATION.
<PAGE>
BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES
Series 1997-1 Original Class B Certificate
Class B Principal Balance:
No. R-001 $ 1,787,984.23
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$ 1,787,984.23
Remittance Rate: Percentage Interest of
Variable the Class B Certificates
Evidenced by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement Business Loan Center, Inc.
and Cut-Off Date:
December 1, 1997
First Remittance: Latest Maturity Date: March 15, 2023
Date:
January 15, 1998 CUSIP No.: 123280 AB 5
Closing Date: Trustee:
December 19, 1997 Marine Midland Bank
Business Loan Center, Inc. certifies that Business Loan Center
Financial Corp. is the registered owner of a percentage interest (the
"Percentage Interest") in the Unguaranteed Interest in a pool of loans partially
guaranteed by the U.S. Small Business Administration (the "SBA Loans") and
serviced by Business Loan Center, Inc. (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The SBA Loans were originated or purchased by the Seller. The SBA Loans will be
serviced pursuant to the terms and conditions of that certain Pooling and
Servicing Agreement dated as of December 1, 1997 (the "Agreement") between
Marine Midland Bank, as trustee (the "Trustee") and Business Loan Center, Inc.,
as Seller and Servicer, certain of the pertinent provisions of which are set
forth herein. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound.
<PAGE>
On each Remittance Date, commencing on January 15, 1998, the Trustee
or Paying Agent shall distribute to the Person in whose name this Certificate is
registered at the close of business on the last day of the month next preceding
the month of such distribution (the "Record Date"), an amount equal to the
product of the Percentage Interest of the Class B Certificates evidenced by this
Certificate and the amount required to be distributed to Holders of Class B
Certificates on such Remittance Date pursuant to Section 6.07 of the Agreement.
During the initial Interest Accrual Period, this Certificate will
bear interest at the rate of 7.0% per annum. During each subsequent Interest
Accrual Period, this Certificate will bear interest at a per annum rate equal to
the Prime Rate in effect on the preceding Adjustment Date minus 1.50%, subject
to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee or
Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Business Loan Center SBA Loan-Backed Adjustable Rate Certificates,
Series 1997-1, Class A and Class B (herein called the "Certificates") and
representing undivided ownership in the right to receive the principal portion
of the Unguaranteed Interests of the SBA Loans together with interest thereon at
the then applicable Class A or Class B Remittance Rate, as the case may be.
Neither the Certificates nor the SBA Loans represent an obligation
of, or an interest in, the Servicer and (except for the Excess Spread) are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Small
Business Administration, the Government National Mortgage Association or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
SBA Loans, all as more specifically set forth herein and in the Agreement. In
the event Servicer funds are advanced with respect to any SBA Loan, such advance
is reimbursable to the Servicer from late recoveries of interest on the SBA
Loans generally.
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made by
the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including
<PAGE>
reimbursement to the Servicer of advances made, or certain expenses incurred, by
it, and investment in Permitted Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Seller, the Servicer
and the Trustee without the consent of the Certificateholders and (b) by the
Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Certificate Registrar in
New York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
<PAGE>
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Agreement shall terminate upon notice to the Trustee
of the later of the following events: (i) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder or (ii) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by the Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date of the Agreement.
<PAGE>
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be
duly executed.
BUSINESS LOAN CENTER, INC.
Servicer
By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:
Dated: December 19, 1997
This is one of the
Certificates referred
to in the within-
mentioned Agreement.
Marine Midland Bank,
as Trustee
By:
---------------------
Authorized Signatory
or
Marine Midland Bank,
as Authenticating Agent
By: /s/ [ILLEGIBLE]
---------------------
Authorized Signatory
[LETTERHEAD OF ROTHSCHILD INC.]
PRIVATE AND CONFIDENTIAL
BUSINESS LOAN CENTER SBA LOAN TRUST 1997-1
Business Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series 1997-1
Business Loan Center, Inc.
(Seller)
Marine Midland Bank
(Trustee)
PLACEMENT AGENCY AGREEMENT
December 1, 1997
Rothschild Inc.
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs:
1. Introductory. Business Loan Center, Inc. (the "Seller"), a
Delaware corporation and a wholly-owned subsidiary of BLC Financial Services,
Inc., a Delaware corporation, proposes to sell approximately $18,000,000
aggregate principal amount of Business Loan Center SBA Loan-Backed Adjustable
Rate Certificates, Series 1997-1, Class A (the "Class A Certificates")
representing beneficial interests in the Business Loan Center SBA Loan Trust
1997-1 (the "Trust"). The Trust will be formed, and the Class A Certificates
will be issued, pursuant to a Pooling and Servicing Agreement, dated as of
December 1, 1997 (the "Pooling and Servicing Agreement"), among the Seller and
Marine Midland Bank, as trustee (the "Trustee"). Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed thereto in the Pooling
and Servicing Agreement.
A private placement memorandum to be dated on or prior to the
Closing Date (the "Memorandum") will be prepared, describing, among other
things, the Class A Certificates and the Trust Fund. Copies of the Memorandum
and any amendment or supplement thereto to date have been or will be delivered
to you.
<PAGE>
It is understood and agreed that the foregoing description of the
Class A Certificates is qualified by a more complete description of the Pooling
and Servicing Agreement, the Class A Certificates to be placed hereunder, the
Trust Fund and related matters as is or will be contained in the Memorandum.
This Agreement shall be and remain effective, and shall be enforceable by the
Placement Agent in accordance with its terms, notwithstanding any variation in
the description of the Class A Certificates, the Trust Fund and related matters
contained in the Memorandum.
The Seller intends to sell the Class A Certificates to a limited
number of institutional investors pursuant to purchase agreements (each, a
"Purchase Agreement") to be entered into by the Seller and each such
institutional investor (a "Purchaser"), in reliance upon an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Act"), and in accordance with Section 8(a) below.
The Seller has requested Rothschild Inc. (the "Placement Agent") to
assist the Seller as placement agent in the private placement of the Class A
Certificates, and the Placement Agent has indicated its willingness to do so,
subject to the conditions set forth in this Agreement.
2. Appointment of Placement Agent; Placement of Class A
Certificates.
(a) The Seller hereby retains and authorizes the Placement
Agent to act as exclusive placement agent in arranging the private placement of
the Class A Certificates by the Seller on the terms herein set forth for the
period (the "Offering Period") commencing on the date hereof and terminating on
December 31, 1997 (the "Offering Termination Date"). Subject to the performance
in all material respects by the Seller of its respective obligations to be
performed hereunder prior to December 19, 1997 (such date, or such later date as
to which the Placement Agent and the Seller may agree, being referred to
hereinafter as the "Closing Date"), and to the completeness and accuracy in all
material respects of all of the representations and warranties of the Seller
contained herein, the Placement Agent hereby accepts such agency and agrees on
the terms and conditions herein set forth to use its best efforts during the
Offering Period to find qualified Purchasers for all of the Class A
Certificates. Such agency is coupled with an interest and, therefore, is not
terminable by the Seller without the permission of the Placement Agent. Such
agency shall continue until the close of business on the Offering Termination
Date, unless the Placement Agent and the Seller agree in writing that the
Offering Period shall be extended, in which case the agency created hereunder
shall terminate on, and the Offering Termination Date shall be extended until,
the last day of the Offering Period as extended, except that, in any event, such
agency shall terminate on the Offering Termination Date.
(b) In the event the offering is commenced but no Class A
Certificates shall have been purchased prior to the Offering Termination Date,
the agency created hereunder and this Agreement shall terminate without
obligation on the part of the Placement Agent or on the part of the Seller
except as provided in Section 6 hereof and except that the indemnification
-2-
<PAGE>
and contribution provided for in Section 9 hereof shall continue after such
termination of this Agreement.
(c) Neither the Seller nor the Placement Agent shall utilize
any form of general solicitation or general advertising in connection with the
placement of the Class A Certificates, including any advertisement, notice or
other communication published in any newspaper, magazine or similar medium or
broadcast over television or radio, or conduct any seminar or meeting with
respect to the Class A Certificates whose attendees have been invited by general
solicitation or advertising.
(d) The Placement Agent shall not, in fulfilling its
obligations hereunder, act as principal in or underwriter for the placement and
sale of the Class A Certificates, and is in no way obligated, directly or
indirectly, to advance its own funds to purchase any Class A Certificates.
(e) The Placement Agent agrees that it will perform the
services contemplated herein and in the Memorandum in a manner such that such
services do not and will not violate the provisions of applicable law. The
Placement Agent will deliver the Memorandum to each Purchaser identified by it
prior to the date such Purchaser purchases any Class A Certificates.
(f) Notwithstanding anything herein to the contrary, the
Seller shall not be obligated to sell any of the Class A Certificates unless the
Placement Agent shall have found qualified Purchasers for all of the Class A
Certificates at a price and on terms acceptable to the Seller.
(g) It is understood and agreed that nothing in this Agreement
shall prevent the Placement Agent from entering into any agency agreement,
underwriting agreement or other similar agreement governing the offer and sale
of securities with any other issuer or issuers of securities, and nothing
contained herein shall be construed in any way as precluding or restricting the
right of the Placement Agent to sell or offer for sale securities (other than
the Class A Certificates) issued by any person. In addition, nothing in this
Agreement shall prevent the Placement Agent in its sole discretion from entering
into any agreement or agreements with other registered broker-dealers reasonably
acceptable to the Seller regarding the offer and sale of the Class A
Certificates; provided, that the Seller shall have no obligations to any such
broker-dealer or other person retained by the Placement Agent (including,
without limitation, obligations relating to compensation or indemnification),
and the Placement Agent shall enter into appropriate agreements with all such
persons advising them of the foregoing, requiring them to comply with the
provisions of this Agreement relating to the procedures for and restrictions on
the offer and sale of the Class A Certificates, requiring them to comply with
all applicable laws and to have all necessary licenses, authorizations and
governmental approvals, and stating that nothing in this Agreement or any
agreement between the Placement Agent and any such person
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shall create a principal/agent relationship between the Seller and such person
or create privity between them.
3. Representations and Warranties of the Seller. The Seller
represents and warrants to the Placement Agent that:
(a) The Memorandum, as of its respective date and at the
Closing Date, and any amendment thereof or supplement thereto, as of their
respective dates, did not and will not, as of such dates, include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that the foregoing does not apply to
statements in or omissions from any of such documents based upon written
information furnished to the Seller specifically for use therein, it being
understood that the only such information consists of the Placement Agent's
Information (as defined in Section 7(d)).
(b) The Seller has been duly organized and is validly existing
and in good standing as a corporation under the laws of its state of
incorporation, with all requisite power and authority to own its properties and
to transact the business in which it is now engaged, and the Seller is duly
qualified to do business and is in good standing in each jurisdiction where the
nature of its business requires it to be so qualified except where failure to so
qualify would not have a material adverse effect on the Seller.
(c) This Agreement has been duly authorized, executed and
delivered by the Seller.
(d) The execution, delivery and performance of the obligations
of the Seller under this Agreement, and the consummation of the transactions
herein contemplated, will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the properties or
assets of the Seller pursuant to the terms of, any material indenture, mortgage,
deed of trust, or other material agreement or instrument to which the Seller is
a party or by which it is bound or to which any of its properties or assets is
subject, nor will such action result in any violation of the provisions of
either (i) the certificate or articles of incorporation or by-laws of the Seller
or (ii) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Seller or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any court, or any such regulatory authority or other
governmental agency or body is required for the consummation of the transactions
contemplated by this Agreement, except such consents, approvals, authorizations,
orders, registrations, or qualifications (including such as may be required
under the state securities laws of any applicable jurisdiction) as have been
obtained and as have been made.
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(e) As of the Closing Date, the representations and warranties
of the Seller contained in the Pooling and Servicing Agreement will be true and
correct in all material respects.
(f) As of the Closing Date, the representations and warranties
of the Seller contained in each Purchase Agreement between the Seller and the
Purchaser named therein pursuant to which Class A Certificates are to be sold to
such Purchaser will be true and correct in all material respects.
(g) Neither the Seller nor any affiliate of the Seller, nor
anyone acting on behalf of the Seller or any such affiliate, other than the
Placement Agent, has, directly or indirectly, offered or sold, or attempted to
offer or sell, any of the Class A Certificates to, or solicited offers to buy
any of the Class A Certificates from, or otherwise approached or negotiated with
respect thereto with, any prospective Purchaser.
(h) Assuming the compliance by the Placement Agent with its
agreements and obligations contained in Section 2(c), (d) and (e) and Section 8
of this Agreement and the accuracy of representations of the Purchasers in the
Purchase Agreements, the Class A Certificates are not required to be registered
under Section 5 of the Act in connection with the offer, issuance, sale and
delivery thereof as contemplated by this Agreement and the Purchase Agreements,
and neither the Seller, nor to the best of its knowledge any agent acting on
behalf of the Seller, (other than the Placement Agent as to which no
representation is made) has taken or will take any action that would subject the
offer, issuance, sale or delivery of the Class A Certificates to the provisions
of Section 5 of the Act or to the registration provisions of any state
securities laws of any applicable jurisdiction.
(i) Within the six months preceding the date of this
Agreement, neither the Seller nor any person or entity acting on its behalf has
offered or sold any securities that are of the same or a similar class as the
Class A Certificates.
(j) The Seller is not required to be registered as an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
4. Intentionally Omitted.
5. Certain Agreements of the Seller. The Seller agrees with the
Placement Agent that:
(a) During the Offering Period, neither the Seller nor any
affiliate of the Seller nor anyone acting at the direction of the Seller or any
such affiliate, other than the Placement Agent, shall, directly or indirectly,
offer or sell, or attempt to offer, sell, dispose of, or solicit any offer to
buy, any of the Class A Certificates.
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(b) As soon as practicable after the date hereof, but not
later than the Closing Date, the Seller shall prepare and furnish copies of the
Memorandum to the Placement Agent and to each Purchaser identified by the
Placement Agent and of each revision or amendment thereof or supplement thereto
(including exhibits included therewith) as the Placement Agent may reasonably
request.
(c) Prior to the Closing Date, the Seller will advise the
Placement Agent promptly of (i) the occurrence of any event or the existence of
any condition as a result of which it is necessary or advisable, in the opinion
of the Seller, to amend or supplement the Memorandum in order that such
Memorandum will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements were made,
not misleading, (ii) the receipt by the Seller of any communication from the
Securities and Exchange Commission or any state securities authority concerning
the offering or sale of the Class A Certificates, and (iii) the commencement of
any lawsuit or proceeding to which the Seller is a party relating to the
offering or sale of the Class A Certificates.
(d) If any event shall occur during the Offering Period as a
result of which it is necessary, in the reasonable opinion of the Placement
Agent to amend or supplement the Memorandum in order to correct any untrue
statement of a material fact or to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, the Seller shall forthwith prepare and furnish to the
Placement Agent a reasonable number of copies of an amendment of or supplement
to such Memorandum (in form and substance reasonably satisfactory to the
Placement Agent), so that, as so amended or supplemented, such Memorandum will
not contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Seller will not at
any time amend or supplement the Memorandum prior to having furnished the
Placement Agent with a copy of the proposed form of the amendment or supplement
and giving the Placement Agent a reasonable opportunity to review the same.
(e) The Seller shall furnish such information, execute such
instruments and take such action, if any, as may reasonably be required to
effect the placement of the Class A Certificates under the securities laws of
each jurisdiction in which the Class A Certificates are offered for sale or
sold; provided, however, that the Seller shall not be required to qualify to do
business in any jurisdiction where it is not so qualified or to take any action
that would subject it to general or unlimited service of process in any
jurisdiction where it is not now so subject or to register the Class A
Certificates under the Act or any state securities or "Blue Sky" laws.
(f) Prior to the Closing Date, the Seller shall furnish or
make available to the Placement Agent and its counsel such additional documents
and information regarding the Seller and its affairs as the Placement Agent may
from time to time reasonably request, including any and all documentation
reasonably requested in connection with the due diligence efforts of
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the Placement Agent regarding information in the Memorandum and in order to
evidence the accuracy or completeness of any of the conditions contained in this
Agreement, which information shall not be made available to any prospective
Purchaser by the Placement Agent without the consent of the Seller; and all
actions taken by the Seller to authorize the sale of the Class A Certificates
shall be reasonably satisfactory in form and substance to the Placement Agent.
(g) The Seller shall, at all times upon request from the date
hereof through the Closing Date, (i) make available to each Purchaser or its
advisers, or both, prior to acceptance of its subscription, such information (in
addition to that contained in the Memorandum) concerning the offering, the
Seller and any other relevant matters as it possesses or can acquire without
unreasonable effort or expense, and (ii) provide each Purchaser or its advisers,
or both, prior to acceptance of its agreement to purchase, the opportunity to
ask questions of, and receive answers from, the Seller with respect to such
matters.
(h) No future offer and sale of securities of the Seller, or
any affiliate of the Seller, of any class (or securities caused to be issued by
the Seller or any such affiliate) will be made if, as a result of the doctrine
of "integration" referred to in Rule 502 of the Rules and Regulations
promulgated under the Act by the Securities and Exchange Commission such offer
and sale would render invalid any of (i) the sale of the Class A Certificates by
the Seller to any Purchaser, (ii) the resale of the Class A Certificates by any
Purchaser to others, or (iii) the resale of the Class A Certificates by such
other purchasers to others, pursuant to a valid exemption from the registration
requirements of the Act.
6. Compensation; Payment of Expenses.
(a) In consideration of the services of the Placement Agent in
acting as exclusive placement agent for the placement of the Class A
Certificates, the Seller hereby agrees to pay to the Placement Agent an
aggregate fee in an amount equal to 1.00% of the aggregate principal amount of
the Class A Certificates actually placed by the Placement Agent and sold by the
Seller (such aggregate principal amount being referred to as the "Sale Amount");
provided, however, the fee payable to the Placement Agent hereunder in
connection with the placement and sale of the Class A Certificates shall not be
less than $250,000. The fee referred to above shall be payable on the Closing
Date by wire transfer of immediately available funds.
(b) Whether or not the transactions contemplated hereby and by
the Pooling and Servicing Agreement and the Purchase Agreements shall be
consummated, the Seller hereby agrees to pay all costs and expenses in
connection herewith and therewith, including, without limitation, (i) the
preparation and reproduction of the Pooling and Servicing Agreement, the
Purchase Agreements and the Memorandum and any amendment of such documents (such
documents being referred to as the "Transaction Documents") and the Memorandum
and any amendment of such documents, (ii) the Seller's performance of and
compliance with all agreements and conditions contained herein and in the
Transaction Documents on its part to be
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performed or complied with, (iii) the expenses, if any, of registering or
qualifying the Class A Certificates under state securities laws, (iv) all
expenses and taxes incident to the issuance and delivery of the Class A
Certificates, (v) the fees and disbursements of the Seller's counsel, (vi) the
fees of the Trustee, (vii) the fees and expenses of the Seller's certified
public accountants, (viii) the fees and expenses of one counsel for the
Purchasers of the Class A Certificates, up to an amount not to exceed $20,000,
(ix) the fees of and Duff & Phelps Credit Rating Co. in connection with the
rating of the Class A Certificates, (x) the fees and expenses of counsel for the
Placement Agent up to an amount not to exceed $10,000, and (xi) the expenses of
the Placement Agent in an amount not to exceed $10,000 except with the written
consent of the Seller; provided, however, the foregoing monetary cap shall not
apply to or limit in any way the obligations of the Seller arising under or
relating to the fee provisions contained in this Section 6(a) or the indemnity
and contribution provisions contained in Section 9. All such costs and expenses
shall be immediately payable upon receipt of an itemized bill.
7. Conditions of the Obligations of the Placement Agent. The
obligations of the Placement Agent hereunder to place the Class A Certificates
are subject to the accuracy in all material respects of the representations and
warranties of the Seller herein and in the Purchase Agreements and the Pooling
and Servicing Agreement, to the performance by the Seller of its obligations
hereunder with respect to the Class A Certificates, and to the following further
conditions:
(a) The conditions of the obligations of the Purchasers set
forth in each Purchase Agreement with respect to the Class A Certificates shall
have been satisfied in all material respects.
(b) All documents incident hereto and to the Pooling and
Servicing Agreement shall be reasonably satisfactory in form and substance to
the Placement Agent and its counsel, and the Placement Agent and its counsel
shall have received such information, certificates, opinions and documents as it
may reasonably request.
(c) The Placement Agent shall have received copies of the
opinions, dated the Applicable Closing Date, of Stroock & Stroock & Lavan LLP
and Weil, Gotshal & Manges LLP, special counsel to the Seller in form and
substance reasonably satisfactory to the Placement Agent.
(d) The Placement Agent shall have received certificates,
dated the Closing Date, of the President or Chief Executive Officer of the
Seller in which such person shall state that (i) the representations and
warranties of the Seller in this Agreement are true and correct on and as of the
Closing Date, as though such representations and warranties had been made on and
as of such date, except to the extent any such representation or warranty was
expressly made as of any other date, in which case such representation or
warranty was true and correct as of such other date, (ii) the Seller has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder and under the Transaction
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Documents at or prior to the Closing Date, (iii) to such person's best knowledge
the representations and warranties of the Seller in the Transaction Documents
are true and correct as of the Closing Date, as though such representations and
warranties had been made on and as of such dates, except to the extent any such
representation or warranty was expressly made as of any other date, in which
case such representation or warranty was true and correct as of such other date,
(iv) there has been no material adverse change in the financial position or
results of operations of the business of the Seller subsequent to the date of
the Memorandum, except as contemplated by such Memorandum or as described in
such certificate, and (v) nothing has come to such officers' attention that
would lead such officers to believe that the Memorandum, and any revision or
amendment thereof or supplement thereto (other than the information contained in
such Memorandum and any such amendment or supplement under the headings "Notice
to Investors" and "Plan of Distribution" or the last two paragraphs under the
heading "ERISA Considerations", including clauses (i) through (iv) therein
(collectively the "Placement Agents' Information"), as of its date and as of the
Closing Date, contained an untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(e) The Placement Agent shall have received letters from Duff
& Phelps Credit Rating Co. stating that the Class A Certificates have received
the rating of "AAA".
(f) The Placement Agent shall have received fully executed
copies of (i) the Placement Agency Agreement, the Purchase Agreements with
respect to the Class A Certificates, the Pooling and Servicing Agreement, and
all agreements related thereto, and (ii) all certificates and other documents
(other than the Class A Certificates) delivered by the Seller to each Purchaser
on the Closing Date.
(g) The Placement Agent shall have received a letter, dated
the Applicable Closing Date, addressed to the Seller, and the Placement Agent
from Richard A. Eisner & Company, LLP, Certified Public Accountants, as to
certain information set forth in the Memorandum in form and substance
satisfactory to the Placement Agent.
8. Manner of Offers and Sales of the Class A Certificates. The
offers and sales of the Class A Certificates are to be effected pursuant to the
exemption from the registration requirements of the Act pursuant to Section 4(2)
thereof or pursuant to the provisions of Rule 144A under the Act. The Placement
Agent and the Seller have established the following procedures to be observed by
the Placement Agent in connection with the offer and sale of the Class A
Certificates, and the Placement Agent hereby agrees to comply with such
procedures.
(a) Offers and sales of the Class A Certificates will be made
only to institutional investors that qualify as accredited investors (as defined
in Rule 501(a)(1),(2),(3), or (7) under the Act) or as qualified institutional
buyers (as defined in subsection (a)(1) of Rule 144A under the Act) (each such
institutional investor hereinafter referred to as an "accredited investor"). No
Class A Certificates will be offered to natural persons.
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(b) The Class A Certificates will be offered only by
approaching prospective Purchasers on an individual basis. The Class A
Certificates will not be offered or sold by any means of general solicitation or
general advertising within the meaning of Rule 502(c) under the Act.
(c) In the case of a non-bank Purchaser acting as a fiduciary
for one or more third parties, each such third party will, in the reasonable
judgment of the Placement Agent be an accredited investor.
(d) Class A Certificates will be issued in minimum
denominations of $100,000 original principal amount and integral multiples of
$1,000 in excess thereof.
(e) Each Class A Certificate shall contain the legend set
forth on the form of the Class A Certificate attached as an Exhibit to the
Pooling and Servicing Agreement.
(f) Each Purchaser of the Class A Certificates will be
furnished a Memorandum, together with any amendments thereof or supplements
thereto. The Memorandum will describe, among other things, the restrictions on
resale of the Class A Certificates and will contain a statement expressly
offering an opportunity for each prospective Purchaser to ask questions of and
receive answers from the Seller concerning the offering of the Class A
Certificates and to obtain additional relevant information that the Seller
possesses or can acquire without unreasonable effort or expense. The Placement
Agent does not assume responsibility for the accuracy and completeness of the
data and information contained in the Memorandum except for the Placement
Agents' Information. The Placement Agent will provide no information to any
Purchaser or potential Purchaser concerning the Seller unless it has previously
verified the accuracy and completeness of such information with the Seller.
(g) Each Purchaser of the Class A Certificates will be
required to execute and deliver a Purchase Agreement.
9. Indemnification and Contribution.
(a) The Seller agrees to indemnify and hold harmless the
Placement Agent and each person, if any, who controls the Placement Agent within
the meaning of either the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and each of their respective officers and directors,
against any and all losses, claims, damages or liabilities to which they may
become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Memorandum, or
in any revision or amendment thereof or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and agrees to reimburse such
indemnified party for any legal or other expenses reasonably incurred by them in
connection with
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investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that (i) the Seller will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Seller by the
Placement Agent specifically for use in the Memorandum or any revision or
amendment thereof or supplement thereto, and (ii) such indemnity with respect to
the Memorandum shall not inure to the benefit of the Placement Agent (or any
person controlling the Placement Agent or any of their respective officers and
directors) if the person asserting any such loss, claim, damage or liability
purchased the Class A Certificates that are the subject thereof and did not
receive a copy of such Memorandum as then amended, revised or supplemented at or
prior to the confirmation of the sale of such Class A Certificates to such
person in any case where any such untrue statement or omission of a material
fact contained in such Memorandum was subsequently corrected by amendment,
revision or supplement, and the Placement Agent (or such controlling person or
such officer or director) would not have been liable had a copy of such
Memorandum, as so corrected, been so received; provided, further, the Seller
will not be liable with respect to any settlement of any action in respect of
any such loss, claim, damage or liability entered into without the prior written
approval of the Seller. This indemnity agreement will be in addition to any
liability that the Seller may otherwise have.
(b) The Placement Agent agrees to indemnify and hold harmless
the Seller and each person who controls the Seller within the meaning of either
the Act or the Exchange Act, and each of their respective officers and
directors, against any and all losses, claims, damages or liabilities to which
they may become subject insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in a
Memorandum, or in any revision or amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Seller by the Placement
Agent specifically for use in such Memorandum or any revision or amendment
thereof or supplement thereto, and agrees to reimburse such indemnified party
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability or action
as such expenses are incurred; provided, the Placement Agent will not be liable
with respect to any settlement of any action in respect of any such loss, claim,
damage or liability entered into without the prior written approval of the
Placement Agent. This indemnity agreement will be in addition to any liability
that the Placement Agent may otherwise have.
For purposes of Sections 9(a) and 9(b), the only written information
furnished by the Placement Agent to the Seller for use in the Memorandum or any
revision or amendment thereof or supplement thereto is the Placement Agent's
information.
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(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability that it may have to any
indemnified party otherwise than under this Section 9. In case any such action
is brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may elect by written notice
delivered to the indemnified party, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party will have the right to employ its counsel in any such action, but the fees
and expenses of such counsel will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
been advised by such counsel employed by it that there may be legal defenses
available to it involving potential conflict with the interests of an
indemnifying party (in which case the indemnifying party will not have the right
to assume the defense of such action on behalf of the indemnified party) or (3)
the indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees and expenses of
counsel will be at the expense of the indemnifying party or parties and all such
fees and expenses will be reimbursed promptly as they are incurred. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section 9 for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution toward the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above in such proportion as shall be
appropriate to reflect the relative benefits received by the Seller, on the one
hand, and the Placement Agent, on the other, except that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not also guilty of
such fraudulent misrepresentation. The relative benefits received by the Seller,
on the one hand, and the
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Placement Agent, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Class A Certificates (before
deducting expenses) received by the Seller bear to the total agency fee received
by the Placement Agent. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect the
relative benefits received by each party from the offering of the Class A
Certificates, the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any untrue statement or omission, and any
other equitable considerations appropriate under the circumstance. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim that is the subject of this subsection (d).
(e) Notwithstanding any other provision of this Section 9, the
Placement Agent shall not be required hereunder to pay or contribute any amount
in excess of the agency fee received by it.
The obligations of the Seller and the Placement Agent under this
Section 9 shall survive any termination of this Agreement, in whole or in part.
10. Agreement Not to Sell Other Securities. The Seller agrees for a
period from the date hereof until the earlier of the Closing Date or the
Offering Termination Date, that neither the Seller nor any Affiliate of the
Seller, will, directly or through others, sell or solicit the purchase of any
SBA Loan-backed securities of the same class as the Class A Certificates without
consulting the Placement Agent.
11. Termination of this Agreement. Notwithstanding anything herein
to the contrary, this Agreement and all of the obligations of the Placement
Agent hereunder may be canceled by the Placement Agent for reasonable cause upon
giving thirty days prior notice thereof to the Seller; provided, however, that,
in the event the Seller does not perform any obligation under this Agreement or
any representation and warranty hereunder is incomplete or inaccurate, this
Agreement and all of the obligations of the Placement Agent hereunder may be
immediately canceled by the Placement Agent by notice thereof to the Seller. Any
such cancellation shall be without liability of any party to any other party
except that the provisions of Sections 6 and 9 hereof shall survive such
cancellation.
12. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Seller submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent or any controlling
person, or by or on behalf of the Seller or any controlling person, director or
officer of the Seller and shall survive delivery of the Class A Certificates to
the Purchasers.
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13. Intentionally Omitted.
14. Notices. All communications provided for or permitted hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered, sent by overnight courier or mailed by registered mail, postage
prepaid and return receipt requested, or transmitted by telex, telegraph or
telecopier and confirmed by a similar mailed writing, if to Rothschild Inc.,
addressed to it at 1251 Avenue of the Americas, New York, New York 10020,
Attention: Jewelle W. Bickford, Managing Director, or to such other place as it
may designate in writing to the parties; and, if to the Seller, addressed to the
Seller, as the case may be, at 919 Third Avenue, New York, New York 10022,
Attention: Robert Tannenhauser, or to such other address as the Seller may
designate in writing to the Placement Agent.
15. Parties. This Agreement shall inure to the benefit of and be
binding upon the Placement Agent, the Seller, and their respective successors.
Nothing expressed herein is intended or shall be construed to give any person
other than the persons referred to in the preceding sentence any legal or
equitable right, remedy or claim under or in respect to this Agreement. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and their respective successors
and for the benefit of no other person. No Purchaser of Class A Certificates
from the Seller shall be deemed to be a successor by reason merely of such
purchase.
16. Miscellaneous. This Agreement, and the Fee Agreement dated
February 28, 1997, as amended and restated constitute the entire agreement and
understanding of the parties hereto with respect to the placement and sale of
the Class A Certificates and the other matters and transactions referred to
herein and supersedes all prior agreements and understandings whatsoever
relating to such matters and transactions. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which shall
together constitute one instrument.
17. Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York without regard to the conflict of laws provisions thereof.
If the foregoing is in accordance with your understanding, kindly
sign and return
-14-
<PAGE>
to us the enclosed duplicate hereof, whereupon it will become a binding
agreement between the undersigned in accordance with its terms.
Very truly yours,
BUSINESS LOAN CENTER, INC.
By: /s/ Robert Tannenhauser
-----------------------------
Name: Robert Tannenhauser
------------------------
Title: Pres
-----------------------
The foregoing Placement Agency Agreement is hereby confirmed and accepted, as of
the date first above written.
ROTHSCHILD INC.
By: /s/ ML Fingeret
--------------------------
Name: ML Fingeret
---------------------
Title: SVP
--------------------
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from BLC
Financial Services and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,498,000
<SECURITIES> 5,057,000
<RECEIVABLES> 31,939,000
<ALLOWANCES> 641,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,198,000
<PP&E> 1,084,000
<DEPRECIATION> 342,000
<TOTAL-ASSETS> 53,281,000
<CURRENT-LIABILITIES> 1,427,000
<BONDS> 3,374,000
0
0
<COMMON> 197,000
<OTHER-SE> 14,072,000
<TOTAL-LIABILITY-AND-EQUITY> 53,281,000
<SALES> 0
<TOTAL-REVENUES> 15,729,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,234,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,158,000
<INCOME-PRETAX> 5,337,000
<INCOME-TAX> 2,111,000
<INCOME-CONTINUING> 3,226,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,226,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .15
</TABLE>
